Alexa Binns 00:09
Today, we welcome Teddy Repko of the Yahaviattam of San Manuel Nation. This is a sovereign wealth fund here in California. Teddy is an incredibly clear thinker and speaker. He speaks to his lessons learned over seven years at the Columbia Endowment as they transitioned from a hedge fund heavy framework to a very relationship driven venture capital one. He’s applying all those lessons learned today and gives us a very clear picture of where they are interested in investing and where they’ve dialed back, including more investment in Israel, China, and India. Welcome,

Earnest Sweat 00:59
Teddy, during our prep conversation, prep call, I really enjoy just hearing your background and how you’ve been in so many different environments and have shaped your worldview. Could you just provide the audience with a glimpse of the origin story?

Teddy Repko 01:14
Yeah, so let’s see, I grew up in San Diego, was there for most of my childhood, I think there were sort of two defining features of my childhood that really shaped the investor I turned into, or the path I took down the road. I think it was one, growing up with an older brother and a younger sister, both all three years apart, but my older brother, in particular, contrary from I think what is typical, where the first child is supposed to be in line, very reserved, quiet, he was the crazy one, and so I grew up observing his craziness and the trouble it got him into, and that I think had an effect on me, where my approach is probably more risk aware, a little bit more disciplined, and as an individual, and now as a professional, someone who tries to excel within guidelines, you know, I think about the world you all live in every day, with founders breaking the rules and driving these amazing change. It’s a little less of what I’m comfortable with, so it’s a different style of investing that I think that upbringing took me into. I think the other relevant point that influenced a lot of my decisions growing up, and now as a professional, was growing up with parents who really emphasize an international perspective. My dad spent a lot of his young childhood growing up in Asia. My mom spent a lot of time in Latin America, and we were fortunate enough growing up to spend ourselves a lot of time on the road traveling, and I think that shaped very early on the importance of having a broad global view. It not only impacts the decisions I made for going to university and afterwards, but certainly now in how I think about underwriting managers and strategies,

Earnest Sweat 03:56
was venture capital always something that you had an interest in, or like, how did that come, come about?

Teddy Repko 04:10
I would say it was not something that I had my focus set on early. I did have a clear focus on investing from a very young age, and again, I think that goes back to my older brother. He was one of those guys where, in high school, he was reading all the finance books, and me, a few years younger, wanted to be exactly like him in every way, except for the getting into trouble, but it meant I tried to learn about investing early on, and sort of pivoted my focus toward investing on the path going forward, for me the focus was more on liquid markets. Out of college, I worked as an equity trader focused on Delta One swaps, and I thought that was a great place to cut my teeth. You know, you’re thrown into a very lean trading desk, we’re given a lot of. Lee autonomy, I think that did a lot of force growing up and built a lot of quick connectivity with understanding market dynamics, but I quickly realized after a number of years that that style of investing wasn’t what I wanted to do long term. I wanted something with a little bit more breath and a longer term focus. I didn’t know exactly what that was going to look like, but I started to look around, and really out of pure luck, I stumbled upon a posting from Columbia’s endowment to be an allocator on their investment team. I went into the interview process wholly unprepared. There are resources like Summit of allocators that we have now, like we did back then, but fortunate enough to get that role, which was an analyst working in a generalist model, which gave me my first exposure to venture, and through that I really fell in love with the asset class.

Alexa Binns 05:54
You were there at a time where, correct me if I’m wrong, the CIO changed over with a new strategy that was much more focused on venture. Anything you can share about that experience?

Teddy Repko 06:08
I am incredibly grateful for that change, because it feels like, while I was at Columbia for seven years, it’s as if I worked at two different places, because the philosophies were so different. When I was originally hired at Columbia, I was working for Peter Holland and Tim Donahue. Peter came from JP Morgan derivatives background, and that very quantitative, risk-oriented focus that he trained on growing up in his career really bled into how the endowment was organized and how we invested. What ultimately meant was we didn’t do very much in dedicated ventures, and we took a lot of tech and innovation risk in the hedge fund portfolio, but everything we did and how we made decisions was incredibly quantitative in nature. Fast forward a couple of years, and Kim Blue joined to lead the organization, and her philosophy is quite different. She is amazing at reading people and investing in relationships. She was able to complement our process by integrating really this people’s underwriting methodology, while also pivoting the portfolio to do a lot more in venture, and so what that meant was the handful of years I worked under her spent a disproportionate amount of time working in the venture ecosystem and cutting my teeth there.

Earnest Sweat 07:30
How was it picking up after having such an analytical background, quantitative background? How do you start to build that muscle of being able to read people better and diligence people better, when there’s frankly in venture not much numbers to really grapple with.

Teddy Repko 07:49
Well, I think that in and of itself is an area where venture can improve a lot. I think there are a lot of numbers in venture, and I think the fact that we came from this very risk-oriented mindset has led me down that style of assessment in venture. However, I will say that the people part is so much more important the earlier you go. I think what I have found is that when we’re investing into early stage ventures, it’s far less about what deals you’ve done so far, how they’re tracking, and more about who you are as a person. Can I trust you? Do you say you’re going to do what you say you’re going to do, and do we have shared alignment on what you are trying to build over the long term, with this long term being the timeline we’re trying to assess you on? I mean, one stat I always go back to when trying to get too quantitative in early stage venture is only about half of the funds that are in the first quartile on a TV TV PI basis in year five end up as a first quartile fund, all to say the numbers are a little bit meaningless early on, and if you invest in T zero in year zero, you have to make another one to two decisions before the numbers really mean anything. Of course, there are a lot of signals in there that we spend a lot of time on. A lot of them are people-oriented, coming from references with other founders, with other investors, but it’s an interesting dynamic of trying to bleed the two worlds together of quantitative and qualitative underwriting.

Alexa Binns 09:23
Could you share with us some of those more quantitative things that are really important to you?

Teddy Repko 09:29
What I’ve spent a lot of time on in the venture ecosystem is trying to understand base rates, and then having managers communicate to me how they’re different and why they’re different from the base rate. You know, the very common numbers that managers talk about, or excuse me, that is a reality in venture, is call it 50 to 60 early stage companies go to zero. On the other hand, the market standard is that 2.5% of seed stage companies achieve unicorn status. For the best managers, the sequoias of the world, this can be double that, still a very small number. But if a manager is walking me through their venture math, and for their math to make sense, they need a hit rate of 10% something’s a little off there. I think it just gives us firepower to talk through the philosophy in which the venture manager is organizing their strategy.

Earnest Sweat 10:35
what traits have you or signals do you feel like you have to see to trust that that manager could at the right times be in the top quartile top decile over the 1015 year relationship?

Teddy Repko 10:54
I would say the answer to that is very hard and there’s obviously no sure fire way of knowing what I look for as positive signals that help build conviction in early stage managers are those GPS that have a very clear idea of what their competitive advantage is, what is their superpower, such that they can be better than the base rate on a sustainable basis, not on a one-off basis. So I think that’s point number one, a clearly articulated edge, and that can come in many different shapes and sizes, and then the second, which goes back to more the quantitative side of things, being able to express the portfolio construction approach that aligns with that superpower, I think so much of the risk reward that LPS ultimately experience comes through portfolio construction, and yet so much time is spent on a manager’s ability to pick. Certainly, if you’re not a good picker and not good, not someone who has the access they need, that’s a first principles reason to pass. But the second necessary ingredient is being able to build a portfolio around those ideas.

Earnest Sweat 13:39
As the three of us sit here, we know that we’re kind of in unprecedented times, and you’ve been following the market for a while now, Teddy. Two-part question: one, what trends are you seeing that are really net new that maybe you haven’t seen before in previous cycles, and two, how has that impacted the way you approach the asset class and diligence in

Teddy Repko 14:07
it? Two things come to mind for me. I think the first has to do with some of the truly mega companies that are being formed in the private landscape. We hear so much now in speaking with managers about the path to a trillion dollar outcome, not so long ago we were really happy with a $10 billion outcome, and there frankly aren’t that many $10 billion outcomes, and yet a trillion dollars is what we talk about now. I think the impact of that, that we’re going to see in the very immediate future, likely to see in the very immediate future, that will be a step change. Is there a world in which, in the next 12 months, $4 trillion give or take, of venture-backed enterprise value, goes public. I think these three companies alone, SpaceX, OpenAI, and Anthropic, themselves. Themselves can change the DPI story that is constantly the issue or the challenge that LPs talk about when discussing venture, I think digging a layer deeper, it’s a very concentrated list of companies and list of fund managers who experience DPI from from these public offerings, and so I think from an LPS perspective it will change a little bit how we think about and analyze DPI, because the benchmarks are going to look a little weird for a long time to come. So I think TBD on that. I think the other material change we’ve observed over the past decade or so is the emergence of mega platforms, where just a handful of funds are raising the vast majority of venture dollars and deploying far more than anyone else. I think the jury’s still out on what the performance of these mega funds will be. I know you guys talked to David Clark from Prevent Cap. I think he is, he and his team are amazing. His data is amazing, and they offer a really compelling narrative as to why these mega caps are structured to win. I think on the flip side of that, some of the assumptions you do have to believe to get to a 3x plus are difficult to wrap your head around, but I think what is changing is these mega cap or these mega funds are changing the seed ecosystem, just writing hundreds of seed checks, new investments every week. I think that changes a little bit how other funds, smaller funds will have to compete, so these are all things we’re trying to wrap our heads around, and they continue to evolve very, very quickly.

Alexa Binns 16:47
Yeah, absolutely. Is there anything concerning about the venture capital landscape as you’re looking forward, since we’ve, since we’ve got a second son speaking to the risks,

Teddy Repko 17:00
I think they’re related to these two dynamics that I just spoke about. I think the first is valuations. It’s amazing that something can go from zero to billions of dollars in a matter of months or straight out, straight out of the gates. There’s a high degree of trust that excellent founders who’ll be able to turn an idea into something very real, and while I’m confident that these will happen, and they have happened, it doesn’t leave that downside protection that I would typically hope for in getting large ownership stakes at a low valuation at this stage of investing, so valuations I think is one, and the other is because of the pace of innovation happening in AI. I think the knock on effects is the pace of funding rounds has ticked up to be incredibly quick, where GPS can have, and you guys will know this better than me, will have days to make a decision on something, I think it can be very hard to have a deep diligence dies when such a short timeline, you know, it’s important to want to go into these opportunities with a prepared mind, but still having to make decisions quickly is a sacrifice that scares me a little bit.

Earnest Sweat 18:18
Are there certain parts of the market, whether it’s stage geography or verticals, that you’re a little wary of today, that you, you know, not to say there’s no in this business, there’s no like absolutely never investing in something, right, there’s always exceptions, but where are you a little bit more like wary when looking at kind of the thesis areas of your fund managers,

Teddy Repko 18:46
two areas come to mind. I think the first is dedicated to later stage growth. There’s a lot of ways to make money in a venture. There will be very, very amazing outcomes in this ecosystem and this space, but I think broadly, what I worry about, going back to the valuations, is that if you aren’t choosy in later stage ventures, I worry about you getting burned in a very big way. I think in this world, run in an AI-driven venture, there will be outstanding outcomes, unprecedented outcomes, but I also think we’re likely to see some unprecedented losses, and so dispersion is something top of mind for me. The other one that comes to mind a bit for me more recently is the crypto ecosystem. They’re one historically I’ve had high conviction in sharpshooter dedicated venture managers, I think. Where I am beginning to feel a bit of concern is around the Bitcoin narrative being a store of value. It just hasn’t behaved that way in an area of inflation relative to gold, and so now I think you have to believe that Bitcoin is on its path. To become a store of value, and that’s a different bet, obviously. That’s very different from the broader venture crypto venture ecosystem, but it’s such a big proportion of that ecosystem. I would fast to think if something, if something material were to happen in a negative way to Bitcoin, it would have terrible ripple effects for the ecosystem. So that’s something we continue to study as well,

Alexa Binns 20:22
and what about on the flip side, what are the opportunities, or where do you see Alpha?

Teddy Repko 20:27
There’s a lot of areas we’re very excited about. A couple that come to mind are more geographically oriented in a lot of ways. I think China has become washed out, but there’s a lot of great innovation happening there at reasonable multiples, so that’s a place where we’re quite active. Earlier this year I spent some time in India. I went on that trip with a high degree of skepticism, because I feel like the idea of now is the time for India has been what Alligators have said for the past couple of decades, and it hasn’t really worked out after getting boots on the ground there, that perspective for me has changed. Where I am quite enthusiastic, you’re finally starting to see those power law outcomes domestically that can change the risk reward formula there. And I think a very interesting data point, one of the most active IPO markets in the world last year was India, so things are happening there. We’re spending a lot of time there. I think the last I would say is it’s more of a structural thing. It’s smaller funds where to have a parallel outcome at the fund level, you don’t need a deck of corn, a $50 billion outcome, a trillion dollar outcome. Use you construct your portfolio in a way where a $5 billion outcome can return one times or multiples of your funds, and why that’s compelling is because they’re kind of fishing in a different ecosystem of founders and of ideas that I think what I am seeing more typically in other funds, so those are the areas we’re spending a lot of time on, and are quite excited about

Earnest Sweat 22:06
The conventional wisdom has been from a number of domestic and even international allocators is to kind of stay away from the Chinese market. What aren’t they seeing that makes you more interested,

Teddy Repko 22:23
I think. I, and we, are eyes wide open to the same risk of not being able to get capital out. I think where, where some of us differ is on if that risk is a hard line and a reason to completely die. Right now I’m at the point of believing it’s, it’s not a hard line, but it does raise the bar, and the risk-reward we’re seeing there does compensate for that risk, but it’s an area we debate very regularly, regularly and intensely.

Alexa Binns 22:56
Teddy, you are investing on behalf of the Yahavia Tom Tribe, and I would love to understand what a sovereign wealth fund is looking for. Who are your comrades? What should we know about these pools of capital?

Teddy Repko 23:12
To start off, I will give a little background on Yahavia, Tom. It’s a federally recognized tribe of Cerrano people based in the San Bernardino Valley, here in Southern California, federally recognized since 1891 More recently, a very big milestone for the tribe was reclaiming this ancestral name of Yahaviatang, which means people of the pines. They do a lot of fantastic work, I think it’s since 2003 2003 the tribe has awarded more than $450 million in philanthropic support for the community in terms of education and culture. So, really, really a great organization, and a great, great group of people that I’m very proud to work on behalf of within the sovereign wealth fund. In terms of how the sovereign wealth fund operates, it looks and feels and makes decisions a lot like a typical mid-sized US endowment. Many people, when they think of sovereign wealth funds, would not think of a sovereign wealth fund within the geography of the United States, and so I find it helpful to draw the parallels to an endowment or a foundation. We construct the portfolio very similarly, you think about risk quite similarly. There are nuances, of course, as there are with every program, and I think the world is not entirely different from how we thought about building the portfolio and making decisions. When I was back at Columbia, I think that the biggest difference that I’ve adjusted to is the program is, is more, is a bit more new, and so we don’t have the legacy exposures, we don’t have any tech debt, we can really build fresh, and that was a key draw of. Why this role is so attractive to me, and moving east to west to join, join the opportunity

Earnest Sweat 25:06
When, when joining a new organization, how much venture capital were they doing before? Without getting into the specifics, I’m just trying to get a sense of, but they’re already a known book, or were you being brought on to kind of help shape what it looks like?

Teddy Repko 25:25
There was an existing venture portfolio when I arrived. It’s a fairly robust portfolio with great exposures, and so my.. when I joined, my focus was not on ripping things out or changing things drastically. It’s really trying to add value on the margin and find areas of uncorrelated alpha within the existing exposures, so there’s still plenty for us to do, and we’re very excited about continuing to build, but I would applaud my, my team on what they’ve accomplished to date,

Earnest Sweat 26:01
so and so, enhancing and bringing more value add for our other allocators, who are, you know, our audience, a lot of them are moving into places that maybe already have established books. What are some of the pointers you would give to those folks when joining these organizations, how to actually do that? Enhancing,

Teddy Repko 26:25
I would say there are a couple of things. The first is, before you enhance, you need to understand what you have. It’s really important to understand the mix of managers, the mix of areas of differentiation, the mix of exposures. I think one of the most compelling things that a new individual can add to their portfolio is saying here are all these special sauces of our mix of managers, and again, can come from a lot of different sources, but in venture, one of those is often the network that a GP brings. Here is what I have found as an excellent GP, and why it is different to me, a lot of that enhancement comes through differentiation. It might be helpful for me to give an example of things we’re thinking about in our portfolio. I would say our portfolio today is very Asian heavy and very US heavy, an area of the market that I spent a lot of time in, and end up very highly convicted in is the Israeli venture ecosystem, particularly with seed stage Israeli ventures. Why is that differentiating? It has the beta, I think, of a US venture, but with a very different top of the funnel, which is geographically in Israel. So that’s something that could be quite additive to our portfolio today.

Teddy Repko 28:16
one of the things I loved about canvassing the Israeli ecosystem, which is an exercise I did very deeply a handful of years ago, was that you could go to Israel, spend a week or two, and meet with the vast majority of institutional players, not all, but you can get a pretty good idea of the different players in the market, and that makes it far easier to begin making decisions and narrowing the funnel, because you have that full, that full view. I find that so much more intimidating and challenging in the US, because there are just countless opportunities, and you know that there are things you don’t know in US ventures. It’s far less extreme in a much smaller market in Israel.

Alexa Binns 28:59
Yeah, that ecosystem, what I’ve learned, it’s, it’s also, there’s still plenty of room for the emerging managers, but so many of the US firms now are playing in the, you know, seed series A, etc. But I guess those Israeli managers are not alone any longer.

Teddy Repko 29:22
it’s such an interesting dynamic, because that was the case a decade plus ago, where all the big global firms had their dedicated office in Israel, and for a host of a variety of different reasons, it didn’t play out, those managers pulled from Israel, and the boots on the ground spun out and started their own firms, and there are probably a dozen of those spinning out from Sequoia, from Benchmark, a whole number, and now these managers are coming back. So I think it remains to be seen a little bit the impact of that on the moat around. Israeli seed, I think. What I go back to from my experience there is the market connectivity between people is very tight, so which goes back to the military experience that I think, first of all, if you’re going to be successful in Israeli venture, you have to be Israeli, really ingrained in the culture there, and that could be hard for non-local institutions.

Earnest Sweat 30:24
I think this also points to, in our pre-conversation, how much you value network building and relationship building in this space, both from allocators and other GPS. It’s no surprise that now everything’s becoming spam with the advent of AI and a lot more noise is happening, so I’m sure your email is just like it’s probably a lot right now. How do you leverage this new world, or how do you build true relationships, whether they’re kind of like cultivating people you’ve already known versus like net new relationships? How do you find the right people? How do you stay connected to them, and what do you expect in return?

Teddy Repko 31:20
I think I’ll approach that question a couple of different ways. First of all, I think you’re completely right that the value of an email, inbound or outbound, has just gone down drastically. So much can be automated, and so the volume of traffic that we see has just gone up exponentially. Makes it really difficult to sort, sort the signal from the noise. There, what I think it does is create an opportunity to really build meaningful relationships, but it requires time and effort, and a lot of that time and effort has to be in person. I think the limiting factor for us as people is time, so we have to be really purposeful with who and why we try to start relationships, and it’s very important that there’s a give and a take, but the actual practice of building those relationships, I think, is evolving to be even more in person. One sort of amazing tactic that I experienced, and now I do it myself, is rather than a thank you email after a really impactful meeting, handwritten note, handwritten note goes amazingly far at building a lasting relationship for someone you really want to connect with long term, you know. We also provide, for example, some interesting tidbits from the tribe, or you know, endowment could provide interesting tidbits from university, something very personal that when the receiver gets whatever you sent them, they know that you put thought and you really care. I think subtle actions like that are only growing increasingly important in this world of AI.

Alexa Binns 34:01
We started out this conversation talking about our small children falling from great heights, and Teddy, I’ll be really, I’ll really feel like you’re taking care of me when you Amazon me those baby gates. Any, any final words of wisdom, or just things you’ve been chewing on and thinking a lot about that you could share with us as a final sign off. Teddy, this has been such a joy.

Teddy Repko 34:29
Final sign off, let’s see. I would say it’s an incredibly interesting and dynamic venture backdrop, one in which comes with a lot of potential FOMO and fears, but also a lot of opportunity, and many of your guests have said it, and I completely agree. The name of the game adventure is consistency. It is a very dangerous game to exit the venture market because of the power law you see. Be in vintage years, and so when I think about where we go from here, it’s to keep following our north star of looking for GPS with sustainable superpowers and backing them for the long term.