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20VC: Aleph's Michael Eisenberg on Why Generalists Over Specialists, Why Boutique Smaller Firms Over Multi-Stage Firms, Portfolio Construction Theory, Capital Concentration Limits and How To Think Through Reserve Allocations with Market Cycles in Mind?

Feb 8, 2021

Michael Eisenberg, co-founder of Aleph and seasoned venture capitalist, shares insights from his impressive 25-year career. He discusses why generalists often outperform specialists and the advantages of boutique firms over large multi-stage ones. Michael also unpacks the psychology of reserve allocations during market cycles and the nuances of risk versus uncertainty in investments. His reflections on navigating portfolio construction and the impact of economic cycles reveal a refreshing perspective on venture capital strategy.

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ANECDOTE

Unconventional Path to Venture

Michael Eisenberg's career began in political consulting but quickly transitioned to tech.
He leveraged his early internet knowledge to back Israel's first internet companies, leading to success during the dot-com boom.

INSIGHT

Psychological Impact of Downturns

Market downturns significantly impact founder psychology and investor behavior.
This psychological impact often outweighs the financial impact, creating opportunities for prepared investors.

ADVICE

Reserves Management

Reserve allocation in venture capital is more art than science, requiring flexibility.
It's crucial to have more capital than anticipated to navigate downturns and support portfolio companies.

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Michael Eisenberg is a Co-Founder and Equal Partner @ Aleph, with over $550M under management and a portfolio including the likes of Lemonade, Melio and HoneyBook, they are one of the leading early-stage firms of the last decade. Prior to founding Aleph, Michael spent 15 years as a General Partner @ Benchmark and before that, made his way into venture with Israel Seed Partners where he built an incredible portfolio over an 8 year period. If all of this was not enough, Michael is also an author having published 4 books.

In Today’s Episode You Will Learn:

1.) How Michael made his way into venture over 25 years ago and how his 15 years at Benchmark led to his founding Aleph?

2.) How has seeing multiple booms and busts impacted Michael's investing mindset? What do many misunderstand when it comes to reserve allocations in market cycles? Why does Michael believe busts are more psychologically impactful than financially impactful?

3.) How does Michael approach portfolio construction with Aleph today? How does Michael think about the right level of portfolio diversification? How does Michael think about the right level of capital concentrated into one company? How does Michael assess the difference between risk and uncertainty? What do many misunderstand between the two?

4.) Why does Michael believe in generalist VCs over specialist VCs? Why do they win? Why does Michael believe in small boutique firms vs large multi-stage firms? How does Michael think about the notion of ownership on first check? Is it possible to really build ownership across rounds today?

5.) How does Michael reflect on his own style of board membership today? How has it changed? What have been some of Michael's biggest lessons on board membership from Bruce Dunlevie @ Benchmark? What advice does Michael have to newer investors joining boards for the first time?

Item’s Mentioned In Today’s Episode

Michael’s Most Recent Investment: Melio

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