The third interview I’ve done on Harry Stebbings‘ “Twenty Minute VC” was just released. You can listen to it here. Frankly, I am surprised by the response to it. This particular podcast covered quite an arcane topic — how to learn how to manage investment funds. It’s a topic of personal interest to me as I’m living it in real-time and trying to learn, but now reflecting on the response, perhaps the reaction makes sense — there are over 1,000 private funds “in market” and perhaps another 250-500 folks who are actively thinking about creating one. That flood of new managers (and hopefuls) will hopefully embark on the journey I am on, and let me just say, it is not easy to learn.
I’ve written a bit about my journey to learn fund management techniques here on this blog, such as these posts, which I’d recommend to any new or aspiring manager: (1) The Long Haul Of Building A Venture Capital Firm, which touches on what I’ve learned from sitting inside the partnership meetings over years at GGV Capital and Lightspeed, in particular a podcast Harry cut with one of Lightspeed’s founders, Barry Eggers; (2) Fund Investing Versus Fund Management, which explains how writing checks is easy, but managing a fund (and across funds) is quite complex and takes years to learn; and (3) VC Firm Creation Versus VC Firm Building, which showcases how Susa Ventures (as one example) sets the bar of how to create an investment “firm” with long-term ambitions. I will keep writing on this topic as issues come up, and I am slowly putting together a more evergreen resource on “Fund Management” that I hope to publish when I have more time. I am doing this informally on a weekly basis for the many funds I advise, and I think it would be useful to put all of this information in one place and maybe even lead a course on this subject. Again, when I have time.
Finally, I want to end with one important point for those who enjoyed the podcast. For those starting new funds and wanting to run their own firms, those are worthwhile goals and dreams. Doing that well certainly requires good to great fund management techniques. And, it will take a long time to learn and master those. You may augment this by bringing on talent to your firm, but you will need more assets and a budget to grow your team with non-investment partners. And, even if you do all this, it may not be enough to run the parlay on your subsequent funds.
Fund management is necessary eventually, but it is not sufficient.
What matters most when one starts is: Are you in good companies? Being in good or great companies is really the only thing that’s required when a new fund starts. Being new managers, investors in those funds know that results are years away, so they will look to other proxies to assess quality — who does this person co-invest with, who follows their deals, how much money do those companies raise, and what is the strength of the underlying companies themselves? So, fund management is important, but mastering it doesn’t really matter unless you can get into good companies early (and you need to max your shots on goals to get this done) — that’s the jet fuel that gives you the lift to get off the runway in the first place. Fund management is more about getting to cruising altitude, avoiding turbulence, and trying to have an efficient flight path. Wishing you all a smooth flight!