Loading summary
Transcript110 lines
- [00:00]
Manica Blaine
I've noticed a few things that make me wonder if the structure might be fundamentally flawed for a specific early stage investor. You're producing income by way of management fees and not from the wins that you're generating. Just because this one investment might triple or quadruple your money, it needs to like, return the entire fund before carry can be had.
- [00:22]
Host
Is Venture Capital an Early Stage Consumer broken in today's episode of Consumer vc I sit down with Manica Blaine to find out. Over 10 years ago, Manica co founded Campfire Capital where she raised one of the very first dedicated early stage consumer
- [00:36]
Sponsor/Announcer
Investing Vehicles, a $32 million consumer fund that would go on to lead the
- [00:41]
Host
Series A for Figs and invest in brands like Cotopaxi.
- [00:44]
Sponsor/Announcer
Then she started her own early stage
- [00:47]
Host
investment advisory fund, Top Not Ventures, this
- [00:50]
Sponsor/Announcer
time with her own capital.
- [00:51]
Host
She's made 15 direct investments so far
- [00:53]
Sponsor/Announcer
and several in beauty and wellness have become breakout brands like Everest Sahajan and
- [00:58]
Host
Sweet Chemistry to name a few. She is also a Beauty Independent Beacon Award winner. She won Seed and Small Growth Investor of the year in 2024 and is
- [01:07]
Sponsor/Announcer
considered amongst the most active angel investors
- [01:09]
Host
backing the next wave of standout consumer founders and brands.
- [01:13]
Manica Blaine
Denver should have the ability to kick you to the curb if you're not doing what you said you were going to do. If you're not paying for something, you don't use it. There comes to a point as an investor where maybe you just have to be really honest about what you're not good at or what you can't really be helpful with.
- [01:34]
Host
Manica, I am so excited to have you back on again. How are you?
- [01:37]
Manica Blaine
I am good. I'm so excited to be back on again. Thank you for, thank you for inviting me.
- [01:42]
Host
Hardly. Hardly. Thanks so much for considering coming on. And also I just, it's ebbing since you came on the first time. You've now been written writing these subsect posts that are incredible. Everybody should be subscribing. It's so great.
- [01:55]
Manica Blaine
Thank you.
- [01:56]
Host
Talk talk a little bit about what was the inspiration to actually start writing the substack.
- [02:01]
Manica Blaine
You know what I so the truth is it was my New Year's resolution a year ago so so I I, I wrote my first substack on January 1, 2026. Very recent. We're in in week like six or seven right now and I had planned to do it a year ago and then life gets in the way, things get busy. You know, I I was going through the first exit of my portfolio. Top Not Ventures. You know, midway through the year. And so it just, it just got really, really busy and I didn't do it. So waking up January 1, 2026, I was like, I'm doing it. And I kind of had these notes in my phone. You take notes? I take notes all the time. And I was like, there's so much I want to say. And not that I'm on my deathbed or anything, like better at least that I know of, but I, I was like, if I did get hit by a bus tomorrow, like, how do I get these stories out? And not salacious stories, not in that way, but just things that I've learned, things that I think could be helpful to other people either early in their careers investing or, or somewhere in the middle or towards the end for founders, you know. And then the other thing that would happen too is I love contributing to beauty, independent modern retail, shout out to, you know, the Gabby Barkos of the world and you know, the Rachel Browns and business of fashion. And every time I would, I would do a piece, my LinkedIn would light up and people would say, oh my gosh, I love what you that. And it's like, okay, well maybe like maybe I should just start putting it out there. So anyway, I'm learning. I think I have like, I don't have many subscribers yet. I think I have like 150 or something like that. But what I am noticing which is interesting is that my, my, my posts get like thousands of reads but like the engagement on stuff stack, I'm like, I don't know why nobody wants to like, like subscribe. It's. It doesn't cost anything. Maybe I should make it cost something. And I would never would. I'm not doing it.
- [03:48]
Host
I, I will say if you do want to make a premium, I think it's worth premium. I am honestly not just saying that. I think that just from your story and everything that, that you've done on the investing side and also you were kind of. Oh, you were not kind of. You were OG consumer and, and everything. I mean listeners, if you haven't subscribed to it yet, it's. You win some, you, you lose some. It's really honestly, if you really want to understand what consumer investing is about and also if you can even make money in consumer investing, which I want to get to and like the, the, the db, you can. But also like if you can make money early stage as a fund, which I'd love to dive into, it really is an absolute treat and I feel like thank you for I feel like I learned so many.
- [04:36]
Manica Blaine
I'm really enjoying it. Like I said, I'm on never six or seven right now. And, and it really just is that it's. You win in some, you lose some. It's, it's just stories that I share. Anecdotes, learnings, kind of you know, realizations that I've had after what is now over a decade of being an early stage consumer investor.
- [04:57]
Host
So to land.
- [04:58]
Manica Blaine
But I sold like I'm 21. Right?
- [04:59]
Host
No, of course, of course. Absolutely. Absolutely. Now also another, another point of congratulations goes to you not only because you started your substack, you had your exit that returned your fund which congratulations, not your fund, returned your entire portfolio when it comes to angel investing. Correct?
- [05:18]
Manica Blaine
Yeah. So it 2x. So I had one exit last year late last year that returned a 2x on all of the capital that I put to work within top not So I have 15 active investments right now and that one exit. So it just, it just goes to show you that there are businesses within consumer that can scale an exit. They're not all going to be sexy ones with headlines. This one particular exit is still private in terms of a public disclosure and but it's, it was a great win for me. It was a great win for the founder, for the team. I'm excited the acquirer is doing with it. I'm, I'm still on board helping out in several capacity capacities and I participate in, there's an earnout component as well. So I participate in the earn out as well and I'm, I'm, I'm still a part of it. So it's, it's exciting.
- [06:11]
Host
Incredible. Congratulations. How has that exit helped shape your thoughts when it comes to investing in consumer at the early stages?
- [06:18]
Manica Blaine
You know what it's, it's without giving away all the substack. I, I have a specific post on you know, the founders that win and I speak very much about this one particular exit. It's, it's really helped me like double underline what I've seen in founders that win in, in situations where an exit actually does come to fruition. And I want to be clear like I don't think there's, there is a little bit of pattern recognition in some things, but some things surprise you too. Right? But, but it's affirmed for me just instinctually what I've seen across the board in situations where there has been a strong outcome. I think that was, that was fun and, and, and sometimes when you're doing something on your own versus when You've done it in collaboration with others or as part of a fund. You know, sometimes you wonder is it, is it me that can pick winners and help them? Or it like. And so it was really affirming for me to have my first big exit within my own vehicle just knowing that, you know, okay, maybe, maybe, maybe I do know what I'm doing here. I know that sounds weird to admit to, but it's, it's the truth.
- [07:33]
Host
Not at all.
- [07:34]
Sponsor/Announcer
Not at all.
- [07:35]
Host
And congrats again. And when did you make the investment? Was. That was about four, four or five years ago was one of your first investments?
- [07:41]
Manica Blaine
Yeah. So this was one where I got involved in. It was July of 2022. And yeah, it's, I can't share too, too much about it without giving it away. I wish I could and I, I hope the founder can one day speak about it too and, and speak really openly about it. And I'm sure, I'm sure she will. But anyway, it's, yeah, it was an exciting year.
- [08:05]
Host
Cool. Incredible. What did you. So I know that you obviously had a fund campfire and then now you're a full time angel investor. You've been an angel investor for some time and I know you've, you've recently written. I, I think when I, when we first chatted, I, I, I asked and I know that this was another one of your subsec posts about a person that, that, that is a dear friend of, of yours. I caught up that said are you, when are you raising your next fund? I know I asked you that question as well. How do you think about funds, early stage consumer funds today and that entire structure.
- [08:42]
Manica Blaine
Yeah. So when you say funds. Cause, I mean, I, I guess I have a fund right now. A fund can just be a vehicle, you know, an organized pool of capital through which you invest. But when I, when I, when I think about, I think I know the article that you're referring to and it's, it's more about the GPLP structure. So it's a fund where rather than my current fund which is today backed by my own capital, my own balance sheet, I don't have any investors. I don't have any third party LPs in my fund. But one of the. I shared a post recently about the various reasons why I've decided not to go about raising third party capital for a GPLP structure. So one where you have a gp, obviously, and then third party investors that, that back your fund. I think that's what you're referring to, right?
- [09:27]
Host
Yes. Indeed, indeed. So the GP to LP structure, why do you believe that that's fundamentally broken for, for early stage consumer? What's the core argument?
- [09:37]
Manica Blaine
There's so many. There's a few, There's a few. And, and, and what I will say is first off, I'm so grateful. Like when I started in my first fund, when we started Campfire capital back in 2014, it took us a little while to raise it. We closed it in 2016, you know, in terms of the fundraising and it was just such a different landscape back then. There were so few early stage consumer investors. Like investing when a company to nearly stages, when a company is like 1 to 5 million dollars, top line like that to me is early stage consumer. It's not seed or pre seed or series A, because I feel like the lines get so blurred. I'm talking about that, that, that realm of how big a company is. I mean back then there were just so few. So in a way I'm so elated and happy that there are more vehicles, more funds that exist to invest in those businesses that are in that, in that, in that realm. But I think I've, I've noticed a few things that make me wonder if the structure might be fundamentally flawed for a specific early stage investor. And, and I went into it in my piece from just earlier this week. But to recap a few of them, I mean one of them is, is, is just the GP commit, you know, across the board. I meet other emerging managers often. Today I am an LP in one other fund, consumer fund and I have looked at a few funds to invest in. But one thing that's always given me pause as I've met with some of these emerging managers is just the size of their GP commit as a relative to the whole fund. And so what I've heard and what you know, I see often now is that market, right is, is more like 1%, 2% of the fund should be the GP commit, you know, and then, and then go raise a bunch of other money. So basically what that means is if you're raising a hundred million dollar fund just to put an easy number on it, you know, the GP commit should be 1 million, right? And that could be spread across your 3, 4, 5 partners, however many, however, and to me it just seems low. Right. I think that financial alignment of interest is something fundamentally important to any investor relationship. You know, when you're managing someone else's money, if you feel like you're writing a check and a meaningful portion of that check isn't your own Capital. I think it just changes the way you think about placing that capital. I think it changes the way you are steward of that capital. And that's just my own point of view. And where I came from and in my career investing, I came from a private equity fund. I spent almost five years there where it was. It was always very much embedded into that firm's culture that, you know, every. You know, everyone around the table, whether you're like, I get this point, senior associates and even associates, the like could write checks into the fund. I mean, everyone around the table needs to feel like they're participating in that investment to make the right call. Because if you are just managing someone else's capital and it's not enough of your own capital, it just creates a different alignment of interests. So, I mean, that. That's one point.
- [12:43]
Host
Yeah. So, I mean, on that point, do you think then rich people should raise. Do you think then that only rich people should raise a VC fund?
- [12:51]
Manica Blaine
No, not at all. Not at all. Not at all. I think, I think that like, in. In. In my case, I mean, just to take a rewind and a step back, when we raised Campfire Capital, I was in a GP relationship. There were four of us in the gp. And you know, very, very truthfully, it was about two and a half million was the entire GP commit. My GP commit as like Manica got him at the time, my maiden name, I. It was a hundred thousand dollars, okay. But I was 32 years old, and back then, a hundred thousand dollars for me was more than 10% of my own net worth. You know what I mean? You think about, like, my assets and what I had. And so it was really, really meaningful for me. However, because we were RA at the time, we didn't know if it was going to land at 30 or 40 million. It was important to align ourselves with others that could also put in meaningful capital. And that's not specifically the reason why the four of us ended up in partnership, but we did have a good rounding out of individuals that could write much larger checks such that our whole GP commit, while individually meaningful to all of us, was collectively to our fund, meaningful as well, if that makes sense. We were around 8%, right. So if you think 8 out of 32. And that, to me, is a much healthier mix because it felt like every time we were writing a check on behalf of our fund, 8% of that check was our own money. Like the four of us looking at each other. Right. And so it just created a much different level of. Of care.
- [14:25]
Host
Quite frankly, did that though with you all putting in different amounts that summed up to 2.5 million, did that at all create tension? Just kind of curious in terms of that. Some, a couple people would, I would
- [14:38]
Manica Blaine
say no actually because. And then this was maybe just the way that it worked out. I was the person, of the four of us that was probably the most responsible for fundraising. And so a lot of the relationships that came in, you know, as you know, they're back. Our fund was backed by 33 Curtin and former Lululemon executives at the time. Those were a hundred percent my partner's relationships for sure. But they accounted for maybe 3, 4 million of the whole fund outside of the GP. Right. So when you think about the $32 million fund, a lot of the relationships that came in outside of that Lululemon group, many of them were like BDC was a $6 million check. The very first investor in our fund, it was a million dollar check and it happened to be my uncle's best friend. Right. It was it my relationships as well, as well as my partners. So even though I came in with a lower personal GP check, I mean my Rolodex was tapped with, you know, everyone within my network that I knew may have an interest in investing in your early stage consumer. I was calling them too, as were my partners. All of us were really. But because I wore that, that fundraising hat, I don't think it created. So they're made for friction points, but I wouldn't say that was one of them.
- [15:55]
Host
So if you don't think that rich people should raise a VC fund that, or rather only rich people should raise a VC fund. But then how do you kind of reconcile that with, you know, funds that might have less percentage, does that mean per se that, that folks should raise less money? That it should be like that? It should be. Instead of trying to raise like a $100 million fund, maybe you raise 30 or $50 million fund. Is that kind of how you reconcile it?
- [16:23]
Manica Blaine
Kind of, yeah. I mean that's, that's the biggest piece. And I speak to these emerging managers, they're not looking to raise a hundred million dollar funds, they're looking to raise like, sure, you know, 10, 20, 20, $30 million funds. And so when I look at their GP commit, as you know, in some cases I've seen less than 1% and you know, there's two of them and I know they have more money than like, do you know what I mean? Like it just, it to me it just looks off, you know, it Just looks a little off. And again, this is not, I don't think there's any hard and fast rules. For me, it was just really a general observation that I thought. I think that in a way we encouraged many emerging managers to come into the industry, which on balance I think is great, may have led to some other consequences, but on balance I think that's great. I think the diversity is great too because to your point, I don't think it's just rich people that have a good nose for brand at all. I just think that you need to really be all in. You know, this is a commitment. Managing third party capital is not something we decide to do on a Monday and hand back keys on a Friday. It's a long term partnership, it's a long term commitment and I just feel like there needs to be more, more
- [17:40]
Host
actual alignment that makes sense. I'm just kind of curious because you're an LP in a fund and because I'm sure that you get pitched all the time to be an LP in other funds if on like a deck, again, like, like, like the GP's deck from terms of fundraising. If they actually put this, and again, this is just your perspective. It's not, you know, anyone else's perspective. They actually put like if you felt it felt like the number was low. Right. They actually put how much, how much they actually have like their full kind of portfolio and they said like, this is what percentage of portfolio, like the, the percentage of how much they are worth actually going into the fund. And even though it doesn't maybe seem that much on paper, like a lot, it could be a lot to them because, because, because it is significant. Does that change at all, your perception?
- [18:28]
Manica Blaine
I think so. For sure. Yeah, I think so for sure. I, I, I think I've never seen that, but I think it would be interesting.
- [18:36]
Host
It would be interesting.
- [18:37]
Manica Blaine
Interesting, yeah. Because I mean, the main point here is that it needs to be meaningful to the significant you feel is truly skilled in being able to identify, support, grow and then help these businesses reach a certain scale to then exit. If you feel that this person, let's call them, you know, Jane Doe or John Smith or whomever. I mean, that would be really great to understand as an lp, you know, not just, not just them saying, this is a significant portion of my net worth, like, can you show me that? Like, I don't know, I feel like, I'm not sure if you'd be allowed to do that as an lp, but if the GP wanted to voluntarily disclose that, I don't think it would hurt.
- [19:21]
Host
Yeah, I don't, I don't see how would hurt, but maybe I'm, maybe I'm wrong. I don't know. I think that's actually kind of pretty cool to be honest with you, saying, hey, this is how much clearly, I
- [19:31]
Manica Blaine
mean, now that, now that you're speaking, you know, you're saying that similarly, if it was, if it was somebody with hundreds of millions of dollars, you know, raising a 30 million dollar fund and if their GP commit was, was a million, you know, similarly, would you, would you feel good about that? Not really. Right. Because it wouldn't be, you know, it'd be a little bit of a dropping that.
- [19:51]
Host
Because if the opportunity is there and you're so passionate about the opportunity, why then aren't you capturing all of it?
- [19:57]
Manica Blaine
Exactly.
- [19:57]
Host
Right. Yeah, right. Understood, understood. So what is your, what's your next point about why the GPLP structure is broken?
- [20:07]
Manica Blaine
Yeah, the next one that I wrote about and, and, and I don't know if this, if people really understood it, but it was, it was that when you have a win in early stage consumer, it can sometimes be this like fund maker great, you know, return, where it returns your entire fund. But because of the way these GPLP structures are, are typically written in an lpa, a limited partnership agreement, you're typically under something called a European waterfall, which is like a whole fund waterfall, which means that in order for the GP to really win financially and economically in the upside of something going well, they need to return the whole fund. So American waterfall would be like a fun business by business one where if you, you know, invested in something and returned, you know, a three times or four times capital on that, then you could take carry out of that. But a whole fund waterfall means. No, no, no. Just because this one investment might triple or quadruple your money, it needs to like return the entire fund before carry can be had. And carry, my say carry, I mean carried interest, which for a gp, a fund manager just. I'm sure many of your listeners know what this means, but just in case they don't, essentially what it is, is it's the mechanism by which the GP gets rich. It's, it's, it's the percentage of profit of the fund that the GP gets to take home. Typically it's 20%. I've seen it as low as 15, I've seen it as high as 25 as well, but typically it's 20%. And what it means is that using really simple math, if you have a
- [21:38]
Host
hundred million Fund this episode is brought
- [21:41]
Sponsor/Announcer
to you by the Hidden Gems let's be honest, there's a lot of bullshit in the marketing agency world. So much underdelivering, overcharging and incompetence. You truly don't know who's good until you engage. And by then it's too late. That's what the Hidden Gem sells for. Powered by deep agency insider knowledge, they provide founders and brand operators with only brand beloved, highly vetted boutique agencies at preferred rates, agencies across media, creative, dev, design, events, social and beyond. All well covered. The Hidden Gems serves brands like Dr. Squash Monster Energy, Gorilla Mind, Figs and Sadva to achieve some of their biggest growth. And here's the best part. David Drexler, the founder, is offering his service free forever to anyone in the Consider VC community who mentions the show. So if you're thinking about hiring an agency, talk to the Hidden Gems first. It's free service, biggest bang for your buck. You simply can't lose. Link in the Show Notes and that
- [22:33]
Manica Blaine
a hundred million dollars turns into $200 million. After fees, expenses and all the rest of it. That's a hundred million dollars of profit. 20% of that is 20 million. And so 20 million would be what would go to the GP. Now I'm leaving out hurdle rates as well, which which complicated slightly. And what those mean is that beyond just returning a whole fund, the earliest instance in which a GP can collect carried interest is when they not only just return the whole fund, but the return that they're making is over a certain point. Typically it's 8%. Again, I've seen it lower than that. I've seen it higher than that. It basically means that you need to return everything and then provide an 8% return and then you get the benefit of getting 20% of the profit that you're generating. For me it's, you know how the LP thinks about it.
- [23:24]
Host
Wow.
- [23:24]
Manica Blaine
So what I mean by that is the way that the structure works currently under the European waterfall means that even if you're a really skilled investor and you have an early win and it's year three or four or five and you've returned back all of the capital, you're not really benefiting in any profit that you've generated for your LPs yet, because you might have 10 other portfolio companies that haven't yet generated a profit. And and so I think that delay in the win for the GP creates this other somewhat hazard to me, which is that typically they end up going to raise larger funds to be able to win Financially through stacked management fees. Right. Which means that okay, you've got one fund that's returning, you know, not returning but, but paying you a certain level of management fees, you raise another fund, you're now getting management fees on that fund. You're, you're producing more income, but you're producing income by way of management fees and not from the winds that you, you're generating.
- [24:23]
Host
Yeah, but then, but on that note, and maybe it's a typical, or I mean, I know it's fund dependent and all of this is maybe fund dependent in, in some capacity, but on the management fee side, does that typically get more like front loaded in a fund? And that's the reason why it gets front loaded where you get like two, two and a half percent for example, for the first, maybe call it three, three to five years. And then if it's a, if it's a ten year fund and then it might go to zero or like 05 then the rest really technical now.
- [24:53]
Manica Blaine
But typically there's a comm. Period and there's an investment term. Right. So typically a ten year fund life, but a five year commitment term means that you would get 2% or 2 and a half percent or whatever the management fee structure is on committed capital. And then in years like 6 through 10, you still get paid management fees, but it's now on invested capital. Do you know what I mean? So as long and, and so in a weird way too, I want to be really careful as I say this, but you know, there are some businesses that should end up as zeros, but if it turns into zero, it's no longer invested capital, it's still capital that's invested and so that GP would still get paid a management fee on invested capital.
- [25:36]
Host
Oh, interesting.
- [25:39]
Manica Blaine
Yeah. I mean at least, and I don't, I don't think, I don't think there's a bunch of bad guys out there. That's not what I'm saying at all. I'm just saying that I think at the very least if GPs were able to win early on their wins, I think some of these potential misalignments of interest might dissipate.
- [26:03]
Host
So are you, are you maybe pro. Are you pro. Not that you're pro anything, you're just kind of pointing out, you know, some of the.
- [26:11]
Manica Blaine
I don't want to be honest, I don't have the answers. I feel like. I wish, I wish, I wish rather than just, just sharing. Yeah. I don't. Just solutions that I don't come equipped with that yet but opens brainstorm yeah, no, no, no.
- [26:25]
Host
I'm just, I'm just kind of wondering, do you think for example, the SPV model for early stage, does that make a lot more sense if you are raising capital that isn't your own capital, right? Like you actually still have LPs per se, does that actually make more sense? And is, and, and is there, is there more alignment there? I guess at that. The hard part with the SPV model is of course your salary or the management fee, which usually that's non existent. But do you find that like that feels a bit more aligned? Because then as a gp, I'd imagine you can actually, once you get that win, you actually see that win yourself.
- [27:04]
Manica Blaine
Totally, totally. I see a whole bunch of other problems with SPPs, but maybe we can leave that for another podcast. But okay, but for this specific point, absolutely. I think it makes a ton of sense because you do all win together when something turns profit. And so, and so there is, I mean an SPV is essentially just that. It's an American waterfall done 10 times or however many times you choose to invest or bring a deal to the table. I think, you know, I think it's a smart route for somebody that is really passionate about investing that finds a great deal. You know, I think there are certain flaws with it as well. I get pitched SPVs all the time and, and, and, and I get pitched SPVs by, by folks where I'm just like, do you actually really believe in this or are you just excited for me to invest and you can collect a management fee and take a bit of carry off me, if this does win and like how much are you also putting in? So there's still, there's, there's still issues with it, I think, I think. But I get it, I get it. It makes, it makes sense to me from, from the GP's perspective why they would want to do SPBs. And I think from the LP's perspective it does more balance that, that, that issue.
- [28:24]
Host
It seems like part of your frustration, I guess back with spb, which is similar to you, which is similar to your first point, is do you actually have skin in the game? You know, are you raising an SPV just because, hey, it's a deal and, and I'm gonna be able to raise this and then, hey, if it works out, I'll get 20% of the carry. And I don't know, I don't even know if there's, I haven't come across SPVs where they actually have had management fees, but I'm sure There are, but
- [28:52]
Manica Blaine
it's like typically like fees and expenses which is totally expensive, but there's typically like a fee and there's carried interest on it as well.
- [29:00]
Host
And, but I guess it goes back to your first point of okay, great, you're, you're helping to put this deal together, which is great, but do you actually believe in this deal? And what, and how kind of involved are you? How deep are you on this deal instead of just writing up like a deal memo and just blasted it out to your, to your network?
- [29:17]
Manica Blaine
Yeah, yeah, for sure, for sure. I think, I think when it comes from somebody that's deeply close to the business, you know, as a real hands on advisor too, I think that helps a lot too because it affirms that part person's conviction around the business and commitment to, to really lean in and supporting the business. But yeah, there's, there's. To be honest, the reason why I've often, I've never done an SPB and I don't think I ever will. And part of the reason why I don't want to do it, I don't think I ever will is that I do have a really deep network of investors that I'm close with that I share opportunities with. But I want those investors coming into something that I'm coming into because like they know I'm not sharing this with them because I just need to like fill around and get a close I can get paid. Do you know what I mean? Like, it's like I want somebody coming into this and writing a check because
- [30:11]
Host
I think it's, you want that, you want all that money, you want them to realize the gains themselves, like 100%. You don't want, you don't want you to be, be. You feel like there's some type of misalignment if just because you happen to bring them the deal. Right. Which I'm not saying like it's still work to put, to put together sp. I'm not saying it's not, but just because, but, but essentially it's sourcing, right? Kind of essentially in terms of it.
- [30:36]
Manica Blaine
But I'm all about everyone getting their bang, getting paid. Like what they do and the work that they do, it just, it, it's never felt great to me. And so it's why I've steered away from it. If, I mean if I share an opportunity with the family office I'm close with, I want them to know that I'm gaining absolutely nothing from them coming in. But for the, I'm writing a check I think it's a great opportunity and maybe I am doing other advisory work with that business. I often am, not often, but I am sometimes. And, and, and I, I'm getting paid from the company through other works that I'm creating with them and other work strings that I'm helping them lead. But I just don't feel great about, you know what I mean, making that call and being like, well, if you write this check In, I get 2% of it, you know, it's like, it feels like, just doesn't feel right to me.
- [31:22]
Host
Yeah, it makes a lot of sense. It makes a lot of sense in terms of, from, from that perspective from an spv, you know. Well, I, I, I understand it from, from your perspective too, just because of how wide your network is. I understand it if, you know, you do, if you're a person at the middle of an SPV or putting together an spv and maybe you're, it's people that, you know that maybe don't have access or don't know about a particular space and you can, you're kind of the go to person. Now. That doesn't mean you're making, taking advantage of anybody or anything like that. But the, but, but the purpose is, is that you're kind of like, serve as a bit more of like the education partner for learning the space. And like that's, Yeah, I think the
- [32:04]
Manica Blaine
reasons why it does work and I know some people that do it and I think very highly of them and I think part of it too, you know. Well, first, there's two advantages. One, from the boundaries perspective, they're not collecting like 20 checks. They get to collect one check from one.
- [32:19]
Host
Yeah, yeah. It's like, okay, you want to go raise my round, go raise my round. That's fine, totally.
- [32:26]
Manica Blaine
But, and I also get the perspective from the underlying investor that, you know, gets to go to one person for questions and get answers to those questions. And, you know, this person hopefully is doing a great job of like keeping that investor group up to date with, you know, quarterly, you know, reporting or annual, like tax lips, whatever, you know, you like. I think, I think there's, there's, there's merit in it for sure. This is not something I'm doing.
- [32:56]
Host
Got it. That makes sense. And then, so that was two, two reasons in terms of why the GPLP structure is finally broken. What is, do you have any other reasons why you think that is?
- [33:08]
Manica Blaine
So the third reason I spoke about in the piece I wrote about was, you know, and, and I've heard this from so many other GPs as, as when you're in the work in early stage consumer companies that you're investing in, call it like 1 to 5 million, 1 to 10 million. I mean they're so young. There's so much to do and so many ways in which you can be helpful. But after a while it does feel like when you have third party investors, like they're your customers, you're reporting to them, you're, you're raising from them, you're maybe thinking about raising your next fund. So you're out there building relationships with prospective LPs, you're, you're just. The entire structure isn't as amenable to being as hands on as I think you probably would like to be if you're really trying to help these founders and these teams early on move the needle. And so it just takes you away from what I think is, is the real work in, in super early stage consumer, which again is like you've got five people around a table. So when you come in as an investor able to help with something, like you've just increased their capacity like by a ton. You know what I mean by being able to be like, I can help you take that on. Like, like, let me help with that. And, and, and, and you can't do that as much when you're a GP and you've got these LPs to manage and you have quarterly reports to get out and an annual meeting to host. And, and then you're, like I said, you're thinking about your next fund. So you're going to conferences, you're, you're meeting with family offices and groups that you're trying to build a relationship with. So they invest in your next fund. It's just taking you away from the real work. So it's, it's, I think you and I have talked about this before. It's just that the customer ends up becoming your lp, which totally makes sense. Right. They are effectively paying you and I think it takes you out of the real work.
- [34:55]
Host
Yeah. And what's interesting, we talked a lot about it on, we've talked a lot on this show before about how once you raise from venture capital, as a founder, you're kind of on a hamster wheel. And maybe that means that you're going to raise and raise next. It's kind of the same things for VC funds, right? It's the same, it's same exact thing. How are you gonna raise the next round? I mean, with the next fund. And that fund has to be Bigger. Right. And, and everything. That's why I'm, I'm so impressed with, with the funds and firms that actually stay their same their size or even say, you know, we invest in series A and seed, but we actually see a lot of opportunity in pre seed. For example, let's go actually a little lower and let's go earlier. Like that's so impressive in my opinion because as you say, you know, if you raise at a smaller fund, your management fees are not nearly going to be as, as big and there's a lot more, I would say, risk that comes with your job. Right. And that's really hard.
- [35:49]
Manica Blaine
It is, it is, it is. And yeah, I mean, listen, all I can share, and I, you know, and I'm happy to share more publicly here with you, and I plan to do so with my substack as well, is that I think the GPLP structure, while I think it absolutely belongs in this ecosystem, I need it in this ecosystem. So do founders. I think there's room for other structures and I think, you know, how I've kind of accidentally structured top not ventures is that not only can I write checks and that same GP commit that I would use for a fund, I now use to write direct checks into companies. And in terms of like how I earn a living and my salary, it doesn't come from management fees, but it comes from me putting it in my hand and actually doing real work with actual companies in my portfolio. And it's never ever a pay to play. I never invest in a company and say, hey, I'm going to invest in your business, but you've got to hire me to do like a, B and C and D. That's never how it works. That's never going to be how it works. I will write a check into a company and kind of put my own little sandwich board of like, here are the things that I know how to do really, really well and that I'd love to be able to help with if and when the time arises that you need that come at me sort of thing. And, and that's, that's how I earn what would otherwise be my salary as a gp, you know, and, and look in comparing notes with other GPs and knowing what I got paid as a GP, given the fund size that I had, I'm actually doing quite a bit better this way financially.
- [37:24]
Host
Wow, that's really interesting. That's really cool.
- [37:27]
Manica Blaine
And like I said, I really don't mind sharing this because this isn't, I'm not the kind of person that Wants to hoard. I feel like I found something where there's space to play. I would love to have more top not ventures out there that I could refer people to. I could say, hey, like I'm at capacity right now. And actually right now I truly am I part of the. One of the reasons why I wanted to do the substack too is, is this just a way that I can share more and be more additive to the overall ecosystem without taking every single call that comes into my LinkedIn or direct messages me. Like it's. It's tough. Right. And again, what I've learned is that there are enough top notch entries out there and I want to encourage other people to take that route if they can. Because to my point, can be far more lucrative. You get to really feel your wins and you're way more aligned with the founder and you're in the work. You're actually in the work. My calendar is no longer filled with. I got to get that quarterly report out to my investors, I got to plan my annual meeting, I got to produce this templated one pager that this institutional investor needs me to do every year. Like it's none of that anymore.
- [38:40]
Host
Yeah.
- [38:41]
Manica Blaine
And so it just keeps me in the work that I love.
- [38:44]
Host
How do you think that's fascinating? How do you think about. Because sometimes you talk to companies, I talked to companies and said, hey, you know, would love to bring you on or have you be part of this company and help on the operating side in terms of your skill set. We can give you advisor shares or we can give you some type of equity to do it, but we can't actually pay you. How do you think about, how do you reconcile that your. That yourself in terms of when it makes sense. Maybe take advisor shares where you're actually doing work versus actually a salary or some type of.
- [39:16]
Manica Blaine
Totally.
- [39:17]
Host
Yeah.
- [39:18]
Manica Blaine
It's taken me a while to get to this place. When I first started, I didn't really have a view and I didn't really care and I was, I was sort of like, well if you can pay me, you can pay me. If you can pay me an advisory shares, you can pay me. Like it was sort of just like, yeah.
- [39:30]
Host
How do you think about structuring it now?
- [39:32]
Manica Blaine
Totally. I think actually my very first advisory agreement that I went into was sort of like, well here's all the things that I can do for you. But like, you just tell me what you want to pay me, like whatever, you know, I mean it really was. And, and I'm not saying that's the way that you should go about selling yourself. I think, I think I had my own confidence issues to work through in, in my early days of getting this set up. But what I, what I've learned, my own notes that I'm happy to share with you and the world clearly, is that the best structure for me is a combination of cash and equity. And I think you should be really clear when you take on those roles of be very explicit about how exactly you're going to be helpful. And I think in order to maintain ultimate founder friendliness, which is sort of my motto in life, but founders should have the ability to kick you to the curb if you're not doing what you said you were going to do. I've seen so many advisors on cap tables where I'm sort of like, what do they do? How do they help? And it's sort of this, well, you know, like they introduced me to a contract manufacturer we're no longer working with. But I guess it was helpful and it breaks my heart. It truly breaks my heart. And I just don't think that's fair. And so any advisory agreement that I structure that has equity within it will always have a one year cliff. You know, they will always have the ability, you know, to, like, if we're in month two, month three, month four, month 11 and 28 days of our relationship and you feel like I haven't done what I said I was going to be able to do in terms of helping you, I haven't landed the things that we said that we were going to land together. Like, I want you to be able to part ways with me where I get no equity in your business. I just think that's fair. You know, you're taking a leap of faith in bringing me in to help with, you know, whether it be business development or helping you, you know, put together materials and think through fundraising strategies like run your financial model and act as your fractional cfo. I mean, I do many things. I do many things, but if, if you feel like I haven't done what I said I was going to do, I just don't feel like it's fair for you as a founder to part ways with your equity, you know, and, and, and in terms of the pay
- [41:47]
Host
thing, this episode is brought to you
- [41:49]
Sponsor/Announcer
by the hidden gems. Let's be honest, there's a lot of bullshit in the marketing agency world. So much under delivering overcharging and incompetence, you truly don't know who's good until you engage. And by Then it's too late. That's what the Hidden Gem solves for. Powered by deep agency insider knowledge, they provide founders and brand operators with only brand beloved, highly vetted boutique agencies at preferred rates. Agencies across media, creative, dev, design, events, social and beyond. All well covered. The Hidden Gems serves brands like Dr. Squash Monster Energy, Gorilla Mind, Figs and Sadva to achieve some of their biggest growth. And here's the best part. David Drexler, the founder is offering his service free forever to anyone in the consumer VC community who mentions the show. So if you're thinking about hiring an agency, talk to the Hidden Gems first. It's free service, biggest bang for your buck. You simply can't lose. Link in the show notes I think
- [42:41]
Manica Blaine
that, I think of it almost like a utility. If you're not paying for something, you don't use it. And so what I learned early on as I got started in top not and started to do consulting advisory assignments is there, there was a period of time where I was like, sure, I'll do this for equity only and no cash. I understand times were tight and this is Matt but what I realized is I wasn't being leveraged in the right way because the founder felt like they were a pain me in a way, it felt like when you're not paying for something, you just don't use it as well. You don't consider it the same type of resource. And so, and also because my model is so founder friendly in terms of not really earning that equity until you feel like, you know, I've actually delivered, I do need to get paid. Right? So it's, it's, it's, it's, that's, that's kind of where I've landed and I'm really flexible at the end of the day, like it's a long game for me. You know, it's, it's, I, I've, I've tried to be really flexible with founders and it's gotten to the point where like I'm only really working with portfolio companies like in my own portfolio. When I first started I was doing advisory and consulting with companies that I didn't invest in and I get a lot of interest, I mean getting a lot of inbounds for stuff like that. But I've decided I just, there's only so much of me to give and I'm only going to be doing that with companies I'm actually investing in in terms of like providing that, that level of support.
- [44:10]
Host
I know unfortunately to say this, but not every company that you invest in is going to make it right. How do you think about time spent overall and especially if you are working for the company? And have you ever gotten a feeling, for example, when you're actually working, working for a company and you thought, hmm, you know what? I actually what I thought that maybe this is the perfect founder, perfect timing, everything was kind of going their way, that maybe now they have some headwinds that I don't think they're going to recover from. And I don't think that this is going to be quite the outcome that we all expect because I know that, you know, when I talk to investors that, you know, once they once a company, not to speak for all investors, but some investors once, once a company, they have a, they obviously have a fiduciary duty. I'm talking about the GPLP investors that, that do, that do have LPs that, that have venture funds, that you have a fiduciary responsibility through LPs to, you know, try to spend their time on, you know, the companies that obviously are going to be returning the fund and try to maximize their time in terms of trying to return the fund. When you do have a company that won't be in that outcome, typically the response is all right, we're not going to be maybe spending that as much time with that, that company. How do you think about that with your own business? Because this is quite a different model in that you actually sometimes at times do get paid and you're actually part of like the operating team and then. But when things are maybe not going as you've planned and maybe you no longer had that belief, how do you think about your own time spent and if you should still going to keep working for that company or even, or even what to do?
- [45:41]
Manica Blaine
Totally. Yeah. I mean, it's such a good question. And I mean I typically structure my advisory assignments as like six to 12 months, right. So it's not like I'm getting paid a retainer forever. You know, it's like, it's like I'm very specific in what I'm doing. So as long as I'm still doing that and additive and helpful to the company, I mean, I'm here for it is the truth. That being said, I can't think of any companies in my portfolio that I have advisory in that I feel that way about if I'm being truthful. I mean, candidly, of the 15 companies in my portfolio right now, I hold advisory positions with four or five of them. So it's not, it's not an every company sort of thing at all. And those four, five companies, those are the companies in my portfolio that I feel strongest about. And that's the truth. So I haven't gotten there yet. I'm sure I will one day. I'm sure I'm going to go down an advisory path with one of my portfolio companies where I'm playing an active, really hands on role and, and I don't end up feeling so great about it. But while there are companies in my portfolio that I don't feel great about, they're not ones that I have advisory. So it's a tough one to answer it. But I think, I mean one thing I've learned just from investing is, you
- [47:01]
Host
know, it's also at a badge by the way.
- [47:02]
Manica Blaine
Like we see the whole thing sometimes. So even though sometimes it may even look like things aren't trending the way you don't always have the whole picture as an investor, you know, and it's not a good thing, that's not a bad thing. But it's just, it's, it's, it's tough to say. Right. So I, what I encourage investors to do when they're just, when they're in something that it's not really going the way I thought. Well, doesn't mean that you detach completely. You know, of course focus on things that are going well, but as best as you can. I think it is really important to continue to be a resource for those founders without completely sucking up all of your time. Of course. But you know, that's where that's, that, that's where that's what I've learned anyway.
- [47:43]
Host
Yeah, no, that makes sense. And I imagine that's also maybe one of the heartbreaking parts of the job
- [47:47]
Manica Blaine
where it's, it's sort of like this quiet conviction that you need to maintain and, and you want to be really supportive. But you know, you also need to focus on the things within the portfolio that are ultimately driving, you know, value and making sure that you're time spent in the best way.
- [48:06]
Host
Yeah, I also even just to your point about you may not know the, the bigger picture, one of the, one of the points that you made that stood out to me when you first came on the show was how you actually prefer companies that are actually very much slower to get to a million dollars than ones that kind of get there super quick. You actually are a bit nervous about that.
- [48:28]
Manica Blaine
I still feel that way.
- [48:30]
Host
Yeah. Can you elaborate? I know that you, you, you talked about a little bit on, when you previously on. But can you talk about why?
- [48:36]
Manica Blaine
Yeah, I think that, you know, if you grow really quickly, you, you've, you've nailed something in the mousetrap, right? You've nailed something in terms of capturing attention, whether it's the viral moment, whether it's a partnership, like, of course, like some things, some things hit really quickly. But it doesn't yet mean that you've built an enduring brand or that you're building a community that is loyal. And retention, as you know, is just like, it's what everyone is finally talking about. You know, coming into 2025 and now 2026. I feel like it's something I've been saying for a really long time I've been laser focused on, but I'm so glad to see the rest of the market catching up because when, when you speak to strategics and you speak to what they're looking for in their portfolios and I mean ultimately many of us consumer VCs want, we, we wish and dream that we can exit our portfolio companies to strategics. A lot of them are looking to fill gaps within their portfolio and they're looking for brands with, with enduring qualities, with really loyal, sticky customer bases. And, and, and, and you don't see that within the first year and you definitely don't see that really quickly. When a brand skyrockets so quickly, you know, it could just be a moment in time. It could just be this one trick, this one mouse trap that really worked and you know, the brand doesn't actually really resonate with the community. You don't yet know. And so I, to be clear, where I Invest is like 1 to 5 million dollars. So I do come in later. I don't come in day one of a business starting and be like, listen, take all the time you want to get to a million dollars. I don't invest, you know, some, some of a million. I've, I've kind of put that, that guardrail on. But I really love to see a business that has taken a little bit of time to, to figure it out and now they're really starting to scale and an unlock is happening and there's proof of, of just a really loyal, sticky community of people that, that, that support this brand, that love this brand, that can't live without this brand. You know, I think I gave the example of Sahajan we were, when I was last on the podcast and I mean, we just refreshed your cohorts like a little while ago and they've gotten stronger even though the company is my Forex since my investment a couple of years ago. What's so great to see is even with that scale, the cohorts, the stickiness of that consumer has gotten stickier. They're coming back. They're coming back still. You know, I think, I think when, when, when she first raised her first round in the summer of 2023, which is when I got involved and I invested, and at that point, I think it was like 11, 12, 13% of her lifetime value net sales came from customers that purchased 10 times or more. That is now closer to 20%. Can you imagine 20% of your lifetime value net sales coming from customers that have purchased 10 times or more? And you're growing, like, that's incredible. So I. It's just, it's. It's something that. And that, because this has been around for over 10 years, you know, Lisa started Sahajan in 2015, so it's, it's. It's really cool to see, and it just reaffirms the kinds of businesses that I'm really attracted to in consumer.
- [52:01]
Host
Totally. That's. That's such an amazing story. That's so cool. That's so cool. Why have you stopped investing in. In food and beverage?
- [52:09]
Manica Blaine
You know, it's so funny because I had somebody reach out the other day. It was a founder and really interesting food and beverage business. And I was almost like, you don't want me on your cat table. I have no track record of investing in food and beverage and it working out. So, I mean, there comes to a point as an investor where, you know, maybe you just have to be really honest about what you're not good at or what you can't see and what you can't, you know, really be helpful with or not even helpful with, but what you just maybe don't have the intuition for. And, And I haven't had success in food and beverage yet. Yet, you know, and maybe I will one day. But. But it's been a hard category for me as an investor, and, and so I've taken a pause on food and beverage. Not to say that it's not a great category. It's one that needs to exist. We all eat every day, we all drink every day. You know, it's. It's a category I love as a consumer. I love the trend. I love all of it, but it's just not one in which I've seen success yet. And so I think it's made me pause on the category.
- [53:19]
Host
That makes sense. That makes sense.
- [53:21]
Manica Blaine
Especially in early stage. I think it's different, right. Different strokes at different stages. But I think if I'm really specific in this one to $5 million, like that's my sweet spot. That's me acknowledging where I can be the most helpful helpful and where, you know, I'd like to get involved. Initially, I think that might just not jive with food and beverage, but I could be wrong again. Like somebody else out there can have this amazing track record of success and that's where they invest in, but it's not me.
- [53:48]
Host
One of my favorite reactions from you when we spoke must have been like a couple years ago or maybe, or maybe a year ago was what do you think about all of these, all of these kind of food and beverage VC firms also expanding their portfolio to
- [54:04]
Sponsor/Announcer
include beauty personal care, which I know
- [54:06]
Host
that's kind of your, your bread and butter. And I was like, you know, the margins look great. And you said, you said, well, the margins look great but hopeful. But, but have they seen the marketing spend? Because the marketing spend is, is, is, is always a lot higher in, in beauty and personal care. What do you, what do you think about today's landscape in terms of investing in beauty personal care from the investor perspective? Because it seems like it's become a pretty hot place to, in the early stage side to, to, to invest.
- [54:35]
Manica Blaine
Well, I think it encompasses wellness now, which I can't remember if we talked about that in the last pod that we did and I think you and I talked about this or it was on another podcast. But it's interesting how everyone's definition of wellness has changed. You know, wellness to me a decade ago, honestly felt like a candle company, maybe like you light a candle and you feel kind of good. Like I'm being, I'm being super honest. Right. This is just me as a consumer, not me as, this is just me as a consumer. But I mean, it's interesting now and I totally get it that wellness looks like supplements, wellness looks like, you know, this overlap with health and, and, and sexual health and, and fertility and all kinds of things. It has these really interesting overlaps in beauty as well. And I think that, I think it's a good thing overall that the definition of beauty now very much includes wellness. But I think it's made, made beauty in general as a category, like wider too, if that makes sense. You know, beauty isn't just now a makeup brand or a skincare brand or hair care brand because it now overlaps with wellness. I think the definition is much more far reaching and it's a big market. It's It's a huge market and so it would. It makes a lot of sense for me that consumer generalist investors are starting to play more into what is a very big category which has a strong track record of success from an exit perspective, where the landscape of strategic acquirers is so large. And so listen, I think I welcome it, especially from the perspective of founders. I mean, I'm not, I'm not against consumer funds. I think they're, I think they're necessary for the ecosystem, you know, and, and so I think that it's, it's overall a great thing. I'm hopeful though, that with the resetting of the market in the last couple of years, like valuations went bananas at one point, and I can see that now has really come down and I think we've, we've now reached a point where it's no longer the cockamamie state that it was several years ago. And arguably many people think, me included, that one of the reasons why it got so overheated was because of the supply of capital and the sheer number of non, you know, beauty investors, if you will, coming into beauty and really raising prices. So it's good to see that that sort of come down.
- [57:00]
Host
Yeah, no, for sure. I, I agree with you that some of the beauty prices have been, or just in general, really, in consumer. How has come, how it's come down over the past few years. Yeah, across the board, for sure. For sure. Manica, this has been such an amazing conversation.