An Individual LP's Guide to Investing Like an Institution | Samir Kaji | Superclusters | S1E8
Jan 8, 2024
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Samir Kaji, CEO and Co-Founder of Allocate, talks about the biggest changes in the LP universe in the next decade. They discuss portfolio allocation for emerging managers and the challenges they face. The episode explores the evolution of LPs and the disruption of the VC world, fundraising challenges, accessing venture funds, integrating work into life, finding joy in work, and building relationships in venture capital.
Determining the minimum viable fund size is essential for aligning fund size with desired outcomes.
Evaluating and selecting venture funds involves asking the right questions and assessing managers' unique edge.
Fund managers should be realistic and adjust elements on the margins when faced with a smaller fund size, while maintaining consistency with the initial strategy.
Deep dives
Understanding the Minimum Viable Fund Size
The speaker emphasizes the importance of determining the minimum viable fund size, which is the smallest amount needed to execute a fund's strategy with proficiency. It is crucial to consider factors such as portfolio construction, reserves, and check sizes in order to align the fund size with the desired outcomes.
Evaluating and Selecting Venture Funds
The speaker discusses the process of evaluating and selecting venture funds. They suggest starting with a large pool of potential funds and progressively narrowing it down based on the fund managers' sourcing, picking, and winning abilities. The selection process involves asking the right questions, assessing the managers' mindset, and evaluating their unique edge or value proposition. The goal is to build a well-balanced and complementary portfolio of funds that offer diversification in terms of sectors, regions, and investment strategies.
Hedging Risk in Fundraising
In today's challenging fundraising landscape, the speaker advises fund managers to be realistic and consider a minimum viable fund size that aligns with their portfolio strategy. They emphasize the importance of avoiding significant changes in the business model if the fund size falls short of expectations. This approach involves adjusting certain elements on the margins, such as the number and size of investments, while maintaining consistency with the initial strategy. By having a minimum viable fund size in mind, fund managers can navigate the fundraising process more effectively.
The Role of Authenticity in Sales and Pitching
Drawing from their experience as a salesman and entrepreneur, the speaker highlights the importance of authenticity in sales and pitching. They emphasize building a compelling story and connection with potential investors by truly understanding their needs and appealing to both their emotional and rational sides. It is crucial to demonstrate self-awareness, stress test assumptions, and create a vision that resonates with investors based on their unique perspectives. Authenticity and a people-centered approach are key in effectively conveying value and building long-term relationships.
Focusing on Passion and Innovation in Building a Team
When building the team at Allocate, the speaker sought individuals who were passionate about the industry and had a deep interest in innovation. They looked for team members who had a burning desire to make a positive change and believed in the future of the company. Additionally, they valued individuals with a chip on their shoulder, who had experienced obstacles and had to prove themselves. The speaker emphasized the importance of hiring people with grit and hustle, who had the drive to overcome challenges and contribute to the company's growth.
The Value of Work-Life Integration and Building Long-Term Relationships
The speaker discussed their perspective on work-life balance, preferring to use the term 'work-life integration.' They believe that work is a part of one's overall life and emphasize the importance of finding enjoyment in what one does. While acknowledging the need for self-care and time with family, the speaker highlighted the sacrifices required when starting a company. They stressed the necessity of building long-term relationships based on care and understanding the other person, rather than just focusing on transactional gains. By investing in people and demonstrating genuine interest, the speaker believes that lasting relationships and opportunities can be nurtured.
Samir Kaji is the CEO and Co-Founder of Allocate, a private markets technology company that pairs origination with portfolio management tools to allow investors to efficiently construct and manage their alternatives portfolios.
Prior to Allocate, Samir spent 22 years in venture banking between SVB and First Republic Bank and closely worked with and advised over 700 venture capital and private equity firms. During this time, he completed over $12B in structured debt transactions and has invested personally in over 75 funds and companies, including early-stage investments into Carta (seed), Side (seed), PolicyGenius (Series A), and FanDuel (Series B) as well as Growth investments into Reddit, Alto Pharmacy, and Carbon Health. He has also invested in over 40 funds across various investment types.
Samir completed a finance undergraduate degree at San Jose State University, a finance MBA from Santa Clara University, and completed the prestigious Kauffman Fellows venture program in 2017. Samir is also the host of Venture Unlocked, a top venture capital podcast available on Itunes, Spotify, and Substack.
You can find Samir on his socials here:
Twitter: https://twitter.com/Samirkaji
LinkedIn: https://www.linkedin.com/in/samirkaji/
And huge thanks to this episode's sponsor, Alchemist Accelerator: https://alchemistaccelerator.com/superclusters
OUTLINE:
[00:00] Intro
[04:15] What will be the biggest change in the next decade for the LP universe?
[08:45] Portfolio allocation for emerging LPs
[12:32] How has Samir's LP investment strategy evolved over the years?
[16:04] Why Samir invested in Bullpen Capital's Fund I
[17:43] GP-business model fit
[19:40] GP red flags
[21:00] The one question Samir asks to see if GPs understand how to do portfolio math
[23:31] The art of asking good questions
[29:44] What is the Minimum Viable Fund?
[36:14] How to pick 10 funds out of 4000 VC funds
[42:19] How did Samir pitch Allocate to his investors?
[48:11] The first hires at Allocate
[50:53] How Samir defines work-life integration
[56:38] The first two emerging fund managers Samir backed at First Republic Bank
[59:41] The lesson Samir's father shared with him when he thought about leaving SVB
[1:02:41] What happens when you overanalyze
[1:07:27] Thank you to Alchemist Accelerator for sponsoring!
[1:10:02] If you liked it, give us a like or share!
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