E397: Why Venture Capital Is a Relationship Compounding Machine

0:00Before we started recording, I was telling you that podcasting is this network effect game. You said venture capital is the same. What did you mean by that? Venture capital is huge network play. The game of venture is to see great opportunities, to pick them, to diligence them, and then to win them and help them down the road. And that collective network helps you in all of those parts of the game.

0:30My guest today is Elizabeth Wheel, founder and managing partner of Scribble Ventures, a venture firm that has grown to$280 million in AUM. Having recently raised an oversubscribed venture fund, Elizabeth has a unique perspective on how emerging managers can raise in difficult markets and how smaller firms can thrive in 2026. Without further ado, here's my conversation with Elizabeth. So you recently raised an oversubscribed fund, which in 2026 is not easy. How did you accomplish that? Great question. I would actually have to rewind to when I founded Scribble Ventures, which was the very start of the pandemic in 2020.

1:07And everybody asked, why does the world need another venture firm? And I knew I felt like there was a hole in the market for a right-sized fund focused on pre-seed and seed primarily to invest in the world's best companies and the world's best founders and doing that in a collaborative way. And I felt like at that point in time, so many funds had become sharp elbowed. So really what it became was just consistency. I saw that we were starting a global pandemic. Everyone thought it was the dumbest time to start a fund, but there was this huge inflection point going on. And I felt like that was the best advantage to investing companies when you're having a step change and there's a world phenomenon that we'll never see again.

1:50So Scribble was born 2020 summer of the pandemic fundraise entirely over Zoom. I raised a$50 million Fund One. It was hard work. I walked a lot of miles talking to LPs on the phone, never once meeting in person. And we were off to the races. Currently, Scribble One returned 75 % of the fund. So there's real DPI for our earliest LPs and supporters. It's marked over a 5X, so we're doing extremely well. And before we started recording, I was telling you that podcasting is this network effect game where the guests drive more listeners and the listeners drive better guests. And you have this self-reinforcing loop.

2:33You said venture capital is the same. What did you mean by that? Oh, I very much believe that venture capital is a huge network play. and something that I think from my youth, I took to and now why I absolutely love Venture so much. So when I grew up, I grew up in Sacramento. My mom was a second grade teacher and you just knew everyone in the neighborhood. You knew your mailman, you knew the person that poured coffee, you knew the sandwich maker at the deli. And going forward in my life, I always have said, I like making a big world feel small. So I love knowing all of the people, the little, the big, the little, we went to our garbage man's wedding with my first kiddo when he was two.

3:11So we just like knowing our world. So fast forward to when you're just an angel investor and the people in your world are the ones that are making you smarter about opportunities. They are helping you diligence opportunities and you just have this friend collective that you're able to collaborate with. For Scribble, we entirely believe in the same approach. And so far as we actually put together what we call the Scribble Network, and that's a group made up of executives, operators, founders. Many of the people that we list on our website are also small, limited partners in Scribble. But I look at it that front flywheel.

3:48The game of venture is to see great opportunities, to pick them, to diligence them, and then to win them and help them down the road. And that collective network helps you at all of those parts of the game and having unique insights when you're looking at your first ever robotics space company. Who can you call in that network that gives you the best expertise right away? It just keeps mimicking. So they help in all the parts, showing you opportunities and then ultimately helping the companies down the road as well. Just to play devil's advocate, I could see how sourcing and having great LPs around the table help you source diligence and make the ultimate decision.

4:29But why is it a network effect business in that, why does every deal become more valuable and every new investment make the firm more valuable? Venture capital is all about relationships and real world relationships. And I think that you want to know your founders the best. You know that they will collectively send you better deals as you get to know them and you feel the real purple person relationship. And I feel like all of the things start going up. So you know all of the people, You know more opportunities. You're able to diligence them faster. Collectively, the returns become better because you're investing in the top, top, top 1 % founders in the world and not even looking at the rest.

5:11So I think the increment value goes up and that ultimately accretes to the LPs as well. And then LPs, word of mouth, send more investors your way and it helps raise all the boats and all things Scribble. And then for our founders, if people know Scribble's involved, we hear, you're a Scribble company. And that can even add some cred around all parts of the table. So you're strengthening your relationships, you're strengthening your brand, it's Scribble company. Strengthening company's value, we hope, if we do our jobs right. And then you're strengthening LPs reputation when they can recommend, oh, you should meet Scribble.

5:48They're a great lesser known fund in the market. I'm also evolving to this idea that great businesses is just accumulation of every day coming in, just getting incrementally better. To what extent is that true? I believe in that too. And it's something actually my husband and I talk a lot about. We even share this with our kids, but every day you just need to get 1 % better and 1 % is nothing in that day. And over time, how much extra value that collects. And I also very much believe in that 10 ,000 hours where you really become an expert of what you do when you give it that time. Something that I've held true in my life every day is my non-negotiable of my morning run.

6:26I do that every single day. I'm not there to get faster necessarily, but every day, putting the endurance, putting the wake up, putting the practice in, and that makes me a better human being. I think with venture, 1 % better every day. It means the backend is more streamlined and simplified. You're decreasing your cycle times with meeting a best founder and being able to make the decision. And then ultimately doing that over and over again to raise great repeat funds and to return them. I mentioned I went to podcasting five times a week for nine months just to accelerate my compounding. Is there an equivalent strategy you could use as a venture capitalist in order to get better quicker?

7:08I would say that would be something I would fight you want to know. I graduated from Stanford, undergrad in 2004, my master's in engineering in 2006. And my first job right out of school was at Menlo Ventures. I still draw on that experience from sitting around this great boardroom table every Monday, many days bored when you had companies coming in and pitching. You didn't even know everything they did, But being able to be this giant sponge and hearing them present, being able to make your own judgments, then listening to the general partnership go around the table afterwards. I did that at Menlo and then Institutional Venture Partners.

7:49And then I operated for a stint before going to Andreessen Horowitz and then 137 Ventures. And I was just a sponge at all of those places where I would fast track to now. I have to actually couch myself from time to time because I think one thing I can be very judgmental personally and behind the scenes as soon as I meet a founder and there's some vibe some way some pitch some there's something and I need to make sure I separate my quick judgment on founder with the opportunity often they go hand in hand I think you can't and connect them. But I think that repayment venture capitalists always say that pattern matching.

8:35I do think there is something into the pattern matching about the opportunity and then the repeat cycles of just meeting great founders. I've had a lot of investors say the exact opposite, which they lean into their snap judgments, this kind of system one versus system two thinking. Why do you hold yourself back on that? I wouldn't say I hold myself back, but I might get off of the phone and be like, there was something there. That might ultimately be the right call, but putting enough work in behind the scenes to give some clear fair shake. And does that mean one of my partners meets the company and makes the call?

9:10Does it mean you just spend one more cycle saying like, did you pick up on that? Like, did you see that he talked over his co-founder? Like these little things, at least making sure, say I'm not taking crazy pills. So you give a fair shake. But those judgment calls, they go to the core. Do you believe in this idea of this canonical great founder? Or is the founder always in the context of the business that they're building? I believe that there is a canonical great founder. What's an example of that? I think if I look for some traits, some and it can be repeat or new. I don't think there's something said on that.

9:41I think the ability to hire a world-class team in the early days when you are absolutely talking people into doing something crazy, jumping off a cliff, usually something pretty consistent for this wild idea. Giving up their high paying job at Google or... Totally. And then also, I think hand in hand, but an early sales motion, I think a great CEO, like they're going to go find those customers early. They're going to be able to, again, talk people into doing what they want them to. I think there's this unique horsepower that we say that our Scribble team works at founder speed, but I think there is a founder speed and you can feel it with some founders and you can feel the delineation of time with some founders and their slowness.

10:25And I love working with those high horsepower, like really quick. Usually like my favorite founders, this I learned at my time at Twitter. I felt like in the early days at Twitter and I was there from around 50 to 2 ,500 people over about four years. There was this special time where the culture felt so good because you knew that person was there to do their day job and they were exceptional at it. but then they were also world-class at something else. And so you'd sit with them and they like might've been in the Olympics for volleyball or if somebody was a Rubik's Cube champion. We do have a Rubik's Cube champion in our portfolio now too.

10:57But there was something extra interesting. And I love feeling that out. I think with great founders, there's something extra exceptional and something that makes them a little weird. And I love finding that out. I love why I love doing podcasts with our companies and the CEOs because there's something weird about them. And when you can find that, and then you can also have that witty banter or they're a little bit like just, there's just something about it. And I think that's when you're - It is democratic. Yeah, very idiosyncratic. How has your fundraising evolved from your very first fund to now Fund 3?

11:37Yes, in early days, I mentioned the raising it entirely over the pandemic. You are standing up a crazy idea, just like founding something. I talked with everybody that could write a check into Scribble. And at that point, it was individuals, it was executives, great other operators that might have had some liquidity. And then slowly that evolves over time. You meet a few family offices that take the risk. They share it with their colleagues and friends. Then we had a few small fund-to-funds come in and back us in the early days. So it's been a very long tail. It was a lot of hard work. I will very much confess that I do not have 10 large LPs that make up Scribble.

12:22It's been a lot of footwork. And that's continued, but also evolved over time. So Scribble One was a 2020 vintage$50 million fund. 2022 vintage was our second fund, and that was a$55 million core fund. So again, consistency. Scribble Three was a 25 vintage fund, a$90 million vehicle. and then our breakout was in the end of 2022. First one was 30. The second one is roughly 55. And again, consistency. And that evolved over time where we added more fund to funds, more family offices. We have our first teacher's pension involved. So it has been a work in progress and we still value and count on our individual LPs.

13:06And we think they add a lot of network value for Scribble like we chatted about. But we are slowly moving up the food chain. And I hope to condense the fundraise just a bit, but still leave there something magic about having a really long tail of exceptional individuals around the scribble table. Expert calls have always been one of the most powerful ways to build conviction. But today, investors are asked to cover more companies, move faster, and do it with leaner teams. With AlphaSense AI-led expert calls, their TGIS call service team sources experts based on your research criteria and lets the AI interviewer get to work.

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14:58Take advantage of AlphaSense AI-led expert calls now. The first to C wins. The rest follow. Learn more at alpha-sense.com slash how I invest. It's such a full-time job to be talking to founders, especially at the stage that you're playing in. How do you have time for so many LPs and what are some of your lessons from LP management? Great question because we have a lean, mean team at Scribble 2. We're a team of six of us all in. We're all operators and investors by background. So as far as team goes, it's myself, another great partner that had run his own venture fund. And the two of us are full-time day-to-day meeting companies, choosing, connecting with the rest of the ecosystem.

15:41I am the primary fundraiser. Our third partner is Kevin, my husband. We call him our operator in residence. So he has a full daytime job. We like keeping him that way. He would say he's better both operator and investor because he does both. So we believe that. So that's the three of us on the investing side, and that's as lean as it is. And then we have a great PR marketing community gal that I've worked with for a long time that brings great operational background as well. And then team admin and the CFO that stitches all together. So we are lean and mean. On the LP side, it's something I've actually come to like.

16:13So I hated selling Girl Scout cookies when I was a little kid. So I never wanted to raise a venture fund purely because of that. I never wanted to ask anyone for a dollar. I think really I was just scared. I always have wanted to achieve. I think I didn't want to lose a dollar for anyone. Why I think these funds are going to be the best funds in history ever because I am absolutely terrified of not making them great. But I've realized they're real people too. And I think I always thought the LP side was this ivory tower or a different echelon of people that were judging and had some extra expertise.

16:55And I realized they eat sandwiches too. They'll go on hikes with me in Portola Valley. And it wasn't just this, I need to show up and be really dressed and present a deck. It became getting to know them just like I get to know our founders. And I think that real people relationship has actually really helped Scribble. So I enjoy spending time with my LPs, but I've just had to own, I'm going to be really me. And I do, they say, Hey, can we meet for a coffee? And I said, actually, will you go for a walk with me? Nearly every person says yes. And then after that, they're like, that was the best meeting I've had.

17:29It's memorable. It's memorable. And I like to eat sandwiches. So we don't go to many sit down restaurants. And so many people now have like my deli choice and they say that was the best sandwich. So it's memorable. It's different. And I have just had to own being me. And I think that comes out in the Scribble brand. Are there downsides of just being you? In other words, this strategy of just being yourself, does it turn some LPs off and that's just part of the strategy or does everyone generally accept? That's a good question because it's very much a negotiation on that side or I think like a little bit like know your audience as well.

18:04Because would I do this with everybody? No. Pick which ones you do. I think we've shown the operational button up behind the scenes, and that's what you really have to make sure, and that we've grown as a firm over time. It's not Elizabeth's fund, it's Scribble Ventures. And we are a team, we're growing over time, we're evolving, we want to be a standalone venture firm that will outlast me. We talk about this as a team as well. So I very much make sure we can show how operationally structured we are behind the scenes, but then still letting my personality come out. But that it is more about team scribble versus what I've done as an angel.

18:46Because that was long ago now. We are more than six years in. So we've changed and evolved over time. I wonder if it's the female equivalent of man points. So there's this concept that men could only talk about their issues and their relationships until they have enough man points, until they're multimillionaires, have the six pack, have all the success, then they could talk about their struggles and their self-doubt. I wonder if that's the equivalent where it's easier by a fun three than it would be necessarily in a fun one. Yes, but I've also realized over time, and it goes back to my first job after my freshman year at Stanford when I learned this lesson.

19:23but I've just had to own being myself. And this first job, I worked at corporate finance, Wells Fargo, in this really tall building. And it was, I mean, I feel like I did data entry. I probably, I think I did do a data entry. And I was seated at the front desk of this floor because they didn't have enough seats for me to do my data entry. And I think private client services was on the other side of the floor. And I was always really friendly with whoever came up the elevator. Essentially, I was doing an intern's job, but in a greeting zone. And I remember getting the feedback from the big, big boss.

19:59And he said, you smile too much. And so the next day, and I was so taken aback, but I'm 20. And the next day I was like super solemn and I wore gray. And all my colleagues on that floor, by the end of the day, were like, what happened? Like, who are you? And like, did something bad happened. And I just was so miserable not being me. And I've always had to know, play the long game of my true personalities. Like it's too complex to have multiple personalities because when I'm that great of a memory and I've just said to be what you see is what you get. And I think a lot of people could probably verify that.

20:39I love that on many levels. And one level that I love that on is the compounding basis of relationships. If you truly internalize this idea of compounding relationships. Everybody talks about it. In fact, every CIO that's been around for 20, 30 years, when you ask them what's compounded the most in their career, 90 plus percent will say relationships because it's really the only true thing that compounds. So if you take that to be ground truth and you truly believe in it versus a bumper sticker you put on your car, then you have to be extremely careful in what relationships under what context you get into those relationships.

21:13And that's only further compounded, no pun intended, by the fact that these funds are 10-year funds. So at a minimum, that relationship is with a 10 years. If you have them over for a three-fund cycle, you're committing to 15 to 20 years with this relationships. And we become so focused on closing LPs, on getting that next milestone. You raise 25 million, now you raise 30, now you get 35 million, all this momentum that feels really good and that we get neurobiologically reinforced that we don't think about the downside consequences of that one relationship. And then who do miserable people love to surround themselves with?

21:49It's not happy people. It's other miserable people to the point of your boss. So now they make introductions to those miserable people. And five years later, you look at everybody around you and you have a certain type of person because you just were focusing so much on the short term and not thinking about the long term compounding of those relationships. So where that comes to scribble in our funds, because I assume you mean more on the LP side versus the founder side, because you also play this on the founder side. side. Making the hard decision to say no to dollars too. And have you ever done that?

22:19Oh, yes. Oh, yes. Have you ever done that to a large check? Yes. And it's hard because they would make the fundraisal so much easier. Support for today's episode comes from Square. It's all in one way for business owners to take payments, book appointments, man, staff, and keep everything running in one place. Whether you're selling lattes, cutting hair, running a boutique, or managing a service business, Square helps you run your business without running yourself into the ground. I was actually thinking about this the other day when I stopped by a local cafe here. They use Square and everything just works.

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23:52Whether you're selling lattes, cutting hair, running a boutique, or managing a service business, Square helps you run your business without running yourself into the ground. I was actually thinking about this the other day when I stopped by a local cafe here. They use Square and everything just works. Check out as fast, receipts are instant, and sometimes I get loyalty rewards automatically. There's something about businesses that use Square. They just feel more put together. The experience is smoother for them and it's smoother for me as a customer. Square makes it easy to sell wherever your customers are, in-store, online, on your phone, or even at pop-ups and everything stays synced in real time.

24:23You can track sales, manage inventory, book appointments, and see reports instantly, whether you're in your shop or on the go. And when you make a sale, you don't have to wait days to get paid. Square gives you fast access to your earnings through Square checking. They also have built-in tools like loyalty and marketing, so your best customers keep coming back. And right now, you can get up to$200 off Square hardware when you sign up at square.com slash go slash how I invest. That's S-Q-U-A-R-E dot com slash go slash how I invest. With Square, you get all the tools to run your business with none of the contracts or complexity.