Jordan Nel, an expert in spotting winning venture funds, discusses portfolio construction, fund scalability, and difficult conversations with GPs. They explore why small funds outperform large ones, navigating venture fund dynamics, LP agreements, and balancing judgment in VC investing. Insights on preempting rounds and insider knowledge.
Concentration in investment decisions is crucial for risk evaluation and pricing.
Nomads fund focuses on supporting small investors without restrictions and judgment asymmetry.
Entrepreneurs with psychological traits like urgency and willingness to be disliked can lead successful ventures.
Deep dives
Investment Banking Lessons
Enduring challenging times, a skill learned in investment banking, is highlighted as valuable in various aspects of life, including entrepreneurship. The speaker reflects on the rigorous work ethic of investment bankers, hinting that they work harder than startup entrepreneurs. Concentration in investment decisions is advised, emphasizing the importance of risk evaluation and pricing based on risk level.
Nomads' Unique Strategy and Mission
Nomads, a fund of funds, emerges as a unique investment entity stemming from Hummingbird Ventures. With a mission to support small investors leading early-stage rounds, Nomads aims to be a pivotal partner without imposing restrictions. The fund's focus involves identifying individuals with judgment asymmetry rather than conventional insights, seeking those challenging the consensus.
Founder Characteristics and Asymmetric Returns
Exploring unconventional founder profiles, the podcast delves into the significance of psychological traits like having mother-father issues in predicting asymmetric returns in entrepreneurship. The narrative suggests that individuals with chips on their shoulders display urgency, a desire to prove themselves, and a willingness to be disliked, factors correlated with founding successful ventures.
Portfolio Construction Strategy
In the context of portfolio construction, an emphasis is placed on concentrating investments based on degrees of conviction and risk. The speaker advocates evaluating risk premiums and pricing based on the risk curve while balancing check size, selectivity, and deployment thresholds. The discussion underscores the importance of individual asymmetry in pricing and selecting ventures.
LP Engagement and Value Addition
The podcast explores the involvement of limited partners (LPs) in venture funding, stressing the significance of LPs not detracting from value while offering thoughtful engagement. Nomads seeks to benchmark great general partners (GPs) and their portfolios, encouraging nuanced discussions and comparative reflections to aid GPs in self-assessment and performance optimization.
Jordan Nel sits down with David Weisburd to discuss how to spot winning venture funds. In addition, they discuss portfolio construction and concentration, the scalability of venture funds and difficult conversations with GPs.
(0:00) Introduction and Overview of the Episode
(1:12) Genesis of Jordan Nel's Fund and Current Strategy
(3:21) Evaluating Founders and the Importance of their Background
(6:38) Importance of Urgency in Management and Entrepreneurship
(8:17) Portfolio Construction and Concentration
(10:47) Sponsor: Deel HR and Payroll Platform
(11:13) Why Small Funds Outperform Large Funds
(14:10) Understanding the LP Base and LP Demands
(17:32) Providing Value-Add as an LP and Tackling Challenging Conversations with GPs
(21:07) Interacting in the LP Ecosystem and Strategy for Follow-On Investments
(24:54) The Role of Judgment and Diligence in Investment Decisions
(28:52) Insider Investing and Differentiating Between Saving an Investment and Doubling on an Asymmetric Edge
(30:51) Conclusion and Invitation to Subscribe to the 10X Capital Podcast on YouTube
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