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nice to have you here um we are gonna uh discuss something that I think everyone is going to be super interested in this audience and it's how do institutional LPS evaluate managers so to get kicked off let's do a quick round robin um for each of you why don't you tell everyone that institution that you work for the kind of AUM that you have uh how much is allocated to venture and what a first check looks like to a new manager that you'll commit to do you want to stop Randy first I'm sure happy to do that uh running ojuku I work for the private Marketing Solutions team at Morgan Stanley we manage about 16 or 17 billion dollars uh and do everything in private markets Venture Capital with Equity buyouts Etc uh and also we'll do Primary School Investments secondaries we've probably committed something like 1.2 billion dollars to venture funds over the last 15 plus years and to a new emerging manager maybe something like 10 to 20 million that's the first show sure I'm David York founder and managing partner of top tier Capital Partners all we do is Venture we manage about eight and a half billion started originally in Silicon Valley and today we have offices in Boston and in London our investment activity spans the whole gamut from seed to growth if we're an emerging manager we're typically in the five to ten ten million dollar range to typically like to be around 10 percent of of a fund the funds are usually lower than 150 million in size for a more traditional manager against thinking about that five to ten percent range we typically invests over 25 to 30 million depending on fund size but that's that's what we do great I'm Caitlin fitzmorris I'm a managing director with Selby Lane Capital we are a boutique investment firm that just invests in Venture growth equity and buyout funds we are a very new firm started last year so we're still building our exposure uh but we're currently committing about 200 million dollars a year across the private markets on behalf of our clients and our initial check can range from a couple million dollars up to kind of 20 million dollars plus depending on the fund in the situation and hello everyone my name is Chris presser Giacomo I'm a portfolio manager at the state of Wisconsin investment board we manage the retirement assets of the Wisconsin retirement system which is a fully funded pension plan so we have permanent Capital it's about 120 billion dollars of AUM our Venture exposure is about two percent so 2.4 million or billion of uh of uh nav most of that is in in funds about 95 percent of the AUM is in in funds 5 directs um we Pace we're pretty disciplined in our pacing on an annual basis so we're we're pacing in anywhere between 500 million and 600 million annually into Venture um and uh we'll like our our typical check size into a fund is is probably 25 to 30 million dollars but we have a wide range our smallest fund commitment is a million dollars and our largest commitment is a hundred million dollars so if a lot of flexibility within the portfolio David I'm going to pick on you first sure okay so evaluations of managers start at first meetings first impressions are everything probably hard to change your first impression um what is a great first meeting look like to you well typically you're on time so that's helpful sometimes I'm not which I apologize for those who've had to wait for me but you know usually it's been on Zoom for the last three years plus um and usually somebody sent the pitch book ahead of time and they just want to chat and that's hard because we see lots of folks we see three to four hundred people 300 managers a year sometimes as many as five or six just depending on what the Market's doing and so trying to remember your pitch book let alone get to it it's really impossible um and so we really want you to kind of take us through your journey and your story and have it tie off in a way that makes sense to us and that's very helpful I I'm a I'm a sort of a study of people so I really love to understand the background of the individuals on on the zoom caller in person and why they're there and how they got to where they are and why they're motivated to do what they want to do Randy any first meetings that like jump out at you has been great yeah so I think for us that there are a couple but I think for us we we generally take a view of the world in VC right and so we have a perspective on what's worked for us what hasn't worked for us and so in a first meeting we want to kind of do a screening back another make sure hey does this GP comport with how we think about the world right no different from a GP going out there and looking for an entrepreneur that makes sure they're in the right sector right geography Etc and so after that it's trying to figure out okay what's the special sauce what's differentiating about this GP versus others right you know we're taking 100 200 meetings a year with VCS right so what's going to make these guys different and make these guys great right um you know you asked if something jumps out uh you know I can actually think of a meeting on the negative side that jumped out unfortunately but uh the the maybe the without preface with that is saying that a great meeting doesn't necessarily mean we'll invest right um You Know It's Not Unusual for us as an example to meet a great fund around one cycle and invest two cycles later and some GPS get that um not all GPS do there was a GP we were meeting with uh and we said hey unfortunately we're going pencils down uh and they came back and said well it's not pencils down it's pencil is broken they say okay well we're never gonna less than you now and when the next LP calls us which they did to ask about that fund you can imagine how that conversation went right so um it is uh an interesting question so use pens not pencils uh Caitlyn I don't know if you're anything like me but sometimes I'll do four or five meetings in a day maybe 15 over three days I can't remember the great meeting that I had two days ago often that evening how do how do people stay on your radar if you're investing potentially two to three Cycles later yeah yeah I think as as ready to just imagine that's it's key and and these can be really long relationships that take a while to develop and as I'm sure you've all experienced LPS have a lot of people clamoring for their time um and so I think it's important to try to to stay top of mind uh and and kind of get their attention while also you know demonstrating over you know one or two fun cycles that you're delivering on you know what it is that you originally pitched as your fund and and what your value proposition is um and so I think that can be as simple as if you're setting a quarterly update to your existing LPS you know pass it along to a couple of prospective investors that you know you hope to build a partnership with over time if you're doing an you know an interesting New Deal or or have some good fundraising updates on your portfolio you know pass that along so that not only do you kind of bring yourself back up to their top of mind but also really show some good progress and and demonstrate that you're delivering on you know what you had pitched as um your your strategy and your value proposition originally Chris anyway any good waste people has stayed top of your radar yeah what I would say I preface the statement first by saying you know start um start communicating with prospective LPS well ahead of a fundraise probably no surprise to all of you again um we see a lot of managers that come through an annual basis I mean we like it's swib um uh you know we set our kind of our our capital budget uh the year before we're building our pipeline so right now we're building our pipeline of re-ups and new managers for 2024 so start that process early Caitlyn hit it right in the head um it you know send out materials on a quarterly basis or a semi-annual basis to your prospective LPS A lot of times we'll get invited to agent their AGM their annual annual meetings there are some instances where the GP maybe they're um uh uh they're a specialist in a particular area whether it be AI or blockchain or web3 or what have you and they'll put on some webinars and they'll invite us to those when we're traveling we're traveling all over the us to meet with our managers who stop in and say hello and meet the team and and get updates um and then I again I would just say uh have have a persistent but not pushy Cadence and touch base with your perspective uh LPS you know every every six months every quarter every six months Randy it's uh as a VC I know it's pretty competitive out there we have uh there's a lot of people trying to get a little Capital uh and we think a lot about Edge what do you think about when you're looking at the backgrounds of teams that give them an unfair advantage that give their match yeah it's a good question I wouldn't say that there's any particular background that uh gives or personality gives a group an edge we've invested in a number of different types of groups right but if I'm boiling VC down right it's you know can you Source uh well can you win those deals that you Source can you help those companies along the way and then can you kind of make sure you're structuring your Capital properly so that you're you know getting to a right exit right so um if you're doing those four things and you should probably be great at all those things and hopefully spectacular at a couple of them right uh but I wouldn't say there's a particular personality that is good at that but for us I think we'll want to understand and Chuck around to say hey well what does a market think of this person right so we'll talk to other GPS and say and understand I want to understand if you you play nicely in the sandbox with others right we'll talk to other LPS right and make sure that you're a fiduciary make sure that you're clear in your communication Etc maybe most importantly we want to talk to entrepreneurs right and talk to entrepreneurs and understand what they think of you what the what the perception is of you how often you really help right and so um with that there's not a particular background I would say right we've backed former operators we've backed lifetime investors I think there's there's a wide variety of backgrounds in fact Katelyn Caitlin any personality traits that you look for yeah I think there's a few that are really important in this business and it goes back to a little bit of what Randy was just saying but at the end of the day this is a relationship business you know both between LPS and GPS you know hopefully forming a very long and multi-decade long partnership but we also understand that it's about for you know the GPS forming relationships with Founders and getting access to you know compelling deals and interesting opportunities and so being able to form those relationships being a good person within you know the ecosystem as Randy said you know everyone talks to each other um you know alfies and and GPS amongst each other and so at the end of the day I think that's really one of one of the most important things is is being able to form you know a strong personal and professional relationships with you know kind of all of the players in the ecosystem I guess when you really think about evaluation a lot comes down to Performance Chris um so has the current market environment that we're seeing today impacted the way you're analyzing performance or absolutely it's it's going to change how we're thinking about our manager performance um you know obviously we're spending more time digging into the the actual funds themselves and looking at the underlying portfolio companies to really get a good sense of where um our our managers are holding the valuations and then getting some metrics of those companies on those businesses and the nice thing that that we have at our shop is um there are a lot of companies um where we have multiple managers that have invested in the same company at the same security so we get to see kind of who's super conservative and who's super aggressive and then we'll kind of uh you know right size or upsize depending upon where we think the value is but what I'll say is that um uh given the fact that we have you know we can see where people are holding their their values it does shape how we view a manager when they come back to Market so my view is you know when you're when you're thinking about valuations be conservative because at the end of the day we'll we'll figure it out we'll make our own determination so a long answer is um we've got you know still a lot of unrealized uh profits in in our portfolio and we're just spending more time on underlying valuations of the businesses and David how do you think about unrealized that unrealized value today and portfolio very similar to what Chris said by you know we our history goes back into the late 90s and so we've seen the internet bubble and we've seen the global financial crisis and and so we're going through a period of value reset currently and it's not made its way really into our book at this point because a lot of the companies financed over the last two years and so um what was clear coming out of the late 90s was the performance during that period of time wasn't indicative of the future performance and a lot of firms actually over time just never caught up so we spent a lot of time really trying to sort that out and make sure that the valuations that are being presented to us from a track record point of view are actually going to stick or have some validity to them so that we're not buying things of the past that aren't going to perform in the future what about firm performance metrics so there's a lot out there that I think of for Mike tvpi DPI irr I guess most managers in the room are probably um incentivized on cash on cash or compensated on cash on cash Chris what's the most important metric for you and why cash is the most important thing at the end of the day I think one of one of the panelists earlier this morning um made a comment that you know you can't you can't eat Ira you can't eat tvpi so DPI obviously is very important for us and our beneficiaries the problem with DPI is you know it takes a while um you know where our portfolio is tilted primarily towards early stage so DPI of a seed fund we know it's going to take some time so looking at those various metrics it really depends on the the fund strategy and what they're what they're doing so um you know for for us you know we probably don't start really thinking about DPI until maybe year four ish um is is kind of our our view there um and then tvpi and our irr we do follow we pay attention to it irr is probably something that I follow a little bit more closely what else what I'll say is the um you know the past couple years you know the returns have been out of this world we're kind of laughing backstage but I've I've told a few folks in our our investment committee like you know don't expect these returns to continue there's going to be a reversion to the mean we're starting to see that now so when you're actually doing some benchmarking using irrs it's been tough to do but I think over the longer term things will get down to a more uh more normal environment talking about benchmarking how do you think about benchmarking Randy like how important is it in your analysis and what are the what are the pros and cons of it yeah so it's definitely important right it's it's something we do but it's not the end-all be-all right I think we've done some analysis internally on looking at our our data and which it would show you that you know it really takes about six years for a fund to settle out in the in the quartile right and that over that six years it's not unusual for a fund to be in three different quartiles right so maybe after a few quarters it's in the third quartile and then it jumps up to the first and then actually it settles out in a second right um and not to geek out too much right but then you should also really be understanding the age of those companies and the deployment pace and that's you know so vintage year is important but also you know understanding the underlying age of the portfolio right um so that you know it's it's important but it isn't the end-all be-all the other thing is that uh you know if you talk about persistence I think the latest pitch book data I saw is a persistence for VC funds kind of you know if you're in a first quartile are you going to be in the first quartile again for your next fund it's around 50 I think it was 55 which is just a little bit better than the coin flip right and so you know it's important we do it but you know there's a lot more analysis that we do one of the things that's that's kind of interesting David I'll ask you this is um when you have new investors in a fund that have been around for a long time you're looking at attribution and track record when you're looking at emerging managers it must be much more difficult to assess their investment capabilities how do you do that carefully so we usually invest most emerging managers we've invested in typically have some historical investment activity that we can try and triangulate against um but we do a lot like Randy suggested which has spent a lot of time in the GP Community trying to understand the value add that that's being preached to us and then we do because we own so many companies indirectly have a great a great sort of laundry list of places to go reference today we own about 15 000 companies indirectly across all our books so it gives us the ability to triangulate pretty well but that's that's how we do it and nine times out of ten a manager that we sponsor for the first time has typically been referred to us or been in business for a while gotcha Caitlyn do you have any other tips and tricks how are you I would definitely agree with with what David said I think you know major selection is always a little bit more art than science and and even more true when there's a less mature track record but I think it really just requires the lp to invest a lot of time and effort with you know the fun that they're speaking with or the individual the GP they're speaking with to really understand um the companies they backed why they backed them what they were looking for and and making really a judgment call um you know as to the attractiveness of those investment opportunities and and not just falling back on you know kind of where they might have been marked in their last uh their last fundraising round so I think it requires a little bit more in-depth work and and probably more time spent in the diligence um and at the end of the day you know is always going to be a little bit of a judgment call you know on the individual LPS front so I want to switch a little bit to how you think about you've talked about first meetings individuals performers but how do you think about teams and Partnerships because uh Partnerships are slightly strange thing it's a group of people um how do you balance what do you think the right balance is between a team and a set of individuals uh trying to achieve something what's the right balance and how do you assess tensions um you know so I yeah this is kind of the classic like agency versus more collaborative model right and and what do uh what do folks prefer I I you know I would be curious to see what other folks think but I think we strongly prefer collaborative models um I think for us trying to make sure you have someone that can challenge your thinking that can you know really make sure you're all on the you know on the right page um that's very important for us uh you know I think in the agency models that we have seen and backed um oftentimes it can be like Partners work for different firms right uh we were talking to a very large firm about a particular subject if I said the name you all would know it um and we talked to three different partners from that firm and they had three it was like they worked for three different firms they had very different perspectives on the same question and it was kind of like wait how can you all work for this firm and all have such different perspectives on on this particular topic right and so that that for us I think is is largely our turn off but but I should say that it's it's a spectrum right it's not like you're an agency model or you're a collaborative model it really is a spectrum between the two you can kind of look more like the other yeah I'm gonna jump in store if that's okay it's because I what's happening Adventures you really are starting to see in evolution and in firm structure um you know if you go back into the the beginning of time in the 70s and 80s it was definitely a bunch of guys sitting around the table almost like a law firm they all had their individual practices and they kind of shared the energy of that and then somebody raised their hand to start a company like Genentech or something like that nature um today we see quite a few Soul solo GPS and those are tricky for institutions from a fiduciary point of view because there's a couple risks there there's the hit by the bus risk which we all kind of know but there's also the headline risk which is something that's not obvious we've tended if we've done solo GPS they've tended to be kind of they've been embraced by a platform if you will and are building a platform to ultimately have more investors come come out of that and or into that to build more collaborative and what I'd say sort of consensus building as far as investment decisions are made but it's been very hard for us to buy a solo GP just because they want to raise money and put money to work Caitlin Chris how do you think about solo GPS yeah so we um uh at least since I've been at uh swib have only invested in a few solo GPS it's um I you know we're not against it um it is a little bit tougher for a larger institution like swim um you know as David said the the the individual the one person that's managing the fund is making all of all of the decisions so uh the whole hit by bus is a big issue things don't work out who's going to pick up the portfolio work with the companies the other thing too is um you know GP typically a GP isn't just going to be looking to raise One Fund they're going to raise fund two three four and five and so their ability to hire both on the investment side as well as maybe you know back office Etc is very important and that's a very different skill set so you know there's another risk there that the individual that you invest in doesn't have kind of the background or qualities to be able to hire a a solid team so um again we're we're not against it we just haven't done a lot of it um in our shop a question for you Caitlin um what warning signs have you seen going back to the partnership Point what warning signs have you seen for a firm that's starting to lose its way it's a great question um I think some of the ones that you know in hindsight if you look back at kind of where things you know got lost I think part of it is around understanding really what is motivating and driving the individuals at the firm and you know what is making them get out of bed every day what are their ultimate goals and you know kind of how they're going to define success for themselves personally and for the firm um I think when those motivating factors are not aligned within a partnership that can result in a lot of issues over time um and and really kind of trying to understand going into a partnership you know what are those those motivations are really important these are really long Partnerships you know multi-decade in some some days uh in some some cases and so understanding kind of what is is kind of intrinsically driving and motivating those individuals and making sure that if it is a partnership you know they are aligned in terms of of what they're doing we love to ask managers especially as they're starting out like how they'll define success for themselves in the future and it can be a really eye-opening question in terms of how people answer that and David once you have committed to a manager um maybe for the first time how of the best firms manage their relationship with you to make you feel like a valued partner and not just Capital got it we tend to over index on um helping the firm try to grow and organize itself a lot of the first time funds we've done we've tend to try to get on a quarterly Cadence where we either sit down with them and talk through life or or get on a call and those sorts of things we tend to spend two to three times a year with managers going through their book and and also what they're doing as it relates to their team um We've Been instrumental in interviewing a lot of General partners that are in our managers to help them frankly promote themselves but also try to sort out if it's a good fit from a different point of view so we really try to be an active partner in a way that um sort of differentiates us we tend to sit on The Advisory Board of most of the managers we invest with so lots and lots of touch yeah and Chris is a pension slightly different um how how do the best managers make you feel valued um you know so look LPS and GPS were all aligned um you know we're all we all want to make money um uh the the dollars that you all invest in the returns that you make come back and and are um you know help our beneficiaries um uh retire and dignity have a nice life where what I really like like my best manager relationships um actually are more curious about like what we do and what we're all about and learning about you know the the 660 000 beneficiaries across Wisconsin that we're trying to generate uh retirement returns for so um you know that relationship you know again Venture is a relationship business um and and so having that closer relationship where I know kind of what they're doing but they also understand what what we're doing and what we're all about you know if I could just jump in on that as well I think there's also value that as LPS we can provide Beyond Capital which I know many JPS May laugh at um but in all seriousness I do think that you know we see the the market right we see your peers and how they're doing valuation and how they're running their back office and um you know how they're thinking about reporting uh and so I think often the best GPS are asking those questions right asking us and trying to figure out and improve upon themselves well how should I be doing my reporting and what should should my check writing policy look like and hey how do you do evaluation how have you seen others do it right I think that's also super important yeah definitely um so I think we're running close on time so I'm going to ask one last question which is what advice do you have for anyone in the audience right now that wants to raise in the next one to two years and maybe they're not like a name brand top tier quartile uh GP what's the advice that you would give them I'll start with you around sure I think it's just being thoughtful about what you're trying to do right I think I'm surprised at the number of GPS that I meet and ask about their fund and fun size and okay well you know why why are you trying to raise 500 million and like they don't have a good answer right like it's like oh well because that's what my friend raised right well that's that's not that doesn't make any sense right like what are you trying to do what's what's the you know what are the ownership targets that you're looking for how do you anticipate loss rates and then how does that actually you know translate to your Fun Size right and the terms that you're going to have Etc right so just being very thoughtful about that um again I'm I'm shocked at the number of GPS that haven't really put the time into thinking about um you know franchise and how they think about their firm David my uh my comment within particular in this market is to be patient um there's there's uh it's Chris will tell you um lots of capital is allocated over the last 10 years and uh people are overweighted and so that they don't have necessarily the ability to commit but they might want to develop a relationship and so take the time to do that one other comment I'll help with Randy's comments is that um do understand about portfolio construction and how many companies do you want to put in your portfolio how what do you want your reserves to look like how you plan to manage that part of your balance sheet because that at least tells us that you understand the the spreadsheet model that's going to generate the 3x in your portfolio and your and your carried interest in a way that helps us understand you what you're that you're actually committed to doing this a lot of people show up and they don't really understand Reserve management and portfolio Construction Caleb I would tell you to start building those relationships now I think especially in this market there's a lot of competition for Capital and you know as Chris mentioned they've already figured out their whole budget for this year so if you're looking to raise this year or next year you know you want to be getting on the lp radar soon if not immediately um and also just making sure you can tell your story well uh in a way that really highlights you know how you're differentiated in the market um so that your you know your pitch and and your value proposition to LPS is is memorable amongst all the other funds that are out there on the market right now finally yeah so um as Caitlyn said start early stay in close communication with your current LPS and prospective LPS you know deliver a clear story stay on strategy um you know don't chase any shiny objects um and and then I I would say that um it's if you don't have a track record uh or as good a track record as you think you will have being able to tell a story about you know how your companies are actually progressing within the the fund um so maybe put together some information on when you made an investment in a company the ARR was X and and now it's why in the the business executed as you as you had planned when you first made the investment so you can tell a story that the portfolio is looking good you just haven't generated the returns yet so if you can develop a clear concise story around that that's that's helpful for for me great well thank you very much appreciate your time and hope that everyone enjoyed it thank you