Reflections of an Emerging Manager

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As many know, Equal’s journey as an Emerging Manager has not been a straight forward one. I left my job at Lightbank in 2018 with zero knowledge of raising a fund or managing LP relationships. I had delivered returns for my prior fund and felt confident there was a gap in the market for our product, but I vastly underestimated the challenges ahead. I’ve unveiled some of those challenges and will choose to keep others private to my inner circle, but the process of starting and sustaining Equal remains one of the most trying experiences of my life.

Amidst that process, I sought direction and guidance wherever I could. I didn’t come from typical venture networks / schools and I didn’t have a mentor in the space that would show me the ropes, so I turned to books like Jerry Colonna’s Reboot and to my peers. This led to the formation of the Emerging Manager Circle. 6 years later, we’re now >700 GPs and we’ve hosted conferences that have collectively brought together nearly a thousand emerging managers and LPs across the last 3 years. We also host dozens of events per year to bring LPs and Emerging Managers together.

Why do we do this? For three reasons. First, I fear for the state of venture capital today. I’ve written at length about some of these challenges and I think emerging managers represent one of the most logical pathway to getting us (as an industry) back in realignment. Second, to bring together each side of the table (GPs and LPs) to forge greater trust and togetherness – these are some of the relationships that have helped me get through the hardest times. Lastly, to learn.

The last of these has been absolutely essential to the last decade of my life. This industry has always been an apprenticeship-mentorship business and frankly, I think that’s bullshit. We aren’t born with the choice of proximity – who are parents are, what their wealth / social status is and/or whether they were oriented to technology and entrepreneurship. We do have the choice to learn. Unlike other industries, venture capital has largely guarded its lessons – even admist starting Equal, when I asked more senior GPs who had started and scaled successful funds if they could give me some pointers the responses ranged from “if you are good at something, why would you do it for free?” to “why would I help enable another competitor”. While I think there has been a tremendous evolution in transparency in the art of venture capital (thanks in part to what were once emerging managers like First Round, USV, IA, Emergence and Floodgate who have all been incredibly generous with their knowledge and frameworks), we have nowhere near the same depth in the art of starting and building a venture capital firm. I am no artist, but EMC is our guild to help myself and others learn that craft.

With that, I want to share more broadly some of the lessons from this week’s summit. We had over 1,500 applicants for just over 300 slots (only half of which were available to GPs) and while I’m elated to see the interest grow in the event every year, I feel remorse over the inability to share with an even broader audience. Hopefully some of these lessons will serve as a bit of solace for those unable to attend.

Betting big on being different - Chris Farmer from SignalFire made a BIG bet on the impact technology can have on our business. The concept of technology disrupting our industry is something we flirted with when starting Equal, but SignalFire has taken this to a level that I could have never imagined. SignalFire has invested tens of millions of dollars into building its tech platform on the belief that you can’t half ass your competitive differentiation.

There are always multiple ways to win – In our second session, you can see the diversity of different approaches to winning. Dave Yuan from Tidemark and Adam Bain have VERY different styles to growth investing and Matt Auxier from University of Chicago has invested across the landscape of growth and early stage. This serves as a reminder that there is no single way to win and the importance of owning your own playbook, rather than following those of others.

Trust and transparency across the table - Our third session featured a case study on Homebrew + Screendoor and I left the session with a renewed appreciation for what I call “the margin of trust”. Homebrew is undeniably one of the most respected seed firms in the market and they’ve done so in a style that is wholly their own, continually evolving AND expanding with the launch of Screendoor. Through this, Satya Patel (Homebrew/Screendoor), Lisa Cawley (Screendoor) and Jesus Argüelles have forged a level of partnership that any set of GPs/LPs should aspire for. The relationship they have with their LPs serves as a best-in-class example of what you can accomplish if you are transparent, trustworthy and true to your values.

Never sacrifice who you are -  Gordon Ritter from Emergence Capital is not only one of the best software investors of all-time, he’s one of the most remarkable firm leaders as well. The thing that I believe defines Gordon (and Emergence) above all else is a commitment to their values. This has been a persistent thread since the inception of the firm and as an investor who has worked with them several times before, you can feel it. I see a lot of VCs fixated on the deal in front of them and I’ve seen some of these VCs make short-term moves that may help them win that given deal, but ultimately sacrifice the integrity of their reputation. Emergence would never do that, and neither would we/Equal.   

“Rough seas make stronger sailors” – This panel included some of the most dynamic personalities in venture – Aileen Lee from Cowboy, Charles Hudson from Precursor, Beezer Clarkson from Sapphire Ventures and Brian Patterson from Latham Watkins. Despite the massive accomplishments of this group, there was mutual acceptance that the market is tough for Emerging Managers. The increasing size of the megas is making it tougher, driving the bar for survivability even higher. Amidst the difficulty of this landscape is the warmness of community that is ever present in the emerging manager community (in my opinion, far more so than in the broader VC world). I encourage folks to read Charles’s post about the session which is heartful, humble and beautifully human.

Your fund size is your strategy – This is a phrase initially coined by Mike Maples (more from him later), but Semil Shah and Scott Belsky personify it. These two investors (accompanied by Daniel Dehrey of SVB) highlighted the strengths of staying disciplined in their investing and the benefits of being complimentary (rather than competitive) to other investors. This session served as a reminder that the second you put fees > strategy, you’re on your eventual path to asset management, not investing.

The best relationships between founders and VCs are truly reciprocal – Annie Lamont from Oak HC/FT has worked with some of the best founders on the planet. Amidst her time as investor, she’s had a lot of the best founders on the planet coming back to the well to join her in building their next venture. Despite managing billions of dollars, Annie still embraces the EARLIEST stages of company building, working alongside these founders to help them bring their ideas into formation. While a lot of talking heads on Twitter like to say that VCs don’t matter, this proves otherwise. These founders clearly value Annie’s involvement and as some of the most accomplished founders in the market,  this further asserts that even the BEST founders can find value from their partnerships with VCs.

“The job’s not finished” (and never is) – This is a quote from Kobe Bryant that I bring back to my team and founders often. I’ll be real, a lot of venture capitalists are soft…they’ve never experienced hardship/failure and live lives of immense privilege. Not all VCs are this way, but many are. This panel featured three individuals who came from outside of traditional VC – former F1 champion Nico Rosberg, Grammy award winning musician Alex Pall of the Chainsmokers and AJ Vaynerchuk, one the most up and coming talent agents in the market. Each of these individuals is ALSO a full-time VC. The first instinct of many is to say “these folks are celebrities”. That’s not the point. These folks are WINNERS. They didn’t get their MBAs from Harvard/Stanford and they didn’t apprentice on Sand Hill Road. Yet, they’ve come into the VC industry in full force, put their own money on the line before raising from outsiders and have brought unique perspective to our market. Above all else, these folks know how to win, the intensity that is required to win in a hyper competitive field (like VC) and are relentless in their pursuit. You can feel the intensity of each of these individuals and I, for one, feel it’s a massive lever for opportunity in our industry.

The importance of partnership – This panel featured some of the most accomplished LPs in the market – Melissa Richlen of the MacArthur Foundation, David York of Top Tier Capital and Atul Rustgi of Accolade Partners. Yes, the market is hard out there, but candidly, it should be. This game looked a bit too easy for awhile and now we’re seeing the other side of that. Amidst those harder times, strong partners are worth their weight in gold. I’ve seen this firsthand and suspect many other emerging managers will see the colors of their partners in the years to come. Having partners who truly believe in what you are doing (not just the social proof or short-term performance) creates an undeniable edge in the market (as Maples would say “patience is a form of arbitrage”).           

We are all a function of our influences, NEVER stop learning – I’ve already used a few quotes from Mike Maples of Floodgate in this post and this session was full on plenty others. Mike is a wordsmith in ways that few will ever be and has an indelible ability to form frameworks that create structure amidst the chaos of start-ups. Mike spoke at length over his influences, both personal and learned, that helped shape his unique perspective and investment style. For someone who has accomplished so much, Mike is still a lifelong learner. He connects the dots between the practice of startups and his principles succinctly and is continues to build upon his “lattice of mental models”. A lot of us get complacent with our learning when we’ve achieved success and Mike provides as an everlasting reminder that our pursuit for knowledge never ends.

A firm is nothing without its team – This lesson doesn’t come from a panel, but rather my own interactions with my colleagues. I get far too much credit for the amazing work they do and I’m really proud to work with them day in and day out. They know how important this community is to me and they willingly roll-up their sleeves, working long hours to pull this off. I think of them as founders of Equal and I hope each of them thinks that way too. I think I’m fortunate to have a special group of people around the table and a special culture that we’ve forged together through hardship, discipline and authenticity to ourselves. One of our LPs worked out of the office earlier this week and admitted it was to see if all my opining on our team culture was real. He told me “Other firms have everyone sitting at their desks, taking their own meetings, focused on their deals…that’s fine. Equal is like a bee hive. Everyone is interacting with each other constantly. Working together on different companies, deals and firm initiatives. It has dramatically higher energy and togetherness than I expected or have seen.” That’s what we’re going for and that’s the foundation we will continue to build upon in the years to come. From Day One, we’ve said that “ a firm should not be a collection of fiefdoms” and if there is one lesson to take away from the legends we had on stage throughout the day, it’s that greatness comes from “we”, not “me”.