Said we need to make a model that is more attractive and easier for the GPs who wanna invest in. When you do these references, what are some non obvious questions you're you're asking? One of the easier ways we can get to information we really need is we end up every call like, hey. Top fund investing for the first time is not necessarily a sufficient signal for you. Why is that?
If it's a multistage that's doing many, many, many seeds per year, they might just be buying their way into the company such that they could ultimately deploy a significant amount of capital in the c and the a and the b and the c. The problem is, like Sean, we got to know each other a couple months ago and had a really interesting discussion. Welcome to 10x Capital podcast. Absolutely. Thanks for having me. So let's get right into it. You work at Gresham Partners.
How did you come to to Gresham Partners? I began in the industry about 15 years ago at a great cause called the DuPont Trust down in Jacksonville. Think of this as the classic foundation, 8 to $10,000,000,000 portfolio. And then in 2019, you know, I had spent a fair bit of time there, almost 10 years. It was time to do something a little different. And I found Gresham, which is a multifamily office.
We just had a number of names in common, some of them fairly unique and nuanced, and that gave me comfort that it'd be a place that I feel good about the investing. Give me some names. Well, you'll know one's a funky buyout name, but, the the big one was probably Founders Fund. So you're in Founders Fund both at the DuPont Trust as well as with Gresham.
As an LP, how do you look at their strategy of really piling into to a large position, the independence mindedness, the lack of consensus building? Uncomfortable is not the right word, but they're gonna do things you don't understand at the moment. But the good news is we're so far deep into that relationship. You know they've proven it works before, like SpaceX. You know, when they were first in that in a big way, you weren't really sure it turned into a great company. Raised 1,800,000,000.
They said 900,000,000 for this vintage and 900,000,000 to to next vintage. What did you think as an LP? That was a a bit of a power play. To do that, I think you have to have confidence in your own ability. They obviously saw something in the market that got them nervous. They know how to deploy money. They can write big checks.
They obviously saw something around valuations or opportunities or what have you that said this isn't the right time to deploy this quickly or certainly this much, and they had the confidence to actually give the money back to LPs. The folks that I know in it, and I know a fair number, none of us view that, anything but positively. Obviously, we like having money in Founders Fund. It sort of takes your allocation in our book down a little bit, but you'd rather have good money going after good.
And if someone tells you we have too much to deploy, I should take their word for it. It was another feather in the cap for them in our opinion and the way we saw it personally. So you came from DuPont, which was a a foundation. And and as an LP, you essentially have a competitive advantage as a foundation. How did you retain that competitive advantage? DuPont Trust is an amazing cause. Cause. Great team, top tier team, and it's a children's health organization.
That is the easiest thing to sell around the world. If you wanna get into the very best funds, at least as an LP, there is a salesmanship aspect to it. And when you have a story and a narrative such as children's health care, that that works really well. When I came to Gresham, look, there are lots of amazing causes at Gresham. We have a 120 families. We're a multifamily office. I can get into that in the moment.
They will have their charitable causes, but at the end of the day, it's not as powerful as pure play children's health. So what we said when I came and I joined with our CIO, Ted, I said, we need to make a model that is more attractive and easier for the GPs who wanna invest in such that we are an attractive partner for them. So we brought to bear a far more transparency. We are very quick to tell people no. If we tell them yes, we're doing work, that means we really are. We provide timelines.
We We also have an easy IC. Easy not in a sense of getting things through, but we have 3 people on it. It's our CIO, my counterpart on Publix, and myself. That means if the 3 of us wanna do something, there won't be noninvestment reasons something doesn't get in the book. Tell me about the friction on the IC. How do you come to the right decision? I think the IC talks are probably the most fun part of what we do. We like to have our hard conversations before the actual investment decision.
And that would mean I can come at the end of the day with answers to the big questions. But where we really push, we we believe uncertainty is part of this business. As an LP, if you try to solve everything, you really can't do anything or you're kidding yourself. At the end of the day, we wanna make sure we understand the key things we can understand. And on the things we can't, we wanna price that risk into our decision making.
Nothing in this business is black and white, but we try to answer as much as we can with our team. But our goal is to build something that is top tier, absolute return across our entire portfolio. Speaking of sizing positions, do do you think more funds should be doing what Founders Fund did? Or what would you recommend to firms thinking about fund size? Oh, it's such a hard one. I would say we are more strict on fund size than most.
We no one else in our book has frankly decreased their fund size. We can actually do a little bit of math and get to an answer. I that was tough as an LP to sell people against in 2021, 22 early 21, 22. It's now much easier to say, hey. If I were a GP, you wanna have your LPs happy. At the end of the day, like, we are people. We like to build relationships. If a GP is working with us and they have a little bit of a slip up, something's not working, we are more than likely to listen to them.
However, if you play hardball every step of the way, the second that situation turns, the LPs tend to run for the door. And I think fund size has become a bit of a talking point around that. And the folks who are more amenable, may actually build longer partnerships going forward, in my opinion. What is the most extreme version of when something came up in diligence and you said, well, yeah, that's a risk factor, but I'm gonna move forward?
The one where that comes up the most now, it's a fun topic. Solo GPs, I I think, is actually a topic where that comes up regularly for us. Because, you know, at the end of the day, like, you singularly have the pit of the like, pit by the bus risk. That that is fundamentally there in every solo GP.
And I think the distinction we've made in our portfolio is if it's in venture capital, and we believe, you know, there's ways that if that person's not there in 3 years, we can have someone else manage the portfolio. There's ways for us to manage around the downside case. One of the things we commonly run into, we'll do ex operators who are doing small, you know, sub $25,000,000 funds. One of those people is going to go start a company. So we've accepted that risk.
So we try to just understand how do we solve for the worst case scenario. And if we have a solid solution, game on. Say more about what what you look for, what you advise, or what's important to you. Maybe just leave you a quick primer on our venture book because that'll help set the stage. You know, ours is fairly straightforward. We have 2 multistages. I mentioned Founders Fund. We also have Y Combinator.
You put those together, you get an awesome foundational layer where you think you're getting a lot of alpha. But importantly, as an LP, you're capturing enough winners, and frankly, YC does a great job helping us. That allows us to take more risk everywhere else. So we're building the rest of our portfolio early stage focused. We talk a lot of times with people around the breakpoints of whatever their strategy is.
If someone is writing a 500 k check as a solo GP, like, that feels like that's a reasonable check size to get in. But in our opinion, if that person wants to scale up to 800 k, and I'm making numbers up, I'm not really sure there's a great cap table for that to fit in. It's sort of in our minds, if you're 500 or below, you can be friendly, complimentary capital. As as one of our groups says, they're Switzerland. But if you wanna write a little bit more, you're almost in co lead lead land.
And that's the way we talk to people around how they're investing, what their role is on the cap tables, and we try to help talk them into staying in their lane. But you also have to win your way onto the cap table. And if someone starts to move outside their sweet spot, that's where we get nervous. And, frankly, look, we're gonna have folks that graduate. And it's frankly a euphemism for saying they've probably done really well, and we part as friends. That's gonna come up.
What about these platform plays, these these large funds that outperform everything from HR to PR to business development? How much value add do you think those firms bring? Yeah. That's, I I think, the ultimate question. You know, we've tended as LPs. You know, we know there's some value to that. We think it's more of a rifle shot help is where VCs can make the biggest difference.
In our opinion, I think the very best entrepreneurs probably fill most of those seats, but the VCs can come in and say, hey. Have you talked to this person? You know, help me get this person across the line. Look. If they can follow on for the next 6 rounds, that does give whoever's joining an understand, oh, like, this company has funding, assuming we do our jobs. But if that VC is doing every single spot, my suspicion is we don't have the best team. It's somewhere in the middle.
Like, there's value add to be had, but my guess is the rifle shot help when it really matters is more important than having various functions that help every step of the way. We'll continue our interview in a moment after a word from our sponsor. Most businesses use up to 16 tools to hire, manage, and pay their workforce. But there's one platform that's replaced them all. That's Deal, d e e l. Deal is the all in one HR and payroll platform built for global work.
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So let's move into emerging managers. How do you go about making a decision on whether you should invest in emerging managers? This is the most fun part of our job, probably the hardest part of our job. Like, it's back to the word shades of gray, but you will never have certainty around these types of folks. And and the reasoning for that is you don't really have a track record typically that you can actually transfer to what they're doing today.
They probably did some angel investing, but the check sizes were small. There's lots of things that may feel different in this new version. So we're honest with ourselves, and we give them credit for seeing the ball right, making some good decisions, but we're also not gonna tell ourselves that they can just replicate what they're doing. The way we think of the world is very simple, and other people said this, think directly to you. But do they see great deals? Can they pick great deals?
And then can they win great deals? Those are the 3 criteria we think the most about. Now we differ in what we think we can evaluate. In our opinion, we should be able to figure out, are those people seeing great deals? Because to us, that's somewhat straightforward. We can reference that. But, frankly, if they're in the right circles, if they worked at the right company, if they had the right wall, that would probably tell us that they are seeing the right deals. Now go all the other end.
We're looking for someone that can also win their way into the company, win their way into the cap table. That is something value added to the founder, something unique about their personality. We like people that are quirky, that feel a little bit different, because we think that can actually separate that person and sort of win their ability to get on the cap table. The hardest one for us is can they pick? We probably don't have a fulsome track record to evaluate.
There's some uncertainty there and some uncomfort. But I think if we pick well on the ones we can control for, we can generally get to better than not type decisions on this, folks. And you've been doing this for 14 years. What are some of the mistakes that you've made? The biggest one I've made I mean, it's the accident we talked about earlier. Eric was pushing me on. But I'm fun size. I think that's where we've made some of the biggest mistakes.
When someone starts with the wrong amount of capital, it really just pushes them to do things that's uncomfortable and outside their sweet spot. You mentioned you don't go above 200, but there's a lot of these funds, 300, 500, 700. They're doing c. They're doing some series a. Are are they kind of in no man's land in your view? Or is this just a kind of short term thing? It's not really going to last? What are your thoughts? It's an interesting question. We're in some funds that have done that.
So I don't wanna like we're not well, we're religious on fund size. We also are not infallible. I think the way we like to think about it today is if you're gonna be a seed fund, you're probably 200 and below. We spend a lot of time on that follow on strategy. I think that's where you're going, Eric. But we wanna spend a lot of time on what is an a round deal you'll go into? What is the b round one you follow into?
The one we hate is when people tout their essentially, their particular pro their their follow on rate. Like, 60% of our deals became a or b rounds and we're in all of those. That to us is not that doesn't make us feel good. We'd rather someone say, hey. You know, we're gonna follow on with our 10%, you know, 15% of our best deals and really size in. What I'll tell you is, you know, we've been told that many times, and it's few and far between.
We've actually seen people get the bulk of that follow on capital into the right deals. It ends up what inevitably, they end up doing it. If they tell us 10, they'll do 20. And then it ends up being, in our opinion, probably a lower returning portfolio than we would have hoped for. I hope that's changing though. We're in the next vintage of that and maybe people learn the lesson. On references.
I'm curious when you do these references, what are some non obvious questions you're asking to try to help help you identify, hey, is this a manager we wanna be in in business with? You really have to get off list, but let's just go to people that are on list. I think one of the things like, one of the easier ways we can get to information we really need is we end up every call, like, hey. Is there anyone else in in your network that would help us out here?
Because that might be an easy way for that person. If they if they have something they're not comfortable sharing because they're friends with the person, what have you, we've seen that before where, well, they will connect you to someone who might say something a little bit more pointed. But, honestly, I think some of the wording that people use I mean, one of the tricks for in Silicon Valley does not work outside of SF all that much, but the superlatives.
When someone's not using the superlatives, you know, look. I recognize different people, personality wise may not, but you can sort of pick up on that through the conversation. And if you have someone who does speak in superlatives and then describing when you get to the person and attributes, they take it down a whole few notches, that gets us nervous.
If someone ends with, you know, oh, but they'll make you money, that's a phrase that, at least for us, is like, we better double click that many, many times. And what are some non obvious if you were hiring somebody, it might be a negative quality, but for fund manager, it would be a positive quality. The LP breed, most of us are pretty, like, you know, we're clean-cut. You know, we're pretty straight laced.
So I think if you actually look at the LP community and then at least in our sense and then the people we partner with, I think the quirkiness factor of our portfolio goes through the roof. The crazy question, though, is like we love investing in quirky people. Would I hire someone that's, you know, like, definitely quirky?
I've never even thought about that, but, actually, I almost questioned, like, maybe that would lead us into different train like, completely different portfolio structure that might ultimately win the day. The truth is, though, I think that would be a hard person for us to hire because they don't look like the 99 other percent of people that are LPs. To be a great LP, you have to you know, look. You have to be analytical. I think you have to have processes but know when to break.
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We thank you for your support. What are some of the biggest mistakes that you've made that that you wish you knew about when you were starting out as an LP? One of the things that took me a lot you know, I think it takes everyone a long time to get comfortable with. But when you come into the industry, your goal is it's uncomfortable asking questions. You want to feel smart. A lot of times, again, you're talking to people who clearly know a lot more about the space. There's a lack of comfort.
And that forces you to think really deeply about the questions you ask and ignore the easy and dumb ones. And I think one of the key lessons I've learned in my career is the simple or the question tends to lead to the better answer. The ironic thing is that tends to show some humility. It tends to open the other person up, and it tends to lead the conversation so many different ways. What other mistakes have you made?
Biggest mistakes I've probably made is getting caught up in and this is one everyone makes, the cycles. Like, we didn't do this in the most recent, but, like, oh, we have to have an AI finder. We gotta pile into crypto because all my friends are doing it. As LPs, there's, like, always groupthink. Right? Like, groupthink can work in multiple ways. Like, you know, if a certain group of LPs moves into the same fund, then it feels like it's a race to get in. 1 person's in, a few others are in.
You're you're almost silly if you're not in. I think that happens in hype cycles as well. And, look, I've chased a few managers to where I hear a couple of groups fall in, and then I cut my process short because I'm like, oh, gosh. I gotta get in here. I'm gonna look silly if I'm not. And those have been some of the worst decisions I made.
Just to play devil's advocate, have there been companies or funds that you've gone in from social proof, essentially, Momentum, that have worked out really well for you? That's an interesting way to put it. We've definitely had a few of them work. Again, like, look, the first person might have made a really good decision. I think in our world, you wanna do good work and have good decisions. If I can do good work every time, I think I'll have a long career, a long successful career.
You mentioned last time they were talking that a a top fund investing for the first time is not necessarily a sufficient signal for you. Why is that? It's not that we don't respect a top fund's decision making. It's just the question, what is that company at that moment playing for that firm?
And what I'm getting to is if if it's a multistage that's doing hundreds of seeds or, like, you know, many, many, many seeds per year, they might just be buying their way into the company such that they could ultimately deploy a significant amount of capital in the c, in the a, in the b, in the c, etcetera. And that is a very smart decision. Right? That is that is they're taking optionality and playing it into their own model. That makes a lot of sense for them.
The problem is, like, I'm not sure how a VC and our portfolio can think of that as signal. It's different, not in benchmark, but I like their model. If you're doing one and a half deals a year as a GP, my suspicion is you can trust when they make a decision that that that is some good signal potentially. So you have a 120 families. You've seen some of the most elite families and what they do with their money.
But what is the best practice within the cutting edge family offices that you work with? Private equity, alternatives, whatever you wanna call it, have become soup du jour for the wealthy class. The nuance is I don't think many of them outside of the single family offices we could all name get into the most sophisticated stuff.
So that's what we're trying to do for our families is we wanna make sure they're getting when you want this once in a portfolio, it's not just getting 20% private equity or 25. It's getting, like, top tier, certainly above median. So I think the important thing for us and our families is let's get into the highest quality groups that we can. Let's be thoughtful about how we build the portfolio. It's not just access. It's how you put it all together.
The question for us is co investing, because you wanna get to an interesting question. Like, co investing is something that I think most groups want. Family offices love it. Well, Sean, this has been really enjoyable. I appreciate you taking the time to to chat. What would you like, the audience to know about yourself and about Aggression Partners? The 2 things that matter, you know, Aggression Partners is great at helping families.
So if someone is needing some help on that side, like, reach out. I think we build great portfolios. On the investing front, like, look, we're we're friendly user it's on our it's on our LinkedIn. We're we're user friendly GPs. If someone is looking to deploy capital, we always read emails. We always respond. It may not be what people wanna hear, but we give quick notes, though, and we make it efficient. Great. Thank you.
Thank you, Sean. Look forward to all meeting soon in in New York or elsewhere and, grabbing a drink. Thanks, Sean. Sounds good.