Why You Should Be Wrong and Alone | Chris Douvos | Superclusters | S1E1
Nov 20, 2023
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Chris Douvos, an experienced venture capitalist and founder of Ahoy Capital, discusses his journey in the venture capital industry. He shares lessons learned from industry experts, the importance of deal flow, and how to construct opinions on great venture capital firms. The podcast also touches on the dot com bust, the allure of California, and strategies for successful cold calls in the industry.
Evaluate fund managers based on their unfair advantage, team dynamics, and strategy alignment.
Assess the fund manager's portfolio construction and decision-making to understand their approach and indicators of success.
Building a positive reputation, strong community, and aligning interests are vital for venture capital success.
Deep dives
Evaluating People and Unfair Advantage
When evaluating fund managers, it is important to understand their unfair advantage or what sets them apart. This could be domain expertise, a rich network, or their impact as entrepreneurs. It is also crucial to assess how well the team members gel together and complement each other, fostering healthy creative tension. This evaluation helps determine if they are the right people for the strategy at the right time.
Understanding Strategy and Resonance
The strategy of the fund is another key aspect of evaluation. It is important to see how well the strategy aligns with the team's expertise and resonates with market opportunities. Does the strategy reflect a thematic story rather than an eclectic approach? This analysis helps determine if the team and strategy are well-suited for success.
Assessing the Portfolio and Constructing Leading Indicators
Analyzing the portfolio of past investments provides valuable insights into the fund manager's decision-making, their ability to get into certain deals, and the impact they had on portfolio companies. It is crucial to understand why specific companies were chosen and why others were not. Additionally, examining the fund manager's approach to portfolio construction showcases their thinking and their understanding of sustainable portfolio allocation. This evaluation helps identify leading indicators of success beyond lagging indicators like TVPI or IRR.
The Importance of Persistence
Persistence is highly valuable but often underrated. By consistently providing value, helping others, and offering unique insights, individuals can build a positive reputation and gain the support of others. This support can open doors to new opportunities and limitless potential.
The Power of Community and Interest Alignment
Building a strong community and aligning interests with entrepreneurs can have a significant impact on venture capital success. By creating a peer-to-peer network and focusing on community engagement, venture firms can provide valuable services and set the foundation for long-term success. Interest alignment also plays a crucial role, as it ensures that both LPs and GPs are on the same page, fostering trust and positive relationships.
Chris Douvos founded Ahoy Capital in 2018 to build an intentionally right-sized firm that could pursue investment excellence while prizing a spirit of partnership with all of its constituencies. A pioneering investor in the micro-VC movement, Chris has been a fixture in venture capital for nearly two decades. Prior to Ahoy Capital, Chris spearheaded investment efforts at Venture Investment Associates, and The Investment Fund for Foundations. He learned the craft of illiquid investing at Princeton University’s endowment. Chris earned his B.A. with Distinction from Yale College in 1994 and an M.B.A. from Yale School of Management in 2001.
You can find Chris on his socials here:
Twitter: https://twitter.com/cdouvos
LinkedIn: https://www.linkedin.com/in/chrisdouvos/
And huge thanks to this episode's sponsor, Alchemist Accelerator: https://alchemistaccelerator.com/superclusters
OUTLINE:
[00:00] Intro
[03:01] What Chris learned from the founder of Greylock and the Chief Investment Officer at Yale's Endowment.
[06:25] How a timber pitch and losing the nose game earned a Chris a front-row seat to venture capital.
[10:35] How 2001 is similar to 2023.
[12:44] What legislation makes California special?
[13:11] Do firms need to have geographical presence?
[16:44] How did Chris first start to build his deal flow?
[23:17] What needs to go in a good cold email
[24:53] Breaking down how Chris constructed his first opinion on great venture capital firms
[30:04] How did Josh Kopelman build 'ecosystem as a service' in 2004
[33:28] How did Chris end up backing Data Collective
[37:52] What are the 4 leading indicators of fund manager outperformance?
[48:46] Which firm of Chris' recent portfolio is willing to be wrong and alone?
[51:32] Chris' Peter Dolan impression
[56:09] Thank you to Alchemist Accelerator for sponsoring
[58:45] Legal disclaimer
Follow David Zhou for more Superclusters content:
For podcast show notes: https://superclusters.co
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Follow Superclusters on Twitter: https://twitter.com/SuperclustersLP
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