The Strategy for Selecting Top Co-Investments as a Limited Partner

With Josh Porter,
Co-Founder and General Partner, FirstLook
This week on Swimming with Allocators, Earnest and Alexa welcome Josh Porter, Co-Founder and General Partner at FirstLook Partners. During this conversation, the group discusses how the LA venture ecosystem has evolved from an entertainment-centric hub to a diverse tech industry landscape. The conversation also covers how Porter and his co-founder Ankeet Kansupada came to know one another and build their hybrid Fund of Fund strategy. Josh explains FirstLook’s focus on smaller funds under $50 million, filling a gap for institutional-grade partnerships. He details their fee structure, aiming to be more attractive by offering lower fees compared to typical fund of funds. Josh concludes by highlighting the firm's strategy of consistent investment and the importance of being a fiduciary, while also sharing some niche fund investment strategies. Nik Talreja, CEO of, also joins us this episode to discuss his personal investment journey and the role of SPVs in building a venture track record.

Highlights from this week’s conversation include:

  • The LA venture ecosystem (0:43)
  • Unique investment opportunities in LA (3:54)
  • Leveraging entertainment and deep tech in LA (6:42)
  • The Partnership between Josh and Ankeet (7:47)
  • Finding the right partner (9:23)
  • The goal of FirstLook Partners (11:35)
  • Fee structure of fund of funds (15:47)
  • Strategy Shifts and Market Validation (18:13)
  • Co-Investment Strategy (20:05)
  • Investment Thesis and Co-Investment Opportunities (21:30)
  • Insider Segment: Fund Administration and the Rise of Hybrid Fund Models (24:42)
  • Product Development and Core Focus (27:18)
  • Future of Venture Capital and Hybrid Fund Models (31:36)
  • Sourcing new managers (36:46)
  • Criteria for manager selection (37:41)
  • Unique investment strategies (38:24)
  • Venture allocation and market dynamics (43:40)
  • Challenges in decision-making and final takeaways (44:57)


Founded in 2023, FirstLook Partners is a hybrid fund of funds investing in venture capital firms under $50M and software companies. FirstLook is managed by Josh Porter in Los Angeles, CA and Ankeet Kansupada in Chicago, IL. Visit their website at is a frictionless deal execution platform for venture investors. Our platform handles back-office operations for venture investors, automating banking, compliance, contracts, and reporting so that customers can focus on making deals and building relationships. Learn more at

Swimming with Allocators is a podcast that dives into the intriguing world of Venture Capital from an LP (Limited Partner) perspective. Hosts Alexa Binns and Earnest Sweat are seasoned professionals who have donned various hats in the VC ecosystem. Each episode, we explore where the future opportunities lie in the VC landscape with insights from top LPs on their investment strategies and industry experts shedding light on emerging trends and technologies. 

The information provided on this podcast does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this podcast are for general informational purposes only.


Alexa Binns 00:12
Today we are speaking with Josh Porter, co-founder and GP of FirstLook Partners. FirstLook Partners is a hybrid fund of funds, actively investing in funds under 50 million. Josh has done the Goldman thing, the VC thing, the family office thing, the operator thing, am I missing anything? Today, Josh is going to explain why he thinks smaller funds make the best investment opportunities, among other gems. Thanks for being here, Josh.

Josh Porter 00:39
Appreciate it. Thank you guys for having me.

Alexa Binns 00:43
You are based in LA. And as somebody who is meeting with lots of emerging managers, we’re curious what the LA venture ecosystem is, like right now.

Josh Porter 00:51
Yeah. I mean, LA is always awesome. You know, it’s a, it’s an exciting, it’s exciting right now. Obviously, like everybody in the business, it’s been a challenging, you know, couple of years, the last couple of years. But, you know, if we, if you zoom out, you kind of see how far the LA ecosystem has come since I got here. I moved to LA from New York in 2011. So I’ve been here almost, I guess, going on 13 years. And you know, a lot of the funds that are now household names in our business anyway, didn’t exist. So, you know, folks like mucker, and fika, and bonfire and M 13, and wonder, and three l these, none of these, none of these funds were around. So you know, it’s been really fun to watch and to kind of be a part of that over the last decade plus. And, you know, what I think is cool, too, is.

Earnest Sweat 02:29
So for the LA market as well. What have you seen as far as even the entrepreneurs? I think that, yeah, they really established themselves in a few markets.

Josh Porter 02:41
Yeah, so I think what’s also just been really, really cool to watch is, you know, when I got here, I think it was LA was sort of we we definitely had kind of a redheaded stepchild syndrome, compared to, to the folks up north. And I think part of that was because most of the most of the founders here were building in, you know, kind of entertainment media, direct to consumer ecommerce brands. And that’s because kind of the fabric of LA has always kind of been the entertainment business. But as the ecosystem started to take off, and more capital came here, and, you know, founders could could kind of raise money from outside of Silicon Valley, la became a pretty nice place to live and to start a business. And so, you know, if you think back to kind of version one of the LA tech, you know, venture-backed ecosystem, you think of companies like snap and Dollar Shave Club and ring, and, you know, gaming companies like riot and Scopely, which, you know, the all these businesses are massive, you know, huge companies and massive success stories. But now, you’ve got companies like relativity, space, and Anduril, and shield AI down in San Diego, and ad tech companies, like go Guardian, and there’s, there’s, you know, billion plus dollar companies that have that have been built over the last decade in categories, you know, ever from everything from enterprise software to aerospace and defense to hard tech to Ed Tech. So I think it speaks to the king of the maturation of the ecosystem. And, you know, it’s just been you see what’s going on in El Segundo right now. And it’s been cool to watch what

Earnest Sweat 04:29
stories or anecdotes Do you feel that have really defined your perspective on the ecosystem from your days as in the family office and VC

Josh Porter 04:42
stories that have defined it as well. So this comes to mind because we were I was just talking about this the other day, and it’s a it’s a funny story, and this is kind of like, this is like an only in LA story, but this was probably 20 A 16 or 17, I was investing for a family office and got introduced to a guy named Ted Sean, who had just launched a fund called Castle verde. And so Castle verde was one of the first cannabis focused venture funds. And at the time back in 2016 17, that was, that was kind of an edgy, edgy thing, but there was a huge opportunity in space. And so I went and met Ted, at their office at the Casa Verde office, I think it was in either Westchester or El Segundo, and you know, show up, and we sit in a conference room, and Ted and I have this great, you know, 45 minute conversation, it’s super smart guy, you know, kind of outlining the opportunity in the, in the category. And all of a sudden, the door opens and his assistant pops her head and says, Ted snoops here to see Josh. And I’m like, and I’m, like, trying to hold it together. And like, sure enough, in walks in, walks Snoop Dogg, and, and like, I’m, you know, I’m a hip hop fan. And since like, early days, like, I think, I think doggy style was one of the first CDs, not the CDs I ever bought. And, and so, you know, all of a sudden, like, the legend walks in and sits down and Snoop starts, you know, pitching me the Fund and, and the opportunity that they see and how he can leverage his personal brand to help companies and, and it was an awesome meeting. And I just walked out of there thinking, like, there’s no way that this stuff happens anywhere, but LA. It was pretty awesome. That’s,

Earnest Sweat 06:49
That’s an insane story in a very long story. How do you think LA can kind of be the last question on the market? How do you think LA can continue to leverage kind of how it’s like a melting pot of both entertainment? And then we’re seeing deep tech and all these other things, commerce? Yeah, be down there?

Josh Porter 07:10
Yeah, I think there’s, so first of all, there’s, there’s a whole handful of funds that have been created to kind of specifically do that, you know, folks, like, plus capital and M 13. Does this pretty well. And, and so there’s funds out there that are actually created to kind of leverage the entertainment business and the, you know, personal brand of celebrities. And look, it’s like, I think when, when it works, it works really well. It doesn’t work in every category. And you know, it’s got to be kind of, it’s got to be authentic to sort of, you can’t just sort of slap a celebrity on a DTC brand and expect it to blow up. But, you know, when it works, it works really well. And I think as kind of, you know, there’s a convergence, convergence of, of, of kind of media and content and commerce. And so I think that’ll kind of continue to be an important theme in LA,

Earnest Sweat 08:11
How do you and Anki become partners?

Josh Porter 08:15
Yeah. So on Keaton, I met six or seven years ago, now, we were both investors for a family office. And so that’s kind of how we initially met with our colleagues. And then, in 2019, the family had invested in one of their portfolio companies. It kind of needed some help, it was going sideways. And so the principal at the family office asked Keaton AI to kind of step in, and fix it. And so, so basically, so awkward, had moved from New York City with his wife, and at the time, two year old daughter, and I was living in LA, and I was literally commuting to Chicago, back and forth every Monday to Friday. And the two of us sat next to each other for about a year and, you know, trying to fix a very challenging situation. And, you know, when you’re, when you’re kind of thrown in the fire and a stressful situation with you kind of really gets to know your colleagues. And so, you know, we, we, there was a lot of late nights at the office, you know, and we had dinner, we go out after afterwards for drinks and kind of developed a bond and a friendship and a mutual respect for each other and said, you know, one day we wanted to do this, you know, on our own. And here we are, you know, it took us five years, but uh, we we did,

Earnest Sweat 09:50
Josh on that point, I think that’s something that can be really helpful is, you know, people always talk about timing and also this is a relationships business. Yep. Any advice? For, you know, fund managers or you know, even folks who are running fund to funds, what to look for to find those, those partners?

Josh Porter 10:11
Ooh, that’s a good question. I think. So I’ll say this. I think first of all, you got it. If you’re going to partner with someone, obviously, it’s like a marriage. And it’s a very, very long term commitment. You know, you’re gonna fight with each other, you know, almost daily, right? So there’s got to be images just true. And like, by the way, that’s healthy. And if you’re not doing that, you’re probably doing it wrong. But so it’s got to be someone. One that is kind of, I think you have to have at least similar financial motivations about what you expect out of it, I think you have to have similar expectations about where you want it to go in five and 10 years. And then you’ve got to have there’s got to be a mutual respect for one another, because you’re going to it, there’s inevitably going to be tough times and there’s going to just be times where you disagree with each other, and you’ve got to do it. And those Mark arguments can get heated, intense. And, you know, you have to realize that at the end of the day, like we’re all just trying to come to a higher truth and come to the right answer. And you know, and so yeah, you got to make sure it’s got to be someone that you that I think you know, and have known for a bit and respect. I think that like people that try to partner up because like this the story looks good together or whatever. I think that’s a huge, huge mistake.

Earnest Sweat 11:42
So we need to fight Alexa more.

Josh Porter 11:44
You guys. You know why you guys don’t fight? Come on?

Alexa Binns 11:49
I think we have a healthy way of sparring.

Earnest Sweat 11:55
We’re two Capricorns that we come in thinking we’re right. So right there already. Yeah, who

Josh Porter 12:00
ends up being right? is it balanced? Totally, that

Alexa Binns 12:06
I like this thought of, if you’ve agreed on the end goal, you’re gonna be able to figure out the tactics to get there. It’s like, yeah, eye on the prize? What’s the blue ocean? Like? What is the big goal of your new fund of funds? Like why does the world need another fund of funds?

Josh Porter 12:23
Great question. So I would say when we, when we set out to do this, we saw a kind of a gap in the market. And so what we’re trying to do at first look is to be an institutional grade partner to smaller emerging managers. So we define that as $50 million fund sizes and below, and managers on fund one, two, or three, or four. And so, the issue that we saw, right is, so we talked to institutional LPS frequently, right? We talked about pensions, endowments, and, you know, funded funds, right. And so, a lot of these massive pools of capital, right, these are 2030 $50 billion pools of capital, and usually the teams are pretty thin, right? And so all of them that we talked to see the opportunity in, in the space, and then a category that we’re investing in, they they know, like, you can look at the data and, you know, you can tell you can see that smaller funds tip tend to outperform newer managers tend to outperform. But for those large institutional investors to write a, you know, a five, or even a $10 million check into a $30 million fund just doesn’t want it to move the needle for them. And so and so they don’t, you know, they’ve got to write 50 to $100 million dollar checks, so they’re just fishing in completely different ponds. And so, you know, the challenge that that leaves then for some newer emerging managers is, you know, if you strip out institutional pools of capital, you know, that sort of leaves individuals and family offices. And so then on on the LP side, you know, on the family office side, the other thing we saw was that, and having sat in the seat at a family office, right, is, is there’s an explosion in the amount of, of new emerging managers, right every year, like it’s just going up into the right. And so the folks that we are that that we want to partner with, right, our family offices that don’t necessarily have a venture team or venture person, right. Typically they have, you know, maybe a CIO. So maybe it’s just a family, or maybe they have a CIO, but that CIO covers multi asset classes, so they do stocks and bonds and real estate and credit and everything. else, and venture and private equity. And so what we saw was, you know, folks like that, in the last cycle tried to, you know, they’re interested in venture, they want exposure to the asset class. And so they tried to go direct by, you know, by doing direct venture deals. And I think what they saw is there’s adverse selection and trying to do that, right, they’re not seeing the best deals. And so if they want to do it through a kind of fund to funds, or, you know, a manager strategy, right, they’re also getting 20 3040 pitch decks a year from emerging managers, and they all kind of look the same to them. You know, it’s like, they all got great experience, they have all they all have downstream co investors with logos that everyone recognizes, like. And so it’s kind of like, well, how do I, how do I choose here, and obviously, the dispersion in kind of top quartile versus bottom bottom quartile managers in the space is massive compared to relative to other asset classes. And so I guess that’s sort of the gap that we saw is on one side, managers can’t access the bigger institutional funds. And on the other side, you’ve got LPS that want exposure, but don’t know how to select managers. What’s

Alexa Binns 16:19
a typical fun offense fee structure for our allocators? Who are like, Oh, maybe I should be doing this instead.

Josh Porter 16:28
So typical fee structure for a fund of funds, and, and we don’t. So we we think of ourselves as slightly different, right, we’re hybrid fund, but so for, I guess, for typical fund of funds is anywhere from call it 1% management fee, annually, and anywhere from, you know, five to 10% carried interest, and maybe you can step up more than that if there’s, you know, performance hurdles, or whatever. But that’s sort of the kind of standard fees for funds of funds. And so, you know, we spent, obviously, I’ll keep an eye. I came from the family office world and, and spoke to lots of different family office investors. And for a lot of them, that’s sort of a non-starter, they just can’t stomach paying basically three and 30 for an investment. And by the way, that’s totally fair. And so that was actually the first thing when Keith and I sat down to do this, that was, that was the first thing we whiteboard, it was how do we set up a fee structure for our fund, and our vehicle? And can we make a product that is kind of tailor made to people who believe in the benefits of a fund to fund right the the diversification of, of having, you know, 15 underlying managers and three, four or 500 underlying portfolio companies, but not wanting or kind of being anemic to paying the added layer of fees. And so when we thought that through, you know, that’s sort of that’s sort of dictated our portfolio construction, portfolio weightings in terms of so, you know, our, the way that we structured our fund is, a third of our investments will be LP commitments into emerging managers will do about 15 to 20 of those. And then the other two thirds will be direct investments and to break out companies out of those firms. And so and so the way we set up our fee structure was such that, you know, on the, on the, on the third of the portfolio, where we’re investing in funds, you’re gonna pay double layers of fees. But then on the other two thirds, you’re actually going to get a fee break, you know, relative to other investors in the market. So that, you know, on a fully loaded, kind of blended basis, our investors pay roughly two and 20. You’re close to it. Josh,

Earnest Sweat 18:49
from the original kind of conception of the idea of the fund to now, were there any kind of shifts in strategies or just learnings as you went out into market? On your own?

Josh Porter 19:01
Good question. You know, I would say, I wouldn’t say the strategy has shifted, and it’s only been a year. Yeah. And so I think if the strategy shifted, probably we didn’t, we probably didn’t have too much conviction in it. But then I would say that, and in some ways, I think that the market has kind of validated a lot of a lot of things that we sort of thought of when we set out to do this a year ago. But I wouldn’t say that there’s any kind of nuances in the strategy that we stress tests all the time. You know, I’ll give you an example. Right now, we think that there is a kind of better risk adjusted returns to be had in the preceding market relative to the seed market. Right. If you believe the data, which you know, in our business I’m sure you guys know it’s it’s it’s hard, right? Like I think that’s the worst part. about this job is that the data is opaque. It’s self reported, there’s a lag to it. And so even as you’re looking at it, you look at it all the time. It’s hard to trust, right? But right now, it looks like almost every stage precedes series growth, you know, pre IPO valuations have come in pretty dramatically over the last 24 months. Seed is the only category that we’re that really hasn’t happened yet. And so, you know, that’s, that’s kind of influenced the first couple of investments we made for sure.

Alexa Binns 20:35
How does this cool investment strategy play out? In real time? What’s it actually look like?

So basically, what we want to do is, you know, we want to invest in, in managers, we want to, we want to be kind of a hands on partner to them, we want to kind of track the underlying portfolio as they’re investing. And as they’re building it. And this is kind of something I’ll keep an eye on all the time as I go through the portfolio. We’ll do our desktop diligence on companies that the managers have invested in either out of the fund that we have committed to or out of prior funds. And, you know, we’ll get on the phone and say, here’s the three or four things that we’re really interested in. And if it’s, if it’s something where the founder can make an error, then the manager can make an introduction to the founder and will start those conversations as soon as possible, right? And the idea is, we want to get kind of ahead of a financing round, right, so our CO investment strategy is to come in, once the managers that we invest in exhausts, follow on reserves. So typically, that happens, you know, kind of around Series B, there’s sort of other metrics we want to see on our side to, to make it, you know, an interesting investment for our strategy. But we want to kind of call it six months ahead of that of that series B term sheet getting dropped. And so this is I mean, again, this is kind of one of the one of the kind of core tenets of the thesis, which is something we saw again, and again, when we were investing at the family office, which was, you know, we were investing in these smaller funds, 2030 $40 million funds. And what would happen is, those folks would make a precede seed investment in a company, they, they’d get 810, nine 10% ownership, right, they’d follow on one or two rounds, and then what would happen is, you know, company would be start to break out, we’d be doing really well, they’d get a term sheet from a tier one, and that manager would get an allocation into into the round. And those will be kind of chunky allocations, it could be three, four or $5 million allocations. And so the manager would would, you know, they’d spin up an SPV, they would get on the, you know, they send out a blast email to their LPs and say, and by the way, these are all folks who, when they made the LP commitment, really said that raise their hand, and so we really want to see co investment opportunities. And then what inevitably would happen is half of them were busy, you know, some because they’re just and it’s to no fault of those family offices, right. They’re just the problem is, and this is kind of what we’re trying to solve is like, they’re not set up to make a decision on a direct venture investment in 10 days, right, which is or less, which is kind of what you have to do when those when those deals come together, because they move quickly, you guys know. And so and so yeah, we just, we just saw that again, and again and again. And the manager would spend, you know, 10 days or two weeks away from their day job trying to fill this SPV and walk away with a half a million dollars in the SPV. Right? And then they look kind of foolish to the founder. And it was just kind of a bad experience for everyone.

Alexa Binns 24:05
Can you take the guesswork out of that, like that? That when you’re the GP saying I think I might be able to go get you three, four, and then you go out to your network, and you only come back with 500. Okay, or whatever it is. Yeah. Can you take the guesswork out of that for your GPS that you’re like I I mean, how does, how do you actually make that easier for your GPS. So

Josh Porter 24:28
What we want to do is say, is to meet that founder again ahead of time, so that we can build conviction and kind of get to a place where we can tell the manager we love it. We love the business. You know, obviously this never has to happen. The SPV can happen, but can we kind of anchor that SPV like we’re okay to invest on the direct side through an SPV? Yeah. And paying fees like we want to, you know, we would hope if we are you know, A majority that SPV will will pay below market fees. But I think the idea is that it enables and gives the manager confidence that they can go out to their LPs and say, Hey, this deals coming together. First look is already in for, you know, million or million five, you know, if you guys are interested, you know, speak to us, speak to them, whatever. And so we hope that I mean, look, even if they don’t, even if they can’t wrangle other LPs into that vehicle, they’re still hopefully in a better place than they might have otherwise been. Yeah, for

Alexa Binns 25:31
sure. No, first look, the LP that says they want to co invest and actually does. That’s yeah,

Josh Porter 25:37
That’s the idea. And so that we get a first look at those deals.

Earnest Sweat 25:42
I love it, Randy. Now we’re gonna take a quick break to speak with our sponsor. On the show today we have an industry expert and sponsor Nik Talreja, co-founder and CEO. Sydecar helps you start and run your fund or SPV, so you can focus on making deals not spreadsheets. Nick, it’s a pleasure having you here today and partnering with us at swimming with Allocators. But first I would love to hear what’s the origin story behind sidecar.

Yeah, thanks for having me here. And it’s been an honor working with you and a privilege to be here. The Origin Story Behind the sidecar was really solving a problem that I faced in many ways. I was you before the sidecar. Prior to that I was a lawyer, I practiced law for about a decade in New York City, and in the Bay Area, worked at larger firms taking companies public in New York. And then I moved to the Bay Area where I worked with startup companies and venture capital firms and really got enamored with this whole notion of creating something from nothing and trying to solve problems for the whole world with with a lot of energy and passion, that took me down a path of venture, starting my own law firm after working for larger law firms. And when I had my own law firm, I’d work with companies from the zero to one stage frequently, you know, people would come to me with just an idea, they needed an entity, they needed a business, you know, to actually take that idea to their commercial mission. And I would help them with that process, help them grow their team, help them with fundraising, help them with, you know, whatever commercial transactions they have, so on and so forth. And I would see this growth and think, Well, I’m not really playing a part in that I’m just serving as their advisor and counselor, I’m charging an hourly fee. I want some upside, I want to be a part of this journey started in investing behind these companies that were my clients. And that’s, that’s really the origin story of sidecar. So when I started investing behind these companies, I used SPVs. And I did look at the market at the time, because I didn’t want to do everything myself, I could, of course, put together legal forms and open bank accounts and whatnot. But I didn’t want to handle the tax returns and the accounting side of the business. Ellsbury, who’s out there doing what I need, who’s creating software for myself and emerging VC. And I found that short of a marketplace type of environment, there really was no software. So really, sidecar was born out of a personal need of creating software for my own business of just investing behind my clients, which then became investing in other businesses, which then became supporting other investors and running their businesses of investing buying companies. So it was a very organic type of growth here. And of course, over the last three years, it’s been really fun growing to hundreds of customers and moving over $100 million through the software that we built. But it really started again, out of just the personal need for something more.

Earnest Sweat 28:40
Who uses a Sydecar other than me, and why?

Other than you and me various emerging venture capitalists, you sidecar. So anyone that’s trying to perhaps launch a fund, right and wants to build a track record to prove that they know how to find great opportunities and back world changing founders, they use sidecar to build their track record. If you have a fund, you know, you know, the benefit of being an LP in a fund oftentimes is the ability to co invest alongside the fund behind the fund’s winners, those funds used to create SPVs alongside the fund. Many first time fund managers use this for their first fund given that we now have a fund product called fund plus. So really anyone in the venture ecosystem is a prospect for us and as a customer. Now

Earnest Sweat 30:56
awesome. One thing I’ve been impressed with, and I have to admit, I was a little naive when first kind of like even deciding which platform I want to use for my SPVs was your delivery of K ones. Could you share with us why this has been kind of a focus area that, you know, historically has been ignored. As one example, I have been, I’ve invested in, you know, very legit, established Chronos funds, and have waited six, nine months for K ones before.

Yeah, you know, late K ones are something that folks are not happy with. And, you know, in our world fund administration, businesses have largely been very manual and how they operate, right. So if you think about a fund administrator, I don’t think the image that comes to mind is software. I think it is fun for accountants, using Microsoft Excel, consuming legal forms, interpreting them, putting it in some accounting platform, generating financial statements, taking those financial statements working with a tax advisor, generating tax forms and distributing K ones. That’s the world that existed prior to side current still largely exists when you think of a fund administration. But in our world, we didn’t want late K ones. At least K ones . We could control the delivery of certain K ones that will undoubtedly be late still, because you can’t issue them until you receive information about that process. However, for the vast majority of private investments in venture capital, there shouldn’t be any late payments, because it’s a pretty simple, straightforward process to generate that. However, that world can only exist with software that actually gets everything done in a timely and organized fashion. So we basically had to build software that was bespoke and opinionated around the types of structures we create, how you get into these investments, how we track capital flow, how we write to visit basically proprietary proprietary ledger, and then build your own accounting and tax systems around those, those information centers to generate K ones right and issue them to your investors.

Earnest Sweat 33:23
Nick, you’re clearly out ahead of the future of venture capital. For those interested in using Sydecars software, please visit backslash allocators. And now back to our allocator interview. Josh, to kind of not push back on the on the on the model, but there has been a rise of hybrid models in different levels of success. Yep. Why do you think it’s so complex and hard? And what are you all trying to do differently? From the kind of like, back into, you know, in the day, you can assume? Oh, they’re only pushing the things that

Josh Porter 34:06
are? Yeah, so. So there’s definitely, you know, a handful of firms and funds that kind of look like what we do. I would say, I would say one thing that that I think makes us unique is we for us it’s our investors are investing in one vehicle, right? And so our LP commitments are coming out of the same vehicle as our direct investments. Right. And so, one of the sort of attach your question about one of the reasons why it makes it kind of hard is like, our fee structure looks a little wonky. And so, you know, when, when, when we and this is something we talk about internally all the time is like how do we position ourselves like is hiring I was calling it a hybrid fund . Do people understand that? And when they see the fee structure, You know, people are just accustomed to seeing things like Doom and 22 and 20, you’re like wanting to enter. And so when they see ours, it looks a little different. And there’s a bit of an education process that goes into kind of explaining why we set it up this way. But the reality is that we wanted to make sure that on the fund investing side, we had a mechanism in there that kept us honest, right? And so if you believe like we do that there is alpha in smaller emerging funds, right? Then those investments can, can and should be treated like direct investments, right? If you can get a 5x or an 8x on a fund, you’d be happy to get that under direct investment, right. And so what we didn’t want to do is create a fund to funds vehicle that had one fee structure and a direct investment vehicle that had another fee structure and that they were sort of SR or arm’s length relationship funds. Because we felt that, that that would you could you could imagine a world where that would lead you to make some investments on the fun side, that could be purely for deal sourcing, right? And so we just said, ” Look, if we think that if we think we’re only gonna make 15 of these investments, these fund investments out of this fund, we have to believe that every one of these investments can be a 345 6x font. And if we do that, we feel pretty good that we’re going to see a handful of opportunities out of that out of that manager that we can then co invest in later. And so if you pull it all together, we think it can be a pretty unique product. Are

Earnest Sweat 36:41
you on the hunt for managers right now? Always?

Josh Porter 36:46
Yeah, no. Yeah, we are. We

Earnest Sweat 36:51
How are you? How do you usually source them?

Josh Porter 36:55
so sourcing, how do we like to source? Just cold, LinkedIn, just email me, no emojis. No, sourcing comes from me, you guys know, it’s like when you’re, if you’ve been in the business for a while you’ve got, you’ve got a pretty healthy network of people. And so you start to reach out to them and tell them what you’re doing. And we’re, you know, word gets around, especially in a market like this, where there’s a supply and demand kind of imbalance of capital, it’s like, the word gets out pretty quickly that of who’s actively deploying. And so, so yeah, obviously, like, you, obviously, you always want to get, you always want to get deal flow from trusted sources. And so, you know, we talked to founders, we talked to other GPS, we talked to, you know, we’ve got I got a list in front of me of, of, you know, about 45 family offices and institutional LPS that we know, are at least looking at it, emerging managers. And so, you know, we’re, we’re on the phone with them all the time trading notes on managers, and hey, have you seen this one? No. Have you seen this one? But, and I know joked about the cold inbound, but like, I actually don’t, I know, some people are like, that’s not the best way to reach someone. And like, I don’t like, I think it’s fine. I think that, like, I’ll respond to a LinkedIn note or a cold email, if it’s a compelling enough, you know, opportunity. I think that is usually probably a better way to get to someone, if you just take like 10 minutes and do a little work, you can probably find someone who will introduce you, but yeah.

Alexa Binns 39:15
And what are you looking for? What are you filtering for?

Josh Porter 39:21
Great question. So we are looking for, you know, at the end of the day, we’re looking for either sector experts, right? For managers. So basically, we’ve got to believe that that a manager has a unique edge in terms of in terms of sourcing, and then in terms of evaluating and winning deals, and so that edge can come from, you know, either you were a founder or or an operator in in a sector right and that kind of gives you the right to do To win deals in that in that sector, or, you know, it could be you are you’ve got a geographic edge, you know, you’re the, you’re the go to precede fund in Austin or Denver. And so, so first and foremost, we’re looking for, well, yeah, yes, we’re looking for an edge on source, and we’re looking for an edge on winning deals. And then beyond that, right, where we want to see, we want to see a track record of that you are investing into that the fund that you’re raising, now, you have a track record of doing something like that, right? A lot of the times you see people that will, a manager will have a, an angel portfolio, and, but the problem is the angel portfolio is like, they invested, you know, 500 posted in this thing, and they invested in this category that they’re not doing and so like we want to see, like, is there consistency with what you’ve been doing? And what are you saying you’re gonna do? You know, and then and then kind of beyond that, we want to see that you are, you at least understand the responsibility of being a fiduciary? Because that’s something that is not, you know, it’s different than angel investing or, or maybe investing for a family office. You know, you’ve got to, there’s just, there’s a lot more, there’s a lot more rigor that goes into managing a fund for other people’s money. Yeah,

Earnest Sweat 41:34
it always comes up if you know, it’s a hard transition from an investor to a fund manager. And so I think a lot of people kind of don’t don’t understand that. What are there any strategies that you haven’t seen much of that you think would be successful?

Josh Porter 41:52
I mean, we’ve seen a lot. So we, so we started looking, we kind of really started looking at deals and called it summer of last year, and we’ve looked at 250 managers in our strike zone. And so we’ve seen quite a few, you know, we’ve seen a lot of strategies. One, you know, there’s a couple that stands out because of, I would say how unique they are, that I think are just sort of interesting and worth mentioning. There’s a there’s a fund in New York, and I won’t, I won’t give names, but there’s a fund in New York that they are investing, they’ve got a whole thesis around investing in immigrant founders that are repeat founders, who had a prior exit between 10 and $200 million of enterprise value, and are building their second company in the exact same category. And I was like, that is pretty, I mean, that is pretty niche. But you can see why that would be 100%. Yeah, potentially be an outlier fund. And

Earnest Sweat 43:10
it had to have happened between 2011 and 2090. Well,

Josh Porter 43:16
Basically, it was like he put a tarp on, like the exit value, because it’s like if the founder made too much, probably not as hungry as they want them to be. If they made too little, they might be taking too much risk. I thought that was cool. And then there’s another one, there’s an accelerator Earnest in your neck of the woods that we’ve spent some time with. And they, I guess sort of similar, but like, they’re looking for repeat founders, where they are kind of early to mid 30s. That is where they’ve got a spouse or a partner, no kids yet, but want to have a family and want to take one more swing before they have a family. And again, I thought it was just a unique strategy. I would

Earnest Sweat 44:07
I love to see that decK.

Josh Porter 44:11
Blast, I’ll ask them if I can share.

Earnest Sweat 44:14
That is That is some strategy.

Josh Porter 44:17
There was one where it’s funny we were talking to this if we haven’t seen this, but I actually thought this was kind of clever. We were talking to a founder here in LA who very successfully took a, you know, founded a company that he took public. And he has since moved on to academia and we were chatting with him. And he said, You know, there’s all of these. There’s all of these funds out there that are kind of alumni funds for colleges. So there’s like GPS out there that’ll invest in Stanford alumni or Princeton alumni. And he’s like, I actually think that the affinity networks are stronger and the relationships are stronger for private high schools. And I thought about it. Right. And so he’s like what, you know, could you build a fund around? I’m just spitballing, like, Phillips Andover alumni or whatever. I thought that was interesting. So, someone to go build it.

Alexa Binns 45:14
Yeah, for sure. I think Sam Altman just spoke at my husband’s 100th high school reunion fundraiser. And I don’t know where to get high school, he wouldn’t do the same for his college, frankly. He was at Burroughs, which anybody from St. Louis asks, the first question they ask is, where do you go to high school? Yeah, and, and so I think for those particularly, sort of exclusive well heeled, high schools, that’s interesting thesis, it was a really impressive 100 high school reunion,

Josh Porter 45:53
I got

Earnest Sweat 45:56
I have nothing to contribute to this conversation.

Josh Porter 45:59
I’m a brat. By the way, I’m a product of public school. Me too.

Earnest Sweat 46:05
Although I went to a lot of colleges with a lot of those schools and learned about speaking, so is it a good time to be allocated to venture you think, versus other asset classes? I

Josh Porter 46:19
mean, yes, otherwise, we would not be we, I would hope so otherwise, we wouldn’t be doing this. But I mean, look like there are, there’s certainly dynamics in the market right now that that, you know, would lead one to believe that 2024 or 2025 will be pretty interesting. vintages, just in terms of, like we mentioned earlier, the supply demand and balance of capital, right, there’s more, there’s, there’s more higher quality founders chasing less capital, right. And so, you know, that means that prices have come down. And the ability to kind of access higher quality companies for investors has gone up. But, you know, just like in public markets, right, it’s, it’s really, it’s impossible to try to time the market. So I think like, if you’re going to invest in a sound self serving, but if you’re going to invest in a venture, you’ve got to do it and commit to it. And it’s got to be part of your strategy. You can’t, you can’t kind of dip in and out of it. There was I think it was stepstone, or industry ventures, I think was steps done to this, release this research paper, this white paper in q4. And it was super interesting, it basically they looked at funds between I think 1970 and 2022. So pretty, you know, pretty deep dataset. And they found that 95% of returns came from an index track, like 2000 funds, 95% of returns came from six vintages. And so, and they weren’t net, right, and you and they weren’t necessarily the vintages you would have thought like necessarily after a correction or whatever, which kind of speaks to the power law nature of the business. And so it’s like, if you’re, you can’t say like, I’m gonna do this fun, but then not the next one, I’m gonna get back in when I think the market just doesn’t work that way.

Alexa Binns 48:19
And any final points that you think would be relevant to this audience are things that you find yourself debating with your partner? I

Josh Porter 48:28
mean, there’s lots but I think like, I think, you know, I think one of the one of the hardest worst parts of, of this business, for any investor is you meet, you know, you meet so many great talented people that you know, are going to, you know, they’ve got it and they’re probably going to be wildly successful. And unfortunately, you only have so much capital, and so you have to make really hard decisions. And so, you know, sometimes you’ve got, it’s just the nature of the business, you’ve got to pass on people that you’ve built a relationship with, and, you know, over time over the diligence process, and so, you know, that’s something we think about is like, how to, how do you how do you pass and kind of the most respectful manner? And how do you, you know, what can you do to be to be to offer advice or anything and how, how can you be authentic about why you, you know, why you said no, and so that’s something we kind of, we kind of think about a lot

Alexa Binns 49:50
all those people are worth your time. I feel the same meeting with founders that you’re gonna cross paths again in totally. When When they need when you need something from them excetera totally

Earnest Sweat 50:04
No ghosting, Allocators. No.

Alexa Binns 50:08
Okay, see you later. Go see an Allocator.

Earnest Sweat 50:13
Josh has been a pleasure. Thank you so much for your insights, a lot of fun. Appreciate. Glad to have you on.

Josh Porter 50:20
Yeah, appreciate it guys.

Alexa Binns 50:26
See you later, Allocator!

Proudly sponsored by

Subscribe for updates on events and resources for LPs and VCs.

The Hosts

Earnest Sweat

Earnest Sweat is the Founding Partner of Public School Ventures, a dynamic syndicate of over 600 technical operators, go-to-market specialists, and LPs. Previously, Earnest built new venture capital practices at Prologis and GreatPoint Ventures. His focus is on investing in value chaintech, specifically vertical SaaS, applied AI, middleware, and B2B marketplaces, which are poised to revolutionize foundational industries like real estate, insurance and supply chain. Earnest has sourced and led investments in companies such as Flexport, Flexe, KlearNow, and Lula Insurance.

Alexa Binns

Alexa Binns is an angel investor and LP. An experienced investor and operator, she has climbed the ranks from associate to partner at Maven, Halogen, and Spacecadet Ventures and built digital and physical products for Kaiser, Disney, and Target. Alexa has worn every hat in venture from fundraising to sitting on boards. She invests in companies with mass consumer appeal, focusing on the future of shopping, health/wellness, and media/entertainment. Key angel investments include The Flex Co, Sana Health, and Chipper Cash.

Copyright © 2024. Swimming with Allocators. All rights reserved.