Sidecars 101: Why Venture Funds Are Investing on the Side

0:00Maxine Minter: When I was watching Venture from the outside as an operator and just being like, that's not company building. Like what those people are doing is not company building. I don't know what it is. It's definitely not company building. And then you stepped in the door and you're like, oh, look, everyone here is building companies. Oh, would you look at that? Probably, as I said, you're one of the best people to find these. What is a sidecar?

0:21Cheryl Mack: That is essentially the core concept is like, hey, we're investing in this through the fund. Do you want to put a check in directly? and I put directly in quotes. If you're watching on video, you'll see me doing it because it's technically not directly. Finally, technically, they are sidecars, which I didn't know. Also, fun fact for you.

0:37Maxine Minter: Really? I would just call that an opportunity fund. Well, yes. It is now just called an opportunity fund because it has become mainstream. But when it started, it was considered a sidecar. Right now, it has its own name. Yeah, okay. Okay, three, two, one.

0:52Cheryl Mack: Hey, I'm Cheryl. I'm Maxine. This is First Track, part of Day One, the network dedicated to founders, operators, and investors. If you want to be a better early stage investor, this is the show for you. So TLDR, if you don't want to suck at investing, listen up.

1:10Maxine Minter: All righty. So it's been a while since we've done one of these.

1:14Cheryl Mack: It has been a little while, but hopefully people are excited for our next 101 episode because this is something that has become a lot more prevalent recently. It's kind of

1:25Maxine Minter: mainstream although it was pretty niche. Actually when we first started doing this podcast even a couple years ago it was relatively niche at least in Australia but now it's mainstream.

1:32Cheryl Mack: In Australia yeah. I feel like SPVs were a big thing in the US and now they're like oh yeah yeah they've arrived in Australia. SPVs have entered the Australian chat.

1:43Maxine Minter: They've entered the chat. We're of course talking about sidecars which is a special version of SPVs but excited to get into the definition. You obviously are one of the best people in Australia to talk about these because you literally probably see most of them as they happen. Because we are seeing so many of these around, especially with starting to see more small funds in Australia, but also in the US, I thought it'd be interesting to dive in. No doubt about sidecars. Why do we have them? What do they do? What do we call them in their different formats, etc.

2:16Cheryl Mack: Who goes into them and why? Yeah, let's do it. Yes, this is something that we do all day long. So I'm happy to jump into it. Let's do it.

2:25Maxine Minter: You're listening to a DayOne.fm show.

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3:42Maxine Minter: so probably as i said you're one of the best people to define these what is a sidecar so a

3:48Cheryl Mack: sidecar is basically when a fund is uh making lots of investments through their fund but uh they often will also give their lps uh sometimes people outside their lp base but most of their lps a chance to essentially go in almost directly into a company they're investing in this takes on different versions, but that is essentially the core concept is like, hey, we're investing in this through the fund. Do you want to put a check in directly? And I put directly in quotes, if you're watching on video, you'll see me doing it. But because it's technically not directly, but it is the ability to choose that company in particular.

4:25Cheryl Mack: And there's so many reasons for doing that.

4:27Maxine Minter: Yeah, totally. Why is it different than co-invest? What does co-invest mean? And what does sidecar investing mean?

4:32Cheryl Mack: Yeah. So the co-invest version is where you actually get to invest directly. So let's say you're an LP in a fund. Let's say I am an LP in the Coventures Fund and you're investing in the next Uber for Cats. And if I want to co-invest or if you're giving the opportunity to co-invest, then I might write a$100K check alongside your fund check. If, on the other hand, you're running a sidecar for Uber for Cats, then you would set up a special vehicle, some sort of legal trust or whatever. We can talk about the various structures that these SPVs take form. And you would set that up and I would go into that.

5:13Cheryl Mack: But that would correspond only to my Uber Cat investment or your Uber Cat investment and not all of the companies and the funds. Do you use the Uber for cats example all the time?

5:29Maxine Minter: All the time. I'm like trying to visualize what Uber for cats would look like. It's like, is it a transportation ecosystem just for cats? I mean, I'm focusing on the wrong thing here, but I like, I am like, love. And also possibly a cat driving the Uber. This is the question that I have. Are we like, you know, maybe in this driverless world, you can have Uber for cats and like the ride comes with the cat. Yes. Maybe you're pitching me a new idea. So, okay. So you have sidecar investing and then you have co-invest. Sidecar investing is when there is a entity that sits next to your core entity. So the core entity being the fund and there's anything ancillary to that.

6:11Maxine Minter: And then you have co-invest, which is actually the opportunity to come directly in via alongside a fund, usually at the like introduction or invitation of the fund or the investor that you're investing on. Yeah.

6:24Cheryl Mack: Yeah. And the difference there is that if you're co-investing, your name as the LP gets to go on the cap table. When you are doing an SPV or a sidecar, then your name is not on the cap table, but it is a one-to-one. So your$1 gets one share or whatever it is, then that corresponds to that company exactly. Whereas your investment in the fund corresponds to a much smaller percentage of that company.

6:51Maxine Minter: And why do people do it?

6:52Cheryl Mack: Yeah, that's a really good question. I mean, there's a bunch of reasons. You can probably add some, but I'll start with a couple. So there are scenarios where a fund is going into a company that their check size may be, you know, let's say for your fund, your check size is$200K. and you're leading the round and there's a little bit of extra allocation, or you may want to bring on somebody, come on, that you think is really valuable, or you're like, hey, you know what, we're leading the round and we want to make sure that there are people on this cap table that are, you know, friendlies, I guess, in case of anything down the road.

7:33Cheryl Mack: On the fun side, I think it's partly about control, right? If you or your affiliates are taking up most of the cap table, then you get more control in the round. On the LP side, I can name a couple. I mean, if you're really excited about a particular company in a fund, then you probably want to do what we call double down, right? So you're, let's say you put 100K into a fund. If they're doing, let's for simple math purposes, 10 investments, only one-tenth of your capital is going to that company. But if you're really in love with that company, you may want to put more than just one tenth of that 100k into that company so you'd probably want to double down on that one um some lps do it just pure like invest in funds just purely to get the co-invest or sidecar opportunities and they do something you can probably explain this better but they do something called like averaging down so it's like they're uh give me a second to figure it out and then you can add to it but uh they're they're like they know their fees on the fund side are high but then when they do the SPV on the side, the fees are usually lower.

8:34Cheryl Mack: And so somehow it works out to averaging an average lower fees.

8:39Maxine Minter: Exactly. Yeah. The somehow is that you can imagine if you have a million dollars, you're investing into venture, say, you can either put a million dollars into a fund and the usual fees for working alongside a fund manager at 2 % management fees per year and 20 % carry. Alternatively, you could put, say,$500 ,000 of your million dollars into the fund, and then you could keep$500 ,000 to the side to double down alongside. But the key thing is, is for most sidecars, they have lower fees and lower carry. So the usual is a 1 and 10. So 1 % management fee and 10 % carry. Half. Yeah, exactly. if you put 500k in at 1 and 10 and you put 500k in at 2 and 20, you end up at 1.5 and 15 across your entire capital pool, assuming the entire capital pool performs in the same way.

9:34Maxine Minter: So it is a way in Australia in particular, especially with super funds, has become quite normalized to have these sidecar investments where it allows the super funds and bigger LPs to average down the total fees and carry burden, but they have investing in venture.

9:52Cheryl Mack: You know what I think is funny about that strategy is that you, let's say you're as an LP, you're like, cool, I'm going to invest in a fund to get diversification because I don't think I'm going to be good at picking winners, right? Like that's why you go into a fund is like, all right, well, I'm going to, I want diversity. I'm not really great at picking winners, but then also I am going to try and pick winners on the side in order to average down my fees because like theoretically or even like in practical terms there's no way you're getting co-investments on every single deal in the portfolio so unless you can get every single deal in the portfolio you're actually not really averaging down your fees unless you the ones that you happen to get co-investments on or sidecar investments on actually end up being the winners so I feel like it's it's almost this like conflict of you think you're doing it one way but then you're also doing it that conflicts with your strategy on the first way.

10:42Maxine Minter: Totally. Yeah. I think, I mean, like it makes more sense to me at growth stage because at growth stage... Max Lassreski. Yeah. Where this started was that you have like big institutional managers. The way that it was like traditionally thought about, ventures traditionally thought about this idea of a funds management or fund manager specifically within venture is those sophisticated LPs are thinking about what's called look through ownership. So effectively, they just want to be invested in the best companies. but they know that they can't do the work to go and find the best companies and win positions in those companies.

11:17Maxine Minter: And so because of that, they work with managers who do that work, who take a clip of the ticket, but they're ultimately trying to buy inverted commas, look through ownership in the best companies. And I think once a company gets to series C or series D, it's pretty clear that the winners in a category are going to be inside of a certain set. Okay, it might not be the best company, but it will deliver like pretty solid returns to you. So that's the kind of history of the mentality of this sidecar investing or kind of co-invest. Whereas in early stage, I think it's actually something quite different.

11:50Maxine Minter: It's the same vehicle, it's the same mechanism, but like at least in our world, it's driven by a very different thing, which is investing at the earliest stage, as you and I know, like it's a lot of work. You've got to be in all of the information feeds. You have to look at a whole bunch of deals, et cetera. And so I think in that version, Actually, it's just drafting off someone else's diligence platform. And so you invest via the fund and then you can get sidecar investments. There is a version of sidecar investing, though, that we haven't talked about, right? What we're talking about here or implied of what we're talking about here is the stuff that is co-investing or like investing at the same time as the fund into a company.

12:27Maxine Minter: But there are also other versions of sidecar investing that allows emerging managers or maybe people that want to be particularly disciplined to invest in that format. I wonder if you can tell us a little bit about other ways you invest around a fund using a sidecar.

12:42Cheryl Mack: Yeah, I mean, there's the follow on option, right? So a fund invests, let's say, you know, your fund is pre-seed only, you invest at pre-seed. But then of course, the company does well, and they raise their next round. But that no longer fits your fund mandate. Some funds have a follow on fund for that reason. But a lot of funds don't, especially because, you know, if you're raising your second fund, and then, you know, doesn't, like, you may not be able to then also raise a follow-on fund, like raising one fund on its own is hard, raising two funds at a time.

13:12Maxine Minter: No mean feat, let me tell you.

13:16Cheryl Mack: Exactly. So then as a fund manager, you have all this pro rata allocation in these companies that are doing well. And what are you going to do with it? Your fund doesn't fit that mandate anymore, and you don't have the capital from your fund to put into it. So you might want to offer that to your LPs. That's a nice little benefit for them. So why don't we call that a follow-on sidecar, I guess? And so you would create a sidecar opportunity for your LPs to take up that pro rata. And that's where I think the structure makes the most sense. Because if you were to just go back to that company and say, hey, yeah, I know we've got a million dollars in pro rata.

13:52Cheryl Mack: That's great. I actually want to give it to my LP. Can you just bring them on the cap table? There's a whole bunch of like mechanics around rights of first refusal and bringing different entities on in the next round. Like there might be another Series A or Series B investor that's like, no, no, no, I want that. They're not, if they're not taking their allocation, they can't just give it to someone else, you know, because they're buddies. It doesn't work like that. But there is something called the affiliate. So as a fund, you can say, well, actually, this SPV here is affiliated with us. So it is entitled to our pro rata.

14:27Cheryl Mack: And so that is a main reason why you would set up this sidecar entity in order to take those investors funds and take up that pro rata without triggering a whole bunch of like Brexit first refusal and and other investors saying, no, no, no, we want that.

14:43Maxine Minter: Totally. And like, I think it is it can't be overemphasized how competitive those realms are looking, especially right now. right like you can't just waltz up and be like hey your company has six x in the last year and you have all the best funds around the table i'm just gonna give you a million dollars and you're gonna take it like that is not what growth rounds look like today they are incredibly competitive to get in so the competition to try and get capital into some of these companies like being able to share with your lps or share with your investors if you're running a syndicate like hey you can now come into this, be it a way that you wouldn't be able to otherwise is super valuable.

15:19Maxine Minter: I also think it's worthwhile saying here, like often, especially bigger LPs or maybe even smaller LPs, one of the reasons that they're using sidecars as opposed to going direct is admin. Because, you know, as you and I both know, the amount of admin maintaining a large angel portfolio, it's a lot of admin, right? There's like lots of like resolutions and stuff you need to sign and things that come back to you and filings every year and like all that stuff. Do you know how many companies we are on the gap deal before? I don't even want to think about it. I cannot even imagine the volume of admin you guys have to deal with.

15:56Maxine Minter: I bet you are very glad AI invented itself in this journey because, man, that is a lot of admin.

16:02Cheryl Mack: Yes, I know, but also like it's still a lot of admin. Like you still have to read stuff. Like yes, say I can read it for you as a first draft, but like you still got to read stuff. Like we have a fiduciary duty to our investors to not just AI it away and be like, yeah, we trusted the AI. Like it was fine. Totally. Yeah.

16:18Maxine Minter: Totally. Yeah. The AI told me. Yeah. So, I mean, like often for a lot of folks, they're actually using sidecars to abstract themselves away from a lot of that admin because they still have professional managers at a cheaper cost managing in that format. So we pull out here for a moment, we think about it, you end up using sidecars either to co-invest alongside at a cheaper rate, sometimes free, right? Depending on whether you're a cornerstone of that fund or not, or not. And then afterwards, you also use sidecars as a way to participate in those follow-on rounds. Fun fact for you, I didn't realize this actually, but technically opportunity vehicles are sidecars.

16:58Maxine Minter: Those like standalone funds, which in a blind fund, so to speak. So people that pull capital into these entities that then take up those prorata and take up those next opportunities in the subset of what comes out of the fund. Apparently, technically they are sidecars, which I didn't know. Also a fun fact for you. Really? I would just call that an opportunity fund. Well, yes. It is now just called an opportunity fund because it has become mainstream. But when it started, it was considered a sidecar. Right now it has its own name. Yeah. Okay. But if you think about how old venture is in the US, a venture in the US has been happening since roughly 1945.

17:35Maxine Minter: The invention of the Opportunity Fund Sidecar was 2011 by USB because they had such a banger of a fund one, but they didn't want to change their investment strategy. So Fred Wilson invented the Sidecar Opportunity Fund, which was this vehicle that they put on top of it and that they would invest in Twitter and all of the other incredible companies they had in 2011 doesn't feel like it was that long ago i know but it is and i think anyone younger than us would be like 2011 is ages ago and we're like that feels like yesterday it's like i mean but i mean it's only 15 years ago like 15 years ago yeah yeah it was the first

18:17Cheryl Mack: opportunity sidecar and now it is extremely normalized and now it has its own name it's like yeah we're doing an opportunity we're raising fund three plus an opportunity fund

18:27Maxine Minter: Yeah, which is a super common stapling.

18:31Cheryl Mack: Very common.

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19:13Maxine Minter: So I wonder if actually it's useful to talk about how sidecars usually enter the chat for an emerging fund manager's growth. Like when, if you are an angel investor today or you're thinking about starting a syndicate and what that progression looks like from angel to syndicate, syndicate to fund manager, like when should you start thinking about sidecars? What I think is interesting is that even five years ago, the only funds that were doing sidecars were the larger funds.

19:41Cheryl Mack: And now it's basically something that has entered the chat as soon as you start your, basically as soon as you do your first fund, you're like, yeah, we're going to be doing sidecars alongside it. But that, like, I mean, that was something that you started to do with your first fund. But before you, Black Nova, Archangel, and, you know, you guys have all started within the last five years, that wasn't a thing. It was like, oh, no, you know, sidecars and opportunity funds, that's something that bigger funds do. So now what we typically see is like on first fund, a fund manager like, yeah, we'll run a sidecar alongside for whatever things that we can get extra allocation for or whatever things that doesn't fit our fund mandate at the second round.

20:23Cheryl Mack: So that progression really looks like, you know, you may start a syndicate first as a fund manager to get some runs on the board, build up a bit of an LP base and reputation, do deals individually, most likely using our platform, obviously. And then when you go to launch your first fund, already having that syndicate launch means that you have that sidecar available to you to run those deals alongside. It is a little bit of extra work, but I actually think that is, and you can maybe comment on this, don't you think that it's becoming more and more important from an LP perspective to get those opportunities on the side?

20:58Maxine Minter: Oh, yeah. I think actually it's probably helpful to go a little deeper on why as a fund manager you do it and then maybe why as an LP. I can talk a little bit about that, why as an LP you want it, but why as a fund manager? that you do it. One is it allows you to kind of add more capital around great companies, right, at the earlier stage and then throughout the journey. In our case, it's also a great way to get more angels, like great angels alongside us onto cap tables, as you said, but also an opportunity to get more people who are maybe like venture curious to feel more comfortable to start allocating because they can allocate into our sidecar on a deal by deal basis and like get runs on the board and like get reps before they either come into the fund or branch off and do their own thing as angel investors.

21:44Maxine Minter: So there's like a kind of almost angel investor training thing for us, which I think is fairly uncommon for why people do sidecars. The other benefit as a fund manager is for your core fund, you have carry and then you have hurdles on that carry. So when you are investing, you have to meet 1x the initial investment plus some kind of hurdle. In our case, it's 8%. So over the course of a fund, you generally speaking will see if you're kind of in the top 25 % of your vintage, you should be able to distribute back about 1x your capital inside of the first eight years, right? As LPs, you would expect 1x your capital inside of eight years.

22:23Maxine Minter: But to clear your hurdle as an investor, as a fund, you have to, it's roughly kind of 1.5x the initial capital invested by the time you get to year eight, year nine. And so if you think about that for a moment on the SPV side or in the sidecar side, actually it creates, you can start participating in carry much earlier because you don't have to clear that hurdle. So that's, you know, for the fund manager, but also for the other employees who are working that fund, that's a material benefit. it. Then the other reason that you're running sidecars is it gives you an ability to, you know, stay disciplined on your core strategy, but flex up and down with kind of additional capital into some of these companies and participate on that other side.

23:04Maxine Minter: Then as you were saying, you know, you might not want to dilute your strategy. For example, like we are strictly pre-seed. USV fund one was strictly seed and then series A didn't want to do anything else. But then they're invested in and they have these great relationships with founders who build generational companies, truly incredible companies, and they have the opportunity to invest, but they don't want to dilute their core focus. And so they set up these vehicles, a sidecar for you to come in afterwards. I would say increasingly, it's also becoming par for the course, right? The most sophisticated LPs are, especially if they're coming in and cornerstone in funds, they expect this.

23:41Maxine Minter: So they're coming in and they are wanting to invest by a sidecar. Cars will get opportunities to invest by sidecars, if they're your cornerstone, they're often wanting to negotiate on that fee and carry via those sidecars. So they're wanting to get much lower than that 110, sometimes fee free. So that's a norm in the Australian ecosystem, especially for super funds, right? They're coming in and they're investing kind of into these funds. I think the last Blackbird fund, not the one they're raising right now or just have raised, but the one previously was, I think they announced it as a billion dollar fund.

24:16but actually the core fund was only like 250 million oh it was actually three funds yeah yeah

24:21Cheryl Mack: three or four funds i can't remember yeah it was like a core fund growth fund i think it was three

24:25Maxine Minter: yeah i think it was a core fund of like 250 million uh growth slash opportunity fund of like 600 and the rest was fee-free co-invest and so actually it was like quite a material amount you know it was great headline number a billion was incredible for them to raise but like yeah actually a lot of it was co-invest not sidecar investing so that's another way where you know it actually earns you the right if you're running bigger strategies maybe bigger funds it earns you the right to be able to work alongside some of these bigger investors with a really attractive position and bring them in early on deals should we also talk about the different structures

25:00Cheryl Mack: because one of the things that i keep seeing like as you know as the platform uh and the back-end office for a lot of these as well as as well as fund managers uh most people email us being like hey can you set up an spv and then we jump on the phone and i'm like cool so you want to run through the auctions and they'll be like yeah i want an spv and i'm like yeah i know but like spv is stands for a special purpose vehicle which like maybe in the states that's a actual legal thing but okay it's not a real it's not like an actual legal thing so i can't just be like yeah I'm going to the SPV office and setting up an SPV for you it doesn't work like that you got to choose from the different structures so um the main ones are either a unit trust a discretionary trust a bear trust or a nominee agreement um and there are pros and cons to each I can go through uh I could talk endlessly about those I can probably go through a couple like I bet you did yeah because none once I once I get on the phone with them I tell them this now they're like, oh, surprise Pikachu face.

26:03Cheryl Mack: Like, well, now I've got a whole other like decision to make. And sometimes then they'll go and try and do their own research and come back. And I'm like, I should have just said, yeah, we'll do an SPV for you. And like just chosen for them. But you know, me, I like to give options. But yeah, so those are the four main ones in Australia. And they are all types of special purpose vehicles. But SPV is not the legal entity of the thing. you got to choose one of these four. And so we typically do the unit trust. It, in my opinion, offers the most protections for both investors and the underlying companies.

26:39Cheryl Mack: But yeah, there's the other three structures as well.

26:43Maxine Minter: And I think that's important to understand, especially if you are either investing in one of these vehicles, like to understand there are different structures, but also to understand like if you're thinking of running some of these vehicles, there are like material trade-offs through some of these. So if you are thinking about running a sidecar alongside your fund or you're like fund curious, I think it's important to understand that, especially in Australia, there's different entities.

27:05Cheryl Mack: So if you do want to understand it, feel free to book a call with me and I'm happy to walk you through them. Yeah, call me. I'll walk you through them.

27:12Maxine Minter: You can test whether she can in fact speak for hours on the differences between those entities. Not something I would chance. I think she probably could. So Astrage is a bit of a weird one when it comes to SPVs and how the sidecar investing ecosystem has grown up around the Australian ecosystem. Because I would say in the US, it's really normal now, right? There's lots of infrastructure around it. There's lots of different platforms that will allow you to build this alongside your fund. As we've said, USV was the first, but now pretty much anyone around Fund three starts to look at setting up an opportunity vehicle to invest across those.

27:53Maxine Minter: It's probably worthwhile saying sometimes these opportunity vehicles are fund specific. So it will double down on opportunities out of fund two. But sometimes these vehicles are cross fund, right? They like kind of layer in over the top of each other. So an opportunity vehicle might invest in any opportunities in the year, you know, 2026 to 2029, regardless of what entity it's come out of over that period of time. So that's become extremely normalized in the US and it's kind of like a well-trodden path that you go, you know, angel, syndicate, fund one, fund two, fund three, plus opportunity fund, and then, you know, build the franchise that way.

28:29Maxine Minter: But then alongside that, the normalization is also this co-invest. So increasingly meeting LPs who are, like, it is par for the course. It's what they expect. And so it's almost like trend back. But Australia is a little different because our regulatory ecosystem is a little different in relation to SBBs. And so there's been some changes or some discussion of how that's changing, especially in Australian context with the super funds being pretty heavily regulated on fees.

28:56Cheryl Mack: Yeah. They have to report on fees. They can't go above certain things on fees. Yeah. Yeah.

29:03Maxine Minter: Which I didn't actually realize, but there's your choice, your super program, which is an initiative that I actually think is pretty well-meaning, which is trying to get super funds to disclose and like hit certain fee thresholds so that they don't, you know, unnecessarily load up companies or load up super fund or investments with too many fees. But if you fail that test twice, you can admit no new members. You're effectively out of business. I didn't realize it was like that heavy handed.

29:33Cheryl Mack: That's pretty strict. Yeah.

29:34Maxine Minter: That's pretty strict. Like if you as a super fund twice invest in something like venture and the fees end up being above the thresholds you're allowed to have then you're out of business game over i think they campaign

29:53Cheryl Mack: because i was talking to rick baker uh maybe last year sometime and he was like yeah i'm gonna go talk to them about this uh like they had called they called him to come and like I don't know if testifies the wrong word, but like, yay, Rick. Yeah, as like an expert on the subject as to like why VC funds should probably be excluded from this because of the fee structure and the way that like venture investing works, it's difficult, especially if you're doing SPBs and sidecars, like you should look at it as an aggregate in this sector rather than a particular like one thing. So I don't know if he ended up campaigning for that and they got it or not.

30:34Cheryl Mack: But I do think it makes sense, right? Like if you are a super fund manager and you're worried about this, then like your natural inclination would be like, hey, well, I'll just exclude venture. And then where does that leave you, right? Probably with the worst portfolio. And also then we have a bunch of super funds who are excluding themselves from like one of the largest high risk, ultra high reward asset class, right? I don't think that's a good outcome for anybody.

30:59Maxine Minter: Absolutely. Actually, I mean, it doesn't just affect venture, right? Like venture is a subcategory of private equity, meaning the investing in private companies. And a lot of private equity has very similar fee models to this. The two in 20, right? Hedge funds is where this started. And then venture is a subset of that same fee model. And so, yeah, I think it's been a problem for them for a long time. And I don't think that they've handed down the decision yet or have decided yet. I know the government did a bunch of consultation at the beginning of the year to try and work out. Well, actually APRA, I think specifically, did a bunch of consultation at the beginning of the year to try and work out what the right fee structures were around these.

31:37Maxine Minter: But I think it's a really big opportunity for Australian super funds in particular, because at the moment they're kind of fighting with one hand behind their back, so to speak, to try and deliver great returns and also invest domestically into the Australian ecosystem of various kinds, but specifically into tech and venture because they can't. They either have to work alongside managers at such egregiously low fees that it makes it really hard to run a business as a fund manager, or alternatively, they just don't invest in this asset class and they're stuck with ASX stocks, which isn't great. Not a great outcome for them.

32:12Cheryl Mack: Not a great outcome.

32:13Maxine Minter: We're hoping that we'll start to see some more evolution around that. And you've got like a crop of really exciting funds in Australia that are now doing like fund four and fund five and are starting to get that range to work alongside super with their sidecars and with their more mature structures. And so hopefully both that infrastructure will be waiting for them by the time they get to that stage.

32:34Cheryl Mack: Yeah, I like I absolutely agree with the concept in principle, but I think like with anything, you know, government comes in like, hey, we want to regulate this. And then we're like, actually, I like I know you don't really understand venture, but it you know, this these are going to have a whole bunch of unintended consequences. So hopefully, yeah, that is something that can be adjusted or has been adjusted already to account for this. Because, yeah, you're right. Like the ecosystem has matured. We've gotten to a stage where we've gotten many funds that have graduated to that. Will we call them like mature at fund four or five?

33:06Cheryl Mack: That's an interesting question, isn't it? I've heard that going from what, two to three is the hardest.

33:11Maxine Minter: So, yeah, I think about 30 % of funds graduate from fund one to fund two and fund two to fund three. And then it's more like 60 or 70 % after that. It's very similar to pre-season series A. Because at the end of the day, we're all just running companies, right? Right. Yeah, yeah. I still laugh at myself when I was watching Venture from the Outside as an operator and just being like, that's not company building. That's like what those people are doing is not company building. I don't know what it is. It's definitely not company building. And then it's definitely not venture building.

33:44Cheryl Mack: And then you stepped in the door and you're like, oh, look, everyone here is building companies.

33:49Maxine Minter: Oh, would you look at that? So, yeah, definitely business building. It's just a different shape of business than, you know, a venture scale business. But I think if we pull out here and we think about, okay, did we do our job on giving a one-on-one on sidecars? What they are? Why we have them? Why do GPs do them? Why do LPs do them? and then how they're evolving over time and some cool stuff that's happening in Australia. Anything else we should talk about?

34:21Cheryl Mack: No, I think we covered it all. I mean, this felt like it went by really fast. I would love if anyone in the audience has any further questions about sidecars, please ping us and we would love to answer those for you. We could add it as like an appendix on the episode.

34:36Maxine Minter: Yeah, we can cameo on our own episode at the end. Yeah, send us your sidecar questions. Awesome. Thanks, Vaxine.

34:47Cheryl Mack: Thanks, Cheryl.