E49: Long Journey's Strategy for Chasing "Magically Weird" Companies

0:02Welcome back to Turpentine VC, a podcast where we discuss the art and science of building successful venture firms, VC to VC. Today's episode is with Lee Jacobs, the founder and managing partner at Long Journey. Lee leveraged the AngelList ecosystem to his advantage, becoming the first person to launch an AngelList syndicate. In the conversation ahead, we discuss how he founded Long Journey with partners Cyan Bannister and Ariel Zuckerberg, their venture partner strategy, and how they identify magically weird companies. Let's dive in. Lee, welcome to Turpentine VC. Thanks so much for joining the podcast.

0:37Thanks for having me. It's exciting to be here. So Lee, first by way of introduction, talk about Long Journey and what makes you guys special. And then we're going to get into your sort of evolution as a firm and how you came to be where you are. Yeah. Long Journey is a collaboration between me, Cyan Bannister, and Ariel Zuckerberg. I founded the firm with Cyan in 2020. Before that, I was an angelist and had been investing really since 2013. but the first institutional fund was in started in 2020. And yeah, and we are a pre-seed seed fund really focused on, you know, we're very values oriented.

1:14And the first value on our website is our thesis, which is to chase the magically weird, which means that we think the best companies look pretty weird at the time. So historically, you know, through my track record and Cyan and then the rest of the team, we've been really good at finding things that we think most people are a little afraid of investing in. We think that are, that is interesting and takes a little bit of courage to invest in and then they become great things. So yeah, that's our fund. So Long Journey itself has been a long journey. You mentioned starting 2020, but that's really on top of what you've been doing throughout the 2010s.

1:49I know you had a bunch of different investing efforts that you got off the ground and had some success with. So why don't you take us a tour of how this actually came to be? Because a lot of people look at people who have big funds and even people who didn't start a massive company or plow in a ton of their own money into it, they ask, how did they do it? And you have a really interesting story. So why don't you tell your journey? Yeah, I think it's really methodical and step-by-step. I always say it's like one foot before the other. So yeah, the way it started is I had started a company and in 2013, I decided that I didn't wanna run the company anymore.

2:26I wanted to focus on what I thought I was good at, which was finding really smart, passionate people but like my co-founder, helping them get set up and doing that multiple times over. And to me, that meant investing, business models investing. I think one general theme was like, I wanted to do something and then I was very, I organically tried to solve that problem. And as you said, we now are slightly under half a billion dollars in AUM. And it started with$150 ,000 LLC that I raised from family and friends in 2013. And so I raised$150 ,000. It probably took me about a year to raise that money.

3:01I did something kind of crazy, which was I invested in three companies out of that fund, which talk about really concentrated. You know, it's a pretty concentrated strategy. And I got lucky. I invested in a company. It was called Descomplica. It's one of the leading tech companies in Latin America. That company started to grow really quickly. And then a very hot Series A came together. And I was like, man, I have this like$700 ,000 allocation in the company. How am I going to fill this in one week? It took me like six weeks to fill the allocation, just the$150 ,000 fund. And then Naval at AngelList announced syndicates.

3:37And I thought, wow, this is pretty interesting. I should give it a try. So I was the first person to do an AngelList syndicate in 2013 for Descomplica. And it really changed my life. It went from scraping together and trying to figure out how to get LP dollars to writing a$700 ,000 check in under a few days. It was raised in a few days. So that was really the first breaking point for me, which was like, okay, I can really leverage this AngelList ecosystem. I can continue to find interesting investments. And then I had the ability to write bigger and bigger checks. That was like the first real step.

4:09And then eventually I ended up working for a guy named Mark Triggerman at NHS Capital. And I think he noticed that I was good at identifying really interesting companies for others. I spent about a year with him. I learned a ton from Mark. Mark and I have very different strategies. He's kind of like the Warren Buffett of early stage investments. He does about two deals a year. We do a little bit more than that at Long Journey. But I learned a ton about how to think about... Really, the number one thing I learned from him was like, I remember him telling me something like he was excited about a company and he said, I really hope no one else likes this company.

4:43And it's a little bit counterintuitive because at the time, most people are like, well, is this a hot company? Is this going to be like an A16Z or Sequoia round? But Mark was like, I really hope no one else likes it. And I was like, huh, that's pretty interesting. And so I really understood that lesson that what you're really trying to find are gems, things that other people see that you see that other people don't. And that's where Alpha is from. So that lesson was really important to me in the beginning. And then after about a year with Mark, Naval asked me to come and join him at AngelList.

5:11And the idea was that I would start the first version of what became Long Journey at AngelList. And Naval was just looking for more people like me, more people that had access to deal flow, but didn't necessarily have the capital. So my job was to go find the next generation managers. And then at Angelus, I started the first version of what became Long Journey. So that fund was called Edelweiss. In that period, we recruited a guy named Brian Balfour, who was the VP of growth at HubSpot, now runs Reforge, Elaine Wary, who sold Mebo to Google. And the three of us came together and started the first version of the fund.

5:45And initially, it was a lot of Tom and Elaine's money, a very little bit of my own. But the same thesis, It was just like, go scrap and find things that we thought were independently interesting, that we didn't really care if other people thought were interesting or not, and make investments. In that period, we invested in Loom, which just sold to Atlassian for a billion dollars. We invested in Crusoe Energy, which is, I think, one of the leading AI infrastructure business or one of the leading AI infrastructure business companies. We invested in Payjoy and a lot of really great things in that period.

6:14So that was sort of the period when I was at AngelList. And that's where I met Cyan. and Cyan, I know you know Cyan. She's an incredible human being. Not only is she brilliant, but she's just a free thinker. Someone who, again, has the courage to invest in things when other people think that they're silly. And she's one of the best track records of all time as an angel investor. So she did Uber and the Seed, SpaceX in 2007, Andurl, just an incredible, incredible track record. So we became friends while I was at AngelList. And then she went on to go to Founders Fund. So at Founders Fund, what Sian would say if she were here, she'd say, look, when you're at these big funds, what you end up getting over and over again are the same deals.

6:57Everyone's sending you the hot Sequoia deal or the hot Andreessen deal. But the deals that I would send her, like Crusoe or Pipify or Mindbloom, which is a psychedelic medicine company, were things that no one else was sending her and were independently interesting. And I think you asked a really good question about a lot of people who have these$100 million funds and plus had a big success before that. And I think if I look back at what I had to do, I just always focused on what I thought was independently interesting. I wasn't in the hot deal flow. So I had to kind of go make it up on my own.

7:29I had to go find things that I thought were interesting on my own. And one of the challenges, and we're sort of getting back to sort of where we are with fund journey now. But one of the challenges of the job right now is that we actually do see a lot of the hot deal flow, the things that everyone else is investing in, and having the wisdom to discern what is actually intellectually interesting for ourselves now and making an investment decision. Because if a lot of people like a company, it doesn't mean it's bad necessarily. But before, I didn't have that luxury. And so what we look for across our team, across everyone that we invest with, is really independent thinking.

8:06And I think you know Justin Mayers from Kettle and Fire and now TruMed. He is an important part of our team. He's a venture partner. He sends us really great investments. And he is the consummate independent investor. He just likes something and then he makes the call. So that's a key thing that I've learned along the way. So Cyan and I became really common co-investors when she was at Founders Fund. And then when Cyan decided that she wanted to go back to her roots as an early stage investor, You know, as you get bigger and bigger at places like Founders Fund, and we are huge fans of Founders Fund, we think they did, you know, independent non-consensus investing, you know, right from the early days.

8:43But as the fund got bigger and bigger, you know, Cyan's role of, you know, they wanted her to write bigger and bigger checks. And that just wasn't her DNA. So she called me up and said, hey, let's work together. And this is in 2020. So that's when we really got Long Journey off the ground. We raised, you know, a$35 million fund. in that period. And at that point, we didn't think we were just like, look, we're going to run the same strategy of investing in great companies. We weren't ready to lead yet. We wanted to kind of sort of understand what that motion looked like. And then with the fall-in fund, we raised$85 million early stage fund and$85 million opportunity concentration fund to go and lead pre-seed and seed rounds and then concentrate in our best companies.

9:26You were full-time investing from when? I would say 2017. Yeah. So the 2017 to 2020 journey, I remember, you know, you were investing, you did some great companies, you had other sort of part-time partners. But I guess talk about that. I understand, I guess, why you talk about the co-founding in 2020, because that's when Cyan joined and you have a shared journey. But you've been doing this for some time. And some people don't appreciate sometimes how long it takes to really, like, get established. So take us through that journey before you had the first institutional. Yeah, man. $150 ,000 was that first little thing I raised.

10:06And then I went back to my LPs and they were like, what are we investing? We kind of forgot about that. So I had to start over. And so then I was just able to do Angelus syndicates. And so one after the other, and it was hard, man. I mean, the thing about... Look, I love Angelus. But the thing about doing these SPVs was that you're selling on both sides. You have to convince the founder to let you into a company and say, Hey, by the way, I'm not sure if I have the money yet. And then you have to go on the other side and tell the LPs that there's this company, but you can't meet them. And please trust me, invest in two days.

10:36So it's really a hard thing to do. So yeah, those SPVs were very hard in the early days, but you had to sort of... With Mindbloom, which is another one of our large success stories. It took about nine months to raise the SPV to do the seed investment in that company. One company through it like nine months. And you just kind of just have to keep going and believe in yourself. I don't know what else to say. I believed in what Dylan was building. I believed in the importance of the medicine and what psychedelics was for the world. And I just was willing to just keep making calls. And eventually we found some good LPs for that.

11:12And we ended up that round. And it's a good example of like the company could have taken money from other people, but you know, it was, it was weird at the time. Psychedelics was quite weird at the time. So yeah, it's, I, there's a, there was a lot of different bumps in the road, but I appreciate you saying, you know, you just have to put one foot in front of the other and just keep going. Hey, we'll continue our interview in a moment after a word from our sponsors. How deep do you go to seek out an answer to a question? Maybe you've spent hours clicking the source links on an obscure Wikipedia page, or maybe you're even the type of person who checked out the entire shelf on the topic at your library.

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12:56For the fund before the 2020 fund, was that a rolling fund? Where did that capital come from? And at what point did you realize, hey, I should probably get a partner here? Because there were a bunch of people trying to do solo GPs. Some people were able to raise a bunch of money. Yeah. What was that like? Yeah. So we had a committed pool of about$2 million or so. And then everything else we did was via SPVs. So we invested about$10 million in the period from, let's say, 2015 to 2020. And at the time, we were, you know, Brian was part-time. Elaine was part-time. Elaine runs Dandelion Chocolate.

13:33Brian was running Reforge. and I was an angelist and then I went full-time. I mean, look, I've always been pretty ambitious and I knew that I wanted to, you know, honestly, like being a small fund and being$2 million or$10 million is not going to pay the bills. You're not going to be able to live off of that for very long. So you had to kind of scale the ambition of the project. And I always knew that, you know, I guess at one point I kept noticing like we would invest in a company like Mindbloom, for example, or Crusoe. And then all these other people would invest a lot more money into these companies.

14:06And over and over again, these things just started getting marked up. And I sort of got the confidence. I was like, huh, we could write way bigger checks into these companies and we should. So I think that's another good way of thinking about the way that I've evolved the fund. It's been very organic and bottoms up. It was like, look, we have invested in these great companies over and over again. So we've gotten some good feedback there. We think we are early to a lot of these things. So we could be taking much larger of an allocation in the company? And then what's the right capital strategy and the right fund strategy for doing that?

14:40And that's how we kind of decided, okay, we're ready to raise this institutional fund. And having Cyan come to me and say, look, let's work together was, it's funny. I don't know if this is true in your life, but I have these things where I kind of know they're going to happen already. I knew that Cyan was going to ask me to work together because we just had such great, amazing energy together. And so when she asked me, I was like, I kind of knew you were going to ask? And the answer is yes. So that's kind of how the beginnings of the institutional climb started. So how do you guys split or make decisions?

15:11It was interesting because Cyan is someone, here's my outside read. Cyan has more investment experience. She's obviously done phenomenally well, but she's also kind of an iconoclast, right? And an iconoclast, you know, they create incredible things, but they also sometimes like to do things their own way. So how did you think about, okay, if I bring this person in, there's lots of opportunities that that enables, but that also changes the dynamic of the firm of it. It's not just my own shop. Now I have a partnership. Am I CEO of this? Am I not CEO of this? If there is no CEO, what does that mean for how decisions get made?

15:49How did you think about that? So I'm the CEO and have been throughout. And I think that's what Sian wanted. She didn't want to have to go and do the institutional thing herself and go. She could have raised from LPs based on her track record, but that's not what her zone of genius is. Her zone of genius is finding really incredible people and making quick decisions and investing in great companies. And so I was willing to do the work of going out and raising capital and kind of providing some leverage for her. And, you know, I think one of the things that as I reflect back at this journey is the number one thing that I care about from the team is that I have to admire the people that join the team.

16:26And so Cyan is incredible and hard not to admire. Ariel is the same. We haven't talked about Ariel Zuckerberg. We can talk about that in a minute. Everyone who joins us is someone that I personally admire. And then the next step is like giving them space to be themselves. And so with Cyan, we actually refer to her as Dennis Rodman. So I don't know if you've seen the last dance. I know you're a basketball fan, so you probably did. There's a moment when Phil Jackson, basically at the beginning of the playoff run, Dennis Rodman goes to Vegas. And everyone's like, oh man, Dennis is in Vegas. And Phil's like, don't worry, Dennis will be back.

17:02And just sometimes Dennis needs to go to Vegas. And so I think that's true for Cyance. He needs to sometimes go and experience the world in a way that doesn't look like everyone else. but man, does she come back with such incredible investment ideas and such incredible things. And so I think I've done a really nice job of providing her the space to be herself. And that's something that I really try to do with everyone across the team. How do you stick to the center of what we do and have really strong values? And we should talk about our values, because I think that is the fundamental thing that keeps us all together in our mission orientation.

17:37But then how do you add pieces to the puzzle where you admire them, you know, they're great at what they do, but you also allow them to do their best work. So, you know, Sian jokes that she likes to go to random conferences. Like she went to a toilet paper conference at some point recently. And I was like, okay, go, go to a toilet paper conference. That sounds great. And then, you know, the next thing, you know, six months later, there's a company that's working with toilet paper and Sian's an expert on toilet paper. And so, you know, how do you like, that's the, that happens over and over again.

18:08So you let people follow their curiosity. So yeah, I think, you know, for me, I'm really ambitious. I know that I can't do this alone. So you have to create leverage by adding really talented people and letting them work within a system. Let's get to Ariel because I'm curious, besides sort of all the attractive, the qualities that make Ariel an amazing partner, how did you think about who you wanted to complement you and Cyan with? What were the skill sets or expertise or personality? I love the quote that our mutual friend Hunter Walk said when Ariel joined. He sent an email to Ariel and he said, oh, you went from being the weirdest person at Cotu to the least weird.

18:50And I was like, oh, we nailed it. That's exactly what I was looking for. So, you know, Cyan and I are true and form, like early stage investors. Ariel has been trained, you know, she learned diligence from John Doerr. She spent a bunch of years at KOTU. So she knows, you know, how the more traditional funds do Series A and B investing. And as we thought about our portfolio and as we thought about the great companies that we'd invested in over the years, we knew that there was an opportunity to do follow-on investments in these great companies. And at the stage in which we were going to do them, we were going to be later than seed.

19:23And Ariel was the perfect blend of that. She still has the values and mission orientation. And I think to her is very strange and weird in the best way. But she has this traditional venture background that really complemented us. And so that's why she was the perfect person. And it's really been fun for all three of us to work together. How do you think about where is Long Journey in 10 years? There's lots of different firms that have taken different paths of growing and scaling. Some do multiple funds. Some remain generalist. Some do multi-stage. There's lots of different examples. How do you think about which examples make most sense for you, given your team and your ambitions?

20:06Yeah, I think, look, I want to have this firm be something that is lasting. And as an institution that I hang up, whatever the equivalent of investor cowboy boots are, that this thing is going on for many years. So I want it to last. You know, from where it goes, I try to think in increments, like we said earlier, like I scaled from the small practice that we were doing to the$35 million fund because I saw that there was a business opportunity to do that. So whenever we think about what the next fund size looks like, we think from our value, which is it's not monopoly money. We really care a ton about the LP dollars that we're raising, the causes they're supporting, and to treat those dollars as if they were our own.

20:51In many cases, they are ours. So when we raised the Opportunity Concentration Fund, we saw that there was a great opportunity to invest in some incredible companies at a stage that was later. And then so the question then became, okay, like what size check do we want to be writing into those companies? What's the right portfolio? The number of companies you want to get where you can have enough concentration, but have enough diversification. So every new fund, we sit down and think, okay, where is the market telling us there's a business opportunity? And so I try not to predict these things, but over the course of the 15 or whatever years I've been doing this, we've been quite good at finding where there is alpha.

21:29So I think we will continue to be ambitious and continue to grow. And we've really scaled our AOM, you know, like I guess from$35 to under half a billion dollars in four or five years now. So I think that that trajectory may not be the exact same, but it has to make sense for our LPs and everyone involved for us to grow on a step-by-step basis. Hey, we'll continue our interview in a moment after a word from our sponsors. Talk us through your journey with building an LP sort of based in ecosystem and the different types of LPs that you've gotten involved over time. Yeah. I mean, look, as you said earlier, I didn't start a billion dollar company.

22:10I didn't work at Sequoia. So in the beginning, you will take money from whomever will give it to you. And that's sort of the way it is in the very early days. And there are some people that, you know, I really want to call out a guy named John Brooke, who's one of our venture partners, he founded Pocket. He brought his brother and his family into that first little fund, that$2 million fund. And that's going to be an incredible fund. So he'll be paid for that risk. But he took a bet on me and saw something that was there. And so I would put him into like a family office or the high net worth individuals.

22:42So that's like often the first bucket of people that will bet on you in your first fund. And then over time, it's gotten more and more institutional. We have some of the best LPs in the business that have made incredible investments in the iconic venture funds at this point, but it's a process. You start with the folks, you look, you got to get into the game. You got to build up a track record any way you can. And so any advice I'd have is like, whatever fund size, like you can get off the ground, get off the ground, you know, start there and then build up a track record. And then over time, the institution and others will come to invest in the things if you keep doing what you said you're going to do.

23:21So at this point, we're quite institutional. And I'm really proud of that because as I said, we're trying to create a lasting foundation that will be around for long after I'm gone. And when you say institutional, are you referring to endowments or which kinds of institutions? Yeah, we have foundations, endowments. You're right in saying that LPs look very different. So there are very wealthy billionaire folks that have run an institutionalized family office practice. We certainly have those. We also have endowments and foundations. It is interesting. Talk about the opportunity fund. Do you think that is something that more funds should be doing?