Trust Over Likability: How Charles Hudson Built a 450-Company Portfolio

0:00Every company in our portfolio that you love, I picked it. Every one that you're not thrilled about, I also picked it.

0:05Maxine Minter: I actually think that he might be the most successful, most scaled solo GP yet. I think most people's jobs are horribly over-constrained.

0:14Cheryl Mack: You're just out there being like, hey, do you suck at your job? Build a company and I'll invest in you. Do you suck at your job in a good way? In a good way. Like I have founders in our portfolio who called me and said like, I want you to invest in my next fund. I've said I'm not investing and here's why. Brutally honest. Trust has to come first. You've got to like build your balance. And that's the difference between it being well-received and people thinking you're a you-know-what. My first day independent post-uncork was April Fool's Day 2014. She's like, is this the punchline? I'm giving up a very safe, highly compensated job to start a venture fund that collectively all of my friends in the industry told me is like a bad idea.

0:50Cheryl Mack: Okay, three, two, one. Hey, I'm Cheryl. I'm Maxine. This is First Check, 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 out.

1:11Maxine Minter: Super excited for this one today. We have Charles Hudson from Precursor VC on the podcast. Charles is literally an OG of the US ecosystem, but also a global allocator, which is a fairly rare combination. So Charles is the solo GP of Precursor Ventures, which I actually think that he might be the most successful, most scaled solo GP yet. I believe they just closed fund five. It is a$60 million fund. I believe he's allocating to like a hundred companies out of that fund. He's done this high volume strategy for quite a few funds now. And let me tell you as a solo GP that blows my socks off. Socks are gone.

1:50Maxine Minter: Like that is incredible what he's been able to do.

1:53Cheryl Mack: Yeah. I mean, I can't, I can only imagine how excited you are to talk to him as another solo GP. And I think we were just talking about how we don't have a high volume BC play in Australia. So we don't getting to a little bit of an understanding of how does he even do that, let alone being a solo GP doing it. I'm also keen, I'm so excited to chat to him about the pros and cons of doing this strategy, right? Like, I think it's tough to convince LPs that like, yeah, I can totally do this on my own for so many fun.

2:21Maxine Minter: Yeah. Let me tell you, it's not easy to convince people that you can do it on your own. And I think what blew me away about Charles actually is the range of investing that he has done right started his career in Qtel he was one of the first employees at UMCorp which is a very successful fund out of the US and then obviously has built precursor the last over a decade has invested in some incredible companies along that journey and so I think has some really interesting insights investing kind of across the map of different asset classes but what I really loved as well as he was investing in kind of underappreciated founders from way before it was a trendy thing to do.

3:00Maxine Minter: And he still is committed to that, even in today's society, where there is that kind of strong headwind around DEI type investments. That's not his focus. But I think if you look at his track record, he really is truly investing in underappreciated and underrepresented founders and doing it very, very well and accelerating those people to huge success. So I can't wait to dive in here with Charles and nerd out on solo GPs. Yes, let's do it. Let's nerd out. Let's get started. You're listening to a dayone.fm show.

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4:47Maxine Minter: Charles, welcome to First Check. We are so excited to have you. Thank you for having me. It's a real honor. What's the first thing that you've ever invested in? The first thing I remember investing in was actually a stock. When I was in high school, I worked at a brokerage back when brokerages were analog, not digital. And I worked at this brokerage and I bought stock. The first stock I remember buying was actually, I don't know, this is probably not great in this era. I bought stock in ExxonMobil.

5:17Cheryl Mack: Wow. Okay. We won't hold it against you. Yeah, I bought gas at Mobile near my house and I was like using the Warren Buffett. This is a stock I understand. I give these people money every week to put gas in my car in high school and I'm like, it's a pretty stable stock. And I bought it actually not through the brokerage, I bought it through their direct stock purchase program where you paid no brokerage commission but you had to like mail in a check to buy the share. It's very, very analog. That's like a whole, that tells you how old I am, I think. But that was like the first stock I really remember buying and I've never sold it.

5:48So like I still every year get this little statement in the mail. Oh my God, stop. Really?

5:54Cheryl Mack: Wait, did you buy one? Like did you only bought one? No, I think I bought like 10 shares. I think I bought like 10 shares. That's incredible. You still have it. I feel like at this point though, you can probably get rid of that. Like I don't hold it against you for buying it in the first place, but maybe that's not something you want to hold anymore. It turns out logistically selling the stock in this direct stock purchase program is actually quite complicated, which is the main reason I still hold it. But like that opened my eyes to stock and then. Okay. Okay. Fair enough then. I bought a lot of other things that are much better for the environment later in my career.

6:26Maxine Minter: I will say though, I quite like the story of like buying it direct and like handing it down generation to generation. Right. That's not really a thing anymore. I mean, we and our listeners can all know it's mainly logistical, but you can like create like what you can't hand stuff down. Of course you can. To generation.

6:44Cheryl Mack: Oh, you mean like actually owning XM. like a physical thing right like i think my grandma gave me one back in the day and i'm not even sure where it is but like the the idea like a physical she gave you like a physical stock certificate yeah exactly it's probably in a safe somewhere at the bottom of my parents house back in canada but i'm just saying that's not a thing anymore right like you don't hand down a physical sheet of paper that says here's the stock i own that you're like transferring physically to your grandkid.

7:13Maxine Minter: Totally. That's true. I didn't even know that was a thing. I more meant just like from a story perspective but actually a piece of paper, person to person is a whole separate thing. So, Charles, in the direct program, did you get a piece of paper? Is it also sitting in a basement somewhere for you? No, every year. And the funny thing is I haven't figured out how to change my address. So it goes to my mother's house every year and every year I text on my mom is like, I I got your little statement again. You should probably... That's a longer statement about the state of custody for these kind of things and like how difficult that world is.

7:48But like, yeah, every year I'm like, I got to fix this. And every year I don't fix it.

7:52Maxine Minter: I love it. Oh, that's so good. This is maybe the best one ever. I don't know that we've ever had like the physical direct owning us. So good. Okay. So now I'm like let off the leash. I'm ready to ask all my questions about solo GPs. So, as I said, you are probably one of the most successful solo GPs and definitely the person that has most successfully scaled this model. I'm wondering for our audience if you can give them a little education on what is a solo GP fund, how are they structured, what are the benefits, what are the cons of it, how do they have for them to think about it? I just have to say like everyone stands on the shoulders of somebody else.

8:34and while I have had a great run as a solo GP, it wouldn't have been possible without some people who came before me. So, I think about Steve Anderson at Baseline, I think about Manu Kumar at K9 and Tim Connors at Pivot North. And also, the irony, Maxine, is when I joined Uncork, which was then SoftTech, Jeff was a solo GP. So, in a lot of ways, people go, well, how did you figure this out? I'm like, well, I had the luxury of partnering with someone. And when I joined SoftTech, it's still hard for me to sit on a court, even though I know I'm supposed to. When I joined SoftTech, Jeff didn't even have an assistant.

9:10Like the whole fund was run out of his inbox.

9:13Maxine Minter: That's crazy. Wow. So you were it? You were essentially the assistant? Yeah. Like, I mean, like a solo GP firm is a firm with a single partner. And I think once upon a time, solo GP equaled one person. And we can talk about this later. We've moved to a world where a solo GP typically means you have a single investment decision maker. at the firm. And increasingly, there are solo GP firms that are supported by larger teams. So Precursor Ventures is still a solo GP firm, but we have 14 people who work at the firm, including me. So I'm the only partner, but I'm not the only person. And for a long time, solo GP meant single decision maker, but also single person.

9:57And I will tell you what I perceive to be the benefits. As I joke with my LPs, the probability I will ever get in a fight and break up with myself is very low. And so I personally believe one of the biggest long-term risks to venture capital firms, not individual investments, but firms, is actually partnership dynamics. And if you think about it, like I've been doing Precursor for 11 years, I am not the same person I was 11 years ago, but I'm not in relation to anybody else. And I think the probability that I would have partnered with somebody 11 years ago and we would still have the same quality of relationship through all the twists and turns of life strikes me as fairly low.

10:39So low. So one nice thing is there's no team breakup risk because the team is one person. Second, there's no attribution issues about who's actually making the investments that matter for the firm. There's no palace intrigue. There's no rivalry. and also I think performance is easy to assess because as I tell my LPs, every company in our portfolio that you love, I picked it. Everyone that you're not thrilled about, I also picked it. So however you feel about the portfolio, that's how you feel about me and my selection. And I think there's a uniformity of culture that you get from having a single decision maker.

11:19And this is something I don't usually talk about, but because you and I have had many conversations before this podcast. I really do think founders value knowing that you're going to get a consistent experience when you touch a firm. And if you have five different people with different personalities and different styles, your experience with that firm could actually be a function of the partner at that firm that you work with. And I'd argue with very few exceptions, most firms do not have a uniform culture where your experience with that firm will be the same no matter which person you touch.

11:50Cheryl Mack: Oh, I see that all the time when I send founders to a particular VC, I'm like, oh, you had a bad experience, but did you talk to this partner? Because like, yeah, that I'm not super surprised. Yep.

12:05Maxine Minter: Right. Also the kind of orphaning of companies, right? Like I think we talk about firms as a monolithic group, but it's, you know, these are humans that join an organization and they often leave an organization. And with them moving on, they then kind of orphan a company into that fund. And that, as you said, right, the probability that a partnership stays together for 11 years is actually not super high. And I think it's become even more pronounced because the big firms have become very institutional and industrial, which means you have junior people writing checks and making seven to 10 year commitments to companies where their tenure at the firm might be two to three years.

12:48and I tell people like if you take money from pre-courser you're taking money from me I'm not going anywhere like I'm not going anywhere you for better for worse you will get to deal with me for the remainder of your time as a active portfolio company I have one company my scene where I'm on my third partner from the firm that made the original investment because the first person who made it left the person who inherited it left and now runner third and the third person is perfectly nice and capable and has zero context on like the previous iterations of the company and based on my expectations for that company there will probably be a fourth and a fifth person in that seat before it's all said and done.

13:29Wow. Which isn't great for the founder.

13:31Cheryl Mack: And they're like on the board and like actually practicing. I think that's tough. Like if you're going to do that then at least like don't take a board seat. And these people are doing the best they can with what they've been dealt. They got a battlefield promotion and someone said, hey, so-and-so left. You've got to take on this board seat. It's a company where you have no connection to the founder. You had no involvement in making the investment. You have no sense of... But they show up and they do the best they can. And I really respect... And go. Go and go. Exactly. And go.

14:03Maxine Minter: Right. Yeah. And I mean, I think like, especially for you guys, because if you write your first check, but you seek to kind of stay involved, take board seats, like be quite an active supporter along that journey as well, which, you know, for a lot of leads, that's the case. And so as you're adding leads through series A and series B, and you're working with these multi-GP funds, it is a risk that you take on, right? That you're going to end up being connected to the firm, but not connected to the partner in the long term. I've never really phrased it this way, but what you said just struck me.

14:30Part of being a solo GP is I think you have to be much more intentional about the architecture of the relationships and expectations you create with founders because there's only one of you. So what I tell people is like, I don't take a lot of board seats because there's only one of me. But when I take one, it's super serious, but I'm probably going to have to come off that board at some point because I have such limited capacities. I will not be your forever board member. And second, my goal is to be of greatest value to you at the time where I am most valuable. And what I tell people is like, from the pre-product market fit, like kind of think post idea to like product market fit stage, I can do a lot to help you.

15:11When you're a series C company thinking about some crazy venture debt instrument or some like weird mezzanine, like I'm not the best person to help advise you on that. And so what I tell people is like, I'm going to like try to front load the value I provide to you. In those first two or three years where I'm probably one of your largest shareholders and most active investors, I'm going to do everything in the world I can for you. And then you're probably going to drift away from me more than I'm going to push you away because you're going to have new investors and more people on your team. You're not going to bring me the same set of problems.

15:46And while I'm always here for you, my experience has been people don't think about me as much when they're at Series C and D. Now, it's not that they don't think about me at all. I just spent a big chunk of last week talking to some of my serious C &D companies. But like, I'm not the primary person. There's somebody else who's like the lead. And I'm like, my job is to help get you from zero to one.

16:04Maxine Minter: Super interesting. Something that we spend a lot of time thinking about is just the product of what we are selling to founders, right? The like service that we are providing and the point at which we're onboarding, but also the point at which that service changes exactly as you've just talked about. At what point as you kind of built this fund, because you were, as you said, you worked at Uncork for many years, you saw those reps, but I didn't actually realize you'd worked at In-Q-Tel and you'd worked at a bunch of other places prior. Also, like an outrageously long operating history. Just a side note for a moment, I did have the moment when I was reading what you have done, being like, wait, hold on a second, how old is this guy?

16:39I thought he was fairly young.

16:43Maxine Minter: He has done so much. People always ask me this question and I find it so rude. Back at us all the time. I'm like, mostly it's the other way around. People asking us how old we are. Right. It's actually never happened to me that I've read someone else's bio, but let me just say, so impressed by the just incredible operating history you've had and investing history you've had. It's incredible the amount of things you've done. Diverting back to my question is, you know, as you think about how that evolved for you from fund one to fund two, fund two to fund three, how did you think about the product you were delivering to founders and talking about it.

17:20Again, something I've rarely been asked. So I've told you this, I think. I have a coach that I work with who helps me think about what is the product of Precursor. And most of our sessions go like this. This is the experience I want to have. I want to deliver to founders. And he's like, how well do you think you're doing on that right now? I'm like, not that great. He's like, okay, cool. Let's look at what are the tension points. and in the beginning, Maxine, I offered people an unbounded, I will meet with you forever with the initial cadence because it didn't cost anything to make that offer and because I didn't have a big portfolio and I was like too naive to think about, well, what happens?

18:00You make this for 50 companies. What happens when you have 200? And two things happened. One, I realized like I cannot in good conscience make an unbounded, unlimited support offered at our portfolio companies anymore. It doesn't work. It mostly doesn't work because when I started Precursor, Pre-Seed to Seed was like a two-year journey. Now it's a four-year journey. But you know, what was more revealing to me was the power of inertia. And what I realized is I would never check in with people like, do you still need to meet a month? I'd put a month on, it would recur forever. and the calendar is like whatever.

18:37This violates all like good rules of meeting hygiene about the forever recurring meeting. And I'd have these things and people would show up dutifully and we would have a meeting. And then my coach was like, what if you just ask people, do you still need this meeting? And what I realized is the dynamic of a lot of the founder relationships I had in the beginning, people were so grateful for the help in the beginning. When they outgrew it, it was awkward for them to say, you've been helpful, but like, I don't want this anymore. So now what I do is usually once or twice a year for every founder, I'm like, Hey, this is what we've been doing.

19:16We've been meeting every four weeks. Do you still want this? And no is an okay answer. And I'm bringing this up because if I don't bring it up, I'm putting the burden on you to opt out. And a lot of founders are like, well, now that you bring it up. Maybe we could do every eight weeks. And that worked for a while. And then at one point I was like, well, I usually have an opinion of what I think. So why make this, why not be a little more prescriptive? So that evolves into like, hey, we've been meeting every four weeks. My sense is based on what you have on your plate, you need me once a quarter, not once a month.

19:52I'm happy to keep it at once a month. I'm happy to go to something between once a month and once a quarter. But my sense is like once a quarter is what you need. If that works for you, we can change it. If you want to keep it where it is, we will keep it. 90 % of people take my recommendation. And I think it's because they are feeling the same thing I'm feeling. And the 10 % who don't, we just keep it. And I found that like the power dynamic between investors and VCs is there's some things that are much easier for me. And this has like a cascading across many things. The meta lesson for me was there are many things that as the powerful person, relative powerful in quotes.

20:30More powerful person. There are many things that are less awkward if you bring them up than if you wait for your portfolio company founders. So we also do an NPS survey after everybody successfully closes a round, which is like, how helpful were we? And we mostly get fives, but we don't always get a five.

20:47Cheryl Mack: I mean, like how helpful would you be during a round anyway, though? Like you're trying to invest, but also like drive a lot of value? This is for follow-on rounds. For follow-on rounds.

20:57Maxine Minter: Oh, okay. That's bold to do it in your initial. No, we're not that bold. We're not that bold. And sometimes people tell me things that have changed the way we work. They're like, I wish you had done this or this intro or like, and sometimes people tell me things that I'm like, well, that's a problem I can't fix. Like, I understand that you gave me a three because you wanted me to like, have identified somebody who would lead you around. I'm like, well, I made like 30 intros for you and those people did a bite. this, like, I can't make them. I'm okay with the three, but that's like good feedback.

21:32If the product I want to have is I want people to say, Precursor Ventures and Charles Hudson were very instrumental, important investors to me for the early part of my life. And I hope that every one of my founder friends gets the chance to work with them. If you reverse engineer from that, like, what does that experience need to look like? It means you need to like, not be a jerk. It needs you to show up within three to five minutes of when your Zooms are supposed to start. It means you need to remember what you talked about last time. And it means if you agree or offer to do something for founders, you should more often than not do it.

22:07And if you're not going to do it, you should tell them why. Those are pretty basic. Right. That feels like a doable thing. The last thing is, I think you have to also decide what kind of long-term relationship do you want to have with founders? And this is related to your question, but it's a little roundabout. We got to a point around 2022 where I was like, we're not going to have follow on dollars for every company in our portfolio. And how do we want to approach these conversations? Do we want to be honest with people and tell them we're not investing and here's why? Or do you want to give them the VC triple bank shot?

22:42Well, if Sequoia leads it, I'll do my prorata. Duh. That's like, that's like a, not a yes. and I was like well I want long term trusted I want people to trust me and believe in me which means I'm willing to tolerate moments of awkwardness like I have founders in our portfolio who called me and said like I want you to invest in my next round and I've said I'm not investing and here's why and as you can imagine you don't even have to imagine you know this they're not thrilled they're not happy and I'm like I know you're not happy no they're definitely not thrilled

23:19Cheryl Mack: are you not happy no founders like yes you're not coming in after i just asked you to follow on you're not investing yes i'm so thrilled awesome i'm just like this is why and it stings and usually that next check-in after i've told them no not the most fun meeting we've had but oftentimes one of a couple things happens they close the round without me and they're like you should have done it i'm like maybe i should have they don't close the round they're like wow actually everybody else told me the same thing you told me about their reservations. So now I have context and the company fails. And then a year later, they're like, you shouldn't have given us money.

24:00Now that I'm like out of the fog of war and I have distance, we weren't a good company and you actually like made a good decision. And you were one of the few people who was actually direct and honest with me that you weren't investing and gave me some context as to why. But you have to be like long, I tell my team all the time, we want long-term friends. And long-term friends can get in fights, can have disagreements, can not talk for a while. And you get through it because you're going to be friends for a long time. And I think there's a lot of temptation in this business sometimes to do the easy thing to avoid saying or having a difficult conversation.

24:38I've told my team, we're just not going to be one of those funds. We're going to like, deal with people that we care about in all honesty because the things we tell them, other people are probably going to tell them the same thing too.

24:50Maxine Minter: Or even worse, not tell them and just act on that. Not tell them. Right? Like, not just be like, oh, love you, love the company, ghost. Yeah, that's more common. Hold on, can I have the feedback of why? Where are you? Like, Are you going to invest? What's happening? You know, I think actually having the bravery to give that feedback in those conversations, taking that social risk is the gift. I told someone today, they're like, what's going on with Iran? I go, it's you.

25:46Cheryl Mack: Thank you. Visit deal.com slash day one. That's D-E-E-L dot com slash day one.

26:01It's you. He goes, wow. I go, no, I don't think that. Because I'm already an investor. I was like, I can't tell you who, but I've talked to enough people who've passed. The consistent feedback I've gotten is people, it's you. It's not that you're doing anything wrong. They just, they don't think you're a killer. and I was like I don't think that's a fair assessment of you but this is the word on the street I've heard it from enough people and like something about the way you're showing up in these meetings is making people think that you don't have what it takes I obviously disagree I don't know what you should do differently I'm just telling you this is the impression you're leaving people with when you meet with them and like it's getting in the way of you fundraising it's not getting in the way of you operating the business that's pretty honest like brutally honest

26:45Cheryl Mack: if i was a founder okay so i suck but i don't know how to fix it and thank you for telling me and he but we ended up talking in the company well he started asking me he's like have you seen any of these and i'm like i haven't but let me tell you a version of you that i can imagine might show up in a meeting that people and i kind of told him i was like and he's like oh i now can sort of see what you're saying. He's a very understated matter of fact founder. And I was like, some people will interpret that as a lack of ambition and they're going to discount it. And he's like, oh, I didn't really like, he's like hearing you say this, I don't agree with the assessment, but I can see how that might show up for other people.

27:28And I hope it's, I mean, this has happened today. I don't know what's going to outcome. But I hope it was helpful for him to hear something uncomfortable, but from someone who he knows. only wants the best for him. And this is the other parallel. Like, long-term friends, you have to have trust first. I have all these, like, dumb aphorisms. I'm like, trust has to come first. Everything you want to do, everyone's like, I want to be able to tell people the truth to be honest. I'm like, well, you need trust first. So first you must build trust. And then trust gives you the permission to open the door to say things that are more difficult.

28:05And that's the difference between it being well-received and people thinking you're a, you know what. Trust first, then mean feedback. You need the trust first. You got to build it up. It's like a bank. You got to like build your balance.

28:17Maxine Minter: You do. Yeah. Maxine actually talks about this a lot. Yeah. There's that trust battery or that trust kind of the bank account, your trust bank account, right? Those conversations actually do take from that trust bank because people want to negotiate with themselves on that topic, right? Where's that coming from? Is Charles just having a bad day? Blah, blah, blah. but actually in the long term as you said like maybe a year later they'll realize that that was actually really valuable feedback but that doesn't mean in the moment it was great to hear or it makes them trust you more in that moment and so I think that's really elegant I think that's the hardest thing I find when I'm talking to people who are earlier in their career whether they work at my firm or not and like if you're doing it's funny I went to an LP meeting and we were talking about founder NPS and this LP was like Any VC who has 100 % founder NPS isn't doing their job.

29:14And I thought about it, I was like, you're totally right. At any point in time, if you're really doing your job as a fund manager, there's somebody who's disappointed or angry with you because you've made a financial decision that they're not happy with. And the person's like, look, if your NPS is 20, I'm concerned for a different reason. But the person was like, yeah, I have all these GPs who come in and tell me they have 100 % NPS. I'm like, oh, so you never tell anybody the truth. You, like, never do anything hard. That's why everybody likes you. And, like, when the person said it, I was like, oh, yeah, like, that's a much better articulation of, like, what I've been trying to articulate to my own team and to our founders, which is, like, I want everyone to like us in the long term, which means in the short term there will always be some people who wish I had done something different to help them.

30:00Maxine Minter: I think it's a really interesting distinction between lackability and trustability, right? And I think that the, especially in VC and especially in like as risk appetite is rebuilding in the ecosystem, the ecosystem seems to default to likability at the expense of trustability. And I feel like we are experiencing the repercussions of that kind of 2018, 19, 2021, where the ecosystem was long likability, just like all founder first kind of mentality, no tough conversations, no kind of some of those moments where you identify, hey, there's a real like learning gap you need to close or there's something kind of you need to work on.

30:43Maxine Minter: Then on the other side of it, when all of those chickens came to roost and, you know, farms weren't doing follow-ons when they said they would have, they're turning around on a dime and being like, hey, remember the last board meeting when I said, you said, go all growth? Well, actually, where's your austerity measures? You know, all of those moments, like that has a serious blast radius for those operators. You know, I'm meeting a lot of operators who I'm not touching VC with a 10-foot pole ever again. You know, I think that probably will change for them over time. But right now they're like, you know, they've lost a lot of trust for the entire industry, which it's an interesting question.

31:19Maxine Minter: How do we get better at building trust without just falling into the trap of likability? Because likability is so much funner. It's so much nicer. It feels short term valuable. Everyone wants to be liked. No one wants to be like, I'm a jerk.

31:35Cheryl Mack: Everybody wants to be liked. Yeah. Actually, I'm probably not going to follow on on your company. Let me just like, like obviously funds want to say that. I think we're in a, in a moment where deals are very competitive again. And like being like, a lot of people are like, I don't want to be challenged. I want people who are going to let me do what I want to do. And I'm going to sign off on all my decisions. And so being the person who's like, no, I'm actually going to hold you accountable. I'm going to like be hard on you. It's like a coach in any, like that's a coach you want. but probably not the coach you would choose.

32:09On the one hand, you're like, well, I want the coach that like, will let me come late to practice and like skip practice and play in the game. I'm not going to get better, but that's easier. But deep down, most people are like, I actually want the coach who's going to hold me accountable and who's going to like tell me when I'm not playing hard and is going to sit me if I skip practice. That's what they really want. But nobody like wants to choose that person, but they know that's what they need. And so I think likability wins on the front end and trustability wins in the long term. But if you're just like, I'm only focused on winning the hot deal, then you're like, what's governance?

32:44Governance, you just, you control the board, do whatever you want. Like I might make a suggestion every now. And so, I think part of what's happened is in a desire to win competitive deals, people have gone beyond likeability to capitulation. And I've just said like, I will surrender all, I will unilaterally surrender all of my rights in order to be on your cap table. And if I were, and there's a set of founders who are like, this sounds great. I get your money and I get no control. Great.

33:11Maxine Minter: Yeah. Excellent. I think it's an interesting thought bubble as well as you're thinking about, I mean, I know for your funds being very much focused on kind of what I would call out of network founders and, you know, you're a big part of your alpha is being able to identify folks who I think you use the framing kind of, there are the fundable founders, right? The people that ever, all of the funds can easily spot like a hundred percent, you're going to be successful, whether that's true or not is a separate thing, but you know, that mental model and you're focused on, you know, helping the folks out of network access those networks, even though they're excellent operators.

33:46Maxine Minter: Yeah. And I think a part of that is a lot of this kind of like unspoken culture and this kind of cultural coaching they get from being in network is absent, right? And so for the folks who are out of network, helping them understand the norms, those unspoken rules, I think is really interesting as a way that you add value to them, but also to the companies that you work for, right? That like informational asymmetry between the two. I'm wondering if you can talk us through a little bit on just for the audience's context, what is your thesis at Precursor, right? What is the area that you are looking to invest in?

34:24We have no market or sector thesis. I don't think I'm smart enough to predict where things are going. There's a couple of things we believe. One thing I believe is that, and this is maybe like getting a little meta, not Facebook meta, but like meta meta. I think most people's jobs are horribly over-constrained. and like corporations structure jobs to limit the negative impact that individuals can have on a company. Like if you're Google, you don't want a junior product manager accidentally taking down Gemini or search.

35:00Maxine Minter: True. You don't want that. So you like dramatically constrain what that person can do for good reason. And I'm like, but like running a company is an unconstrained problem. Like nobody tells you, it's the opposite. Like no one tells you what you can do and you can actually tank your startup at the blink of an eye if you're not careful. And so I'm like, well, who are the people who are like chafing under these constraints? Oftentimes they're like not great employees because like they're trying, they're like actively fighting against whatever box or constraint the companies put them in.

35:35Cheryl Mack: You're just out there being like, Hey, do you suck at your job? come build a company and I'll invest in you. Yeah. And it's like, there's like, do you suck at your job in a good way? In a good way. Cool. Shut up and take my money. Yeah. Which, which makes referencing show that it makes referencing people hard because sometimes I'll do references and do like, well, this person was like not a great employee. I'm like, wonderful. I'm like glad to hear that. I'm not, I'm not hiring. So when I tell my LPs, I was like, I'm hiring people to be first time CEOs. So my job is to figure out of all of the people who want the job, who's actually going to be good at it.

36:11So a couple of things. One is like, does this person have a good barometer for talent? And oftentimes I look at two things. With whom have they chosen to found the business if they have a co-founder? And are they realistic about that person's skills and abilities? So the worst thing is someone who's like, this person is the very best engineer I've ever worked with. And I'm like, I believe that. You're 24. You've worked with four engineers. I believe that this person is the best of the four, but they're not like the best in the world. but like the ability to attract talent and the ability to like assess talent is like a big thing second is like you have to opt into chaos as a zero to one founder and i meet people sometimes i'm like you seem very happy with the structure you have at adobe or amazon or like you're gonna have none of that and like one of the like moments that's seared in my brain i funded two guys from Facebook who did a company and they wound it down and gave me my money back.

37:10And in our last check-in, one of the founders said, I learned a really important lesson in doing this company. I said, I'm curious, what is it? He goes, well, everything that made me successful at Facebook is useless in this startup. I'm like, what do you mean? He goes, managing up, being able to command resources. He's like, I was good at all of these things at Facebook. He got me to director. and none of these things like are useful skills in my current situation. I'm like, that's bang on, that's bang on. You're right. You taught me something. You just articulated something that I've been struggling.

37:48And so I also find though, in general, these people have other things in their life that they've done where they've like been a novice or they've like gotten off the beaten path, it usually shows up somehow. It could be a hobby. It could be a job they took. It could be a cultural experience. And I just find it really hard to back people who've never been at a zero to one startup and who've always taken the safest, most attractive career prospects available. I'm like, I'm not saying you won't be successful, but like nothing you've done before has prepared you for what you're about to do. and uh i also just believe in meeting a lot of people and i think my lp is like how do you pick these teams i'm like well if you meet a couple thousand teams a year the 30 or 50 that really stand out stand out now the ones that stand out to me could be different from the ones that stand out from you but volume is actually like a pretty good way to level yourself and figure out like well what are the things that spike for me and why do they spike for me 100 yeah i think that's

38:53Maxine Minter: interesting i mean especially the volume question right because there is a degree to which you're investing kind of relative to the pack right noting that power law church noting that we cannot get away from that religion right in this asset class it is the thing that drives so much of the way that we operate our funds the way that we source deals the way that we invest the way that we support and so as you are thinking about like actually the best 50 in the 2000 that you see I think probably is the best 50 in that stage in the kind of geo that you cover. I think what's really unique about what you've been doing is you've been investing outside of the US in those kind of non-obvious markets for a really long time.

39:37Maxine Minter: I'm wondering, can you tell us a little bit about how you started? For a long time, I was like, we're just going to do US because it's easier and I don't want the headache of explaining to my LPs where we're doing something different. And so, for the first two funds, I was like, we're just going to keep this very simple. We're going to do US only. A little bit of Canada because I'd done Canada on Cork. And then in fund three, one of my friends from YC was like, hey, I have this like Nigerian payments company you should meet. I was like, I don't do that. He's like, it's YC. Do kind of...

40:12Cheryl Mack: Nigerian Prince? That was ironically the first thing my LPs were like, are you sure this isn't the scam? Like, no, no, no. It's like a real Delaware C Corp. The company's doing actually quite well. And he was just like, this is YC. Like your LPs will understand if you do things through YC that are, now this is a great sales pitch from him about YC. And he's like, you can like experiment here. And I did it. And I was like, oh, this is a great company. And it was a fintech company. And I was like, oh, how do you think about Visa or Mastercard? He's like, I don't, they're not here where I am. I was like, oh.

40:49And that opened my eyes. I'm like, oh, well, fintech might be a very nice way to try international investing because money is global and local at the same time. And so that was the entree into, we made probably almost a dozen investments in African fintech companies. Wow. Cool. A couple of which are doing quite well. We did some things in Lat-Am, a teeny tiny bit in Southeast Asia.

41:19Cheryl Mack: Are you Australian? Close, but we haven't got anything done yet. You come that far across the world. We'll get something done there. We'll help you make your first. Yeah, you find it for me. I'll do it. And then I started meeting all these other people, like Accion, all these other people who were doing global fintech investing, I'm like, oh, I'm not that original. Other people have the same thesis. And I realized that like money is a very good way to get to know a country and an economy in a way that like, I think social is much harder. So we haven't done like, and I'm like, social to me feels like you need more cultural context versus money.

42:00I'm like, well, everybody wants to move money digitally. Like, and most people are going to build products for their own market. So it's probably 5 % of 5 % to 10 % of what we do per fund will be things ex-US. More than that, I'd probably tell my LPs, this is becoming such a big chunk that we need to have a bigger conversation about it. And I haven't felt compelled to do more than that.

42:21Cheryl Mack: Yeah, super interesting. And how have your LPs reacted to that? Well, Cheryl, we made all these investments first and explained them later.

42:30Maxine Minter: And they did well by the sounds of it. I love that approach. So I think if I'd gone to them and said, like, how do you guys feel about us investing in Africa? They would have said, don't do it. And we made a couple of investments. I was like, hey, guys, you've made a couple of investments in Africa. They're working great. They're like, cool. Don't go crazy. But great. That is working. All right. Good approach. Good approach. I love that. And I mean, it's working, right? Like those investments do well. I think what's really interesting is right now, obviously, 2020 and 2021, the Zerp era, there was lots more investing ex-US from the US funds.

43:02Maxine Minter: It seems like the US funds are refocused back on the domestic market, which has been super interesting, right? Definitely across the companies that we work for, more of the investors that we invest alongside who are in the US are asking for Delaware C Corp substantial presence in the US and or that the founders have an intention to kind of relocate to the US. Are you seeing the same thing across your portfolio? I think a lot of people saw like Rappi, they saw a bunch of this stuff work and they piled into it. And then it got hard and a lot of people were like, this isn't, the juice isn't worth the squeeze.

43:41And a lot of people I know were just like, well, we're done. But I think this is interesting because I think about the other market that was dead for a while was consumer fintech. And consumer fintech is back now in the moment that we're recording. and I'm like some of these things you just have to stick with them long enough for them to come back in favor and when you're a generalist with a large portfolio at any point in time I have sectors that are like deeply out of favor and the people like what can we do I'm like your only problem is everybody hates your category it's actually not your company it's your thematic category people don't like like don't take it too personally and then we have things where people have irrational enthusiasm.

44:24And I'm like, also, like, you're not that great. Like, you're buoyed by a good tide, and you should take advantage of it. So I was joking with one of my LPs, like, the best AI investment we'll probably ever make at the fund was an investment we made in 2018. Before AI was even a thing.

44:44Cheryl Mack: 100%. Yeah, because you probably got a good price for it, then. It'll be the best one. I'm pretty sure it'll be the best one we've made. And I think it's worked because they started just as AI and LLMs were starting to get good enough. They weren't good enough, but they're starting to get good enough. And it was before, I don't know, I've told a bunch of people, themes kill returns. Because like once the thing's a theme, people don't exercise the same level of judgment. They pile into it and they tell themselves that the eighth best company in a given category is going to work. And I'm like, most themes only yield one or two great companies.

45:24So as a pre-seed investor, the job is to be like ahead of the theme. So we have all these women's health companies, people like, wow, how'd you know? I'm like, oh, I didn't. They were just good founders. And I was like, well, women's health seems underfunded. We're going to do a bunch of these investments and like, hopefully some of them will work out. And they have. And now I'm like, well, being a women's health company isn't a differentiator because most people think that's an investable theme, which means whatever you're doing, you will have good competitors. because it's an investable theme.

45:52So I did a dog ranch company and one of my investors was like, that's out there. I'm like, no, pet is an investable theme. Dog ranch pet boarding is like the frontier of the investable theme. So this is like a good thing.

46:08Cheryl Mack: Surely that's like, where is the tech there though? You, if I told you the whole model and I won't because they haven't publicly launched, there's actually a decent amount of logistics and tech around the way that they're moving the dogs. Okay. Yeah. I believe you. But some of these things, like one of our best companies, Cheryl, it's a baby formula company. And the tech is in the formula. It's Bobby Baby. Yeah, okay. And so I tell my job is to find things that are interesting, where I think venture dollars can get you a venture scale return. Most of them will look like software. But not all of them will look like some of them will look actually quite different like do you just have that much credibility in the market because of your experience that you can just go to lps and be like hey so i'm a solo gp which has its benefits but also has a ton of like key man risk uh and like i can't be across all of my companies long term so like a bit of control risk there also I'm picking founders at the very earliest stages that are not good employees and uh our first-time founders like I'm just trying to understand how when you go to pitch LPs that that sounds like a great yeah you son of a bitch I'm in for many people it doesn't sound good it's a short answer and what I've told them is like there's a unifying theory here which is like I'm fairly humble about the level of impact and influence we can have on the trajectory of the companies.

47:46And I tell my LPs, I'm like, I'm going to talk to people 12 times a year. When we look back on that year, there will be two or three conversations that were important and impactful. And the other 10 were trust building relationship development. And the founder's like, you're too modest. I'm like, but this is what it feels like from my point of view, which is like, I'm going to help you with a couple of really important decisions you'll make in the first couple of years. And the rest of the time we spend together is let's get to know each other. But I actually don't know. I would tell them, I can tell you at the end of the year, what I think are the two or three most important conversations we had.

48:22And the wild thing is, sometimes people will tell me that conversation we had changed our company. I'm like, I literally don't remember what I told you. Or I have a vague notion of what I told you. It's not because I don't remember. It just didn't feel that impactful. I have someone where I gave them like, at the end of the call, the last five minutes, it's like, I just have this random thought about your business model. We've been talking about this for a few months. There's something that suddenly occurs to me having thought about all of our conversations. I just want you to sit with this. And we ended the call.

48:57And two calls later, they're like, you have no idea. Like we were stuck in the thing you said, like totally unlocked us. I was like, the thing I said at the end, they're like, yeah, I was like, I didn't think it was that profound. They're like, it was what we needed to hear because we were stuck on the thing you highlighted. And I went back to my team and told them what you said. And that's how we got to where we are now.

49:25Maxine Minter: It is pretty amazing, isn't it? Especially if you can get to see reps, right? I don't think in VC as an investor, I don't think it is possible to underestimate how valuable being a very high volume repeat player in a market where most of the other, like the founders in this market, they're doing it one time, two times, maximum three or four, right? But your portfolio now your what hundreds? We've made about 450 investments in the last decade. About 270 of them are still active.

49:59Cheryl Mack: Good God. Yeah. How do you invest in that many companies? They're all different. And look, some of them are like, I want nothing from you. Not because you're not a nice person, but like you're 100K of a$5 million round. I don't have any expectations. And others are just like, I expect a lot from you. You're half of my pre-seed round. And, you know, we have some companies that like hit the ground running and graduate quickly. And we have others that struggle. And it takes a lot of architecture to figure out how to stay in. And we're not perfect. There are companies where I feel like I wish I were spending more time with them.

50:42And due to travel and other circumstances, I'm like, those relationships aren't where I want them to be. And we have other companies where I'm just like, I feel like we're over delivering for their expectations and I feel great about it. And on average, I feel okay, not so frustrated that I want to like redo the whole thing, but annoyed enough that every night I go to bed, I'm like, God, I need to do better for these five companies. Like I'm not happy with my level of contribution to making them successful. I don't feel like I'm doing enough for them. But in the end, I'm always like, they're the judge.

51:18And I found that like, like I said, there's a few things we can do to really help people. And if we consistently do those things, like I tell you, well, if you're having a serious co-founder issue, if you're struggling to raise money, if you're thinking about selling or you're thinking about pivoting, I have almost infinite time for you to work through those issues. Because helping you edit copy on your website is a low value activity that you could get from somebody else. You don't need me for that. The things I just mentioned are things I'm like, I think we have unique perspective and value add relative to most founders in that very narrow set of issues.

51:59So probably I tell people like one of the most inspiring documents I ever read

52:07was David Lee, who was my boss for a little while at Google, when he worked at SV Angel, wrote this post called The Inflection Point. and when he says he's like basically like sv angel he's like look we're like a surgeon you don't go to a surgeon when you scrape your knee you put a band-aid on your knee and you like but when you need surgery you go to a surgeon and when i talked to the people who took money from sv angel over the history of that firm the one thing that stands out is almost every founder I've met who loves that firm can tell you a story or two of a time where Ron Conway or someone at SV Angel went to extraordinary lengths at a really important moment.

52:56They can't tell you anything else. They can't tell you about like, oh, he said good job on all of my monthly updates. But they can tell you there was a moment in time that was very important for my company and Ron used his network and his access or his insights to help me. and I think that's all founders really care about. Great.

53:16Maxine Minter: Definitely the stuff that stays with them. That's what stays with them in those really important moments where you have asymmetric power, influence, or insight. Will you use that on their behalf? Yeah. I think that is a really great way to frame it up because I think for a lot of investors and for the angel investors that listen to our podcast but also the fund managers, the constant challenge is time management. the constant challenge is like prioritization across being split in many directions and I think that that's a beautiful framing of it I feel like I could I would like to do this for another two to maybe four hours I'm confident this is not going to be the last time we have you on the podcast we're coming almost to the end of our time together and I am dying to ask this question which is what is your biggest big cojones moment a moment that you have felt really brave because I I feel like I watch you and you are brave day in, day out.

54:10Maxine Minter: So I'm keen to know on your barometer, what's your bravest one? Which one's the biggest? I honestly think it was deciding to leave Uncork, which was not an easy decision. And I left Uncork after we had closed Fund 4. Collectively as a group, we've done the hard thing. We got through Fund 3. and like now we're at fun four things should get better and maybe even dare I say easier also I had been at that point when I decided to leave I'd been I was like engaged but not married and I'm like I have to go explain to my father-in-law that like I'm giving up a very safe highly compensated job that's about to become like both more safe and probably better compensated i'm giving this up to start a venture fund that collectively all of my friends in the industry told me is like a bad idea people i really respect were like you should not you should literally not like are you familiar with the two words adverse selection because that's what you're gonna get.

55:27Cheryl Mack: Wow, blunt. My first day independent post-uncork was April Fool's Day 2014, because it happened to coincide with the end of the quarter. And if you know anything about, you know, the way VC Accounting Front, accounting works, it's easiest to end things at the end of the quarter. And my wife was like, this is a little auspicious, don't you think? It's 2014. And I was like, I'm trying not to dwell on that. She's like, is this the punchline? Yeah, I was like, I'm trying to dwell on the fact, and like I do, because Jeff is gracious and kind, I was able to be a venture partner for quite a bit of time while I got precursor up and running.

56:06But I, you know, my kid was born around the time that I was the middle of fun too. And I was like, what have I gotten myself into? I've like turned my whole world upside down. I went, I have a wife, I'm expecting a kid and I have like a little teeny tiny 15 million dollar fund and I'm trying to scrape my way to getting the second fund done so that I can like support my family. Like this is objectively, I'll never forget there was one day my wife was like, so you pay money to go to work, right? I'm like, oh no, 100%. Like not only do I not make money, I write a check to the firm every day. I am paying money to go to work.

56:46And she's like, how long do you think you're going to do that? I'm like, five years at a minimum.

56:51Cheryl Mack: Most likely 10 to 50. And that's about, yeah, it took about five before I'm like, we're even. The Gozenta and the Gozada are like kind of in balance, but. I bet she'd like it to not be even though, to maybe be more skewed the other way. That like funds coming home is greater. We'll get there. We'll get there. We'll get there. eventually right but i think the one decision i made was once i left uncork i had some people who reached out like hey maybe you should come join us i'm like i can entertain no option other than starting my own firm because if i have these conversations there will be a day that's a low day a low confidence day and i'll be like you know what joining some i tried it didn't work out towels thrown in let's go get a job and i'm like if i don't entertain those options i won't end up there i'm gonna end up in a worse place but i won't end up there

57:55Maxine Minter: 100 i am i so resonate with that definitely on on the bad days when someone has offered you a job recently it's so easy to be like oh that would just be so nice to go and like take a salary and clock in and clock out, wouldn't that just be absolutely lush? But my, to your point before about coaches making obvious statements, my coach pointed out to me, he's like, I think you're post-employment, right? I don't think you could go back work with someone else. I'm like, I think, I think you're right.

58:29Cheryl Mack: That's like one of my biggest fears though. Like now that I've done this for long enough, I'm just like completely unemployable. F. yes I think we are

58:39Maxine Minter: I think we are it has a way of focusing the mind yes Charles this has been the best thank you so so much for the time and all of those insights thank you for having me really appreciate it this was so fun thank you

59:06Thank you.