Can You Index Venture Capital?

0:00The public markets solves the power law problem. You can buy the whole distribution for a few basis points, which means you own every outlier by construction. And the same concept didn't really exist for seed stage. So we decided to build it ourselves.

0:16Alex Kirk: Welcome to Swimming with Alligators, the VC podcast from the LP perspective with your hosts, Alexa Benz and Ernest. You ready? Let's dive in. Our next guest is Alex Kirk. He is Vice President at Virtus, and I have been so pumped to have you on the show, Alex. As fund-to-funds go, this is the most differentiated approach I have seen out there, and I'm so excited to hear about what you're doing. Thank you. It's great to be on with you guys. Absolutely. Before we jump into Virtus and what you all, your approach, this sort of quant approach to selecting managers. Could we get the Alex allocator story?

0:59Sure. So I started my institutional investing career about 10 years ago in the classic asset allocation driven endowment style model. So allocating to managers across all the alternative asset classes. And when we started, we had a public markets book that I was covering, which was split between an equity strategy and a hedge fund portfolio. And the other side of the book was a large allocation to private markets. And that included buyout, growth equity, venture, real estate, and natural resources. And what I really liked about this approach was, one, seeing everything that was out there, but but two, building strategies for each asset class and building that into a portfolio with an extremely long time horizon.

1:55And so what I like about this was that it really allowed us to optimize for time, which is a big controllable component in compounding capital. And so I think I had a great foundation with being able to see all that as I started my career.

2:09Alex Kirk: The journey of the venture strategy is kind of the journey of your career. Yes. What unlocked that you all shifted how you were wanting to approach venture? Yeah. So way back when for the family office, the original approach to venture was kind of the common thinking that you need to be in the brand name VC funds to get the attractive venture returns. So we invested in venture fund to funds products that had access to these types of managers. But what we found over time was that as these firms and as these products scaled, the exposure that we were buying was much more multi-stage, often late stage, which didn't really offer the same return profile we were looking for in an early stage allocation.

3:07And that set us on our journey to build dedicated exposure at the earliest possible entry point. And so at a high level, what that looks like today is a highly diversified index approach across pre-seed and seed by investing in funds, often sub -$50 million funds, funds, often emerging managers, and many of which are fund ones, who are optimizing their portfolio construction for first check exposure and outlier capture. And so at scale, that's about a fund commitment per month for us. And our strategy covers about 20 to 25 % of all the seed stage companies in the US. That's amazing coverage and scale.

3:55So before we get into kind of how you all built that out and specifically finding the right managers and deciding that that was the right criteria, could you talk to me about like having experience with so many different other asset classes, how that prepped you for how you looked at venture in the past and today? Yeah, when you go back to the importance of just thinking with a really long time horizon and investing, how we worked across multi-asset class, this multi-asset class approach, and thinking with that long time horizon, it allowed us to see that venture was this really unique asset class that benefited from a unique investment approach that was different from what we were doing across other areas of the portfolio and in many ways different from what others, other allocators are doing in the early stage venture space.

4:55Alex Kirk: What was the key to realizing you wanted to do this in more of an index approach? How did you come? How did the strategy come to be? When we were building the strategy, we spent a lot of time studying the structure of asset classes, especially in the private markets. And a big takeaway was that most private market asset classes look like your classic normally distributed bell-shaped curve, meaning the mean and median returns are very similar, and both are typically referred to as the beta return for the asset class. And in these asset classes, the aspirational approach is to drive alpha through selection.

5:45So, you know, picking the best managers to try and achieve top quartile returns. Seed stage looks much different from an asset class structure perspective. And that's because of the power law where, you know, the thick right tail of the distribution, which is, you know, all of the outliers and all of the massive winners. it's driving the bulk of the return. And the biggest unlock here is that in a power law asset class, the mean return is so much higher than the median driven by those outliers. And in fact, the mean return is often so much greater than the median return at seed that it historically sits right around the top quartile for the asset class.

6:26So that was pretty eye-opening for us because the takeaway there is that if you back every single seed fund and every single seed company, you really get that top quartile asset class return. And the US stock market, so thinking about public markets here, the US stock market functions in a similar way where something like 4 % of all companies account for the whole return of the asset class. And the public markets solves the power law problem. You can buy the whole distribution for a few basis points, which means you own every outlier by construction. And the same concept didn't really exist for seed stage.

7:07So we decided to build it ourselves. With those initial kind of thoughts of how it's a power law asset class. How do you all iterate on the strategy now that it feels like it's become a power, power law asset class where there's a power law to the power law. And so how has that impacted how you all think about finding new managers?

7:34Alex Kirk: I'm picturing some of these companies wearing like those like booster things that make you fly in the ocean. It's like, yeah, this is normal. Like we now are, some people are wearing jetpacks. So like, does the strategy change? The strategy stayed remarkably consistent since we started. And so I think what's changed for us is kind of the scale and the process that we've built. And so when we first started, the goal was very much just to test our ability to access the seed market, given that we sit in Philadelphia and it's not exactly the center of the venture world. So we had to build this sourcing pipeline and this network with a lot of ecosystem research and cold outreach.

8:25and we were able to get a feel for the early stage landscape over time. And, you know, I think credit a lot to our managers, especially in the early days. We have a lot of amazing managers in the portfolio. Many were, you know, those first few commitments when we were getting started and were so helpful for us to lean on as we were building kind of the sourcing engine and function. And many of those managers we continue to back today. But I think that the sourcing work has changed as our network has expanded and we've become more well known as an LP in the market. So it was a lot of outbound initially.

9:03Now it's a mix of inbound and outbound today. And so that scaling has changed over time for us. And, you know, both on that sourcing side and also on the investing side and also on the portfolio and data side. We've got over 4 ,000 companies and something like 72 unicorns so far across 70 funds and I think 45 GP relationships since 2017. So we've got this pretty robust historical data set and we've built a bunch of infrastructure to help us manage and sort of extract insights from that. You know, we have a lot of allocators that are outside that are just getting started and are outside of kind of like Silicon Valley or New York, both domestically here in the U.S.

9:51and internationally. What advice would you give them as they're building out that ecosystem and trying to make those first investments? You spoke to, one, getting out there, two, leaning on your first investments to help you get some of that tribal knowledge. What other tactics would you provide them? Yeah, I think it's really important to spend a lot of time understanding the market and the ecosystem and just the network of who's there before deploying capital. It's a really, really distributed ecosystem. There's hundreds, maybe thousands of funds in venture and all of them unique in some way.

10:37And so spending a lot of time going to, you know, there's a lot of great industry events now and, you know, conferences and networking events. And, you know, many of them are not in our backyard, but reachable in, you know, many of the classic venture ecosystems. And so spending a lot of time in those markets and figuring out who the players are and meeting those folks, it really helps to paint the picture for what the market looks like. And then you have a better frame when you start deploying capital. And then it compounds from there and that you have these relationships now that you can lean on to really help build out your strategy.

11:19Alex Kirk: I feel like there's an interesting tension between if you're working in one asset class where you're describing sort of that the median is the same as the average, you're leaning on some of these more soft skills. You sort of have a muscle for selecting managers, and you have to turn that off then to really commit to your venture strategy, are there some things that carry over from the more qualitative analysis in the venture strategy, or is this all quantitative driven? No, there's certainly a non-quantitative component for what we do. At the end of the day, this is still very much a relationship-driven business.

12:13And while we have a kind of rooted in the numbers quantitative lens to how we've approached our portfolio and strategy as a whole, we focus a lot with managers on process. And so I think process can be more of a qualitative, But for us, that's really one of the most important things to underwrite. And we spend a lot of time with GPs, often fun ones. That's an entry point where we really like to build relationships with managers. And we spend a lot of time thinking through process as opposed to things like, you know, track record and some of these other criteria that others may spend more time on in their underwriting process.

13:04When we think about process, it's much more focused on understanding the portfolio construction, the sourcing function that the manager has, their network, and just really how they expect to deploy capital. We view this as the more controllable part of the early stage investing. So the results in track record are far less controllable over time, which means they're just generally harder to underwrite. So we choose to focus more heavily on process. And a lot of that process is, you know, speaking with the manager, getting an understanding for how they view the strategy and kind of their long term plan and all that.

13:45Alex Kirk: There's a concept that Aaron Gilman was telling us that sort of he's looking forward thinking as opposed to backward looking. And it sounds like focusing on process gets you a picture of what could happen in the future. Exactly. So, Alex, with a steady portfolio, I'm really intrigued by your future portfolio construction and what you look for in filling that. Is it a process of, hey, we're a little underweight in this strategy within seed and pre-seed? Are we overweight in another? Or are we just looking for all people who have high, high potential for alpha? I'm curious because one of my mentors said as a fund manager that it is critical for you as a GP to understand where you fit in your LP's portfolio stack.

14:41And so just I would love to hear kind of your thinking behind as you're continually like building upon the portfolio. How do you decide what you're looking for? We think about the portfolio holistically from this index like coverage of the early stage venture market. And what we try to do is not try and tip the portfolio in one direction or another. It's too difficult for us to make those calls. And I think it invites a lot of consensus or bias kind of risk. So one part of our approach that helps us really stay rooted in this kind of strategy and approach long term is we have a preference for generalist strategies over specialized or factor focused strategies.

15:30We really like the generalist approach to the portfolio because it allows us to spread our exposure across the startup market without having to make any type of bet as to which is the right future sector to be in. Our managers generally steer the portfolio exposure for us based on their read of what products are being built and where the founders are headed. It would, you know, I think instead of, you know, us steering that ourselves, we've tried to remove that as much as we can and let the portfolio really cap weight itself just based on where the market is moving. The one follow-up question to that is, however, I'm sure from that strategy, if there's technological shifts that we're experiencing right now with AI, you're going to feel that as we're going through this transition period and before this becomes a ubiquitous part of technology, you're going to feel that overweightness, right?

16:33Yeah, that's kind of how the cap weighting piece of this works. And so, you know, I think if you look historically in the portfolio, there have been shifts where, let's say, 10 years ago, when we were getting started, the market looked very different. It was certainly less AI focused and there was an AI component in the portfolio. And that's actually showing up today in that portfolio for these companies that weren't, you know, the core focus for many of these funds. But the generalist approach through the generalist approach managers were still investing in these companies and spreading their bets across kind of a wide pool.

17:13And so I actually don't remember what it would have been about 10 years ago. What what was the hot area? But today it's obviously AI and there's a large portion of the portfolio going into AI. But as we think about looking ahead, we're pretty confident that there will be a number of winners, both in the AI space and in kind of these lesser known areas that will grow into being, you know, whatever the future winners tend to be.

17:41Alex Kirk: If your entry point, you're looking at sub-50 funds, fund ones, what's the relationship over time? As these GPs, some of them go on to develop more franchises, do they cycle out? Yeah, it's a great question. So for us, it comes back to the whole focus on process and how that manager is set up to deploy the fund and really execute the strategy over time and kind of multiple cycles. And, you know, that's something that we can underwrite as part of our diligence process. And we continue to kind of reevaluate that ahead of each fund cycle. We're typically a continuing investor with our managers because, you know, we're believers in their process.

18:33And where we do tend to cycle out is when there is material change to that process. So, you know, like you mentioned, the manager decides to materially change the strategy, whether it's, you know, things like portfolio construction or the stage focus or various other reasons that does happen. And it's often a natural process of scaling and evolving as a VC firm. So our goal is to maximize the lifecycle of that original process and strategy. but we do look to maximize the relationship of all of these managers for as long as we can. Now we're going to take a quick break to speak with our sponsor.

19:16Alex Kirk: On the show today, we have our stellar partner and industry expert, Shane Gowdy, leader of Sidley's Venture Funds Practice and now host of the podcast, Talk VC. We highly recommend you listen. If you get value from this podcast, we have Shane and his team to thank. So appreciate you so much, Shane, for being a part of this show. And the perspective you bring, really the bird's eye view is second to none. So thank you. Well, it's, as you know, Alexa, I think the world of both you and Ernest and Swimming with Allocators and our partnership has been utter gold for us, whether it's content or just great industry speak or friendship.

19:58It's an honor to be here always, and I'm super excited to talk a little bit more about VC stuff going on.

20:06Alex Kirk: Our listeners have heard from many of the Sidley partners that Shane has introduced us to across the ecosystem. And today we get to hear from the boss himself running the venture program specifically on fund formation and operations for VC funds. so in that context i am curious what has been keeping you busy shane yeah what hasn't been keeping you busy um it is uh it is gangbusters on the fund formation front um you know a lot of that is just not garden variety but just regular main line main fund activity funds that have been um you know, last raise a couple years ago or coming back online. So the normal course kind of every day, but there's also been just a ton of very deal specific work.

21:00So a lot of work in like co-investment funds and SPVs. Some of that tailored and tied to some of the main fundraising because oftentimes you'll have the commitments going into main funds tied to additional participation in SPVs or an opportunities fund. And so there's a lot going on in the way of a more holistic look in the LPs, institutional LPs viewpoint on how and where they're investing in venture and actually what bargain they're striking and a lot of that. So it's a lot of same as it ever has been with the acceleration, obviously, of the impact of AI and, you know, these hundred and billion dollar deal specific deals that have put a lot of gasoline in the tank of venture these days.

21:46But there's, you know, like it's whether it's defense tech or deep tech or a lot of life sciences activity, you know, venture is just hot now. And not surprisingly, that is, you've gotten a lot of work on the fund formation front. So, you know, but there's also been a lot of transmigration of talent, people, you know, new people leaving old funds, starting new ones. There's, you know, new entrepreneurs who finally had exit opportunities are starting their own funds. And so, you know, a lot of the just broader venture ecosystem has allowed there to be more activity and newer emerging managers, newer firms for established managers.

22:26And that's all resulted in just kind of a tidal wave of really, really great work on our side.

22:32Alex Kirk: Oh, I have so many questions based on this. So starting with the top, you were describing sort of people coming back to market. Do you think that timing is working out for folks? Everybody was sort of sitting back waiting for DPI, waiting for – what's driving this now? What's changed? Yeah, I just think one is investment opportunity. One is, you know, a lot of really great deals out there. And the sort of FOMO, of course, progenuates a lot of movement in venture. and with a lot of these incredible rounds and really frankly, early stage emerging companies, any AI, deep tech, defense tech areas popping up all over the place now.

23:15And a lot of it is also people coming from very large companies, OpenAI, Anthropics, starting new ventures. And that has been a lot of the opportunity cost if you don't have a fund out in market right now that you're not able to really take advantage of it unless you sit on a lot of dry powder. And frankly, from 2021, there's not a heck of a lot of dry powder left, to be honest, just given the past year plus and the healthy spending that's gone on in the venture industry. So that lag or that sag of a lot of extra capital that really weighted down the timing of a lot of funds coming to market, you know air has been let out of the balloon so that you know the the normal market cycle is kind of just coming back now here in 2026 and a lot of people starting again thinking about early 2027 and this is about the time we start talking to those folks about their fundraisers and getting all their documents ready so that around thanksgiving christmas time they're launching and then having first closes at the beginning of q1 so some of it is that but i but i but i do think that there's just been a little extra catapulting on some of the timing.

24:27So someone who maybe was going to wait until 2027 in mid 2027, late 2027 is now, I think that FOMO effect is really starting to impact a lot of people's decisions. And frankly, the availability of LP capital, you know, this is about the time of year when, you know, traditionally in years and decades past, you look at what capital's left to invest in a venture fund on the LP side in the last half of the year. And usually it's not a ton. You know, they've been very strategic about planning for their asset manager, their fund managers who are raising B's, not M's, you know, and they've been careful to allocate to those, you know, best of breed names.

25:10But then it's, you know, there's a lot less opportunity and capital available to invest in just-in-time funds coming on market right now. So, you know, And that all changes again in January when fresh allocation buckets get filled up. And so there's a lot of discussion around about timing and planning and strategy and who's out in the market. And a lot of people are asking us, you know, which LPs are investing still this late in the year? And so, you know, it's helping clients kind of align and land their planes on the right part of the runway to be able to, you know, have really successful first closings to be able to launch them into, you know, great second closings.

25:46or if you're at a really advantage, you can do it one and done, then how in a market like this do you help them navigate all that?

25:54Alex Kirk: Thank you for joining us on the show, Shane. If you're a GP or LP looking for expert guidance on fund formation and venture capital legal matters, you can visit Sidley's website, S-I-D-L-E-Y.com. And now back to our LP interview. And now back to our LP interview. Alex, during our prep call, you spoke a little bit about a trend or tendency of investors that kind of have to show their over-preference for certain factors that have some perceived edge or predictability. In that example, you were talking about VCs having over-preference for serial entrepreneurs or even allocators having over preference for kind of, you know, big brand proven firms.

26:43Talk to me a little, talk to the audience a little bit about, you know, how you diligence for that, as well as like, how do you keep yourself in check to not have those, you know, follow that trend? Yeah. So something we focus on as part of our thesis and our strategy is doing our best to remove structural biases within our venture portfolio. And that can mean a lot of things for us. Some of those are the preference for generalists over sector specialists. We invest with both solo GPs, multi-partner firms, fund ones, et cetera. We want to make sure that we're seeing everything or that we're not narrowing ourselves and missing potential outliers.

27:30So said another way we're trying to avoid rigid pattern matching and there's a natural tendency in investing to pattern match and you know we're wired as as humans to build heuristics and to look at what's worked before and try and use that to predict what will work next but venture is just such a unique asset class and the whole nature of outliers is that they're disruptive and unpredictable And so when you take that very natural instinct of pattern matching and you try and apply it at early stage, it can actually stop being a tool and start being a structural bias. And you can see where that leads once it's in place.

28:14Investors narrow down their sourcing to things that they can feel they can actually evaluate, whether or not those are real patterns or signal or just noise. And so for, you know, I think you mentioned as a VC, that could be the proven serial repeat founder with the right background, the right pedigree. For an allocator, that can be the manager with a strong prior fund, you know, the spin out from a brand name firm, the track record that suggests some kind of repeatable edge. I think all of that feels like discipline and nobody should be undisciplined. But I think what I'm more focused on is that early stage works very differently compared to almost anything else you can allocate to.

29:01And in a power law business, a very small number of these outliers drive the return for the whole asset class. and it can be extremely costly in a power law business to screen out potential outliers to the point where they're not in your funnel at all. And there's lots of data out there that says things like fund ones tend not to have material track records, but they generate strong performance and they have a meaningful share of finding these outliers. And the same goes for founders.

29:35Alex Kirk: The fund one bias. If you have more detail or data you could share on why you're excited about fund ones. So many people are nervous about them. What is it you love? There's this really interesting thing that happens at the fund one stage where your surface area for luck and your surface area for skill are very unique to that fund one stage. As you continue to invest and raise more funds, your surface area for luck actually decreases over time. Your surface area for skill might increase over time, but that luck component just naturally decays over time. And so what we really like about that fund one stage for these managers is that that's mathematically when you're the luckiest.

30:24And I know that luck and skill is kind of a, you know, a separate conversation in investing, but we think that that's an attractive, it offers an attractive time to be investing with managers. and we spend a lot of time focusing on finding these fun ones when we're looking for new relationships in our venture portfolio because of that component and also because it allows us to back a manager that we then have a lot of runway for. It really maximized the life cycle of the relationship there. I love that framework of skill versus luck and the surface area for it. it immediately takes my mind to why a new band or new musician has such a great first album and has difficulty with their sophomore album because they've been waiting their entire lives to make this one album or one movie.

31:23And now they need to produce and maybe they have had some success for that second album. And then you start to have an over-preference. And so then you start to lose out on some luck because you've been, now you have your frame of like, oh, I only can do this to be successful. So that totally makes sense.

31:48What, I'm curious on just kind of the future of the seed market, where you see it going. on our prep call you talked about there you know you've seen several three years on three years off of many cycles first question about the the market what do you feel is genuinely different about this one yeah we do our best as it relates to how we invest not to let the macro side of things drive decision making. But with that said, this AI innovation super cycle has certainly shifted the market in a number of ways. I don't think it applies to the entire market broadly, but it's an important subset for sure.

32:39And it feels like the speed at which companies can really scale has accelerated. And that's had a big impact on pricing, both for entry values and also for exit values. And I think that the biggest and most important shift has been on the exit value side or on the implied exit values. So we're seeing trillion dollar valuations, IPOs. That has a profound impact on the investment case for these startups. And it has a downstream effect on companies that sit at valuations below that. So if you're holding a$5 billion valuation company in your portfolio, and it's still growing and compounding tremendously as a business, I think where these other companies are being valued now, it changes your appetite a bit for continuing to hold on to these growing assets because you can see now what the market will allow them to grow into with some patience.

33:42Whereas before, you might have seen that$5 billion mark as a more obvious exit point. So while I don't have to make those selling decisions, thankfully, I certainly recognize the sentimental shift that's happening, largely because of what's going on with AI. With those characteristics of the market and how fast valuations can go up, specifically if it's something within or around AI, I'm curious, what do you think is going to happen between the delineation of pre-seed and seed? Because I've been talking to a few friends who are in that market, and they believe there's a convergence that's going to happen for a certain subset of asset classes, certain subset of company opportunities.

34:34What's your view on it? Do you think they'll actually just merge and be kind of one thing? Yeah, it seems like it's heading that way a bit. The clear delineation between what was pre-seed, what was seed, it feels like it's blended a lot more of late to anything pre-series A. And we kind of think of it that way as well. we look at it as kind of first institutional check stage because the naming and the framing can change over time and it does seem to be blending a bit. And so our goal with that is to just stay rooted at whatever the earliest possible entry point is. That doesn't really change. You know, the pricing might fluctuate or the terms might change a bit, but, you know, I think there will still be a first check stage, whatever it's called and whatever the terms are.

35:25I won't pretend to know, but, you know, it seems like it is blending into more of that looser term kind of stage right now.

35:36Alex Kirk: How do you how do you appreciate GPs having to sort of shift given the pricing to like, I guess there there's the camp that sort of says we are going to be very committed to our ownership. we're going to be very committed to our entry price and you can trust us that we're not going to fall into the trap of the ZERP era. And then there's another set of GPs who are sort of saying the entry price is the entry price today and these are the best companies and you're paying us for access so we've got it and we're going to win these opportunities. Do you need both in your index? Or are you preferential to one or the other if you're trying to hit the outlier?

36:34Alex Kirk: If you're trying to only get those outliers, if the point of the index is to get the outliers, are you in fact more open to these sort of like the price is the price folks? Yeah, it's a great question. And I would say that both are important. And when we think about it, again, it comes back to that whole notion of process. And so we like consistency. And so there's a balance between deploying capital as quickly as possible and deploying capital too slowly because you're waiting because things feel expensive or a number of reasons. So there's a blend there. And I think the balance is that we like to stay on process and kind of the market, what's happening in the market is the market.

37:29And it's a bit out of anyone's control. There's a portion where, you know, I think he said something like we're paying for access. And I think we would agree with that. we are investing. We like consistent deployment because if you think about a typical three-year deployment window, and that's across two years where things feel one way and one year where things feel another way. And so let's say you change your process and your behavior, and now you're spread out more over five years. Those investments in years four and five have a shorter compounding window now and so they have to be better picks or better better companies

38:13Alex Kirk: ultimately what's so surprising about this sort of indexing approach is i don't see other people doing it um and i consider this show a little bit of a listening tour of like what do the lps want what are they hunting for like selling is easier if you know what people are buying and you all initially were doing this as a single family office and your LP colleagues came to you and said hey can you take our capital too this is proof that this is something you know LPs are looking for is there like a posse are you guys all like the quant fund guy do you have a do you have a whatsapp of like ex-hedge fund day traders who are all doing the quant version of venture?

39:03No.

39:07Alex Kirk: Why is, you know, it seems like this is a very backable strategy. I think there's a gap there with just how, you know, the rest of the fund funds or maybe the rest of the allocator market historically has approached things. And that's certainly why we approached the asset class the way that we did. So I think what we're more in the minority on at times, and so a WhatsApp group would be helpful, is being an LP and trading notes with LPs who kind of think about the portfolio construction and things in the way that we do. We have, you know, a number of our funds tend to be on the more diversified portfolio construction approach rather than more ownership driven, things like that.

40:04And I think there's a big LP demand for, you know, that more ownership driven style. And so when we know of LPs who are interested in kind of the same profile and portfolio construction that we are, we do tend to share things around. and coalesce around some of these GPs because I think we're in the minority in the LP world for backing that type of portfolio construction.

40:34Alex Kirk: My prediction is you will have copycats, Alex. They're coming.

40:41Alex Kirk: You can invest with Alex. You can give him your money or you can try to do what he's doing. It sounds easier to just give him your money. Yeah, that's probably better. Alex, you've reiterated a number of times through this conversation the importance of process when you're diligencing fund managers, your own process. To that point, what are a few of your favorite questions or tactics to really understand the fund manager who is across the table from you? One thing that we like to spend time with, especially with let's say a fund one is thinking through their long-term kind of vision and goals for you know their fund maybe a few fund cycles into the future I think it really helps to understand what they see themselves doing with you know kind of their firm and their strategy over time.

41:43And a lot of managers, most managers, I think, that are doing this at Seed really love the stage at which they're investing. I mean, they're really driven by meeting founders and finding new founders and staying on kind of that forefront of the innovation curve and just being ahead of all these new and next exciting things. And so really understanding that and seeing what motivates the GP is something we spend time on and thinking through a relationship for, you know, multi-fund, multiple cycles of funds. And then we'll spend time going through the portfolio construction. That's where we get into a little bit more of the quantitative side of the process.

42:29You know, if you picked, let's say your fund size is 25 million, walk us kind of backwards through the math on how that$25 million is deployed. And that really helps to get and understand how the GP is thinking about portfolio construction and kind of how they arrived at the number that they arrived at for fundraising. And it's a simple kind of back of the envelope conversation, but it teases out a lot of their thinking on things like the size of check they can write into rounds and this and that. So it tends to be a kind of a helpful conversation. My last question is, what strategies should people just stay away from within the seed market, seed venture market?

43:21This could be from the perspective of a fund manager or an allocator. I think it's really challenging to be investing at multiple stages. So, you know, I think we've seen, not often, but you'll see occasionally funds that are doing some at seed, some at kind of series A, like very multi-stage blends in deployment. And I think that's really competitive. It personally isn't a huge fit for us. It certainly can work for some. I think it's really competitive. I think being rooted in your stage is a really important part for being able to successfully access deals and deploy capital.

44:07Alex Kirk: Any other final thoughts on sort of things where you see yourself butting heads or having a different opinion than a typical allocator? I think most of this has typically been where we're one side of the conversation versus another. I think we're starting to see a shift towards kind of diversification in portfolio construction. And I think part of that is, you know, there's a lot of folks now who publish, you know, data, Carta, things like that on kind of the portfolio models and how the math kind of benefits you there as a fund manager. And there's a number of these firms, some in our portfolio, some just that we know or that are in the market, who deploy diversified portfolio construction.

45:09And they have struggled to raise over their early fund life and their early fun lives or their early funds are, you know, showing meaningful performance and, you know, meaningful success. And so I think that there's a lot of evidence now that you can win both ways in venture. And so I think that is hopefully becoming a more mainstream kind of approach that LPs are recognizing. and it seems like that's becoming the case. Well, Alex, thanks so much for being on Swimming with Allocators. We really appreciate your insights, your perspectives, and we hope a lot of LPs reach out to you and a lot of great fund managers reach out to you as well.

45:58Thanks, guys. It's been a blast.

46:00Alex Kirk: See you later, Allocator. After Portfolio Tile, investing with a smile.