Alexa Binns 00:02
Welcome to swimming with allocators, the VC podcast from the LP perspective, with your hosts, Alexa bins and Ernest. Are you ready? Let’s dive in. So

Earnest Sweat 00:13
Today on swimming with allocators, we have Evan Finkel and Charlotte Palmer who are on the ventures team at Integra Global Advisors. Today, we’re going to go through how LPS can provide meaningful feedback to emerging managers and trends and sites from investing in emerging managers across a number of GEOS, us, Israel, Latin America and Europe and so on. So honored to have both of you, both of you on, Evan and Charlotte, thanks for being

Evan Finkel 00:44
on, yeah. Thanks so much for having us. Really appreciate

Earnest Sweat 00:47
it. So I think I want to start first with each of you by sharing just your stories to become allocators. It always kind of serves as a good base and some lessons for those of us who are out there, those who are interested in becoming allocators. So we can start with you. Evan, sure,

Evan Finkel 01:09
my story is sort of a happy accident, honestly, you know, is not part of a grand plan, necessarily. I studied finance and psychology in college, then spent a couple of years in consulting at a relatively quantitative firm, then was recruited by Anheuser Busch, the beer folks, where I led a team focused on data science around the billion plus dollar marketing budget. And then life took a little bit of a twist. I planned to go back to school. I was going to do a PhD in either applied math or quantum mechanics, and then I wanted to start a company, something sort of deeply technical. And in doing that, I had met several months before, one of the founding partners of Integra, before they launched the firm. And around the time that I was leaving Anheuser Busch, Integra was launching, and so became a good opportunity to, keep a little bit of money coming in, work with some people that I really liked and thought I could learn from, and then hopefully, sort of build out a broader network so that ultimately, when I wanted to go start a company, I’d already sort of have a base potentially, of, you know, either co founders on the founder side or prospective investors. And over time, despite doing a second degree in applied math and a master’s degree in machine learning and then doing a little bit of a detour at Amazon, I really loved what I was doing in Integra and in particular, working with emerging managers,. And so I’ve really enjoyed what I do at Integra. We also do some stuff on the direct investing side, so it works, sort of that muscle. And yeah, so happy accident, but it’s worked out quite nicely, and particularly given sort of how we’ve developed the thesis, I feel like there’s a lot of alignment, sort of between what we think can do best for our LPs and the types of investing we like to do, which is sort of those emerging managers, and, you know, first couple of vintages that were that we’re seeing in the market,

Earnest Sweat 03:09
awesome. And then I’m expecting it was a happy accident as well, Charlotte or you just always knew no, no. Quite the opposite,

Charlotte Palmer 03:16
but a slightly different angle coming into Evan, which I think makes us quite complimentary when we’re looking at deals together.I left university, I did business social policy, left to go to Australia for a year, came back and started working at the British business bank, doing the draw downs for emerging managers. So the British business bank is a UK Government sovereign wealth fund, essentially utilizing taxpayer capital to deploy into economic gaps in the ecosystem, one of them being fund managers in the VC asset class. So I spent the first few months doing all the draw downs, thinking guys having much more fun than me, doing all the processing of the documents. So I jumped ship quite quickly and joined the investment team on the Enterprise capital fund scheme at bbb. I loved it. I spent four years there purely emerging managers as a focus, Cornerstone checks up to the value of 50 million pounds. So some quite serious investments which were involved, some quite serious diligence, some of which could take anywhere between two and four years. So really getting to know the manager as well, seeing a whole lot of deal flow. And got to a point after four years, I would say, there’s never quite a good time to leave, because there’s always a deal you want to see through. It just takes so long to do. But I wanted to broaden my investment horizons geographically, and invest in a few opportunities beyond the UK. And got introduced to Evan, the air mutual friend in the industry. Loved what he was building on the VC side Integra, got to know the team at Integra, kind of the culture and the thesis behind the team, and yeah, onboarded back in August last year. That’s

Earnest Sweat 04:53
awesome. And so Evan, could you give us an overview of Integra? And, you know, I know it’s an RIA. How does it differentiate itself from the growing amount of RIAs, especially within this asset class?

Evan Finkel 05:09
Yeah, absolutely, so. Yes, it’s a registered investment advisor, which is a relatively common term in the US, but I think is scary to its people outside of the US Registered investment advisor just means that you are registered with some sort of government authority, right? So either a state level, a state level, regulatory authority, or at the federal level, would be the SEC. So we are an SEC registered, you know, registered investment advisor, functionally, it doesn’t really have any effect on how we think about investing or how we think about the world. If somebody saw us and didn’t know that we were an RIA, they would sort of say, You look a lot like a multifamily office, in that our clients are ultra high net worth, families, foundations, endowments and pensions. We have a quite high investable minimum. if you just looked at Integra and you didn’t know anything about what an RA was, you would say this looks a lot like a multi family office. We invest out of a discretionary pooled capital vehicle, which means we don’t have to go back to our clients and ask them to sign off on every investment we don’t have to pitch our clients. We are, we are the LP, you know, we are the ones who deal with the managers. We fill out a single set of sub docs. And so RIA is a designation that is important for a lot of areas of our business, around regulation and compliance. But in terms of actually investing in venture capital funds, it really is no different than a fund of funds, or a multi family office, or any other institution that just has a pulled capital vehicle and can deploy from there.

Earnest Sweat 06:48
That is a great overview, and so many threads I want to pull there, but first kind of setting the stage, what is kind of the profile of the families that use you all as their kind of, like, essentially outsource CIO,

Evan Finkel 07:04
sure, yeah. typically, the profile is, you know, either, again, an alternative family, or it could be an institution that is looking at their wealth across a multi generational time horizon, right? So they’re unlikely to draw down all of their wealth, you know, in the generation that generated that wealth. So they’re thinking about how they can invest across a much longer time horizon. And what that tends to lead to is less of a need for liquidity, which means, you know, we could have more more alternatives, provided they are, you know, fit the fit the risk profile and the investment profile of these families, which typically they do, and we, we don’t have to worry as much about sort of the day to day need, the need for liquidity, or the risk of sort of, you know, spending this money down in some, you know, in some sort of a short time horizon. And so that allows us to think about our investment program, I think, in a more creative way, in a more interesting way, and allows them to access opportunities, you know, at bite sizes that make sense for them and that maybe are a little bit more aggressive on the alt side than some of our competitors. Again, the way that we think about it is you can, you can, you can use manager selection and asset allocation and location to drive a lot of benefit for clients, and a lot of that is happening in private markets rather than in public markets. And so, you know, we follow the research, and we try to, you know, obviously build based on that and based on our clients particular needs and situations. And overall, we feel like that allows us, in particular, to operate more on, you know, the alternative side, including venture capital and more of our clients’ portfolios tend to be allocated there. I think that most, many, or most of our competitors,

Earnest Sweat 08:47
and you know, are most of the families in one geo or kind of all over the world,

Evan Finkel 08:53
they tend to be concentrated in the US, not because we cannot or don’t want to have, you know, clients outside of the US. In fact, you know, we do have clients that are not US based and I expect that will continue to be the case, and they will represent a larger percentage of our clients going forward. It’s just that, typically, if you sort of look at our main office and our founding partners and how we started the firm, it’s obvious that our networks were strongest on day one in the US and the firms that the founding partners had worked at previously was also more us focused, but over time, particularly as we’ve been able to use, for instance, our venture investments as a launch pad for meeting more people globally. And so my guess is that, you know, if we look at the proportion now, and you know, in five years, you asked me the same question, we will have, you know, hopefully many more, both an absolute number and a relative basis, families outside of the US. And we think that there’s a large opportunity there, because the option pool, or the pool of options, let’s say for ultra high net worth families, let’s say in Europe.

Earnest Sweat 12:46
. Could you tell me about the venture book at Integra? Is it mostly focused on some kind of core, established funds or or is it focused just on emerging managers? Or is it just combination of both,

Evan Finkel 13:01
sure, it is predominantly emerging managers and smaller funds. We do have a couple of positions that are either a little bit larger or maybe a little bit more established, but the vast majority of what we have done and will continue to do is emerging managers, smaller funds. We feel and I think that there is, you know, a reasonable amount of data to back this up, that that is sort of the place for alpha, you know, there are some exceptions. And so I think there are particular opportunities in particular idiosyncratic situations. But I think the data really, you know, if you follow that, it does sort of suggest that emerging managers, smaller funds are the place to be. And I think that intuitively, that makes a lot of sense, right, in that it’s fund one and firm two, your fund tends to be a little bit smaller, so you’re not necessarily getting wealthy off of management fees. You have to drive, right? You have to be thinking about not just what’s going to be good for me right now, but you know, how do I build LP relationships? I could raise a fund two or a fund three. How do I think about building a portfolio like I think there are a lot of things that you have to really think about when you know what matters to you is, is the carry and what matters to you is making sure that you are building, you know, in a way that allows you to continue to raise funds in the future. I think when you get to a certain size you know, the numbers become much more challenging, just in terms of returning a fund and what that looks like, and the ownership and those types of things. But also, you know, it is impossible, or nearly impossible, I would say, you know, to be as motivated, you know, when you’re generating $20 million a year in management fees on a billion dollar fund, versus, you know, $2 million on a $100 million fund, right? Or 400,000 right? On a $2 million fund, right? And so I think that there’s, I think that there’s just that intuitive aspect that feels like the motivation changes over time. And when you’re first starting out as an emerging manager, and you haven’t necessarily collected all that, all those management fees, i. On, you know, you feel a little bit more, you know, internal motivation, or intrinsic motivation, to actually deliver returns. And so we just try to follow that data and sort of think through that in terms of crafting our program.

Earnest Sweat 15:10
Yeah, something that I’ve shared with friends, and I can’t even remember who’s told me this term, but there’s definitely a delineation in venture capitalists, those who are post economic and those who are not right, like and to really be competitive there. And there are exceptions of individuals and firms who have been post economic and still acting like they’re kind of like those PhDs of, you know, what is it? Poor, hungry and desperate? Those are special, kind of, you know, animals, but it is something that I’m sure you guys have to, you know, dig for. And it really sounds like it’s shaped how you’re going to approach, kind of the bet you’re going to make in venture Charlotte,What do you think makes a great emerging manager today,, that’s very different than even three years ago.

Charlotte Palmer 16:07
This market is incredibly competitive. I think it’s really tricky to be an emerging manager today as it was three years ago, but I’ve said 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 three years successful, and as you manage it in terms of fundraising, and I guess I’d answer it more in personality traits. One is the entire lead, 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 telling the troop around things, or if you’re hiding something like a good due diligence process, So 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 first 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 listen to feedback. Sometimes we’re not able to invest in major EG, we don’t do micro funds. 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 than be obsessed 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 is 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 bat 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 any merchant 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 18:49
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 19:57
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. 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 carryOn 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 of solar GPS, but just don’t want to, like, go through that torturous journey of, like, 18 months of fundraising and fund management, right? t 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, willing to, absorb the torture of fundraising, whereas,the Great Investors maybe don’t want to do that And so it’s not just who’s the best person sitting in front of you. It’s, are we allocating to the real best of the best? Are 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. Yeah,

Earnest Sweat 22:19
it makes me think of this conversation I literally had this week with a friend who spoke to an LP, and she’s an emerging manager, and the LP said this market is tough for allocators as well to assess and diligence this new crop, like post 2022, crop of emerging managers, and it’s because they were saying, all right, there are two groups that we’re whether we invest or not we have some kind of like experience with diligence, right? The first archetype is the traditional spin out. Right? You’re at an established fund, and you immediately spin out to do something, right? The second is that, you know, famous operator unicorn plus exit Angel track record starts a font, right? But the one in the kind of that messy in the middle that you’re talking about those individuals, right, that they’re at a good fund, they did well. But the LP was saying to my friend, we can’t assess, is it your ego that’s driving you doing this? Like you just hated it so much that, like, you’re like, I’ll do my own thing. I’ll do the same, I’ll do the similar, the same strategy, and just just be the boss. Or do you have a unique perspective? And I thought that question was kind of, like, very loaded, because I don’t know who has been successful without a little ego, and sometimes a lot of ego, but with the core of what the LP was getting at was, Do you have a differentiated perspective? And so how do you all actually put that in your diligence of understanding, given the challenges Charlotte you mentioned, of really diligencing for this manager, as you said, Evan is the best of the best, because they have a perspective and they can do it all,

Evan Finkel 24:15
yeah, so I think it’s a combination of things, you know? I think there is always this question, right? And I think emerging managers should know that, right? When you leave a big brand, there is always a question of, you know, did you do those deals? Because they were inbound deals, and you were just the next person with some free time, and so you got this deal, and now you did it, or, you know, did you really do the work? Did you source that deal? Were you the person who pushed it internally? Was there some partner that didn’t want to do it and you overcame the internal opposition? And so one way to answer that, right, is to go to the founders and say, How did this happen? Right? Like, did you go to the partner at the firm and they just, like, pushed it down for the analyst? And. So the analyst of the deal, or, you know, did this person like to find you at some industry event before you had an idea, and they stayed in touch with you, and you know, that relationship evolved over time, and they were internal champions. So I think one way to really tease this out right is to just go and ask a bunch of founders. Now, you have to be able to read between the lines and the subtext and understand all that. But I think in general, if you speak to a number of founders, you will get a sense of how this person built their track record. So I think that’s number one. I think the second is brand building, but not brand building, like everybody needs to have a podcast or everybody needs to be on Twitter, right? But if you mean, you can be right if you have something to say, and Twitter is the medium, or your podcast or sub stack or whatever, like, that’s great, right? But another way to build a brand is to actually just become an expert and then, like, be able to be value add to your founders in a way that other VCs cannot be. And so I think there’s something really important about saying, Well, if I want to do FinTech like, what is my unique ability to add value to my portfolio companies? What is that secret that I have, in the same way you would ask a founder, what is that you know? What is that secret that you have a right to that nobody else does well as a VC, right? What was it that I did that allowed me to stand out from the crowd? How can I continue to, sort of, like sharpen that? And I think you that becomes apparent in your conversations, you know, you speak to 20 FinTech VCs, you kind of get a sense of who is doing FinTech VC, you know, because they really, really deeply feel passionate about it and have some sort of a right to a secret and who kind of stumbled upon it. And it kind of works now, because they’ve been able to raise a bond, but you know, they don’t necessarily feel it in their bones, right? Or have that ability to influence their companies. Now, again, I think that’s hard. You have to be able to read between the lines, right? There’s some there’s some subtext, but I think the more time you spend diligencing A market and the VCs within it, and the more time you spend speaking to founders, you do start to get a sense, at least on some level, of who are the people that could be interesting and who are not. Even then you still have to do more work right. You still have to understand access and right to win, and if they’re gonna be able to fundraise a viable fund and all of the strategy makes sense. But at least as a starting point, I think that you know, speaking with founders and just surveying a big chunk of the market, and then, just like stack ranking people is any very good starting point for those conversations,

Charlotte Palmer 27:31
just to build on everything’s great point there. It’s really hard when we do look at founders from that perspective, and maybe the individuals worked at a tier one VC, and you’re kind of questioning, did the founder take the money because they were a tier one VC, or because it said individual that worked there? And it’s trying to find the nuance of, was the person great, and that’s when you took the money, or were they great after they came on the cap table, and you took the money because you wanted that label on the cap table. And it’s quite difficult, and I think we find the best way of getting through that is going for the off book or off list references, and doing a little bit of a deep dive on LinkedIn. And you often find the references that are put forward are always all singing, all down, saying this VC couldn’t have been better. And it’s great to hear that and have some validation. But I think getting the story behind kind of some of those op lists or founders that have failed, where that investors have invested, and how they look through a different lenders is also equally as helpful, if not a little

Earnest Sweat 28:27
a bit more. Now we’re going to take a quick break to speak with our sponsor,

Alexa Binns 28:31
Jason. I know you were a recent addition to the Boston office, so you may not have as much context for this, but Id on what are your clients? This is spring 2025 what are some of the things that your venture capital clients are asking you for advice on these days?

Jason Kropp 28:49
Yeah, thank you. Alexa, so we were working, we worked very closely with many LPs and venture capital firms, you know, information and you know, throughout their life cycle and investment period and beyond, recently, we’ve seen a lot of them so we tend to be more on the international side of those types of transactions. We see a lot of, you know, foreign LPS investing in US funds and US funds investing in non US companies. So those cross-border transactions fall well within our wheelhouse. And a lot of those questions that we’re getting recently relate to all kinds of, you know, international aspects or elements of investing, fundraising, investing and exiting in a cross border setting that includes, again, non uslp, investing in the US fund, for example. So tax has always been like a big, big deal, of course, tax optimization, withholding taxation, something I call tax leakage. I think it’s very important for everyone to make sure that whatever transaction they do gets the right amount of attention from a tax standpoint, because those tax payments, or those tax obligations as they come up, are much more difficult to fix after the fact. So getting into the right structure, the optimized structure, both at the company level and the fund level and the. PHP level, can save a lot of money later. And these are the types of questions we get almost, you know, every day. Quite frankly, you know, there’s a lot of rules that are changing. There’s a new administration in the US. There are tariffs there, you know, geopolitical issues, and folks are, you know, always concerned and trying to stay ahead of the curve. So those are the types of questions we’re getting now. Hey, what should I do if I’m investing in a company that is outside of the US, or I’m a Foreign LP, I want to invest in a US fund. Should I be concerned about one, two and three? And you know, that’s, that’s the kind of stuff.

Alexa Binns 30:32
Cross border business, your taxation expertise has never been quite so popular and in demand, I’m sure. And Jason, you are new to the emerging companies and venture capital practice at Sidley, what are, what are some of your thoughts on, on why to join this, this team?

Jason Kropp 30:50
Oh, sure, well, so picking up on, on some of the theme, although, from my perspective, more as a company side lawyer, you know, I work with companies from founders, from formation all the way through, you know, financing exits, IPOs and life as public company with, you know, the way that the market has been lately, the way the regulatory and government environment has been lately, there’s obviously a lot of sort of uncertainty. My experience through, you know, several cycles is that uncertainty creates opportunity. And what we’ve been seeing in the market, and one of the reasons I joined Sidley, is that companies and investors in companies are looking to sort of figure out how to navigate that uncertainty and seize that opportunity that might involve creating a novel, you know, business strategy around health care payments or provision of legal services or payments or what have you. Ai, obviously, is huge. Where those opportunities exist, there is oftentimes not real clear lanes within the regulatory framework, restriction structure, and so companies and investors and companies need to be really thoughtful from the early days about how to navigate those channels and to figure out how close you can get to the edge of an analysis versus not on the company side, as Adan was saying, with respect to structuring issues, if you attend to those kinds of questions early and with some sophistication, maybe not boiling the ocean in day one, but with some sophistication and care, you can really work carefully to seize that opportunity for both yourself as a founder, but also your stakeholders. And

Alexa Binns 32:28
now back to our LP interview.

Earnest Sweat 32:35
Charlie in our prep call, you spoke a little bit about an integral approach to getting more than just capital and getting involved with your fund managers. You know what kind of factors go into the decision making of being on an ELPAC or not? I

Charlotte Palmer 32:56
I think ELPAC is one of those things that’s often confused. Where it’s for the help of the fund. It’s not for the help of the LP. I can read your quarterly report. I can do it at your AGM, hopefully we have a good relationship. Your ELPAC should be constructive of individuals who you can go to and ask advice, get counsel, get guidance, get governance. So really how is that team? GP found, or whatever I’m looking at, actually, who is helping me is not always your anchor investor. And I think a lot of teams get that confused, or they put in the most money, so they just sit on the ELPAC. If that is your very first VC investment, and they’ve never invested in VC before, and they probably won’t again. They’re probably not the person to certain URL pack, because they’re not going to have the insights and the guidance and ability to actually help you as much as someone like myself and Evan Integra, where we’re doing this time in time out, we’re spending all our days looking at things, we’re reading data, we’re reading articles, we’re doing podcasts. So I think it should actually be more constructive. How should the GP construct that ELPAC instead of how? I mean, we’re always happy to set up an ELPAC. I think we have a lot to bring in terms of value added to an ELPAC. You know, strategic oversight, operational support. I think we have a lot to say and a lot to give. And we also are not scared of asking the difficult questions or challenging the manager if they need it, or probing a little bit, but it should very much be driven by the team and the GP themselves of who is helpful for them.

Earnest Sweat 34:31
As a follow up, how do you think LPS should give feedback to fund managers?

Charlotte Palmer 34:38
Is that pre or post investment, or both. All right, that’s,

Earnest Sweat 34:42
That’s great , that’s a great clarifying question. Let’s do both pre and post investing.

Charlotte Palmer 34:50
Pre. I think it’s typical for a lot of LPs. I come from a BBB background where we were made to do it, it was enjoyable to do an hour long for. I’m cool, discussing the feedback and having some, oh, wow, creative pushback on a reasoning for our decisions of that

Earnest Sweat 35:08
is not American at all.

Charlotte Palmer 35:13
Evan can even tell me I did not have to do that here, but I would say people take it two ways. People are very grateful and it’s very constructive, or they take it as a personal attack, and they try and convince you, I would say, once an LP had made up their mind. I have never heard of it and I have a lot of fellow friend LPs. So one, changing their decision because you have sent them an angry email, deciding that they have made the worst decision ever, and that you know they should be investing in you, I think you should just graciously accept their reasoning, even if you do not agree with it, have a good relation, stay in contact, and more than likely, they’re going to want to engage with you for the next fund, because you already had that kind of little bit of history, little bit of passing You, they’ll have seen your progress over that time. If I was the emerging manager, I would think about doing personalized newsletters. So send your newsletters out if you are four to five institutions, you’re kind of targeting the Next button. Send it with a personalized email attached. It doesn’t take you more than an hour to do that across four or five institutions, but I guess just have graciousness about things, a bit of decorum and just politeness. And this is a relationship game, and coming at it from an attacking angle is not fun for the LP or yourself. I mean, there’s that great start. I think on fundraising for every 100 conversations, you convert one LP. So it is hard, you know, it’s difficult, and you’re going to have a lot of rejections. If you fight every single one, you’re going to be spending a lot of time sending a lot of unpro emails, I guess, feedback on the opposite side. When you have secured the OP, hopefully you have a much better relationship. You’re able to communicate freely. We help. We foster a culture of transparency at Integra, where, you know, our managers are able to come talk to us if they have a problem. I would hate to hear about a problem in a quarterly report saying, like, this happened, but we fixed it. Like, come to us when the problem happens, and we can talk about it and we can resolve it. So hopefully there’s that open communication channel. And I quite like having, and I know everyone’s the same, like a monthly one on one with our managers, just to let you know the insights of what’s going on. And we tend to give feedback there or just dig into the details. I would say it’s a much more constructive approach, where you’re kind of challenging and probing, but more have you thought about this, or are we seeing this trend? Are you seeing the same trend? So they get to benefit from our wider overview. You obviously invest across four different markets. We see hundreds of deals a year. We come with a lot of knowledge on that basis. So I think the feedback is a lot more. Are you seeing what we’re seeing? Giving insight, sharing insight, and kind of going from there.

Earnest Sweat 37:58
Evan, what questions do you think GP should ask LPS that could be potential that are vetting them to be potential investment investors?

Evan Finkel 38:09
Yeah. So I think there are a few things that are probably important if you are, particularly an emerging GP. So I think the first one is, do you actually invest in emerging managers, right? Or do you invest in my fund size? Because it sounds obvious, right? Oh, you had a conversation with somebody. They’re like, this sounds great. Let’s have a follow up. And then you’re three conversations in only to realize that the Harvard endowment writes $50 million checks, right? And you are raising $10 million so I think what you need to figure out is, do you actually invest in emerging managers? Now that doesn’t mean that if they don’t, you shouldn’t build a relationship with them. What it does mean, though, is that, especially early on in fundraising, you need to be judicious about your time, and you probably should not be spending a lot of time with them. So I think the first question, and again, it sounds really obvious, but I hear so many stories of fund managers that, like, I never realized that that endowment, or that foundation, you know, only writes $25 million checks. And like, okay, they probably would have told you that if you’d asked them, right? And you would have known very early on. So I think that’s one and then sort of in a similar vein, right? Do you invest in my stage, my sector, my geography, right? If you’re speaking to an institution, you’re a European fund manager, investing in Europe, and they only invest in the US. You should save everybody the time, right? And so I think that sometimes, particularly in this market, junior people, in particular, for better or for worse, have a lot of free time, and they’re kind of bored. And so you could take a call, right? And the GP is like, Wow, I’m so excited. I have a call with this foundation or endowment. And the junior person is like, great, like, I have something to do today, but the reality is, like, it’s not relevant, or they don’t have capital to deploy. And so I think that’s really like, the first line of questioning has to be, and it should really be in the first call, you know, or even, like, over email before. Reschedule that call. You know, is my fund size relevant? You know, do you invest in my sector? Stage, geography? Do you invest in emerging managers? So that’s sort of number one. And then I think beyond that is, I think it’s okay, particularly if you’re like an oversubscribed fund, to say hey, like I before I add you to my ELPAC, but before I give you some break on economics or something, because you’re supposed to be super helpful to me, I want to reference you, you know. Do you have a reference list? Can I speak to some references for you, some funds you’ve invested in, you know? And let’s actually hear like you know what you’ve done for that slice of the GP you’re asking before, or for that ELPAC seat, where’s the value that you’ve brought? Now, you’re not going to do that for every 100k 500k or even, you know, a couple million dollar check. But if somebody wants some sort of special economics, or they want to have some sort of a unique relationship, or they want an ELPAC seat, I think that it is a good idea before you not only marry yourself to them for 10 or 12 or 15 years as an LP, but before you give them either like a portion of your company or a position of responsibility that you you look into them the same way that they’re looking into you. And so just asking, you know, hey, do you have a reference list again at the end, before you give them whatever special thing they’re looking for? I think that’s a question that JP should be asking, instead of just giving up ELPAC seats or giving up portions of their management company or the GP, or things like that. And then I guess the last one is just, you know, when was the last time you deployed capital? What’s the check size and how much more are you planning on deploying for the rest of the year? Because, again, I think there are a lot of people that are bored and they’re happy to take phone calls, but if they’re not deploying capital, or if they’re deploying check sizes that don’t make sense for you, or they don’t have capital to deploy for the next six months, you, as a GP, just need to prioritize your time. I mean, it’s not personal. There’s nothing personal about it. It is just a very practical thing that there are only so many hours in the day, and fundraising is really, really hard. And as a GP, if you could save yourself like one wasted conversation per day. That’s two and a half hours you’re getting back in your week. And that multiplies, right? That’s real time, and it’s valuable, because, by the way, besides spending all this time with LPs, you’re supposed to be investing, right? That’s the main part of what’s going on. And so if you could save this time by asking these questions, I think that’s super, super helpful.

Earnest Sweat 42:19
Evan, is there a way to ask around a potential LPS commitment to the asset class? Because I’ve seen kind of in tough markets like this, or even kind of over the past years, a number of people who got off the ground to fund one or even fund two didn’t have people who were kind of committed, like institutions, right? So, is there a way to ask around that?

Evan Finkel 42:43
I think it’s challenging. I mean, I think there’s some heuristics, right? Institutions tend to be stickier than sort of family offices who, or, you know, like some certain RAs and those, though you know, family offices and Ras tend to be stickier than, you know, ultra high net worth individuals. And so I think there’s that heuristic, you know? I think you can ask, sort of like, you know, what’s your RE up rate on managers that you’ve invested in, what percentage of your capital, or your clients capital is invested in the asset class? You know, how much again, how much have you deployed? How much did you deploy last year? How much are you deploying this year, what are you going to deploy next year? And so I think you use these sort of like directional signals. The challenge, though, is that whatever may be the case now may be very different than the situation in three years when you go to raise your next fund. So I think you try to increase the probability that your LPS will be sticky. But ultimately, you know, there’s an element that you control, which is your performance, and there’s an element you don’t control, which is either the macro environment or the idiosyncratic decisions of individual LPs. And so I think the way you sort of ask around it is those sort of directional questions. And hopefully you build a base that is robust and resilient enough that even if something changes, you know, they’ll they’ll be, for the most part, they’ll be, you know, long term LPs, and then, of course, you will have some turnover. I think that’s natural, but, yeah, I don’t know that you can sort of directly guarantee that, but I think there are heuristics you can use and some questions you can use that are directionally

Earnest Sweat 44:16
helpful. No, that’s, that’s a great answer. And I think regardless of not being able to get a 100% answer. I think as a fund manager, it also probably impresses on your potential LP that you’re a shrewd person who’s asking the right things, right? Charlotte, in our prep call, we discussed kind of like culture building. And I think this is so fascinating right now, especially in this tough market. And as we’re starting to see a lot of firms, you know, contract, you noted that, like most, teams don’t celebrate enough wins. How do you think they should and what they should consider? And, you know. Is the impact on the firm here’s pretty

Charlotte Palmer 45:03
because I asked you this when you hit the episode milestone,

Speaker 1 45:06
and I didn’t have a good answer.

Charlotte Palmer 45:11
I think it’s one of those things that I love asking about, because everyone always says, Oh, we didn’t do anything. And it seems such a shame, because as an LP, I can appreciate how hard this journey is, you know, getting to first close or getting to final close after, you know, converting all those LPS at different stages. And it’s not a, you know, one month journey. You’re putting time and effort and your weekends, and you’ve definitely made sacrifices along the way. And I don’t think it needs to be a big thing. It could be going out for a drink at the pub. I just think it needs to be marked by a milestone if we achieve something, and we put all our time and effort into doing this, and there’s an acknowledgement of doing this and that we’ve got here, and we appreciate the milestone. And otherwise, I think this industry just takes over a little bit, and it is definitely not a nine to five. And I think if you just steamroll into a great first close, now we’re investing. And final closing, we continue investing. And fundraising is happening again. You know, nine months time because you’re constantly fundraising, I think you maybe don’t sit down and appreciate and reflect on how far you’ve come on that journey. And you should maybe keep having milestones to say, Okay, we’re here in well, we’re two years in, reflect how far you come on the journey. Because I think everyone, every day, gets better at doing this than they were, you know, the day before or the year before or the decade before. And I think it’s nice to kind of, yeah, had that reflective stance on it

Earnest Sweat 46:34
so true. Evan kind of to that point of, kind of like the result of if you have a good culture or not, what’s your perspective on succession planning or even thinking about that when assessing a firm

Evan Finkel 46:52
Yeah, this is a really tough one, so I guess this is a little bit of a cop out. It’s less of a day to day issue for us, only in that we’re doing emerging manager, smaller funds, right? There tends to be less of this issue. But we do have some funds in the portfolio right that are a little bit a little bit more mature in their firm building journeys. This is a huge problem. Actually. Succession planning is a really, really big problem, I guess the example I like to give, so in Israel, you know, the ecosystem really started in earnest, like in the in the early 90s, and then you had this, like, first generation of VCs, and there were some really talented, like, again, associates, principals, junior partners, but the founding partners didn’t really want to leave or give up control. And so over time, these people sort of left, and they became the second and third generation of Israeli VCs, which was actually great for the ecosystem, but it was a little bit more challenging for LPS, because as an LP in a fund, you would like the best investors to be making the decisions. And that wasn’t really what was happening, and it was actually a short, sort of a short sighted decision for the founding partners of these firms, because they could have given up some equity, they could have given up some of the GP, they could have given someone in the management company, and they could have continued building the firm, and long term, they would have been much better off than what actually wound up happening in a lot of cases. And so I think succession planning is really, really challenging. Ultimately, you know, I think adventure, we have not done a very good job, and part of that is because there’s no way to enforce succession planning, right? So as an LP, you don’t really have the power to tell a GP it’s sort of maybe time to go as a GP. It doesn’t really cost you much, at least in the short to medium term, in obvious ways, to just keep sticking around and collecting part of the management fee and the carry and so I think what we’ve seen is, in a lot of cases, people stick around longer than they should. And again, if they step back and they, you know, they kept the slice of the carry management fee, but they really promoted internally, I think they would actually be better off long term. But I think incentives are a little bit wonky, particularly in venture and so I guess all that is to say VCs have not generally done a very good job of succession planning. I think it’s very challenging. I don’t really see that changing anytime soon, because, again, I think some of this is just ego, some of this is an inability for LPS or junior people to force any sort of change. And so in my mind, will probably, as an industry, continue to do poorly in succession planning. But that is actually an opportunity, right? Because you’ll have more people at the sort of associate or principal level who either spin out or join solo GPS and then become a partner at those firms. And so, you know, I guess there are positives and negatives here, right? And from our perspective and our vantage point. 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. Yeah,

Earnest Sweat 50:16
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 gonna, we’re going to have different top 10s every 20 years. So, I know LPS always looks for and asks if GPs continuously 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 51:11
Charlotte, Mine was a, I guess, a learning in 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 carry is 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 need a Little bit of hand holding during that time, you could 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 like that, it is incredibly difficult to do that. So I think that was a big learning in me, of when you’re talking to someone open one maybe be a little bit more respectful of their position, that they maybe don’t have all the answers. And you probably need to do nicer questioning, so then maybe you can figure it out along the way and also give a little bit more candid 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 is one that you can easily teach.

Evan Finkel 52:23
I think the biggest thing I’ve learned is that it’s more fun to do this with a partner. We, 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 we’re trying to build, I think it, 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 GPS 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 larger organization.

Charlotte Palmer 53:38
This is way nicer than mine. Yeah. What?

Earnest Sweat 53:43
I don’t want to ask another question, because that was such a great way to end it. But I want to thank both of you, Evan and Charlotte, for joining us on the podcast. Earnest Sweat 54:52
Great. Well, thanks for being on so with allocators. Sure.

Evan Finkel 54:55
Thank you so much for having us. Yeah, thank you.