E703 | Max Bray and Juliet Bailin, Kindred Capital VC: LP Conviction, $15B Funds & The Venture Barbell

0:00Max Bray:Welcome back to the podcast, everyone. So, Andreas recently announced a$15 billion raise. In this market, that obviously lands loudly. It sharpens the contrast between scale and scarcity and brings LP conviction, fund size and venture's core value proposition back into focus. Today, we're talking to Max Bray from Kindred and Juliet Bailin, who's building something new and is also a VP at Kindred. We unpack what LPs are really thinking, how venture as an asset class is evolving and why fund models are starting to split at the extremes.

0:32Max Bray:Max, you wrote a beautiful blog post that prompted us during this episode. So let's start there. When LPs look at venture today, what part of the value proposition is hardest for them to believe?

0:44Juliet Bailin:I think it's the outcomes, right? It's all driven by the outcomes. I spent a year trying to raise a fund through 2025, basically. And it started feeling there was something off quite early on in the process. And I was coming into this, it was the first time I was trying to raise a fund. So I'd been kind of sheltered from this previously. And it very much started off with a lot of anecdotal stuff of people being like, oh, it's a really tough market out there, which kind of everyone always says, right? Outside of 2021. And you don't know how much people mean that and how much to believe it. But when you feel it, I mean, I was doing it.

1:18Juliet Bailin:I was doing a first time fund with two guys who built two unicorns as founders. They'd invested in 150 startups as angels. They'd done 20 LP positions. They had incredible numbers on their angel portfolios, like a 13X mark, I think, on one of the vintages. And we were struggling to even get second calls. Now, we made all the mistakes. We made every single mistake that you make as a first-time manager. We didn't go into it with an anchor. Our thesis could have probably been more refined. There was a lack of, I suppose, deep venture experience and inverted commas on the team. But still, I think if it had been a 2021, 22 kind of situation, it would have been very different.

1:54Juliet Bailin:And I came to realize, I suppose, that there was this very strong sense that many family offices, corporates, anyone who wasn't like a dedicated venture fund of funds, and even a lot of those dedicated venture fund of funds were moving out of the asset class. It was like a canary in the coal mine that the fundraising numbers were going to drop. And they were moving towards things that had either security or liquidity. And so that was public markets. It was bonds. It was later stage investing. It was obviously a shorter timeframe. frame to exit secondaries it was anything that wasn't early stage venture to be totally honest and the only conclusion you can come to on that is a macro environment that's uncertain and and scary combined with an asset class that is taking like 13 years minimum to to spit out returns that i mean i was i was having conversations with lps looking across the table and going i wouldn't give me my money like it's just not a not a great proposition at this point um so i think i think it's i think it's all all downstream of returns in that sense i want to just maybe decompose some

2:59Max Bray:of the things you say because obviously so why do funder funds that are dedicated to venture move out of the market or maybe not deploy as much obviously like they're dedicated to the strategy that it's all they can really do so to say however they're raising money somewhere as well and the The fact of the matter is we're all raising from people that are highly impacted by cycles. And if there's anything that any sophisticated LP would know, it is venture. You cannot time it. You've got to stick in it. You've got to believe in the asset class. You've got to just continue allocating. And for that reason, I think that there's a bunch of knock-on effects that you described as being central to the problem of venture as an asset class.

3:37Max Bray:I think what's important to say is it's not about the return profile. It's not about venture not working. It's about the fact that we still rely too much on LPs that do not fully understand the asset class and the importance of investing through cycles. Do you agree, Juliet? Am I being correct here?

3:54Andreas:I mean, the point on investing through cycles is spot on, right? Stepstone has amazing data about this that show that if you try to time a vintage, that's a fool's errand. And you should invest consistently across vintages in this particular asset class. The data is explicit on that point. I do think that there are different groups of LPs. There are some that are much more sophisticated than others. Anecdotally, I do think that there is a lot of inherent either misunderstanding or frustration. You know, I spoke to a family office last week, and they explained that they started investing in venture capital funds in 2020, which, to be fair, not a great vintage to start.

4:30Andreas:But they decided that, you know, through 2025, after five years of investing in venture funds, they haven't seen enough DPI, and so they're no longer investing in venture funds. And it's a statement that just doesn't, you know, they probably shouldn't have invested in venture in the first place. I do think, though, that whether they're sophisticated or not, it is fair to say, and this also goes back to Max's point, that LPs have a right to be frustrated, right? I think that within venture funds, they don't necessarily get a lot of transparency into what's really happening behind closed doors, right?

5:00Andreas:Who's actually sourcing the right deals, how they got into certain deals, how they were priced, the decisions that are getting made, right? There isn't a lot of transparency that goes back to LPs. And so that can be frustrating and make it difficult for them to make reallocation decisions in funds. And I also will say this with self-awareness as someone who's been an early stage investor for 10 years. When you're an investor, you become great or you hope you become great at picking founders, right? And especially early stage, that's a very human task. You don't get taught how to think about liquidity over time.

5:29Andreas:And I was very fortunate to benefit over 10 years of seeing companies get acquired or go public and learning how to think about reserves. But unless you're deeply curious about those things, you won't learn them because learning about that doesn't necessarily make you a great picker. And what that means is that when liquidity decisions are made by funds, you know, do we sell a piece of our position? Do we sell an entire part of our position? Do we double down? Those decisions are often not made particularly intentionally. They can be made in hype cycles. And that is also very frustrating for LPs.

5:59Andreas:So while I certainly agree with you that there are some LPs that are not as sophisticated as others. I do think many of them have a right to be frustrated by the way the venture is being practiced today.

6:09Max Bray:You're clearly right. I think we can talk about LP sophistication. There's obviously also VC sophistication. If we talk a bit about like be practical here or give a bit of advice on how to manage through it, because you've both been through it, Juliet, I know you have a lot of thinking on this as well. I think one of the practices is, of course, communication. You can talk about that forever and so on. I think that there's a governance perspective that a lot of VCs maybe don't take as much of a heart as they could, which is really making sure that they put together an LPAC of sophisticated LPs that they actually trust, that have seen cycles, and that they can then spar with, and not just having it as a body that overlooks that everything is being done correctly, but actually being thoughtful people that you can go to and say, we're thinking about this stake.

7:02Max Bray:What do you think is right to do in this market? What have you seen before? And I speak to many emerging managers that it feels like they don't have that type of trusted LP relationship.

7:14Juliet Bailin:I mean, I think just quickly, I think I'm sure Julia has some great thoughts on this. One of the challenges that I think is baked into this in Europe is it was a kind of cottage industry until like the early 2010s right like there's just in terms of the density of people and especially on the lp side the density of lps who've been in market for enough cycles like say 12 15 years plus to have seen how mobile cloud web 3 like early ai whatever manifested the mistakes that were made and how people came out of it is actually a relatively small amount of people on the european side and i think i don't know the data on it but i would be really interested to know the the number of more than two vintage old funds in europe there is again i would imagine it's a very very strong power law towards first second maybe third vintage funds at most and i think one of the challenges like we definitely found this in the conversation we were having with european lps is either to juliet's point there's a kind of family office who've played around with it and are interested and might be easily spooked or it's a pension fund or the pension funds are probably more sophisticated, but it's a corporate who's coming at it from the perspective of like some innovation theater or looking to kind of look for things that they can't find elsewhere.

8:28Juliet Bailin:We definitely felt like early on and early on, admittedly, you're more naive and you haven't gone deeper on those networks. It's quite hard to find those people who have that level of expertise until you get to the like Chicago endowments or the Stepstones or the more sophisticated, generally US-based fund of funds that have been in enough vintages to actually be able to help you think about how you manage through an IPO, how you manage through an exit. But I don't know, Juliet, what do you think?

8:53Andreas:It's an astute point, right? The ecosystem is certainly younger. And I would say quality over quantity, right? Whether it's an LPAC or it's informal, it's harder to find institutional grade LPs that are necessarily going to help you think through that. And I do think there are some, but to your point, there are fewer than even individuals, right? And when you think about founders and they put together a cap table, they're crafting a group of folks that can each bring something different, right? A big fund that brings some star quality as SoloGP is going to be the first person that calls some angels who have some really specific advice for them.

9:28Andreas:And I think the same can be true for fund managers, right? So even if you are crafting your pitch to make sure that it lands for folks who might be less sophisticated or might have seen fewer cycles or might have more questions than answers, you can also find some individuals, and maybe they are in the US and maybe they're elsewhere, who can be individual LPs or advisors to the fund that can sort of serve that role. So maybe it requires a bit more creativity. But frankly, even as you think about raising a fund, even before you even think about an ELPAC, having those people around you is invaluable.

9:58Andreas:I can't tell you how many mentors I have that I call constantly on a weekly basis, even just to think about how to handle specific conversations with individuals. LPs are so unique and they care about such different things. And so your pitch is going to be different in every conversation. And having people who've even just been through that on the VC side can completely change the difference between a meeting going extremely well or leaving 15 minutes early. So there are probably a lot of different ways to find that level of sophistication or interest. And I don't think it has to be necessarily from traditional LFUs.

10:31Max Bray:Can I ask the two of you a question? Because, Max, you described your fundraise, the failed one, just before. And you had 13 ex-Morgs in the founding team as angel track record and so on. Like you'd think that this is a no-brainer. Of course, you want to be on. And a lot of people in their 20s, when everything was up and to the right, that was how a lot of people invested in venture. I do think, however, that that's also how we end up with these bad situations of GPs that are managing other people's money that have never, ever done that before and are honestly not as thoughtful as you need to be around your investment strategy, around how you're going to generate liquidity and so on.

11:15Max Bray:I'd love to ask the two of you, do you think that there is a need for VCs to be more humble about the craft of venture? And I can obviously say one of the things we're trying to do with EUVC is trying to, of course, up-level the conversation, both in terms of what content is being created publicly, but also we're running our academy, where we are taking people through like 14 sessions of fund modeling and portfolio modeling to figure out exactly what is this assumption, how does that impact another like something five years down the road and big discussion about Mandacalo and whether they make sense or not at all and those types of things.

11:53Max Bray:And I don't think that most GPs can hold their ground in a deep conversation with a very sophisticated LP when it comes to these fundamentals of venture.

12:02Andreas:So my opinion might be a bit weird on this. I think it is kind of crazy that we expect people to become exceptional investors, right? Really train how to work with founders, how to identify and pick the best deals, how to win them, how to work with those teams. and also become exceptional at fund management, be really thoughtful about compliance and risk and regulatory or legal and tax and fund admin and portfolio construction over time, and also learn how to fundraise and deal with LPs and investor relations. So I'm actually of the mind that while, yes, I think there are some very smart GPs who learn these things over time and are inherently curious and surround themselves with people who make sure they can make great decisions along them.

12:55Andreas:I think this idea that we're looking for people to be excellent across disciplines is nonsensical in many ways. You would never go to a surgeon and say, OK, you're an exceptional surgeon. I also need you to be a world-class violinist. And I need you to be a philosopher or a mathematician. You would say, I need you to be a really great surgeon. And I really don't care about anything else if you're the one cutting open my head. So I actually think there's something fundamental happening in the ecosystem where we've put a lot of roles on one person. And so we're thinking a lot about how do you create systems or teams or platforms that allow investors to be exceptional at the thing they're great at and then get the support that they need to make those better liquidity decisions, to think thoughtfully about their fund model, to do all of the stuff that any LP should expect and wants to expect without having to be an octopus and having every arm be as strong as they next.

13:52Juliet Bailin:yeah i actually completely agree with that um i was just thinking about like writing out some stuff as you were saying that and i think there's two angles i'd come at it from one is i think one of the worst things that happens eventually was that it became high status and and what i mean by that is i think if you ask most people in the 2000s it was it was not particularly sexy industry no one really knew what it was and i think there would have probably been less underestimation of the requirements of going into it whereas when something becomes higher status it's like where naturally i don't know the person who might have gone to goldman and the goldman in the noughties or an ad agency in the 90s or whatever it was it's like oh yeah i'm smart i can do a lot of stuff i'll go do that it doesn't look that hard you're finding startups you're giving them money you wait for them to give you money back and to juliette's point you then realize when you're in it that it's it's three and a half jobs at the same time and even just the fact that someone said to me the other day there's such a thing as like a full stack investor which is someone who has that skill set of managing lps managing regulation uh being able to portfolio manage as well as just investing versus, I suppose, what you just call an investor kind of tells it.

14:54Juliet Bailin:But I think there's also then a structural thing in the job, which I definitely only could learn by doing, which is someone described venture to me the other day in a really lovely way, which is like it's being on a swim team. It's an individual sport that's done in groups, but you are fundamentally swimming your own race at any given point. It might be also that the other guys swimming on your team are important, but you're not swimming at the same time and you're not swimming the same race, really. If you think about then how that trickles down into the way that you learn the job, you learn the craft as you're doing it versus, for example, other financial asset classes, like if you went and worked in a hedge fund or you went and worked in a large investment bank, there's much less preparation and training because the teams are so small and it is an individual sport.

15:35Juliet Bailin:But also in all of those other asset classes, you have investor relations, you have back office, you have regulatory compliance because you have AUMs or fund structures that allow for the investor to just do the investment thing. So I always kind of joke that venture feels like finance for people who don't understand finance. But the problem is at the same time, we're being asked to then run a financial institution at the same time as doing a job that is basically picking like character archetypes and trying to find unique, exceptional people at the same time as working out regulatory compliance documentation.

16:07Juliet Bailin:So yeah, I think it can be in some ways a bit of a poison chalice in that sense.

16:12Max Bray:To me, the way I think about it is that you've got to know what type of beast you are. If you're a solo GP, that gives you certain things that you've got to excel at. And if you're also running, like in most cases, if you want to be a solo GP, you need to obviously also be able to do all the admin, all the fundraising, all that stuff. In that scenario, most often we see also solo GPs running what you might call a simpler investment strategy, which is a co-investment strategy where you're not spending hours and hours helping founders through the grind. You are supporting with an easier support.

16:54Max Bray:I know, Yulet, you have views here. But let me finish my train of thought here. I think there's a reason why most solo GPs will excel the most and do excel the most in running strategies where they don't need to lead the round. They don't need to price the round. They don't need to have a concentrated portfolio where they have to be thinking a ton about what they're doing with reserves and how they're managing through that whole journey. because they're just running one ticket in. I'll support you when you need me. I'm on to the next thing. Like I know a lot of solo GPs would not like me framing it like that.

17:28Max Bray:I think if we're honest, many solo GPs run that strategy. That is what I think most can do if they run a solo GP strategy. Some are complete crazy guys. I know some, you know some that can do the whole Monty and I love them and it's incredible. But for most, that's the strategy. I think the problem is that So we're seeing three-person teams that are raising 70 or 50 and are running quite concentrated strategies with reserves of 40 % and whatnot. And this is where you need to be quite thoughtful about the financial aspect. You cannot get away with saying, no, no, I'm just a hipster guy. I'm putting some tickets in and then I'll help company building and that's it.

18:10Max Bray:That is my view. You need to know the craft of venture in that scenario. Julie, you're building something new, a lot in our audience.

18:18Andreas:Can I respond to those things first?

18:21Max Bray:And I think you're doing an incredible job. And I think what you're doing is incredibly important because you'll unleash a ton of venture talent. I think it's incredible.

18:28Andreas:Thank you. I so appreciate it. I will say, though, I think there's some nuance to what you shared, which is one of the reasons that most of the solo GPs have the strategies where they do follow-up checks is a reflection of fund size, right? if you have a$20 million fund, you can't lead a bunch of five on$25 million rounds. So I think that's actually a big piece of it. I'd also argue that the market has become very competitive. And so if you think, oh, that's no big deal. I can do six jobs because I'm just writing 250K checks. Yeah. The amount of capital available to get a 250K or 400K or 750K into a really exceptional and probably oversubscribed deal is actually very hard.

19:05Andreas:And it means that any investor, whether you're a solo GP or a fund, has to spend a lot of time, you know, making sure these founders do all the reference calls with all your favorite founders. They tell them how brilliant you are and trying to create a lot of value. And frankly, I would think even after getting making the investment, I know a lot of founders who lean way more on their solo GPs than they do on their funds because they feel more comfortable, they feel more aligned, and they don't feel like they have to be as performative. And so I would actually argue that it's the craft itself is still quite difficult And a co-investing strategy can be hard to deploy.

19:39Andreas:And that makes it even more important that you have the time to devote to actually working with founders and deploying that capital as opposed to doing all the other things. I do agree with you, right, though, that the larger the fund or the more partners you have, right, anything that becomes more complex requires a more complex solution. That's complexity theory at its heart. And it's been shown that partnerships of venture firms deal with a lot more complexity, especially making investment decisions in a group is a lot harder than making them as an individual human being and relationships that haven't worked together.

20:12Andreas:So I couldn't agree with you more in terms of, right, there is a even greater need to deeply understand how the actual business works as funds get larger and partnerships get larger. But I certainly wouldn't discount the amount of effort it takes to deploy a fund as a solo GP and how distracting the rest of the work can be from doing an excellent job, not just doing the job, doing it really well.

20:35Juliet Bailin:julia this might um tee you up for something else but uh i'm gonna get my tiny violin out for for solo gps at this point but um i do i do sometimes look at the uh the two and twenty model especially on the bottom end and just i guess it often blows my mind how bad the economics are when you're below a kind of 20 million fund right just in terms of how you're supposed to with a 400k year management fee have more than a one-person team and legal overheads and legal expenditure on deals and an office and travel and all of these things and then i don't know how much you want to talk about what you're up to at the moment but um do either of you have a strong view on on whether you feel like that 220 model is the right way to be thinking about things because like it works it skews way too good once you get above a kind of 500 million fund right but on the small end which i completely agree with you is where i would argue a lot of the most interesting work in the industry is done and a lot of the people work the hardest are the most founder friendly are the most honorable form of the job that we do.

21:35Juliet Bailin:The economics are terrible.