Follow me @samirkaji for my thoughts on the venture market, with a focus on the continued evolution of the VC landscape.

We are back with another LP-focused episode with Michael Kim, Founder of Cendana Capital. Michael shares how he started Cendana around his thesis (at the time very early) of backing small, emerging managers. This led to early investments in firms such as IA ventures, Forerunner, and Lerer Hippeau.

During our discussion, we chatted about what qualities he’s seen in great emerging managers as well as his thoughts on portfolio construction.

We also get into the challenges of raising funds today and why the secondary market will a critical component of venture moving forward.

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About Michael Kim:Michael Kim is the Founder of Cendana Capital, a San Francisco-based firm that specializes in investing in very early-stage VC funds globally. Founded in 2010, Cendana Capital has over $2B in AUM.

Prior to Cendana, Michael served as a General Partner at Rustic Canyon Partners where he contributed to the firm's growth and investment strategies. He also was a Board Member of the San Francisco Employees' Retirement System (SFERS), and an Investment Banker at Morgan Stanley focusing on Technology M&A.

Michael holds an MBA in Finance from The Wharton School, an MSFS in International Economics from Georgetown University's Walsh School of Foreign Service, and an AB in International Relations from Cornell University. Michael is a founding board member of the Wikimedia endowment, which supports Wikipedia.

In this episode, we discuss:

(02:49) Michael’s time at Morgan Stanley's tech M&A group in the 90s

(04:11) Cendana’s launch and how it took two years to raise the first fund

(06:16) Seed stage investing has become like early stage venture.

(07:07) The importance of fund managers getting large ownership early

(09:50) Why grit, determination, and hustle are crucial and domain expertise and contrarian thinking are vital

(12:00) Pre-seed is the new seed and rounds have gotten bigger

(14:00) High integrity fund managers need 12-15% ownership

(16:12) Pre-seed managers work with potential entrepreneurs before they start a company

(18:00) Founders now raise more initially for a longer runway

(20:00) How fund size affects ownership and return potential

(23:00) Why smaller funds often outperform larger ones

(25:17) What changes when making the leap from small to large checks

(27:00) The importance of network strength for fund managers' success

(33:00) Fund managers need to explain their investment decisions well

(37:15) Fund managers need to be flexible but transparent

(39:00) The importance of trust and transparency for long-term relationships.

(42:00) Seed funds are best positioned for secondaries

(45:21) The potential rise in secondary market deals

(48:00) Tourist fund managers have mostly exited the market

(50:00) The next few years should be great for venture investments

I’d love to know what you took away from this conversation with Michael. Follow me @SamirKaji and give me your insights and questions with the hashtag #ventureunlocked. If you’d like to be considered as a guest or have someone you’d like to hear from (GP or LP), drop me a direct message on Twitter.

Podcast Production support provided by Agent Bee