Earnest Sweat 00:15
Welcome to the last episode of 2025 or the first episode of 2026 when you’re listening to this swim with allocators, and it’s part two of Best of series where we count down our top five episodes of season three of swimming with alligators. And if you watch it on video, you see I’m coming in with the new year, new me energy, but also the sunglasses, because we got the top three episodes here, and just having a little fun, because, wow, it’s been a great year. So many clips that have nuggets of information that have really, you know, shown me that it’s a people business, even more than you think. People are looking for outliers, not only in the companies that venture capitalists invest in, but also the people they invest in as fund managers, and so many other things that I just felt like I was getting, I’m getting a PhD in in venture capital, and so I wanted to come like it was an award show, because we’re going to count down our final three episodes in our top five countdown. And so it hasn’t always gone so smoothly. So first of all, I’m going to take these sunglasses off, because I have 2020 and this is not helping those 2020 thrive.

Earnest Sweat 02:09
Okay, now we can clip that. So we’re going to kick off our part two with number three and number three features a firm that actually it’s their second time. It’s the second time this firm has been on the podcast before. So that’s a first a firm that’s known for creating amazing content that provides transparency when it comes to LPs, investing in venture capital. And so that episode that is the top three, number three features LoRa, Thompson of sapphire. And you know, LoRa has, you know, if you’re in this business, you’re well aware, well aware of her. She has been a sapphire partner for a while, and she’s written a lot of content for their initiative, open LP, and so we have two clips, but I would really push all of you to listen to the entire episode, and go back to it if you didn’t before. But she explains why underwriting funds is tougher than ever, especially for those raising fund number two or fund number three. She also reminds allocators to consider their program design, like, what are they working towards? And then in the second clip, she breaks down portfolio construction and something that you know isn’t as straightforward as many people think about how to think about reserves. And so with that, I want you to enjoy our episode that finished number three in all of the episodes we did this year featuring LoRa of sapphire partners.

Laura Thompson 04:30
LPS do have finite time. So you know, when you’re thinking about the underlying companies for newer funds, they won’t know the companies. And clearly there have been fewer up rounds and valuations. Are, you know, something where they’re a data point, but it’s particularly hard right now. And so when I think about, when I think about new allocators, a lot, is their program? What do they have in there? What are they trying to add? How can they focus? Is, and then a lot of it always does come down to reference work. And so once they kind of narrow down what they’re trying to invest in, you know, and have a pool of candidates, you have to spend time with everyone. Of course, pick the people that you feel most strongly about, and then spend time calling the founders, calling folks that follow on and doing that type of work, and the underwriting is just hard right now.

Alexa Binns 05:27
Have you seen whether it’s based on the data, your own data, or just the environment, any shifts in what you’re focused on, or how you think about manager selection?

Laura Thompson 05:39
Yeah, I think, like one of the things, I guess I’m highly biased, but one of the things I like about our platform is we just do early stage ventures so we don’t hop out or try and time the venture cycle, which is to your excellent question. Another piece of advice I’d give to folks is it’s just too hard to time. And probably when you get scared by the venture cycle and you step out, that’s probably the best time to make new investments. So just keep deploying and you do you rely on GP and the fun life so long. They are not two years old. They’re a gazillion years, right? So, like, you rely on GPS to develop the companies and figure out the right time to exit. But yeah, I think it is. It’s tricky.

Alexa Binns 06:20
Is the strategy changing? Do you all see yourselves shifting based on either your data or so?

Laura Thompson 06:27
We’re not, we’re still early stage ventures. But I think, like, there’s clearly, as we were talking about, things evolve, and it’d be interesting to hear kind of what you’re seeing. But you know, Fintech is out of vogue right now. I still believe in FinTech. So like, we are still making commitments. I think some people are making fewer commitments. Crypto, clearly, we know is not always. It comes up and down. So like you see people trying to figure out how that fits in their strategy, and then this is probably on every other conversation you’ve had, but like AI, is so interesting because my personal view, which I don’t think is profound, is it’s truly going to creep into and be relevant for most industries. So then it’s us working with managers, figuring out how they’re thinking about adopting that technology into their companies, how they’re thinking about valuations, because they are not low, and though so like it is constantly changing, I do think for a lot of LPs, given the lack of liquidity, given the downturn, people are kind of like, back to basics. So like, people are trending saying, like, let me add but let me add someone experienced with a track record, let me add, sometimes a little bit more safer bets, just because of all this movement. So I do think it’s impacted how LPs are committing. And you can kind of see it in the numbers, you know, the dollars to emerging managers. I think there was a great pitch book article in December, and if I’m remembering correctly, I think it was around 10% to emerging managers, something along those lines. So like it is, it’s hard to be an emerging manager, which is always true, but even more true right now.

Alexa Binns 08:04
And what’s giving you conviction on FinTech when others are running the other way?

Laura Thompson 08:08
It’s the same thing. I think when people think that it’s unattractive, that’s often the very best time to make you have to be aware of, there has to be a follow on capital. So you have to, you know, there has to be enough people to fund it. But, like, if you think about FinTech and how outdated, still, a lot of the technology is, and what a big part of the market is, it is a big effing part of the market. Like, I just think that they’re still like, Will every company be successful? No, but I still think, like, Fintech is so broad, I think both there’s really good returns to be had. And it does, I think, benefit from some specialized knowledge. And there’s some generals that are excellent at it, but I do think understanding how it works, given the regulatory component, is particularly helpful.

Alexa Binns 08:52
Do you have an opinion on generalists versus specialists?

Laura Thompson 08:55
You know, it’s so funny. It’s like, this is the magic part of the job. Every time you say something, there’s a million contradictions. And so in you know, it comes down, like our underwriting is everything from like past returns to brand to fun construct to like, a million things. So there’s not one formula. But my view is it’s hard to be a new generalist. So if you’re an established generalist, either based on a personal brand or based on a firm brand. I still think you need a point of view. I just think in this market, you can’t do everything, so that’s either by firm or by partner or a thesis or, you know, whatever someone decides fits how they like to invest like you just need. There’s still so much capital, and the competition is still so heavy, so high for many, many deals like you need a reason to be on the cap table. And I think often you need to come with a prepared mind, and you need to have a view, and the founder needs to understand that you know what they’re trying to build. And can be supportive of it. And I just think doing everything is just hard to do. Things change too quickly to be able to do that.

Earnest Sweat 10:06
Well, you know, a lot of LoRa, a lot of LPs have, especially fund of funds, have both programs for established managers or and emerging managers. How does sapphire partners really balance that with because there could be various different criteria, and any kind of overweight shift can really mess up the portfolio construction for you all as well. So how do you guys think about that?

Laura Thompson 10:35
Yeah, I love that question. So the partnership we have with CalSTRS is specifically for emerging managers. So that partnership is well defined. And the way we generally think about it, it’s institutional funds, one, two and three. So for us, it’s pretty well defined. But I agree that in other programs, people have to really think about how they are because my view is, I think the very best returns can come from emerging managers, but there’s also mobile volatility in returns, and it’s unclear. So like, you need a portfolio, you need a group. It’s hard to do. I’m going to do one emerging manager every 10 years, like, it’s just that’s like a trickier thing to do, unless you pick someone who’s well established and spinning out. So people have to decide what works for their program. But I tend to tell people, if you’re going to do emerging managers, it’s nice. First of all, if you’re going to do the work to really get to know everyone, you don’t really want to do one new one every 10 years. So like, how do you think of a portfolio within your portfolio? What do you think of how you’re underwriting those returns compared to your established bucket? And it is really just a program. It depends on it program by program. I do think it’s like, like, what do you really want to do? What do you want to build? Okay, and then, what are you doing right now? And is it a stepping stone to that, or is it what you’re going to be doing longer term? And then the model or wrong model. But like, Do you have a view about, and there’s, I think there’s a lot of models that can work and there’s some models that absolutely can’t work. So like, Do you have a logical view about? Like, I think it’s this many companies, and this is kind of the valuations, and here’s what I think of the ownership, and then just an awareness of, like, what outcomes it needs. We always do this, I don’t know, for a team like this, but baby math on like, here’s the ownership. Maybe it’s deluded to this, and then what do you need to return the fund? Because of our discussion earlier about what’s kind of formed, some of my views is, there are some outperforming funds that don’t have fund returners. There absolutely are, but there are more outperforming funds that have fund returners, or companies more frequently that return multiple times the fund and so baby mass shows it needs x billion dollars. Like, are you striving for that? And do you have signs of partnering with some of the companies that can reach that scale, you know, or at least, have you seen it? So, you know, I do think the fund model is super important. And then I love fund management. You can tell my blogs, I do like, love writing about it, but, but the reality is, you can’t have a good fund based on fund management. So you know, you have to be in those outlier companies to drive your fund returns, and then fund management, I think can make a good fund even better, or an okay fund a little bit better, but we do like to have a view on that. And one of the reasons I wrote about reserves, is, I do feel like it’s like, oh, there’s, this is the industry norm, right? It’s like 50% reserves. Well, maybe it doesn’t have to be, at least take the time to think about how you like to invest and then what the number should be. And it’s not an automatic thing, just because everyone else does it. And then, for example, in this environment, I think it’s something I’m thinking about updating kind of my work over the next year. The fundamentals are the same, like you have to invest in companies, and if you’re doing reserves, they have to be concentrated in the best companies, because otherwise you’re just going to bring down your multiple and that’s very sad. But I think what has changed is that a couple years ago, there were rounds happening so quickly. People were wondering how to choose, because a lot of times, companies didn’t fundamentally like they hadn’t fundamentally changed, except for having more com, you know, more capital, and people were having to decide where to put those dollars. And now there’s fewer rounds. So I think, you know, from a GP perspective, maybe the pool of candidates is smaller, but there might still be, it might still be hard to concentrate that much capital in the rounds. It might still be hard to decide exactly who your outperform is going to be, even with a little more time. And then I think it’s challenging. Like, how do you pay to play like, how? Because, you know, for a GPT. See for many GPS relationships with founders and their reputation in the market, right? That’s really important, and it is important. So, how did you, how do you communicate to founders, how are you going to participate or not in those situations as a GP? And I think there are some companies that have pay to play or are not getting funded, especially given all the changes in the market, that will be really productive. But I don’t think it’s all of them or the majority. So you know, if you are faced with those situations, how do you decide how much capital to allocate to those rounds? And I think that’s, it’s, it’s just really hard.

Alexa Binns 15:39
Yeah, I encourage everybody to check out lora’s writing, because she breaks down scenarios for you, and there’s some real numbers you can dig into. And it makes me also nervous, on behalf of all the lps who come on here who are really interested in CO investing, looking at the reserve strategy as sort of a bellwether of what you’re offering your LPS for directs or SPVs, etc, because it’s so easy to get it wrong.

Laura Thompson 16:09
And LPs are like, I want them. I want to invest. I want this office. You’re like, I want them. And then later they’re like, Wait, this didn’t work,

Alexa Binns 16:17
even if you aren’t thinking about your own fund construction, but you are committed to co investing. I think it’s worth taking a look at Laura’s data on this. Because, yeah, it’s, you know, you want those concentrated bets but, but then they have to be do you trust? Do you trust your pre seed investor to know what the right concentrated bets are?

Laura Thompson 16:39
I know, and I think co investments are particularly difficult for all the reasons you outline. And I just advise, you know, sometimes GPS to, like, ask LPs and be like, Are you doing your own work on you know, like, how are you, how is the process working? Because I feel like some LPS do their own analysis and come to their own view, and they want to see everything. And some, you know, some LPs are kind of like, we’re not direct investors. We’re kind of going to do what you say. So like, we need your you know, like we need a different level of recommendation, and so just working with LPs to understand kind of how they’re thinking about it, too.

Earnest Sweat 17:10
Yeah, that was amazing. Thanks again, LoRa for joining the show, and for all you and the Sapphire team, all the things you all do for providing more information out there that’s transparent, that demystifies things such as portfolio and construction and reserves. And so now we’re moving on to rare air. It’s only two more episodes left.

Earnest Sweat 17:49
So for the episode that is finished number two in our countdown, it’s one that I was really excited before the interview, because it was from features, a person who, if you’re an ex or LinkedIn and you like to hear or understand the whispers of what LPs are really thinking about private equity, venture capital and growth equity. This is a person you follow, and the conversation we had with this person

Earnest Sweat 18:30
did not disappoint. I felt like I was leaving with quotes and stats that I never read before, or maybe I just need her to remind her, but then in immense you know, but let’s start it off. But while interviewing, I realized I couldn’t just take notes the whole time. I actually had to ask questions. But I’m talking about the episode featuring Megan Reynolds. Megan has an amazing background in capital formation, and leads one of the largest firms in private equity, growth equity, venture capital, and has learned from so many greats in the business, so it was just an honor to have her share her experience the clips that we’ll be sharing today, she reminds us the importance of capital formation and no business in this fun business, can do anything without that function. And then she also, in a second clip, looks ahead in her crystal ball and tells us what she thinks GP and LP relationships will look like. And how they’ll continue to evolve it and kind of like TLDR is it will include transparency. And so with that, I want to you to get ready to enjoy number two on our top five countdown, our episode featuring Megan Reynolds,

Megan Reynolds 20:33
the two organizations that I work for, that I was able to where I started my career, that was the front of the firm, and they compensated you accordingly. And they, you know, they really treated you as, you know, just right alongside the deal people, in terms of level of stature, importance, respect, and a lot of focus was given to that piece of the business. And the leaders of the business focused on it like they spent time on it. And so those emerging deep people study it, study how to build relationships. Study how the great asset management leaders like Steve Schwarzman or David Bonderman, may he rest in peace. My former co-head of TPG, who passed away this week, Jim Coulter, David Rubenstein, they were you one at one time, and they were really refined capital formation executives at the end of the day alongside a great investment judgment. And so just like you would study great deal makers, I challenge you to study what those great business builders have done in terms of building relationships, in terms of servicing investors. So that’s first and foremost, my like, my one tip, and then I could, we could go into lots of other tips, and just like the different parts of the business and the different parts of the role at any time you want to dive into that a little deeper.

Earnest Sweat 22:06
Well, I think, to your point, it made me think of, I’m starting to see a trend of even, you know, first time fund managers, maybe they’re spinning out of their established fund, but the first hire they make is somebody who’s a COO who has, you know, covered capital formation before at another place. And so you’re starting to see people instill that and see how important that is.

Earnest Sweat 22:30
I was watching a video of you the other day because where you were saying that you have to always be fundraising. And so having that mentality of always having these long term relationships, you’re even seeing it in venture, which is, you know, historically, been a cottage industry becoming more and more institutionalized. So I think that’s aligned with, like, people realizing, if they’re, if they don’t have that skill, they need to the first person they bring on needs to have

Earnest Sweat 22:56
that skill. Yes, or, or there’s great service providers that can help. I mean, there’s, there can be this negative connotation around placement agents, because, especially in venture, because there’s this feeling that a you know, oh, if you need a placement agent, then you’re not, you’re you’re perhaps that saying that you know you need help when you have relationships or you have capital that’s already starting, but sometimes what those service providers can do is really teach you what great looks like if you can’t afford it yourself. Like they have relationship coverage and they have people that just help you with your marketing strategy. And now, sitting in an organization where we have access to, because altimeter has a public business and a private business, we have access to cap intro for the public business at the banks and I had never, we TPG had had a hedge fund, but I’d never really, I wasn’t, you know, I wasn’t focused on the business, building of that piece of the business as much. So coming here and realizing what cap intro provides to emerging hedge funds and establishing hedge funds was a complete eye opener. What a lucky industry that they have a service that will be provided to you. Well, they will tell you how to build your pitch book. They will teach you. They will point you to the investors that are actively allocating. They will help you refine your pitch. They’ll give you advice on how to communicate in an ongoing way. They’ll teach you what great looks like. Private Markets does not have that, and it’s very, very difficult in what is probably a more competitive business today, just in terms of the number of emerging managers. And so it’s really, really a struggle, particularly just given the number of funds out there you really have to navigate it on your own. It’s. Right? And I’m glad that some of my work has contributed to that kind of next generation of amazing managers, hopefully in helping teach what good really looks like. And then maybe the last thing I’d say on that is just, you know, and this is to the emerging manager, like, don’t underestimate how important it is, I think that people believe that if you deliver great returns, it’ll all just follow. And that did work at one point when people were growing the asset class. And this is when I say I was lucky. You know, there were five firms doing what we’re doing, there were 10 firms doing what we’re doing. Like, there are 5000 firms doing what you’re doing today and competing for attention. That is an impossible place to be. I mean, you’re like, I was sitting next to someone the other day, like trying to think of markets that have as much competition, like just a product where you have 5000 choices and umpteen choices, if you think about how you might allocate between different strategies within alts. And your experience needs to be more than returns. If you’re an investor, like the investor experience matters a lot. The client experience, of what it is like to interact with you, what it is like to receive information from you like that is part of your differentiation. And just like if you were, you know, any business like client service is so critical, the client experience like and I just see it underestimated. But the great ones know that it matters. And the great ones, you know, really understand that that defines your business in just just as much as your returns can define it. I think it will definitely. We’re entering a new regime, and I think that this has happened in decades, or maybe, you know kind of, you’ve gone through these kind of five to 10 year phases of the industry, and I think that buyout went through it already, earlier, and ventures are going through it now. Buyout went through a lot around the financial crisis, like buyout had a big boom early, 2000s went through the financial crisis. That’s when all the buyout firms hired capital formation teams. That’s when you saw firms go away. You saw, you know, there were tons of middle market firms emerging. They refined their process like I think ventures got bigger, and more specialized firms emerged. I think that ventures going through that right now, and it’s in its next phase, it’s in that phase. And I think the challenge is that most allocators, most institutional allocators, have large venture growth technology exposure already, and there’s not. There’s no wave to ride in terms of fresh new capital emerging that people of the last 10 years got to ride. Yeah, lucky time they were. They had lucky timing, because they had time to build a track record like there is no huge fresh wave coming for most institutional allocators, again, and everything I say is, is a sweeping generalization. There are always exceptions, everything from wider like breaking in and all of that stuff, even what I put on Twitter, that’s just one perspective, but it is. There are always. There are always, you know, I just met somebody this week that’s building a new venture program, and it’s a large institutional pension, but it is few and far between. And so what does that mean? I would say there is, there’s something that happens in this phase, in a couple of things. One, there’s consistency that emerges between how firms communicate with their investors, because the standards start to emerge. And the same thing happened in the buyout. So there was no standard reporting. There was very little information that is now, again, you got to compete for capitals. So the LPS have all the leverage, and so they’re going to demand, like, a certain level of transparency, a certain level of communication, a certain round of institutionalization around your process, very clear about timelines. You can’t stuff people by saying you’re coming back after a year with a capital raise or, you know, do things that are really off piece, because it’s just you’re now working within a framework. And again, there could be exceptions, and there always are exceptions for phenomenal cases and firms and things like that, but this is what happens in this phase. And so I think there’s more consistency around the levels of communication, transparency. I think there’s more institutionalization of the process. I think there’s more team building. And now I think there’s more creativity that happens. And this is something that I learned at TPG, like if Goldman taught me really how to like what it really looked like to service a client? Well, like Goldman, it was like the client is like the number one piece wasn’t the deal, it was the client. And that I learned that at Goldman and at TPG, it was I learned solutions and creativity and being strategic to someone. And so what does that mean? That means in this phase, because it’s so competitive, you really have to be more creative in how you build solutions for people and really understand what each individual investor needs. We met with an investor last week that we were, you know, talking about expanding our relationship, and we’re listening. We’re saying, You know what? What’s really important to them is training their team, and what if we could help them understand venture as an asset class like maybe that helps them build a relationship. So I’m talking mainly now about the big institutional side of the business. Maybe it’s separate. I think separate accounts will emerge. I think that there are unique co-investment structures. Again, this is where it gets creative. It’s not just that I’m raising a fund and that’s it, and it’s two and 20, and that’s with a step up, and that’s the end to go like there are unique funds, structures, solutions, relationships that emerge, that that help people find a way to capital. And then I think there’s this whole other piece that’s a happy, really interesting part of the market that’s happening in the next 10 years, the LP GP relationship with the emergence of the retail LP, yeah.

Earnest Sweat 32:54
And that is actually a wave of fresh capital coming into the asset class, and I’m very fascinated by how it’s going to unfold. And that’s private markets generally. That’s not just venture that is private markets generally. And that is something that’s unfolding in real time. Secondaries, liquid solutions, bank platforms have been around for a while, but they’ve really been limited to certain wire houses and certain structures and super ultra high net worth. And I think that with the returns that have happened in private markets with the lack of institutional capital at the ready, and with the returns that are like, with just the returns that are happening now in private markets and companies staying private longer, I think that there’s this effort underway to realize that unless you’re an ultra high net worth individual or an institution, you’ve completely missed out on this entire category of investing for the last 20 plus years, where all the best like, where some of the best returns have happened, like alternatives have outperformed traditional markets. And so how can we translate that to a more retail oriented vest investor and we’re seeing bits and pieces of that emerge. There’s some really interesting products out there, and that is going to That’s my prediction of the next 10 years. 10 years from now, I think it will be a more pervasive asset class, and then we will need to adapt our organizations to account for that.

Earnest Sweat 34:45
Thanks, Megan, that was really amazing to have you on the episode, and she mentioned during that episode I forgot something that was really funny, is that her you. EA thought she was going to have to go to a pool or something because it was swimming with alligators. So maybe she did put that seed in an out there of an idea of, maybe we’ll have a live episode just around a pool with a company, a lot of allocators. So that’s where it came from, if it actually happens. But thanks, Megan, for your insights. And anybody who wants to understand more about capital formation, the importance of making you know the LP experience unique as a fund manager, when they’re interacting with you, you’ll want to listen to that episode. Now we’re moving into the top episode. I’m sure my producers are going to kill me for hitting it, so I’ll say it again without it. We’re now moving to the top episode of 2025, aka season three of swimming with allocators. And this is the first time we’ve done this. So this is the inaugural, the inaugural top episode of a best of season series. So you always go back in the record books and say who was the first ever, because we didn’t for season one or season two. And now you know the answer. We’re going to go to Episode 61 all the way back this year to Episode 61 some hints. There were some accents, and not my southern accent on this episode. This featured two allocators who came on, and one of the allocators that was interviewed is a Kauffman fellow. Not sure if you know who that is, but this episode is our number one episode this year. The most Popular episode this year is when we featured the team from Integra Global Advisors with Evan and Charlotte. Yeah, this. I really enjoyed this conversation. I It may, I’m not sure if it was their first podcast as a team. They did fantastic. And it’s proof for anybody who’s thinking about being on the podcast, and oh, I’ve never been on a podcast. I’m confident, I think, on this top five list, at least half the individuals on this list, it was their first or second podcast ever, so come on. The water is fine. And so in the clips that we’re going to share, we have Evan speaking on why their venture portfolio is so heavily focused on emerging managers and the data that supports it. We also have Charlotte speak on what characteristics are necessary for an emerging manager to stand out in today’s competitive market. And then we end the clips asking different questions around what venture has done incorrectly in the marketplace thus far, and why succession planning is so hard. So with that, hope you enjoy our number one episode this year featuring the team from Integra Global Advisors.

Earnest Sweat 39:12
Charlotte, what do you think makes a great emerging manager today that’s very different than even three years ago.

Charlotte Palmer 39:21
This market is incredibly competitive. I think it’s really tricky to be a diversion manager today, as it was three years ago, but I’d say more so especially today, I think a lot of managers got back that maybe wouldn’t have otherwise raised during the covid bubble, and they’re now coming back around to raise their next vehicles in this very competitive landscape where a lot of LPs have either stopped their commitments to venture or have a little bit more fear around venture. So it’s a big pool of competitors and a small pool of capital to kind of fight for. What I think really makes you stand out and be a successful emerging manager in terms of fundraising. And I guess. That answers it more in personality traits. One is entirely like transparency with your LPs, we can see straight through you, or we can just google you, so it’s quite easy to find out if you’re not telling the truth around things, or if you’re hiding something like a good due diligence process. Let’s just be open and transparent. I would also say humble, and in the same regard as everyone is fighting, and I think there needs to be a level of you’re also competing for those positions, and you also want to be hungry, but don’t oversell yourself. I’d rather someone just come and be honest about what they’re giving and presenting, then try and over pitch or oversell me, also someone who’s a good communicator. So they’re open and listening to feedback. Sometimes we’re not able to invest in a manager, eg, we don’t do micro rhythms. So if someone were to raise 10 million, it would fall beyond our appetite and ability to invest. I’d rather have a kind of conversation with that individual who was seeking feedback, then be upset and make it a personal attack that I haven’t invested in. It just happens that they fall out of the thesis. So I would say communication is key. If you want us to be able to invest in your next fund, it’s action and reaction. And I guess having just a strong thesis that you stand behind and having that validated, I think, makes you really stand out. You do not need a massive USP in this market. You just need to have conviction in what you’re doing and doing it well, don’t come to me and say, I want to do fintech. You’ve done biotech before, and you have no validation of the two. So there needs to be a consistent story. You need to back yourself on that story, and you just need to continue being confident. It takes tenacity in this market to do it, and it’s incredibly difficult. You know, hats off to an emerging manager who sticks with this. I think as LPs, we’re very much respecting how difficult this is and how long it takes and how hard it is, but I would say it’s those who stick with it who are eventually the successful ones.

Earnest Sweat 41:59
Yeah, absolutely. And I think kind of to your point about why it’s so competitive is I found that there’s two kinds of cohorts that we had more funds created, that maybe a few wouldn’t have been created. And so I definitely think that 2020, to 2022, is what most people point to. But I would also argue that there was like an archetype of a lot of former founders, operators of varying success at that in that 2015 to 2017 range, that if you didn’t really cash out when there were all those IPOs in 2021 those those funds still have not, even if they’ve raised three, four, funds have not returned anything. And so we’re having just this like massive correction in the market, that if you see this and you still want to get in, you need to be tenacious. You need to be able to show you know, why should there be a firm that you start earnestly, or whoever it is, right?

Evan Finkel 43:05
I think one thing that’s challenging, though, and something I think about a lot, is, you know, there are a lot of really talented investors out there, right? If you look at some of the more established firms, there are some really talented associates or principals or junior partners, and they sort of look up the ladder and they realize, like, I’m never really going to be a partner here. But then they look into the market and say, I love being an investor, but I don’t want to be a funded manager, right? Meaning, I don’t want to have to go out and spend 75% of my time for the next 18 months like scratching and clawing to raise $15 million and dealing with compliance and legal and IR and all that other stuff. And so you have this gap right? Of these people who are sort of sitting in the middle where it’s they’re really good and talented investors, but they’re just sort of stuck at their like Legacy Fund right, where they’re never going to become like the partner, and even if they do become the partner, maybe the fund got so big already that, like, they’re never really going to be like, generating carry. On the other hand, they’re like, I don’t feel like I have the aptitude for fund management. I just want to wear the investor hat, not the fund manager hat. And so I think that’s also a challenge, is, how do you make sure that the emerging managers that are coming out and that we’re evaluating are sort of the best of the best, versus, sort of, like, leaving behind a lot of really talented investors who could be good emerging managers or shoulder GPS, but just don’t want to, like, go through that torturous journey of, like, 18 months of fundraising and fund management, right? I think you have to evaluate not just the manager sitting in front of you, but what does the actual ecosystem look like? What does great look like? And is the manager sitting in front of you great, or are they just willing to, sort of like, absorb the torture of fundraising, whereas, like, the Great Investors maybe don’t want to do that, or some great investors don’t want to do that, right? And so it’s not just who’s the best person sitting in front of you. It’s where we allocate to the real best of the best or. We just like allocating to whoever is willing to sort of go out and jump when it’s 2025, and it’s a hard environment. So that’s something, you know, we also spend time thinking about from our perspective and our vantage point, where we like emerging managers. Things that help seed more emerging managers, or create more emerging managers are probably a net positive, but from an industry perspective, I think we would be better off if there were more successful succession plans that were executed.

Earnest Sweat 45:28
Yeah, I agree with you on both. I don’t think it was a cop out answer, by the way, but I agree with you on both, both fronts. I think the industry would be better, and I think it would be, it would resemble some of the maturation and other asset classes. But also I come to terms of like, it’s good for the industry too, and maybe that’s just a part of it. We’re going to have different top 10s every 20 years. So I know LPS always looks for and asks if GPs are continuous, like learning from things that they’re, you know, reading mistakes they make. Kind of want to flip the question on you all and say, What’s one lesson you’ve learned over the last year or so, just recently that’s helped shape, kind of like your perspective as an LP

Charlotte Palmer 46:22
mine was a, I guess, learning a lesson, not so much about myself, but how hard it is, and how much people underestimate when they’re at a venture fund that’s probably quite well established, and they maybe have their investing role, and they’re doing well and carrying good, and they want to spin out and become their own fund. Like, how big that leap is to take. And I think that’s the learning curve of people probably needing a little bit of hand holding during that time. You can’t just Google. Like, how do I make a venture fund? And how am I successful at that? And if you don’t have a network, it’s just incredibly difficult to do that. So I think that was a big learning for me. When you’re talking to someone on fund one maybe being a little bit more respectful of their position, that they maybe get whole all the answers, and you probably need to do nicer questioning so they maybe can figure it out along the way, and also give a little bit more kind of feedback to them, because it’s really hard. I think you go from being an Evan articulated it really well earlier, an investor to a firm builder is a completely different skill, and I think it’s one that you can easily teach.

Evan Finkel 47:32
I think the biggest thing I’ve learned is that it’s more fun to do this with a partner. You know, Integra is a firm, right, with individuals across asset classes, right? And made back office functions, obviously. But for many years, you know, I was sort of doing our venture investing by myself, and so to bring Charlotte on and to have like that in house, right? Not just, oh, people you know, in the industry that you swap notes with, right? But really, to have somebody like in the trenches with you, and, like, 100% aligned and like, on thesis with you, and really understanding exactly what we’re trying to build. I think it’s more fun, but also I think it makes you a better investor, because you have to be much sharper, like on a day to day basis. And so, yeah, you know, I wouldn’t necessarily say that from the GP perspective. That’s true. In fact, we like solo JP a lot more, I think, at least more recently, than we sort of like people who have shotgun weddings together. But from the LP perspective, you know, I think there’s been a huge advantage, both in terms of just the general enjoyment, but also in terms of sharpness of thinking and, like, really breaking down what we’re trying to do that’s come from, from doing this as a team, instead of you know, one person within a large organization.

Earnest Sweat 48:47
Want to thank again, Evan and Charlotte and the Integra team for

Earnest Sweat 48:57
you know, joining the podcast, and congrats on being the most popular episode this year. That’s amazing. I want to finish part one again. I want to thank all the people who made this year possible. Alexa Johnny and the herd media team, our sponsors, Shane and team from Sidley Tosh and Jeremy and the rest of the team at SVB, and, most importantly, our audience and so thank you so much for listening. And you know, we had, we had New Year’s coming. We have resolutions, I think, for this podcast, the resolutions that I have are taking. Continue to have great guests. I also want to hear more from you, the audience. Send us questions that you want to hear us answer on DDQ episodes, or that you just want us to know. Who do you want us to interview?

Earnest Sweat 50:17
You know, tag us. Tag those people. We would love to have a variety of global allocators that sit in all different types of seats, that I have all different types of opinions. So we really want to be the place for that.

Earnest Sweat 50:35
And last is resolutions to have more dining with allocators dinner series. So if you’re interested in attending, if you’re interested in partnering with us on that, just reach out to us. But with that, I want to wish each and every one of you a fabulous holiday season, a fabulous new year and a safe New Year. And I want you all to have an amazing start to your 2026 and we’ll see you all for season four, which will start in late January. And we have some amazing folks coming up. Don’t want to give it away, but we’ve started recording. This is going to be the best season we’ve ever had. I can’t wait to come back in December of 2026 and see what the countdown looks like. Thanks again, everyone. And see you later. Allocator, and have a happy New Year.

Alexa Binns 51:38
See you later. Allocator.