Podcast Summary
Podcast: How I Invest with David Weisburd
Episode: E222: Why 90% of Managers Fail Before Fund 3
Host: David Weisburd
Guest: Conrad Chang, Managing Partner & Co-founder, Ensemble VC
Date: October 6, 2025
Brief Overview
In this episode, David Weisburd interviews Conrad Chang, a rare dual-experience investor who’s served as both an institutional allocator (at UTIMCO) and a senior venture capitalist (at Norwest and Bain Capital Ventures). They explore the paradoxes and pitfalls of building a successful venture franchise, the underestimated aspects of durable fund management, and what it takes to thrive—with a focus on why 90% of managers never make it past their second fund. The conversation traverses topics from portfolio construction to the criticality of trust with LPs, and offers a deep dive into combining data-driven, product-engineering mindsets with classic VC sensibilities.
Key Discussion Points & Insights
1. The Distinction Between Investor and Fund Manager
- Fund Management vs. Investment:
- Investing in great companies does not automatically make someone a great fund manager. Running a fund is building a long-term business focused on durability, team-building, and franchise creation.
- “Being a great investor is necessary but not sufficient to being a great fund manager… you're trying to build something durable.” – Conrad (01:10)
- Time Horizon:
- Great investors often underestimate the long time horizons required for fund management—where a single investment may last 5-7 years, a fund's lifecycle is 10-12 years or more.
- Advice: Fund managers must believe their firm truly offers something unique ("the world may not need another venture firm, but needs your venture fund").
2. Durability & Survival: Playing the Long Game
- The “survival” aspect of venture is crucial; often, the most returns are generated in just 2-3 exceptional years within a fund's life. Those who “stay in the game” are best positioned to benefit from power law outcomes.
- “Venture is, in some ways, about survival... You want to play long ball and think about durability because you want to be around long enough to successfully build that franchise.” – Conrad (04:14)
- Paradox: VCs may remain inactive during frothy times (e.g., 2021-22), resisting bad deals and thus appearing “crazy” to more active peers—durability trumps constant activity in the long term.
3. Power Law Dynamics & Staying in the Game
- "In order to hit these extreme outcomes, you do have to stay in the game. The way you stay in the game is doing the work..." – David (07:28)
- The path to outlier returns is often through patience, "boring" but critical aspects like portfolio construction, and navigating lean years until the “home run” comes.
- 90% of fund managers fail before Fund 3 because they cannot weather these stretches.
4. Talent Flow as a Leading Indicator
- Team over Individual Founder:
- More than just the founder’s track record, the presence and sequencing of the team—who is hired, in what order, and from where—signal a startup’s prospects.
- “It takes a village to go create an outcome... The most important thing is the team.” – Conrad (12:36)
- Sourcing Alpha: Identifying and measuring “talent magnets” and founder collaboration histories offers high-value investment signal, scalable through data and software.
5. The Foundation of Trust with LPs
- Trust as #1 Factor for Success:
- Across all roles, trust among partners and with LPs was identified as the most important ingredient for a durable and repeatable franchise.
- “Trust is 100% the most important factor… It extends from partnership, to the folks you hire, to your LPs.” – Conrad (15:40)
- Proxy Trust & Warm Introductions:
- Institutional LPs often base early decisions on “trust by proxy”—warm introductions from credible mutual connections.
6. Two-way Partnerships and Communication with LPs
- LPs are not just capital providers, but partners seeking education, collaboration, and mutual support.
- “It’s a two-way street... the best ones take a step back and help educate their LPs on certain areas that they may be interested in.” – Conrad (21:20)
- Over-communication, even to “unresponsive” LPs, is part of playing the long game—consistency builds relationship equity for tough times.
- Tactical Practice: Regular and substantive updates, annual meetings exposing LPs to the full team, and seeking their advice even pre-crisis.
7. Practical Tips for Difficult Conversations
- LPs do not want to hear of every minor operational issue. GPs must balance transparency with materiality, surfacing only significant developments for personalized, trusted LPs before wider communications.
- “Don’t be the girl who cried wolf… but you do want more transparency.” – David (35:33)
- Pre-building roots of trust ensures partnership resilience in crisis moments.
- “If you’re only talking to your LPs when you need them, it’s not going to feel good for them... But if you build that relationship ahead of time, they might even double down during difficult times.” – David (38:44)
8. Institutionalization Lessons from UTIMCO
- As endowments scale, consistent, repeatable process becomes more important than “gut feel.” The most successful funds build institutional discipline from their early days.
- “Process is important so you’re not collecting a bunch of shiny objects... and to have repeatability in your performance.” – Conrad (46:10)
9. Best-in-Class GP Practices Observed as an LP
- Transparency and Over-Communication: Giving LPs clarity on priorities, exposures, and thesis.
- Effort in Relationship-Building: Top GPs visit LPs, not just send updates.
- Firm-Level Relationships: Deep, multi-person relationships foster institutional longevity.
Notable Quotes & Memorable Moments
-
On the GP’s Identity Crisis (01:10):
“Being a great investor is necessary but not sufficient to being a great fund manager... when you decide to sit on this journey of building a fund, you’re building a company that happens to be a venture firm.” – Conrad -
On Survival in Venture (04:14):
“Venture is, in some ways, about survival... you want to play long ball and think about durability.” – Conrad -
On the Team vs. Founder (12:34):
“It takes a village to go create an outcome… the most important thing is the team.” – Conrad -
On Trust in Partnerships (15:54):
“Trust is 100% the most important factor… It extends from partnership, to the folks you hire, to your LPs.” – Conrad -
On Partnership with LPs (21:20):
“It’s a two-way street… the best ones take a step back and help educate their LPs on specific areas they may be interested in.” – Conrad -
On Communicating Bad News (35:33):
“Don't be the girl who cried wolf… but you do want more transparency. The default human benchmark is usually lower than the ideal one.” – David -
On Iteration and Institutionalization (50:37):
“You have to make this a priority and kind of work towards best in class, right? Excellence is not overnight… It’s constant iteration.” – Conrad
Timestamps for Major Segments
| Timestamp | Segment | |---------------|------------------------------------------------------------------------------------------------------------| | 00:00–02:47 | Intro, GP vs. LP perspective, Durability in venture | | 03:30–07:06 | Paradox of power law, Staying in the game, Survival as a strategy | | 08:44–11:44 | Examples: Investing too early, Talent flows as investment signal | | 12:05–14:57 | Importance of the team, Measuring team-building as alpha | | 15:32–18:35 | Lessons from UTIMCO, Trust as the foundation for franchises | | 18:35–24:43 | Defining & building trust with LPs, Two-way communication | | 25:31–29:55 | Analogies: Founder-GP-LP relationships, How/when to share personal vs. professional struggles | | 29:55–36:35 | Market dynamics, Communication thresholds, How to avoid the “chopping block” as a manager | | 36:49–41:54 | Communication best practices, Building roots of trust, Persistence pays off | | 42:56–47:40 | Operating a large endowment, Institutionalizing process, Lessons applied to building Ensemble | | 48:16–50:37 | Top GPs: What stands out from day one, Building firm-level relationships | | 50:37–52:57 | Iteration in fund management and product mindset | | 53:36–58:05 | Ensemble Fund 1: 12x return, Product/data-driven approach, Scaling proof of concept | | 58:10–64:03 | Secret sauce: How data narrows top-of-funnel, Stacking alphas, Contextualization of signal | | 64:14–69:14 | Examples of practical data-driven diligence, Infinite scalability, Advantage of product philosophy |
Ensemble VC: Data-Driven Fund Construction
- Product & Engineering Mindset:
- Ensemble's core philosophy is leveraging product and software engineering—not just typical “data-driven” investing. Their internal platform, Unity, drives a step-function change in sourcing and evaluating companies.
- Software Team at Core:
- Half of Ensemble’s team are data scientists and engineers, allowing exponential scale in diligence.
Secret Sauce
- Stacking Alpha Signals:
- No single variable predicts success, but composite signals (e.g., prior team collaboration, talent magnetism) provide an edge.
- Contextualization:
- Signals differ in importance by sector and stage; Ensemble customizes models accordingly.
- Scalable Diligence:
- Automation enables Ensemble to sift and target high-probability investment opportunities out of tens of thousands of startups, freeing partners for relationship-building.
Actionable Advice for Managers
- Build organization-wide trust—internally and with LPs.
- Consider fund management as building an enduring business, not a vehicle for a sequence of deals.
- Over-communicate and build relationships before crisis moments.
- Continuously institutionalize and iterate, applying process and product lens from day one—even as an emerging manager.
- Use data not just to source, but to continually refine the entire fund management equation.
Tone & Style
The dialogue is candid, technical, and thoughtful—blending hard-won career wisdom and humility with forward-thinking, engineering-driven innovation. It’s tailored for both institutional allocators and ambitious emerging managers looking for truly durable edge.