Earnest Sweat 00:02
Welcome to Swimming with Allocators. I’m Earnest Sweat and each episode Alexa Binns and I give you a VC podcast from the LP perspective. You ready? Let’s dive in.

Alexa Binns 00:13
Hello, and welcome to the latest episode of Swimming with Allocators. Today’s episode is featuring Avanish, the high board member of HubSpot, representing both himself as a high net worth individual speaking to how he’s putting his own capital to work, as well as as a venture partner at the Brazilian corporate Fund of Funds Synapse, it’s not everyday you get to hear how somebody’s investing their own capital. We really appreciate how transparent he is. Thank you. Let’s dive in. Welcome to another fresh episode of swimming with allocators. Today, our guest is Avanish Sahai a board member of HubSpot and Birdie.AI Avanishis an expert in product marketing and ecosystems. He’s held leadership positions at Oracle Salesforce McKinsey Google Cloud, as well as a handful of startups. were eager to talk to him today in his capacity as a venture partner for Synapse, the Brazilian corporate fund of funds, as well as as a high net worth individual making personal LP investments. Thank you for sharing your perspective today.

Avanish Sahai 01:13
Great, Alexa, great to be here. And thanks for having me.

Earnest Sweat 02:39
You know, when thinking about someone as an individual looking to invest in funds, but like, what kind of led you to that, you know, you had some experience or, you know, you’re around the Silicon Valley technology space. How did you then take that step? Oh, I want to invest in funds?

Avanish Sahai 03:02
well, so I’ve been in the tech sector, and particularly in Silicon Valley, since 1989, which probably for some of the listeners is before they were born. Yeah, look, I think, a, it’s a, first and foremost, you have to network, right? Your access to becoming an LP is non trivial. There is a lot of demand, in some cases, especially the larger firms, they have that network of LPs, tend to be obviously institutional investors, that traditional endowments, many times founders and executives that have been in their portfolio before. So that’s the natural starting point, right? If you have any one of those qualifications, it’s a bit easier to have those conversations. Secondly, again, to the networking point, getting to know people right, understanding, who are they? What drives them? What are their investment, theses and strategies? And then third, I think as, frankly, as the network evolves, then network effects kick in, so to speak, which is you work with one and there, you know, you may join, have an opportunity to get to join an investment as a direct investor. And that one thing leads to another. You start, you know, building your own ecosystem of interesting firms and funds, and also sometimes the companies themselves. So it’s a progression. It’s a journey, to get to your point. So

Earnest Sweat 04:51
That kind of speaks to you know, one of my questions was, as someone who’s an individual, how do you really do diligence. I have friends in different points of their career who want to become LPs. And they asked me, you know, what should they be doing as far as diligence? So it sounds like from your perspective, the diligence was actually taking time to get to know these different firms gaining a perspective, and I guess a thesis of how you could help and then what, what interests you the most? But was there any other tips and tricks like, how you got to this point and learnings that you had to help develop kind of the process to oh, I’m going to put a check in to this firm versus this one?

Avanish Sahai 05:39
If you have the opportunity, it’s not easy. But if you can talk to some of the portfolio companies, of that fund, right, talk to the CEO that received an investment, either currently or previously, talk to some of the other executives, or maybe talk to some other co-investors. Right. They will give you that, you know, again, it’s a small world, people know each other, they talk. So they I think will give you the most accurate perspective, right? It’s not the fund memo, it’s not the investment deck, it’s really talking to people. And and again, the benefit of having been here for so long. That is a relatively easy process. I know, it’s not as easy for everybody. But it is a chance to do that. I would urge prospective investors in this category to take that approach. Get to know

Alexa Binns 07:07
When you think about the founder to VC, it’s like, there, it’s not like Shark Tank at all. Or your hand and hat asking please, sir, may I have my please have an investment? In fact, of the founders that you want to be backing and the GPs want to be backing are people who are sometimes difficult to get in touch with? And and? Yeah, it’s the who is selling who is much, much less clear but I think on a show like Shark Tank.

Avanish Sahai 07:40
Oh, 100% 100% agree with that. Yeah.

Earnest Sweat 08:13
We’re gonna take a quick break to speak with our sponsor.

Alexa Binns 08:16
On the show today, we have industry experts and sponsors, one of my all time favorite founders, John Ling, co-founder and CEO of Canopy. Canopy streamlines the administrative process, legal wires, taxes, etc. For private equity co investments and SPV. Thank you, John, for partnering on the show, what is the origin story behind Canopy?

John Ling 08:40
So I think I really started Canopy from, you know, an idea that I sort of observed when I used to work in venture, starting my career in venture capital working at a relatively early stage fund was around I think, you know, $20 million, ballpark. But I think what I really realized was, when I was there, we had a lot of, you know, large follow on opportunities, and some of our most successful investments were like, the pro rata was some magnitude beyond, like the size of checks that, you know, our fund is capable of writing. So, you know, my boss would like, go around, talk to some of his, you know, closest LP relationships. And then, you know, I guess we don’t really set up a lot of like co-investment vehicles, I think, largely because, you know, it’s not to general partners, like main job, right, their goal was really to make sure that their existing investments are successful. And it really takes up a lot of time in terms of managing the data room, their relationships, getting all the documents signed, and so on and so forth. So I think when we were first thinking about it like, hey, how do we streamline this process? A lot of it is really sort of like taking a step back and viewing the sort of investment problem or the CO investment problem really as more of a process problem. And that’s why we sort of built an end to end platform right where we help you manage your LP relationships, help you circulate investment opportunities, get documents signed, get the bank account set up, get the wires in wires out, etc. And yeah, I think that’s kind of, you know where we started.

Alexa Binns 10:13
No, it’s it that pro rata is so valuable to be able to actually take advantage of it.

John Ling 10:22
Yeah, I really think it’s a way for people to, you know, compound their returns on their best investments very easily. I think like that. I think the ease factor is probably like the biggest portion of it. I think a lot of people don’t do it today because they’re like, Okay, I have to like, send emails with all of these LPs are going to ask for all the information I’m gonna forget why talk to maybe like you overcommitted allocation, suspect this specific LPs, and then they’re mad at you now, because you’re like, oh, actually, I have to cut you back. Even if I told you, you could have like $10 million, or whatever it is, right. And I think, you know, having a built-in dashboard to track all of these things is very valuable, especially across like, you know, multiple GP or multiple stakeholders, right? Where, you know, a lot of times, it’s like, hey, you know, maybe I hold really tight, you know, LP relationships with these three people, my partner holds, you know, really tight LP relationships with these other three people. And then we don’t really talk, right. It’s not like we’re on a Google sheet or something like that. I think most people tend to operate individually in silos, and they only come together every now and then. So I think, like, really having a platform helps a lot in terms of communicating with everyone. Right, and making sure everyone’s on track.

Alexa Binns 11:40
Yeah, absolutely. So how does this course indicate product work?

John Ling 11:46
Yeah, I mean, I think the way we really think about it is, at least in terms of like differentiation from, you know, platforms like Angel lists, at least historically, we tend to think of ourselves as like, you know, software to help you run your business more so than actually like, Hey, you can use our fund infrastructure right, as a master quote, series vehicle that people tend to set up. But yeah, so I think our thought process is, you know, we go through onboarding, we show you how our software works. And then at that point, it’s sort of like up to you, we make it really easy for you to, you know, import your LP database from whichever source you have, we tried to make the process really streamline in terms of circulating opportunities, as well. So, you know, probably enter, and you can set up an opportunity, and maybe in like, I don’t know, 20 minutes, depending on how much detail you want to add into it. We have some you know, AI capabilities as well, where we can say like, Hey, give us a pitch decK, give us like, the latest board decK or like, you know, whatever email summary you have, and then like, we will put together like a summary or like a memo for you, right. And I think like things like that, where we really try to make the process a lot easier and removed, sort of, like the onus on like, the GP to prep really, like all of the materials just makes it a lot easier for them to say, like, hey, you know, like finger into when like, is this something that you’re interested in? Right? Like they’re raising, I don’t know, if I have a million dollars led by whatever, just like the latest revenue numbers, like, if you’re interested, we can hop on a call, right? But like, you don’t want to sort of like, waste too much time. I think figuring out if someone is actually interested or not. And like, as I think the GP you really want to like really focus on very high conversion rate conversations. And I think our goal is to help you do that very easily. And I think after that, like once you’re ready to commit, you know, you just click a button to sign, click a button to wire, obviously, like, I think that’s for smaller checks. So we also work with, you know, individual investors, like syndicates, right, and a more traditional angel list type of model, where they are more comfortable saying, Okay, I’ll leave my bank account. And I’ll click a button to send the money to you. Right, whereas obviously, larger institutions would be like, Okay, let’s do a call back for wire verification. Right? And we’re around for that, too. So yeah,

Alexa Binns 14:09
No, that’s, that’s helpful to understand that you’ve got these giant, limited partners coming in on some of these co investments all the way down to angels writing smaller checks into syndicates, under percent. John, you clearly are out ahead on the future of venture capital. For those interested in using Canopy software to set up funds, manage capital, and report performance. You can please visit hay Canopy.com/allocators, and then Earnest and I get credit for sending you thanks so much. And now back to our LP interview. What do you think about allocation to private equity, in the context of your personal wealth? That you are in the room and you do not know these people? But, where does it sort of fit? When you look at your retirement plan? And if maybe what you want to pass along to your kids? Yeah.

Avanish Sahai 15:09
Look, I don’t think there’s a definitive mathematical answer to that, right. But I sit down, you know, with my spouse, with our set of advisors, okay, what’s, what’s a range of allocations, right that we should be considering different types of vehicles. And could be too investments in venture firms could be through fund to funds could be in, you know, access to some more typical PE funds and say, okay, based on the total assets that we have liquid non liquid short term, long term, etc. What’s our comfort zone and allocation? So those are the kinds of things you have to really sit down and think about, and then maybe start with a tiny percentage. And then as you feel more comfortable as the process becomes a little bit more familiar, you can increase it to maybe high single digits or higher, but it’s I think it’s a, again, it’s a journey and a process.

Alexa Binns 16:19
Yeah, and you had mentioned that timeline too.

Avanish Sahai 16:23
Well, that’s the one thing that sometimes people forget, which is, the typical life of a venture fund is eight to 10 years. I hate to use a very simple analogy, but it’s not like a mutual fund, that he can redeem with a, you know, a days or two days notice, right, these are this, these investments are committed, they are somewhat, obviously stuck in that fund, and in the portfolio, they’ve invested it. And then over time, maybe four or five, six years down the road, you’ll start seeing some returns based on exits based on hopefully some IPOs and whatnot. But it is a long game. And I think that time horizon is sometimes something people I don’t know if they forget, or if they don’t, don’t take the same amount of time thinking about, but you know, whatever allocation you make to it, you’re not going to have that in liquid form.

Alexa Binns 17:58
I have there’s an amazing quote from Jason CalacanisIs that he and his wife called him money bombs, because you kind of like forgot that a decade ago, you like invested in this emerging manager, and then like, the one company hits and distributes, and you’re like, yeah, 10 years later, surprise money bomb.

Earnest Sweat 18:34
But it speaks to what you were talking about, like you need to, you know, talk to your financial advisors and see what essentially can you put away that can go to zero or one day? You can have Moneyball? Yeah.

Avanish Sahai 18:50
I will put it hopefully a lot more than money bombs in the zeros. But yes, yes. Yes, yes.

Earnest Sweat 19:51
I would assume from your experience in developing relationships, you really leaned on your expertise and knowledge within the tech industry to have Have more comfort. But as we know, in America, there are so many wealthy people who are outside of the technology industry. And yet they’re hearing more and more about technology, either startups and venture capital being the best asset class of equity, best performing as equity asset class, or they’re hearing about technology to train their industry, that they’re wanting to get involved. How would you advise them on that comfort level of where they should start? Is it finding the right advisors? Is it? What would you say to them?

Avanish Sahai 20:39
Yeah, look, I think you, you asked it exactly the right way, or just, I’ve been involved in the software business for 30 plus years. Yeah. So this one, arguably, I would think of myself as a bit of an expert. And if it’s a software company, in whatever form from a software as a service to cloud computing, to now even AI, FinTech, etc, I can do pretty good diligence myself, and either, obviously, work with a venture capital firm, or maybe even make a direct investment as an angel. And again, I have high confidence that I will, I’ll have a pretty good sense for what the opportunity is, what the challenges are, where I can be helpful, etc. Right. So that’s, that is a, frankly, privilege of I’ve been in the sector, if someone is not coming from a particular tech sector, and we know again, there’s biotech, there is life sciences, there is now frankly, there’s been a lot of crypto for a few years, right, all kinds of things. I think you have to find, again, trusted advisors, and there’s ways to do it either indirectly through fund to funds. And they do the allocation, they do the diligence, they do the analysis, or through other forms of advisors. But don’t, I would strongly urge folks to not go down this. Because it’s hard. So I think finding the right folks to help you in that process is super. Speaking of fund of funds, our audience may not be familiar, not familiar with Synapse. Could you give us a quick background on the organization that you work with?

Avanish Sahai 23:29
Yeah, so Synapse VC, is a Brazil based firm, and we call it a platform for investing in diversified assets. What does that mean? We are closely affiliated with one the largest multifamily offices in Brazil, that manages multiple billions of dollars on behalf of a number of families. And what we’ve done with Synapse over the last six, seven years, is build a model where we’re exposing these multifamily offices who’ve, you know, raised, they’ve raised funds from their personal wealth, and their trust and so on. But to the point we were discussing earlier, not that familiar with either the venture model, the technology business, they’ve read a lot about Silicon Valley, many of them have visited, but they don’t have that proximity to the network that we were discussing earlier. Right. So what we do is provide those family offices, and that multifamily office for access to the venture model, right so we are a fund of funds in that sense. So we try to be that bridge in that communication. And then occasionally, with Synapse, because we have relationships with some of the best firms in the Valley. We also make coinvestments. So we can allocate part of those funds to invest in venture firms as an LP. And another part we make direct investments in companies that we think are of high potential. So that’s the basic Synapse, Synapse VC background.

Alexa Binns 25:58
And you carved out a role for yourself as a venture partner, what, what what are you? What does that mean? What does

Avanish Sahai 26:08
Does that mean? Yeah, so we have two, two of us who are retired. I didn’t say this. But I My background is I’m born in India and raised in Brazil. The founders, the founding partners are in Brazil, but a couple of us, Emilio Umeoka, have lived and worked in Silicon Valley, and in some pretty well known work with some pretty well known companies for quite some time. And we both thought this would be a good way to both, frankly, diversify a bit of our time. We are LPs ourselves in Synapse. And what we’re doing as a venture partner, is do a couple of things. One part of our time is spent with the investor, sorry, with the VC funds, where we are investors. So we’re continuing to remember, we talked about relationships, right? So we continue building on those relationships, going to their LP meetings, meeting individually, with the general partners, understanding investment thesis, changes in kind of market trends, understanding what stages of funds they’re raising, etc, etc, right. So it’s a kind of a more in depth on the ground engagement. The other thing that we are doing as Venture Partners is also because we have backgrounds in the tech sector, Software as a Service, enterprise software, etc. We’re also resource to some of the portfolio companies, but those VCs, and then a handful of times, we’ve also done, as I mentioned earlier, co investments with those firms, so we can be you know, an advisor, we can help them maybe navigate a particular set of issues, et cetera. So it’s a few roles like that, where we’re using our backgrounds to be a skilled, experienced resource to both VCs, and to their portfolios.

Alexa Binns 28:46
That boots on the ground? Yeah.

Earnest Sweat 28:50
What do you think about, I would assume with international family offices, and their interest in venture right, the US has a very mature market that still has a lot of upside. What’s the kind of thought process on portfolio construction, especially from your venture partner role of being that advisor and letting them know where the winds are going? When it comes to, you know, established firms, versus kind of emerging managers, when there could be at any point in the market. There’s a point when people are when firms have reached a point of relevant relevancy, and that they plateau, and others come up to find the best companies. Yeah,

Avanish Sahai 29:42
That’s a great, great insight. And, and, and that is a bit of our investment philosophy, by the way, so I can’t disclose which firms we’ve invested in due to confidentiality. But there’s a handful of major firms that are well known and very well known, globally. that we’re investors in. And then we’ve also picked a small number of emerging managers, where we believe in their, again, their backgrounds, their theses, the early portfolio that they’ve built, et cetera. So that is an ongoing process. And just by nature, those of us involved with the firm, and the multifamily office that we’ve worked closely with, are all very analytical. So we look at tons and tons of data, we look at, you know, investment reports from the major banks, from consulting firms, from the research firms, etc. We talk to a lot, and I do meet a lot of folks in academia. So that kind of builds our knowledge base. From there, again, I think it’s really important to reiterate this point, it is about relationships. So if we find a trend, and we, you know, find a few, the firms or funds that we are interested in, we’ll try to reach out to them maybe through direct contact, maybe through part of our network, start getting to know them. Right. And sometimes it may take years. I don’t mean ears of those conversations, before we actually make an investment. Right. And again, it’s a two way street. We are trying to bring some to the table. The firms and funds are looking for folks who can add something to their mix. So it is a you know, a set of ongoing engagements and conversations. That it’s not an overnight, neither an overnight decision, nor an overnight success. Right. So these things take time. But we do try to keep a global perspective. Right. So what’s happening in India, what’s happening in Israel, the cybersecurity space, what are some trends of things may be happening in markets where we don’t want to get into, because we don’t have, you know, maybe confidence in the market opportunity or some of the investment thesis. So all those things are part of our regular process.

Alexa Binns 32:44
Are there any exciting opportunities that you are focused on?

Avanish Sahai 32:49
So it’s a bit trite to say this in 2023. But we certainly think that AI is obviously a trend that’s here to stay. Someone said, this neck and so quoted, but I can’t attribute it because I don’t remember who said it. And the point is, it’s probably overhyped in the near term, but underhyped in the long term. So we believe that AI based applications, not just the infrastructure, but also the applications and how it gets incorporated into other offerings, and so on, whether it’s in supply chain, whether it’s in consumer apps, whether it’s in stuff we do day to day, it’s here to really make a massive difference. So a lot of our discussions, research, education, I did a session with the LPS up Synapse earlier this year, to get them, you know, to the point of the boots on the ground, give them a view from here, what it means, what some of the challenges are, what some of the risks are, etc. So that certainly is one we’re actively looking and involved in. So another one that we’re approaching, have not done huge investments in is cybersecurity. We think that is a category where, again, the more digital we go, the more we have to be aware of all forms of bad actors, right, whether they’re internal, whether there’s nation states, whether they’re bad characters, etc. So I think that one still has a lot of future potential. And then again, because of our backgrounds, our tendencies to focus a bit more on the software and enterprise software sector particularly. So things like consumer software, and the like we would probably stay a little bit away from because back to the point made earlier, we cannot bring a lot of value to the table. We’re not experts in it, we don’t have particular networks in it. So we’re not going to be a very valuable partner to either a founder, or to a venture firm on that front.

Earnest Sweat 34:16
Thanks all since I totally agree with you on a lot of those fronts in the near term. I think the AI’s application, the products that come out of it, are especially verticalized. Ai, I think, is going to be critical, given the labor issues in this country and over the world, and diminishing returns that we’re getting from legacy technology. What do you also see as opportunities internationally as well? Are there any markets that you’re for a firm that is particularly excited about outside of the US?

Avanish Sahai 35:00
So I guess, like I mentioned earlier, my background is a bit unique in that I was born in India, raised in Brazil. So we’ve been doing some investigations into India. And India has grown very, very dramatically in the last 10-15 years, both from a startup ecosystem perspective, from global companies and global opportunities perspective, and frankly, from a pretty, pretty well oiled and active venture community as well. So, arguably, I’m a bit of a bridge into that, in terms of, you know, getting to know people investigating what, what some of the trends are, how is it moving from a labor cost arbitrage perspective, which is where it started 20 Some years ago, to really some pretty dramatic innovation that’s coming out of India in many, many different fronts. So I think there’s some exciting stuff that could happen there. As I mentioned briefly, I think Israel is a really interesting place. From a, you know, obviously, our thoughts are with Israeli folks in terms of all the channels they’re going through. But the pace of innovation, the pace of global companies coming out of Israel, on a relatively quick scale, is mind blowing, I just always admire that a lot. So we’ve had some conversations there haven’t been too much. In China, for example, we have, you know, the usual concerns about investments in China. But then again, Southeast Asia, there’s probably things that we’ll keep keep an eye out for, and see how that evolves, as well

Earnest Sweat 35:20
So you mentioned that, you know, the excitement of AI and cyber, and I’m going to assume that you’re still bullish on the venture capital asset class. But I wanted to know, outside of those two areas, but macro events, what are there things you see that make you bullish on venture?

Avanish Sahai 36:39
Yes, I am still very bullish on the venture venture industry. Because long term I think innovation is going to drive productivity. It’s going to drive better, better lives, it’s going to drive, frankly, I think the betterment of people’s lives, right. So I’m, frankly, one of the themes I’m studying right now, that I’m not an expert in, is, for example, climate tech. I think that’s probably along with AI. Without much exaggeration, the two things that are going to shape the future of humanity, and the planet right now, and climate tech, there’s a lot of work, for example, we’ve got some of our premier universities. And bringing that to light, bringing that to commercialization, bringing that to scale, understanding how that needs to align with public policy initiatives, domestically, nationally, regionally, globally. Those are big, big ideas and big opportunities. So I’m eagerly engaged, and trying to learn more and more about that as one category. Second one, frankly, there’s a lot going on. And this is an industry that I don’t have expertise in. So if I can watch it very much from the nosebleed seats, it is the biotech and the life sciences space. The amount of innovation happening on disease management on personal health on device based improvements. I was recently at an LP meeting for one of our invested firms for Synapse, and two CEOs presented some technology they’re working on, which blends AI and software and devices. And the biotech industry, right, these things are cross functional by nature. But the problems they’re solving, you know, they go down the path, which we think they will, it’s mindless. Right? So that’s another category where I think there’s just a lot going on, and it has a direct impact on the population at large.

Alexa Binns 38:55
This has been such a pleasure, have a nice, do you have any parting words for this audience? There’s allocators as well as VCs?

Avanish Sahai 39:06
Look, first of all, thank you for the fun conversation. It’s always, it’s always great to talk about sharing so far, the experiences and lessons. I think the lesson I’ve learned is, have confidence. There’s often this mantra out there, but you know, the tech sector is going through a downturn, it’s going through crises and so on. I still believe that we are, you know, yet another cycle will come out of it just great. And, you know, again, don’t go alone, right. So I think working with the right kind of advisors means talking to a lot of people and talking to people who’ve been through the journey, positive and negative. And then make your decision based on data and having the right people to kind of guide you along the way.

Alexa Binns 40:04
I can see why they like keeping you around on your boards. This would be some helpful wisdom to have around the table.

Avanish Sahai 40:14
That comes with being around long enough and losing all my hair along the way. In this phase of my life, a career it’s all about giving back. And part of giving back is being a resource, being someone who can, you know, respond to questions. I am an avid LinkedIn user. So the best thing to do is reach I’d be on LinkedIn.

Earnest Sweat 40:39
Great. Thanks so much for being so me with allocators. I really appreciate it. More

Avanish Sahai 40:44
I’m happy to be here and thank you for doing this. I think it’s important work that you guys do.

Alexa Binns 40:47
See you later, Allocator.