Charlotte Palmer, VP of Venture Capital at Integra Global Advisors on Backing Emerging Managers, Access, and Venture Fundraising

0:00This episode is sponsored by Deck Dolphin. Fundraising can be tough. You build a deck, you send it out and you hear nothing back. You don't get enough feedback. Deck Dolphin changes that. Get honest, actionable feedback from real VCs within 48 hours. Submit your deck today, go to deckdolphin.com and start booking more investor meetings with a better deck. Welcome to another episode of Riding Unicorns. Today we have Charlotte Palmer, Vice President of Venture Capital at Integra Global Advisors. Previously worked at the BBB, or British Business Bank, so has a lot of context around LP and fund of funds and that part of the industry.

0:40So welcome to the show, Charlotte. Thanks for joining us. First question really is how did you get into the world of being an LP and fund of funds?

0:50Charlotte Palmer:I probably had an unusual journey into being an LP in that I finished university and went traveling around Australia for a year and came back in December 19, just as the midst of COVID was about to happen. Obviously, we didn't know quite at that time. And local to my hometown of Doncaster was the headquarters of BBB, which is Sheffield. So I applied for a job as portfolio operations analyst. I remember doing my interview and they were like, what do you think the job entails? And I was like analyzing the operations of the portfolio. I literally had no idea what I was applying for. And fortunately got hired.

1:27Charlotte Palmer:And that was in the March to April when COVID had just kicked off. So started fully remotely and noticed I was doing all the admin. So all the drawdown forms for all the funds and what they were investing in. And after the first quarter, I thought, why am I doing all the admin when they're having all the fun? So I quickly jumped ship and joined the enterprise capital funds team kind of immediately after that and never looked back in the, yeah, six and a half years that we're now into it. But I love being an LP, love everything it entails. And yeah, I feel like we have a much easier side of the fence compared to you guys on the deploying side.

2:00Charlotte Palmer:Starts with some founders. Tell us a bit about the strategy and your role at Integra. We are slightly unusual in that we're technically a registered investment advisor, RIA, by structure. in european terms it technically operates as a multi-family office we do the whole investable universe so hedge funds litigation finance its income liquid equities vc real estate kind of everything keep on adding to that our clients come from high network families big pension big endowment the way we see vc as part of that investable universe is probably the unusual part in that we do exclusively emerging managers which we define as funds one to three one to four depending on your institutional funds previously.

2:42Charlotte Palmer:But we're quite broad after that in terms of we do solos, we do teams, we do generalists, we do specialists, we're sector agnostic, sub 100 million, above 10 million in whatever currency you're raising across US, Israel, Latin America and Europe. But what do LPs say they care about? And what do they really care about that they're not really telling the VCs? It's quite an opaque industry in that the GP answers the actual question at hand and what I'm actually asking you is like for example earlier today I asked someone you know what's your best company and I wasn't really asking what their best company was I was asking how do you read your portfolio to determine the best stat for you is it the top performer is it the one with the most potential is the one that has you know the newsworthy story out there and you know they're different aspects to the answer so it was really like what is your rationale for your best company so what LPs care about and what actually matters to us and maybe kind of yeah pulling back the curtain on this one.

3:39Charlotte Palmer:I think people think LPs care about performance a lot and of course we do. We all hear hopefully for commercial returns. We want our money back if not more but beyond that I don't really mind about your performance in your very early years as long as there is evidence that it's going to be strong. I would rather you not sell something to try and look like your fund has DPI early especially if it's one of your outliers just to try and raise your next fund so what do i actually look for not dpi and performance what is driving you what is it you're passionate about why should you exist in this ecosystem what is the story behind what you're doing and why are you compelling and i guess what that all drills down to is do you have access can you win the best deals from that can you get enough ownership in them to drive me a strong return i guess that's what really matters to me as like a fundamentals instead of all the hype around how many breakfasts you've held with other people and how many lunches you're doing with so-and-sos and all the fluffy stuff.

4:39What builds your conviction around a strategy where returns aren't there? So if what you're saying is true, people can tell a good story and have a really compelling proposition, despite the returns not being as strong as the next fund who you're reviewing, and yet they still get the check. Are there examples of that, like really in the portfolio? and what that might look like?

5:01Charlotte Palmer:I definitely see it in the top of our funnel. Like I've seen some people that have, let's put a hypothetical situation in play, like maybe a 3, 4x fund is doing pretty well. But let's say I'm looking at someone else who's maybe not got that strong performance yet. They're both, let's say, 2019 vintage funds. So still quite early in their life cycle. If fund A, who has quite high performance, has completely shifted strategy and lost one of the partners and tripled fund size and now wants to lead checks and fund B has said we're doubling down on what we did well and how we found the winners and we're just being consistent I'm much likely to pick fund B over fund A.

5:39When you're considering that team dynamic do you try and grade the team across all the different functions of what is involved in being a VC so obviously we have like sourcing selecting supporting selling all the S's do you try and grade in that regard and like does a solo GP have to be strong across all of them naturally and then when teams they can sort of be more like cutting down the role into those different sectors.

6:06Charlotte Palmer:We take a real data-driven approach to diligence so I will cut and slide short track record to like see who is actually doing what and if there's one partner maybe leading all the outlier deals and one partner not pulling their weight or one partner voting everything down at IC or one person presenting everything at IC. I do think, you know, these things do take an army if you have a team doing it. And so people can be stronger in different aspects. Sometimes you get a really strong sourcer and a really strong execution person, a really strong diligent person with the network. So I'm happy for it to be kind of cohesive and collaborative in terms of a team dynamic and pulling that together.

6:43Charlotte Palmer:For a solo, I think there's so many AI tools on the market and different ways that can help themselves in terms of that sourcing element or maybe reviewing enough deals to top a funnel or how they execute or pull data rooms for companies together. I think for a solo, it's a little bit harder. I'd like to see them have sharp elbows and be a little bit resourceful, but they don't need to excel in every single area and be kind of a superhuman. Why, Charlotte, do you think fewer funds are getting backed at the moment? Like, what's actually changed? I think the disciplines got a lot harder. I think there used to be a thing where there was a lot of good and not a lot of great.

7:19Charlotte Palmer:and I think it's very hard now to say you're not good because I think there's a lot of good managers out there I think it's now different to my point earlier of proving why you exist and why you should be in the market and why the market needs you and a lot of managers aren't tipping over to the edge of saying well I seem to have all the core pieces together I've made investments we've worked together as a team we have a strategy it's an AI everyone's doing AI And actually, it's like, why should you exist? And like, have you actually evidenced or validated anything that you've said? And I think that's where managers fall down on those two areas, and maybe why they're struggling to fundraise compared to some of their peers.

7:57Yeah, and you mentioned you back mainly emerging managers. But there's a bit of a theme going on where there's late stage AI companies compounding so quickly, that there's still a lot of money to be made, even in the late stage private market. how does that impact these stats and the money going towards the mega funds that are pumping another 10 billion into Anthropic or whatever and how does that all kind of play into the LP mindset when you're thinking about the trends the macro environment about what's going on in the

8:31Charlotte Palmer:market one thing I probably forgot to mention earlier is whilst we do emerging managers we also exclusively do early stage so we're focusing on kind of new managers doing new companies and I actually really like the trends at the moment with all those later stage deals getting so much hype because if you're an investor at the early stage it gives you so much more room to make secondaries you know transaction and getting some liquidity out early you're entering at series b d e you aren't able to do that until maybe the ipo happens or there's a really big kind of m &a mover down the line I think it really leverages into that early stage investor of how much more they can kind of get upside get return and get quicker kind of returns for lps on that timeline you're seeing it with deep tech back when i started being an lp six years ago deep tech used to have the valley of death and it would take forever to fundraise and now i have gp decks that say i'll return a sum of money in five years to you this is kind of what the market's looking like and i think those things have moved significantly so as an lp with a data-driven approach we would prefer managers doing early stage stuff to capitalize on these current trends i do think the market's being very skewed by these stats as well there's a report by pitch book saying 50 of the capital went to 0.05 of the deals in the market so whilst there is these mega mega rounds there's still many other companies who aren't achieving those kind of volumes can you enlighten us and our audience about the sort of early stage premium and whether that exists and how long you might have to wait for those funds to come through yeah definitely and shout out to Evan because he is wonderful one to work with but just generally as a person yeah again so we invest based on what we think is going to maximize our returns being smaller managers so again sub 100 million vehicles ideally sub 50 if possible um in the early stages we do that because we think smaller funds are more likely to kind of get your 10 20 outlier returns as a profile there was a good example actually in the news this week of it where one of Andreessen's funds invested in Instagram 300x amazing investment super super early and it returned 0.05 for the fund and it was like they needed x dozens instagrams to return the fund when that's an outlier exit in itself you put that into an emerging manager you know we're off to the races as an lp and we'll be backing you again for a long long time so i guess just as the kind of data symmetry of it why would i not put my money where i think it's best place to make outlier returns instead of trying to fuel the big logos that everyone else is chasing where I'm more likely to get a 2x 2.5 at best case.

11:08So how are you guys thinking about portfolio construction like do you look for diversification through just having like thousands of underlying portfolio companies and hopefully you'll land on a few of those big winners like is there a power law among managers like there is with startups?

11:25Charlotte Palmer:There's some angel list data that quotes one in 40 companies will be a unicorn and that probably skewed a little bit more that was in 2024 data so in this current market maybe slightly different now but it's interesting from a fund-to-fund perspective because we have 30 funds now in our portfolio statistically we're going to have numerous unicorns with that and so it's nicer to spread our bets based on diversification you know we are able to do a lot of things because we are like solo team, general specialists, sector agnostic. So we have everything from health, fintech, deep tech, generalist investors, tech investors, deep tech investors, AI specific investors, people who do all the quirky things that you couldn't even put a label on, which is kind of great because it gives us such advantages of spreading so much across the market, across the four key geographies.

12:13Charlotte Palmer:So I would say we're incredibly diversified based on that and how we approach it. But yeah, we'll continue to add to it. And someone's asked me earlier, you know since we have one fintech would we add another fintech manager and I was like I'm sure they can't cover the entire fintech market so yes we'll continue to add more and more and more what are the underlying companies in your portfolio that you can share that have sort of delivered those outlier returns so far or that you're super excited about yeah I guess one of the ones in the recent months I'm probably going to plant OLIX and their recent unicorn announcement was a good going for us quite a few of our Latin America funds have actually hit unicorn status which is really really cool especially for that region so which we're very excited about yeah sorry the company question is a little bit harder because I'll probably have to give away some of the anonymized data yeah related to that do you guys have a sort of direct strategy as well because I know a lot of LPs build access through investing in GPs and then collect the quarterly report data the more sophisticated ones will use AI to mine that data, structure it to find insights and to find outliers within the data.

13:23And they'll then seek allocation directly in those outlier companies and the winners through those managers where they have perhaps pro-rata rights in an upcoming round. Is that something that you look at as well?

13:37Charlotte Palmer:Yeah, definitely. We're very big on our kind of co-investment opportunities and sorting that for the market. And we had a little bit of a reset of how do we best maximize our direct opportunities and how we go around this and it seems silly for me to almost say I spend all day leveraging what people's value add is and how they can win and how they can get access and then think I could get anywhere near where our managers could get and I think that's just a fact so we're much better doing directs via co-investments with our managers so it's a little bit of a big part of our DD you know is that opportunity for us to look at co-investments Are they going to do attractive companies that we could co-invest alongside?

14:13Charlotte Palmer:You know, who else are the other LPs on the cap table that would perhaps also like to do that to add conviction, but also not elbows out too much and it'd be collaborative instead of squeezed. So yeah, we did a direct opportunity in December and it gave me so much empathy. It was my first direct opportunity. I normally have six months, if not more, to look at DD for a manager and I can sit back and I can think. And I had a week to work on this direct deal. And I was thinking, wow, VCs really have a hard job doing this day in, day out on this kind of timeline cadence. But yeah, it's a really interesting market.

14:44Charlotte Palmer:And we'll do more directs and co-investments across 2026 and beyond. Yeah, it can be stressful. It's also the most exciting time to be investor when you've got that deadline. And so it's a good thing. And actually, I just wanted to make a more general comment about that investing in a fund and then being able to do direct investments with the back of it. There'll be a lot of people listening to angel investing or thinking about angel investing. And I've seen a lot of success of angels do a similar role where they sort of put maybe 20 % of what they were going to deploy into a fund or a few funds.

15:15And then they get the co-investment opportunities through that particular. You're not necessarily, you know, high profile angel. Being able to get access to deals through VCs who are doing it day in, day out is also a good strategy, not just for institutions, but also for angels. So I thought I'd just mention that for anyone that's listening. And Hector, I think you've got another question as a follow up. So let me give a bit of context to this question. I think innovation sort of has layers. And I think the startups are at the coalface. The VCs are arguably innovating next. And I think the LPs are coming last in terms of innovation.

15:50That was a sort of sophistication in back office and automation and all of that. And what I want to understand more is what the LP of the future looks like. and if you had a blank canvas to build a new LP that's fit for purpose in the next 20 years post AI what would it look like and how would you do it I think I take a lot of inspiration from

16:14Charlotte Palmer:Integra and how they did it but I guess a few twists if I had an entirely blank canvas and how I do it I would stick to the same bread and butter pudding of emerging managers small funds doing things early I think that would always be the makeup and I think that's where I can add most value as well so I'd probably still operate there especially on like driving commercial returns for myself I think I would build a very strong thing for first check anchor kind of investment and that maybe comes from my days of I know how catalytic that can be for funds and having someone in early to start the domino effect of but also being able to secure some maybe preferential terms with that as well you come in with a decent check early and getting maybe a little bit discount on the management fee or getting a little bit of the carry cut or some sort of preferential sharing there not to distract from the manager or make it less attractive but I think having a value LP can really change your fundraising journey and really change how instead of doing two years you do it in a year that's a year back of your life but you're not having to wear the dreaded fundraising hat yeah so I'd probably do similar strategy to Inchegra cornerstone early checks similar geographies to what Inchegra does and you know we may be moving this direction and then I would deploy I think to your point around LPs starting to come around to some of the technologies we'd share a lot of like what tools everyone's using and our LP groups and it seems people are still testing things out where the VCs seem to have done that quite a few years ago and have already implemented them so I would set up a really solid portfolio tool which had kind of market checkpoints and news stories on any of the companies that I inputted and I would pull in you know benchmarks from pitch book and Cambridge associates and like quarterly benchmark our funds and how they're performing and then chase up managers who may be underperforming or overperforming and I would have more intel on kind of diversification are we overly exposed into a certain space even though we'd back generalist is it where the market's moving and then I would make informed decisions based on kind of what that data inputs telling me so I think you're right it's kind of the next innovative wave for LPs makes a lot of sense I would invest as an LP in your new LP of the future I'll follow you up on that Hector it's actually quite interesting because There is actually quite a lot there, isn't there, that could be done in the future.

18:23There's a lot of data sharing that's maybe not making its whole way through the entire stack very quickly that could be accelerated. So it's just interesting. What I'm so surprised by is that LPs aren't more aggressive on terms. I mean, there are like a small handful of truly access constrained funds in Europe. Like I can count them probably on one hand. Everyone else is looking for LPs and LPs say, we'll invest later, not quite yet, keeps in the loop. And that's fine. But why don't more LPs say, actually, we wouldn't come in now. But if you do this deal for us, we will come in now. I'm surprised there's not more negotiation.

19:05Charlotte Palmer:I think we don't do that because it'd be holding us to doing something. We didn't like the power to leave our hands in a way of, if we said to you, you do that and we'll do it and then you do it and then we don't want to do whatever we promised we would do, we've then lost a little bit of the upside control. So I think, yeah, we could be doing more in terms of that. I don't think that would change much though. Do you think there is an angle in the future to have an LP that's just more aggressive, that basically says, yeah, we'll anchor your fund, but we're going to take a portion of the GP. And actually, it lowers the bar that a GP needs to hit.

19:40It allows more access, more capital to flow to GPs, because the returns are going to be better for the LP because the fees are lower. Why isn't that happening? Or maybe it is. Who are like the more aggressive LPs, perhaps, that you've come across?

19:53Charlotte Palmer:I can think of three LPs, who I probably shouldn't name, so I'm not sure if it's confidential admission, who are more aggressive on terms and are more aggressive on being you know first close investors and taking some of that upside and a little bit more but i don't know if the market's quite ready for sometimes entities like that on a broader scale if everyone was doing it because i think lbs would enter elbowing lps out whereas we're a little bit more collaborative of oh you've gone to this fund would love to know your thoughts because we're going to be on equal terms suddenly you'll have lps all on unequal terms so why should i have to pay more in management fee so i think yeah you'll start making this almost unequal lp market yeah i think that's the problem is that the advice as a gp is always like quite strongly against taking those sorts of aggressive terms because it can jeopardize your fundraise you know if an investor if an lp who comes in later requires mfn uh like most favored nation clause then you're going to end up not giving just that first lp favorable terms but actually forcing yourself self into a corner where you have to give everyone those favorable terms but like on just in theory it should work you know market forces supply and demand I think as you say the maturity in the market just isn't quite there yet perhaps the structuring it is very complicated still around all of this from my experience whenever there's any playing around with fees it can always be argued to be a negative so if it's a lower fee then it's like oh are you struggling with your fundraise why are you giving us lower fees if it's a higher fee it's like well why would we pay that so basically everyone pretty much defaults back to just 2 and 20 because it's so standard that no one can really complain or argue either way and that's from the vcs perspective and i'm sure from the LP's perspective, that's probably similar where they're like, well, let's batter them down on fees.

21:48And then it's like, well, if they're willing to accept that, are they struggling to fund records? It's like, it just raises almost more questions. And also in the world of venture, the two and 20 really, hopefully almost becomes a rounding error because we are dealing with, you know, if things go as well as we want them to, we're dealing with crazy returns that you can't get in any other asset class. If it goes badly, who cares? because it's gone to zero anyway type thing so I feel like everyone wants to see some innovation around fees and I think VCs are probably more willing to start that but I think it just actually I don't know Charlotte what do you think am I talking sense from my experience it's just caused more problems when you try and get creative I think that is a funny one of I have a bit of a

22:32Charlotte Palmer:strap line saying be as vanilla as possible because then it's something I don't even have to consider as a due diligence thing you're just doing something so standard seen a thousand times Am I against someone doing something a little bit quirkier if it works for them? Absolutely. Like, go for it. And if you can prove out why you're doing it the way you're doing it. Yeah, I think, you know, super carrying things is coming a little bit more common. And like we're seeing it in, you know, I think if you're earning a decent return, you should be rewarded for that. And I guess that works both ways of, LPs can swing whichever way they want to swing.

23:01Charlotte Palmer:I had someone the other day saying, you know, they put in a massive GP commit, like, let's call it 40 % of the punch, you know, really skin in the game. and they said someone had rejected them because most of the capital was their own money they felt they weren't in line to making money because they was already so rich and it was like well lps demand you to put more gp commit in and this person put so much in and then it was suddenly seen as a negative so sometimes i think vcs can't really win in the old lp game and if we're looking for reasons to reject you we will find one and we will just kind of put it down but yeah i agree with you on the management viewpoint if you go too low is it a concern if you go too high is it a Johnson so we just kind of push you into the middle position and you'd think we'd be used to it as VCs doing it ourselves on the other side that still seems to scramble our brains so we've talked a little bit there about not playing around and keeping things vanilla but there's always this question around urgency as well for the VC every GP will have sort of a timeline of yeah we're going to close it by this date but it's quite hard to move LPs along that timeline unless you have some amazing deal that's warehouse that has to be closed maybe you can create some urgency through what you've got that needs closing what can VCs do to kind of sharpen the pencil?

24:17Charlotte Palmer:In an LPs world there's absolutely no consequence if I sit on my hands for a little while like if I want to move quick especially as kind of maybe more of a private institution than a public institution I can move quick and do your fund you know if you give me a month's notice or six weeks notice so why should I get involved in the fundraise you know what's my incentive of going you across the line the ones who I've seen do this successfully haven't really chased me on matters that aren't really news you know some people side into your inbox and I give full respect to VCs doing it because I think it's so hard out there and trying to differentiate yourselves and try and think of reasons to pop up.

24:55Charlotte Palmer:Some people would pop up with like, hi, this company that we were talking about like four years ago has done like a seed round. And it's like, I don't remember that company. And I don't remember talking to you about it. And that is not a material thing for me to say like, oh my God, I want to pick up the phone. Like, let me get involved. So I think it's like, have you got a material update for me regarding maybe a big LP has come in or you closed a really big round or you started co-investing with someone or you've had a fundamental shift in your strategy that would reopen the doors for us other things I see which resonate really well with LPs is doing the personalized approach the amount of emails I get and I know my name has just been added to the like hi fill-in block is a generic email whereas you know the ones who say hi Charlotte how was your holiday last month you know we're looking forward to catching up with you maybe we can schedule a call for May I'm much more likely to reply if you personalize it than me just thinking I can just open that and move on because I have 400 other people in my inbox so if you can remember anything that resonated from your conversation from the LP or maybe something that you felt they were concerned about e.g was it your bun size have you slightly amended your bun size a lot of people do it where you know if it's a little bit too large for some people they say that's hard cap and they're actually targeting a lower amount yeah I think the personalization is probably the most likely approach where I feel someone's reached out directly to me I'm duty bound to reply.

26:19And we should know about this stuff because it's the same for founders reaching out to us the more personalized and also actually the updates thing is so true of founders as well there used to be an old adage like investors invest in lines not dots so you need to give them lots of dots that they can create a line but actually nothing creates more urgency than hey we've grown like crazy here are the numbers you haven't heard of me from six months because I've been so heads down and I'm closing it next week. Like that can actually be much more powerful than an investor update with not that much going on, right?

26:55So yeah, so founders, we know that feeling as investors ourselves. So need to walk the walk. So Charlotte, we are slightly over on time, but that's all good. So we're going to just move on to our final two questions. The first is a future unicorn prediction. If there was a company that you've spotted that you think has future unicorn potential that's relatively early, who would they be?

27:18Charlotte Palmer:I think just reading the market and like what my peers and friends are doing. Humantra, you know, the electrolyte sachets. I just feel like it's having such a moment and the kind of trend around people not drinking as much alcohol and getting into health and fitness and, you know, recent news around Huel. I think if they Humantra could go and break the US market I think they would be off to a storm and probably want to watch and they have funding from Jam Jar so you know if you want a good European consumer partner they're probably one of the best so I think that's an exciting one to watch but again consumers are probably a controversial bet there I think what's clever about those sorts of products is we've all heard of electrolytes but knowing what dosage is quite complicated so if someone's just like preloading your dose like that already takes away probably one of the biggest barriers super interesting and then our final question is our dinner party guest game so if you could have dinner with any three people who would they be someone who's run to mind immediately was simone biles i think someone who really excels in their field of like just excellence and rigor and tenacity i think she just embodies all of that and i would just love to pick her brains on her career today next would be tom hanks because he's just my celebrity favorite in all kind of situations oh my gosh a celebrity on the street I was so amazed by and like starstruck because I get him to do a toy story impression I just be in awe and then last one probably controversial but I was thinking you know who's an LP that I really really look up to that I would like to base my career off and I think there's less kind of celebrity known LPs in the world than there is VCs out there and I guess we're a little bit more hidden away but you know someone like Michael Kim it was an amazing reputation so i'm going to put in my third position me when i retire and hopefully i have made a career in nlp world that i can come and pick my brains on as my younger self that's a good one yeah yeah final answer we've actually never had tom hanks can you believe it so that's a unique answer and no it is shocking and alice from ef also picked simone but i'll say if you ever catch up with her then you'll have that in common but yeah index of all of our guests dinner party well google drivers those are great answers so thank you for sharing that and it's been a great episode thank you so much for sharing so much i think it is really important for you know founders even employees of companies who are vc backed founders people thinking about starting companies the whole ecosystem all the way through to VCs and how we operate.

29:53It's so important to understand how the LP world thinks, because that does impact the incentives and the behavior of a lot of people in the industry. And so it's so interesting to kind of pick your brain and learn more about what is actually going on, what people are actually thinking about. So thank you so much for sharing all of that. And it's been really interesting, great episode.

30:15Charlotte Palmer:Thank you so much for having me on. That's it for this week. Thanks very much for listening. To stay up to date with the latest episodes, please follow or subscribe on your favourite podcast platform. We also have a newsletter called Reading Unicorns, which is another great way to get every episode direct to your inbox. Please tell your friends about it and we'll see you on the next episode. This episode is sponsored by Deck Dolphin. Fundraising can be tough. You build a deck, you send it out and you hear nothing back. You don't get enough feedback. Deck Dolphin changes that. Get honest, actionable feedback from real VCs within 48 hours.

30:52Submit your deck today, go to deckdolphin.com and start booking more investor meetings with a better deck.