E46: Atul Rustgi of Accolade on What is LP Value-Add and Can it Lead to Alpha?
Feb 29, 2024
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Atul Rustgi discusses LP value-add in VC, biotech diversification, blockchain exposure, family office investments, and raising funds in a market downturn. They explore the complexities of VC relationships, navigating challenges in investing, and strategic asset allocation in blockchain. Also, reflections on reinvestment strategies, mentorship, and contrarian thinking in the investment landscape.
Supporting GPs by providing thought partnership and diversifying GP bases through trusted LP introductions.
Emphasizing patience in assessing venture investments post 2008 financial crisis for long-term outcomes.
Prioritizing conversational engagements over sales pitches to build authentic relationships with LPs for mutual value creation.
Deep dives
Supporting GPs at the GP Level
At the GP level, the focus is on providing support to GPs by acting as a sounding board and offering thought partnership, especially during times when GPs may hesitate to involve the broader LP base. This support extends to areas like portfolio issues, partnership dynamics, and LP dynamics. Additionally, LP introductions are made to diversify GP bases, where trusted LPs are connected with GPs for mutual benefit.
Evolution into LP at Accolade
Transitioning into an LP role at Accolade, the individual shares their professional journey from working at McKinsey to exploring the endowment foundation world and fund of funds. The evolving landscape post the 2008 financial crisis highlighted the significance of patience in assessing venture and peak growth investments over an extended period to gauge outcomes.
Sales Process and Relationship Building
The LP's approach to engaging with LPs involves conversational interactions to convey authenticity and genuine interest in partnerships rather than rigid sales pitches. The emphasis lies on building relationships and cultivating goodwill with LPs, ensuring mutual value creation and fostering long-lasting partnerships.
Strategic Fund Investing and Portfolio Management
The LP's strategic fund investing philosophy involves anchoring funds with substantial investments to support emerging managers and nurture partnerships. The significance of market timing is acknowledged, with a focus on partnership dynamics, transparent communication, and portfolio construction as key factors influencing re-investments into subsequent funds.
Expansion into Diversified Sectors
Diversification across various sectors within the venture capital landscape, such as tech, biotech, and blockchain, is pivotal to portfolio construction. The LP's proactive approach includes recommending best practices and vendor selections to emerging managers, fostering their growth into institutional players amidst evolving market dynamics.
Atul Rustgi sits down with David Weisburd to discuss his role as a GP & LP, the paradoxes of selling and building relationships in VC, and the strategy of focusing on funds under $100 million. They also delve into including biotech as a diversification strategy, the importance of blockchain and crypto exposure, family office investments, and the challenges and rewards of raising a fund during a market downturn.
(0:00) Episode Preview
(0:45) Introduction of Guest - Atul Rustgi: Role and Responsibilities as a GP
(3:30) Discussion on the Paradoxes of Selling and Relationship Building in VC
(6:03) Strategy Behind Focusing on Funds Under $100 Million and the Math Behind Ownership
(11:14) Biotech as a Means to Diversify and Generate Alpha in VC
(16:01) Sponsor: Deel
(16:43) Blockchain and Crypto: The Importance of Exposure
(21:03) Family Office Direct Investments and The Value of Reference Calls
(24:57) Raising a Fund During a Market Downturn: Challenges and Rewards
(26:17) 10X Capital Podcast Newsletter
(26:42) Lessons Learned from a Long Career in Venture Capital by Atul Rustgi
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