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- [00:00]
Kelsey
It's about fundraising. It's about managing your firm. It's about setting up a platform for growth and sustainability. And I think how we our platform and how we think about driving value for GPS is freeing you all up to do. I think the things that are really difficult, that require a lot of talent, require a lot of specialty, and that is raising capital and deploying the capital, picking good companies. It's not necessarily the third part, which is where we can step in and provide technology and data to allow you to manage the firm. I do think we can drive value around those other two pillars, but I would say one of our primary focuses is freeing you up to the things that I think you're really uniquely positioned to do well.
- [00:42]
Joel Palathinkel
Welcome to the Investor, a podcast where I, Joel Palathinkel, your host, dives deep into the minds of the world's most influential institutional investors. In each episode, we sit down with an investor to hear about their journeys and how global markets are driving capital allocation. So join us on this journey as we explore these insights. So we are live here with Kelsey. We were lucky to have Tony, one of the other co founders, join us earlier. So excited to kind of hear a little more from Kelsey. You know, what we discussed last time was really just hearing the origin story of Omni, you know, so I know, you know, you do have a legal background. So maybe what we could do, Kelsey, is just hear a little more about, you know, your career, how you supported venture capitalists and, you know, really how Omni came about and just tell us where you guys are now as far as just the evolution of the technology. The team, you guys have definitely scaled and come a long way. And I think we also have some time for you to do a little bit of a demo. So that way people can kind of see, you know, how they can leverage your technology to kind of support them to have better reporting and communication to LPs.
- [01:59]
Kelsey
Yeah. Awesome, Joel, and thank you again for having me and giving Omni some love by getting in front of your awesome cohort here. So, yeah, what's a bit unique about my entrepreneurial background and journey is that I will begin my, my career as a corporate attorney. So started my professional life as a lawyer, worked at some large law firms and started at Wilson Sonsini, which is where I met my co founder, Tony. So Wilson's a very large, well known tech law firm on the west coast and our company's actually headquartered in Salt Lake and coincidentally, they just recently announced opening an office there and so began my career as an attorney. And spent a number of years at large law firms doing corporate transactions. And really my specialty was representing entrepreneurs and management teams, founders as well as investors. And the, you know, part of the, what makes that experience really unique is I saw lots and lots of transactions and, and probably in order of hundreds of transactions as deal lawyer, either on the company side or the investor side. And I think what's, what's interesting about that is you. And for me I got the opportunity to work alongside entrepreneurs and see really particularly Wilson Sonsini, which is a company, mostly a company law firm, they mostly represent startups. And in that experience I got to see multiple different rounds of financing in different sectors, whether it was life science, technology, financial technology. So working with all, really all sorts of different entrepreneurs across different industries and got to see how deals were structured, the things that founders cared about when they're raising capital. And then the move to DLA really opened up my, you know, opened up my practice and my platform to working more with investors. So DLA is a much larger, more global platform and at DLA had the opportunity to work more closely with traditional venture funds, family offices, high net worth individuals, corporate venture funds. And so for me, the cool part about my legal experience was just getting to work at all sides of the table with different stakeholders and different investors. And I would say a lot of what Omni does today is, is shaped and informed by the experience that Tony and I had as deal attorneys. And quite frankly, a lot of the frustrations we had as lawyers putting transactions investments together, trying to bring parties together and just the, I think the realization that the industry we knew as deal lawyers was really lacking a lot in data and information and just the ability to access information and bring data into those multimillion dollar and, you know, $100 million plus transaction. So much of what we do today, and I think it flows across a lot of different dimensions of the company, is just informed in large part by our experience as attorneys. So what we built at Omni is a data analytics and infrastructure platform. We are bringing data and analytics to the venture capital and private capital markets. Our core platform that we've built today is we work with many venture capital investors and other types of investors like family offices that have direct investments in the companies. So what we do is really unique. We analyze and it's all sort of ties back to our DNA as lawyers. But the source of our data is the underlying legal agreements that sit behind the investments that venture capitalists are making. So these are the long, detailed, voluminous copies of contracts that sit Behind a typical series A investment, for example, we go into those hundreds of pages of closing documents, we're extracting lots of data, validating it, analyzing it. And then I think the platform and the technology makes it useful and actionable and accessible. So that's because sort of what we do at our core and how we're working more broadly in the ecosystem and we work with, I mentioned just the types of investors, but all different sizes of investment firms, from the Sandhill Road names that you all know down down to emerging funds that are spinning out their first fund. It's a $10 million initial fund. They're trying to build a firm and build a portfolio of good investments across the corporate venture funds and high net worth individuals and family offices. So kind of bringing a lot of those different players together. And at this point, the platform I think addresses a variety of use cases down to the specific role, whether it's a general counsel at a large firm or a CFO or to the investment team or even solo gps. And we can talk about how we drive value for solo GPS and emerging funds. But it's nice that the platform does also drive value for the multibillion dollar behemoth in the room too.
- [06:45]
Joel Palathinkel
Yeah, Kelsey, that's really helpful. One thing that Tony touched on, he gave a little bit of insight on what you need to think about when you're an emerging fund, maybe a nano VC and then evolving into your fund two and fund three. Can you maybe double click on that a little more in terms of your perspective as far as, you know, with tools like Omni or just kind of LP reporting. What do you need to think about as you're starting to scale and get to the institutional size of a fund manager?
- [07:16]
Kelsey
Yeah, it's a really hot topic and an interesting one. And Tony and I maybe have similar views and different views on this question and just really topic at large. But one of the cool things that I get to do at Omni at this point is we are, you know, we're developing analytics for at this point, a broad range of stakeholders in the private capital markets. It includes gps, like many of you on the line today. But I'm also doing a lot of discovery interviews and market research with limited partners and allocators and large sources of capital that actually fuel all of your funds. And so for me, it gives me kind of a unique window on how, as you follow this kind of the trail of capital, how allocators and LPs are thinking about investments. So I think maybe have some hot takes that we could Talk about. But I think for me, as I advise and talk with many emerging managers that are either spinning up their first fund, they're thinking about the longevity of their firm, and raising subsequent funds. I think there's really three aspects to. If you distill down venture capital, list down to three things. From my perspective, I think it's really focused on fundraising, focused on obviously picking very good companies. But the third pillar, which is really important that I think is, is a. Is a really steep learning curve, is actually managing your firm. So I dispelling, I think, some common notions of what it is to be a vc, it's only about picking good companies. Well, that's not all it's about. It's about fundraising. It's about managing your firm. It's about setting up a platform for growth in sustainability. And I think how we, our platform and how we think about driving value for GPS is freeing you all up to do. I think the things that are really difficult, that require a lot of talent, require a lot of specialty, and that is raising capital and deploying the capital, picking good companies. It's not necessarily the third part, which is where we can step in and provide technology and data to allow you to manage the firm. Uh, I do think we can drive value around those other two pillars, but our, I would say one of our primary focuses is freeing you up to the things that I think you're really uniquely positioned to do.
- [09:25]
Joel Palathinkel
Well, yeah, no, that's really helpful. And then when you think about just compliance, you know, what are some things that, you know, you need to make sure that you're. You're monitoring, you know, you know, and it sounds like you guys have a lot of really cool tools and capabilities that do that, that I know you're going to demo in a little bit. But, you know, what are some of the biggest risks that you see more prevalent with, like, the smaller funds versus the bigger funds? I can imagine, you know, some things that have been mentioned in the past is just kind of just reconciliation of, you know, shares and, and just making sure that what. What was on the system of record kind of matches, like what maybe you as a fund manager see. Right. Because sometimes maybe the numbers don't match up. So I think that's kind of a critical thing because if some of the numbers are off, I mean, that could, that could equate to probably millions of dollars. Right?
- [10:17]
Kelsey
Yeah. It can be what would seem like very simple and straightforward aspects of managing a portfolio, which is making sure you understand exactly what you own. And one of the Unique features about investing in the privates is these securities that you're investing in are pretty complicated in terms of the legal rights and the economics and how those function in different future follow on scenarios or different exit events. There's liquidation preferences. So it's much more complicated buying Google in a public market you actually really have to understand the security. And so our platform can do some pretty simple things like just surface and help you understand exactly what you own and confirm that what you think you own is what you actually own. And then we do more powerful analytics around the and I think part of the challenge quite frankly with I think emerging managers is when you pick your good companies and have good relationships, do you have the capability and the strategy to defend that ownership later when the companies break out? So that's something I would think, I think a lot about. And if I were spinning out to start a fund, I would think about as my job as a GP is at some level maximizing returns for my LPs. And I think one of the things I would want to think a lot about is how do you defend that ownership later? Where some of the largest absolute dollars are returned to LPs happens in the growth rounds. Some of the largest dollars are coming back and being returned to LPs from those growth investments. And so doesn't necessarily mean that you need a growth fund or a growth strategy when you're starting now. But I would at least think about that from a strategic standpoint and an investment thesis. How do you plan to defend that ownership later? And there's lots of creative ways to access capital for follow on investing, but do you have the right to do that if you're, if you're sourcing these founder relationships and you're early in the company's life cycle, do you have the legal rights to actually exercise a pro rata position later and those types of things. One, we can surface those insights for you, but it's also helpful to understand what's market when you're making these investments. And should you be, if you're say deploying against a seed strategy, should you be demanding pro rata rights in every investment that you're making and what does that actually mean for the follow on rounds that are likely to come?
- [12:45]
Joel Palathinkel
Yeah, no, that's, that's really helpful. So you know, maybe I'm always a nerd when it comes to product strategy. So you know, I would love to hear how you guys came up with like your mvp. So you guys have the legal background. Did you guys think about, you know, Just pulling this data because there's a. You know, I. I come from the fintech background, right? So I know with all these hackathons, there's people that kind of pull these APIs, and there's a lot of cool data providers that support, like, the fintech ecosystem. So is that kind of how you went about it in the beginning? Because there's a lot of cool, like, you know, APIs from, like, Edgar filings and other, you know, data sources. So is that kind of how you started, or did you kind of, you know, go about it a different way? So I'm always just kind of nerding out on how you guys came up with, like, your. Your first version, and was it really just kind of talking to a specific client and then doing more of a bespoke thing? Or how did you kind of get to the first problem that you solved and then really think about, hey, you know what? This is more of a B2B solution that could be repeatable. You obviously can't. I would say you probably can't always solve the workflows of, like, 99% of every person, but there's probably like 80, 80% workflows. Right. Where you have some product that, like, everybody needs. Right. So maybe you can talk a little bit about how you came from this professional background in the legal space, and then now you're kind of thinking about product and then trying to solve the problems with the first iteration, then scaling that.
- [14:16]
Kelsey
Yeah, it really comes back to what you do as a deal lawyer is spend your life in these private agreements. And I think a lot of the pain and frustration we had is you burning the midnight oil, spending hundreds of hours in these transactions as a lawyer. And then at some point in the future, it could be a month, six months, a year down the road. A client, a partner, someone in the firm, myself. I would have a question about that transaction. What did we do in that deal? How is it structured? And the way that we would go about getting that information is extremely manual. It lives in an unstructured PDF document. Got to actually go probably find the print version of it. Law firms still print a lot of closing volumes out, but I'd go find the version of the closing set and would have to review that file manually. And I suggest some of the frustrations were all of this information was agreed to, negotiated, it should have been captured and cataloged, and I would like to access that in a keystroke like that. Seems like a thing that I should be able to do in a multimillion dollar Transaction context. And so for us, a lot of the pain was around just as a lawyer, the data I wish I would have had at my fingertips. But how we arrived at the MVP was bringing that knowledge to the table with market experts and research, doing tons of interviews with all sorts of different Personas at VC firms, solo gps, but also interviewing general counsels at billion dollar funds, talking to CFOs, fund administrators, trying to just coalesce around like where is the. We have a good sense of where the data opportunity and the gap is, but trying to square that up with pain. And how can we bring value into a product that would address use cases today and how can we do that in a minimally viable way? So tons of market research and then we eventually figured out sort of initial go to market scope of data that would drive value. And then from that, I think to our team's credit, the product and the scope of data is very iterative and reliant on customer feedback. So you know, the scope of data may be started here, but as we took the product into the market and you start thinking about interacting with folks that have different use cases for the data, it's just expanded the scope and power of the analytics over time. So it's at this point pretty mature again into this in the sense that it can be valuable for a large multibillion dollar fund with hundreds of active companies in the portfolio, but also in the same vein, be valuable for an emerging fund that's got maybe 15 companies in the portfolio and you all probably know the portfolio like the back of your hand. But I can guarantee you as you begin, as you go onto your next fund and add more companies, your companies will begin entertaining capital raising rounds on a frequent basis. And you'll probably get to the point where there will be a deal on your desk almost every week is probably what it amounts to. It's just how dynamic and active these companies can be.
- [17:08]
Joel Palathinkel
Yeah, no, that's really helpful. Well, we'd love to take a spin into the product I gave you, share Access. So if you could give us a little bit of insight in terms of what you guys are building, give us a little sneak peek and then maybe tease us a little bit with some cool features to come, that would be great. Then I want to keep this interactive. So guys, feel free to chime in. I know Lance was asking about Asia, so Lance is an emerging manager in Singapore. So are you guys thinking about coverage in international markets as well? Is that like on the roadmap for 2022 or you guys Mainly focusing on like North America for now.
- [17:51]
Kelsey
Yeah, I mean we're at a high level, like in the business of servicing our existing customers really well. And the reality is you, you peel back the curtain between any fund operating in this day and age, they have investments outside of the US and so absolutely it's an opportunity that we're really focused on really for our existing customers. But the nice thing for us is that it does open up new markets and new investors and new VC firms to go speak with. But we're taking, I think a calculated approach in that focusing on our existing customers that actually have a decent amount of capital and investments overseas and driving value for those investments. So Singapore is definitely in the mix in terms of pretty active geographies where US VCs are placing capital, as is India, Europe, Israel. So I think definitely focused on it and would love to, just for the folk, I think the individual investing in Singapore would love an opportunity to understand and learn more about that market. It's definitely one we were interested in and want to do more research and discovery in.
- [18:55]
Joel Palathinkel
And is that a pattern that you've been seeing recently in the last year just kind of more, more and more overseas activity with firms like Tiger Global coming in, we're hearing news with them getting into Pakistan and Israel. So are you just seeing that more of a macro trend, US just kind of going more cross border and taking advantage of possibly some of these cross border B2B SaaS companies that are coming in at a more attractive valuation? I'm certainly seeing that with just all the fund managers that are coming into my cohort. So I'm seeing some fund managers, a lot of them, they're based in the US but they do have a cross border focus because sometimes there's really attractive opportunities you can get like maybe a $30 million company, but you know, that type of company, you know, in a different country could be probably like a pre money valuation of 10 million. So I've been seeing some of that. But I'm curious on your end because you guys have mountains and mountains of data. So you know, just was wondering on, on your end if you saw anything like that.
- [19:55]
Kelsey
Yeah, it's, it's, yeah, absolutely. There's, there's tons of investment, dedicated investment strategies outside of the US and I think LPs are also thinking about that access to, looking at signal for geographies that are at the beginning of their kind of explosive period. So I think one of the, just from a data perspective, the markets we're really interested in are Europe, Israel, and in India, I think Asia is also really interesting. But just how we're thinking about priorities. We are also a startup ourselves, so we can't tackle everything at once. But the ones we're probably most focused on are, yeah, Europe, Israel and India.
- [20:38]
Joel Palathinkel
Cool. So yeah, I gave you share access. Did you want to maybe pull, pull something up if you have it? If not, we can just kind of do more of a Q and A. Yeah.
- [20:50]
Kelsey
Joel, I think if it's good with you in this format, I like to say the platform definitely has a lot of sharp tools. So it really, I think it'd be the most valuable to demonstrate it for specific use cases. I think Q and A would be, would be awesome from my perspective.
- [21:05]
Joel Palathinkel
Yeah, that sounds great. Yeah. So let's see. Does anybody else have any questions in general about just, you know, best practices for, you know, when we were chatting with Tony, he just kind of had some high level pieces of advice for emerging managers. So, you know, any, any just general advice that you have for fund managers as they're kind of starting the journey? You know, they're, they're, you know, because I have a few people that are just starting out, they're just getting their, their fund docs, they're you know, forming the, forming the, the entity. So you know, what, what should they be thinking about right out of the gate as they're kind of creating the firm and going through this journey?
- [21:46]
Kelsey
Yeah, I think it's such a good question. And one, I think Tony and I think about it a lot and we're growing our business right now, but we try to think about it from the perspective if we were starting a fund, what are some considerations we would want to really look at. And definitely a big part of it is around the goals of what you're trying to accomplish that can inform the types of capital and LPs that you would want to talk to. So there can be a lot of just initial due diligence and homework around. I'm trying to raise a fund and this is my focus and my sector, my thesis, what types of LPs are tracking that and looking to invest actively in that space. And then there can just be a lot of kind of early screening too. Thinking about the types of institutions. If you're raising a $20 million fund, probably not a good idea to talk to an institution that has a minimum check size of $50 million. So it's those types of things to really do your homework and try to understand is kind of the addressable group of investors that would even Invest in a fund like mine and then I hate to use like buzzwordy stuff, but one of the things that actually matters in the fundraising process is differentiation. And like, let me qualify that with. I was just speaking with a pretty high volume LP and their funnel is 1400 funds this year. Just looking at this year they started tracking and we're thinking about top of their funnels, 1400 managers. I got that down to about 80 commitments. And so it's helpful to, if you're speaking to a high volume investor like that, that's looking at a ton of deal flow, separating yourself from noise and actually figuring out how you can articulate that differentiation is going to matter. They have to look at differentiation and be able to make decisions quickly when they're dealing with that funnel. So I think differentiation is really important and that can mean so many things. LPs are looking for differentiation across so many different dimensions, whether it's esg, investment sector, geography, which we talked about. And so I think it really squaring that up with what you're trying to do at your firm and trying to find a really good match for capital that's looking to invest behind that kind of approach. And from a macro standpoint, what's great about investing in venture right now is I would say generally speaking you have lots of available capital that is trying to get more and more access to venture. So the availability of capital, as I'm sure you all know, is better than it's probably ever been. And you just have at a macro level lots more that is trying to get access into the venture. So differentiation can really streamline and set you up to succeed.
- [24:28]
Joel Palathinkel
Yeah, you started talking about ESG and impact. Is that kind of a common thread that you're seeing from just interest with families? I only ask because when we had our allocator summit, we did a, we did a survey and you know, a big trend was fintech and healthcare. So that's kind of what I saw. And this is, you know, mostly on the east coast, but any other common threads that you're seeing as far as, you know, what's getting, what's getting the, the LP's excited. You know, obviously performance and track record and networks is one thing, but I wonder is there, you know, because you guys are on the west coast and you know, out in Utah. So I'm curious if there's a different appetite or just things that are getting these LPs excited because that might be good insight for these, these fund managers to be aware of as well to be aligned to.
- [25:16]
Kelsey
Yeah. And LPs are definitely, I mean mostly investing in the human capital part of what you're doing. And so there are, there are things to differentiate just around diversity right now. If you're a diverse manager, there are sources of capital out there that are specifically looking for you. That can be one, one way to think about it. And yeah, ESG is a hot topic and it goes back to like sort of depends on which LPs you're targeting. But if it's a state run institution that has a regulatory framework around it, but it also answers to the public, there might be specific parts of their ESG platform that you could, you could be relevant and differentiate from and make it a really attractive investment for them. You know. Also if family offices or high net worth individuals are part of your focus, there can be specific family offices that are looking to make an impact in a certain sector. So I go back to like the homework is really important on your end too to do the due diligence that you're even targeting the right LPs or whatever. Right checks into a firm.
- [26:17]
Joel Palathinkel
I've been seeing a trend of a lot of family offices also start their own funds as well. So they'll put in some of their own wealth into the fund and then they'll also lever up and raise about 150 to 200 million dollars funds on top of their own commit. Their commit is obviously much more than a 1%. But I was wondering if that's something that you're seeing as well because that might be a different profile for you guys too. Just thinking through those needs of those Personas as well, because they're thinking much more long term and there may not be maybe a 7 to 10 year horizon to kind of return the capital. It's more of like probably a recycling vehicle or just kind of a.
- [26:57]
Kelsey
A.
- [26:57]
Joel Palathinkel
Vehicle that's kind of working in perpetuity. But you know, is that, is that something you guys are seeing as well in terms of just the allocators also becoming fund managers?
- [27:07]
Kelsey
Yeah, definitely. Like a co invest part of their operation is something we hear all the time. And I think a lot of, a lot of LPs are looking for opportunities where they can co invest and they can maybe access their own larger sources of capital to put at work at later stage rounds which require bigger checks. So I think part of it is that sort of proprietary deal flow. If you do identify the big companies we definitely see whether it's family offices or even larger LPs, there is an appetite to co invest alongside their managers. And there could be, you know, could be economics for the managers there too. It's not just you're passing the deal to your LPs but you can have sort of shared upside and those opportunities. So absolutely. Direct deals by LPs is, I think it's going to continue. That trend is going to continue.
- [27:57]
Joel Palathinkel
Yeah. I mean a commenter that I've also been hearing from LPs is just investing in great managers to just get access to your point, right. They, they want to go direct but a lot of times there's really, really exciting opportunities that they just can't get into. It's just the, the opportunity fills up really fast. But if they strategically are able to invest in a manager that has that unique access, then they can get the access and get the exposure at a more broad level, at an index level of all the companies. But then if they have those co investment rights, then they can hopefully get share in some of those outsized returns at the constituent level investing in those direct deals as well. I've been hearing the same thing. It's almost like another sourcing mechanism because normally some family offices and LPs they'll hire like their own staff, like their own associate or principal to try to, you know, organically source the deals. But you know, leveraging kind of maybe a small nominal allocation into a manager could also equate to a great way to source deals as well. So sort of, yeah.
- [29:02]
Kelsey
One thing that's reminding me of a conversation I was having recently. So at a very large firm and the ways LPs can do diligence, the topic of attribution, like who, who, who at the firm gets credit for the investment, it can be a pretty nuanced analysis. So at a, maybe a really large mature vc, it could be an individual or team that gets attribution for sourcing the deal. It could be a different individual and a different team that actually manages the founder relationship, could be an entirely different team and individual that analyzes and should get credit for the follow on investment strategy. So I think one of the challenges as a smaller shop is you sort of have to do all of those things yourself. But I tell you, like at the large end of the spectrum, LPs are even due diligencing on different segments of the investment approach for a single portfolio company.
- [29:53]
Joel Palathinkel
Yeah, no, that's great. And you know, what I've also been seeing is one of my mentors told me that there's also some databases, I think there's some institutional databases where you can, you know, Submit, you know, your firm or yourself to kind of get that attribution as well. That way, you know, when, when you know, these bigger LPs are diligence and you, you know, at least you can pull up, you can come up in some of those databases as well. So is that, is that something you recommend as well?
- [30:23]
Kelsey
Yeah, I think, I think attribution is probably one of the things they care about the most. And how do you, how do you actually sort of back up the, you know, real or hypothetical portfolio that you're presenting? And it goes back to my human capital point. Like, I think a lot of LPs are looking for a long term and you know, the fund cycle is long. It's like 10 years. I mean that, that might be changing. We'll see how that evolves. But they're looking for a long term relationship and there are, you know, some LPs that have 30 plus year relationships with their firms. So how you can really defend that, what you're kind of claiming is attribution is super important. Yeah, it's part of the diligence process. And I think really sophisticated LPs can go pretty deep on just the attribution subject in terms of the own due diligence that they're going to do.
- [31:15]
Joel Palathinkel
Yeah, there's, yeah. So I think, Ryan, you're mentioning Prequen, you know, so that's, you know, are there any other platforms for, you know, just maybe just helping with better attribution, I guess. Is there or is it really just kind of. Yeah, I guess. What, what are some ways that you can develop that attribution? Is it, does it just automatically get picked up through like the EDGAR filings or are there any other, you know, tips that you, you'd advise these emerging managers to kind of, you know, just get better exposure of their track record, especially if they're super early. Right. There's, there's probably some time to liquidity and getting credit for some serious returns.
- [31:54]
Kelsey
Yeah, I think there can be, it can depend on a lot of things. If you're spinning out of a pretty mature venture shop, I think there's ways that you can, you know, you can talk about the portfolio that you built or helped build. If you're not coming from venture, coming from a company or an operator, what we see is you may have built an angel portfolio over five to 10 years. That's, that you've done in a really strategic, kind of deliberate way. And that can be, that can be a portfolio that you look to as informing your investment thesis. For an institutional fund. And then I've even seen there's, there's lots of creative approaches to how you could think about attribution and what you would, what you would ultimately want to put forward to a potential LP to convince them to make an investment in your firm.
- [32:40]
Joel Palathinkel
Yeah, there's, you know, that reminds me of one of our first sessions in the last cohort. One of, one of the mentors came in. You know, one of the LP mentors said that they do, they do track like a synthetic record because some of the people that are on their fund, one, they do have like an angel track record. But it's not an institutional fund. Right. So you can kind of piece together at least indications of good access to quality deals. And then you can kind of look at Those companies, other VCs that co invested. So I think you can still get credit just from showcasing that you were on the cap table. And you know, just, just pulling just that data as well is kind of in a lot of those systems of record. So I think that could probably be pulled up somewhere even just, probably even on Crunchbase or PitchBook. I could probably, I know PitchBook sometimes too, they probably do this as like a growth strategy. But a lot of times PitchBook will reach out to you and say, hey, notice that you invested in this deal. Is this correct? And then you can actually go in and tell them to update the data. And then I think that for them is an interesting funnel for them to maybe hop on a call with you and, and sell PitchBook. But it's also a great way to kind of just make sure those records when people Google you come up, which is really good. So.
- [33:54]
Kelsey
Yeah, yeah.
- [33:57]
Joel Palathinkel
And then as far as, you know, LP pipeline strategy, what, you know, any feedback that you have as far as just building, you know, an engaged LP community, obviously there's different rules for the way that your fund is structured. Right. So there's people that are like under 501C that can talk about it on Twitter. But you know, any, any tips or any strategies that you've been seeing from the managers as far as just kind of building an engaged and active pipeline. And also right now it's the end of the end of the year, so you know, people are just kind of wrapping up. So any, any tips with just kind of, you know, the holidays with things winding down and then maybe just getting ready for, for January, I guess. Do you, do you recommend conferences? You know, creating content? I guess the people that you've seen just in your career that have been really Successful, maybe. What are some, Are there any common threads that you've seen? And I'm happy to keep this interactive too. So guys, if you got, if anybody else, any of the managers have any wisdom, feel free to chime in as well.
- [35:03]
Kelsey
Yeah, the timing goes back to like sort of understanding your, your target, target LPs, but it turns out that the timing, even around sort of tax planning and the LP's own investment strategy can matter. I mean, I know there are LPs that would prefer to make investments this side of the calendar year versus the next. There could be a lot of reasons for that. So I think there probably are still lots of deals to be had throughout the rest of the year. And it does get into sort of understanding some of the motivations behind other allocators deploying capital. But there can be some pretty interesting arbitrage there as to why, why you should try to target capital this side of the year.
- [35:46]
Joel Palathinkel
Yeah. Yes. There's some people that want to know a little more about the products. We can, we can take that offline. What, what other questions you guys have? I guess maybe we can take some questions. We have a little bit of time here, but anybody in the audience have any questions about just LP reporting in general or just best practices for managing the firm and fund?
- [36:12]
Kelsey
Yeah, I had a quick question, Joel, for Kelsey Kelsey, you were describing the product in terms of taking a look at all the underlying legal data. Do you guys as a shop also take a look at your own aggregated data to see what kinds of deals actually make the most sense in terms of structuring? And then would you report that back to the managers to give them a sense of, you know, what kind of legal structure makes the most sense? If they're, you know, whether they're seed or Series A, these kinds of, you know, pro rata rights make the most sense or the way that this contract is actually best practice. You know, those kinds of insights as part of what you guys work on. Yeah, so one of the, It's a good question. One of the cool things we're doing, and I'm pretty sure this may be a hot take, but I'm pretty sure we were probably the first founding team in history to use real market data in our own fundraise. So when we raised our Series B, which was led by JP Morgan, we use market data just at the founder level in our negotiations with JP and JP Morgan, but also other investors to help just inform what we're trying to accomplish together as capital partners of ours, but also as a Business. And the data was extremely informative and helped, I think, shape discussions and move discussions in the right way, where having those same conversations in the absence of data can be, can be challenging. And it's sort of the blind leading the blind at some point. So for us, it was really cool to access that data and it covered topics everywhere from dilution to valuation to size of option pool. We looked at the database to see for a company in our stage and sector raising this amount of money, how should we think about market parameters? And I don't think market data will ever dictate how you all are structuring your deals, but it's super important to driving negotiations in a really good direction. So we definitely used it and we do have features in our platform that allow you to access market benchmarks and information in terms of your own deal structuring.
- [38:19]
Joel Palathinkel
Yeah, one topic that I'm really excited about too is just a convergence of public and private markets. I know I've spoken to a few people about this on the string here. But you know, with the crossover funds, there's public markets that are kind of getting into private markets. Do you think that's something that, you know, is just going to continue to evolve and then have you got, you know, you talked about pulling in some market data, right. So do you think that will eventually cascade with, you know, kind of your product strategy to kind of go into more of these, these hybrid funds and then just long term, what are some things that are just probably still far away, but just kind of next generation things that you're excited about maybe to do on your roadmap, you know, whatever you're allowed to share, but you know, would just be curious to know, hey, you know, long term, what are some exciting opportunities or maybe just really complex challenges that maybe there isn't a solution for that would be exciting to kind of innovate on?
- [39:16]
Kelsey
Yeah, definitely. Focused on how we think about that is the evolution of private markets. The main trend that we're seeing is more and more capital coming into private markets and a demand for that capital actually trading hands more frequently than it does now. And that's kind of in the subject of liquidity. So how do you actually turn unrealized to realized gains in performance? And one of the historical staples of private securities is they're illiquid, they're hard to get liquidity for until there's the big event, the IPO M&A event. And what we see is lots of innovation, lots of need for data to facilitate more liquidity. So we're certainly really just excited about more capital and growing capital markets and how they're evolving. And just the as those markets I think evolve and mature, the need for data, the need for information to facilitate better deal making and better transactions. So that's like high level kind of what we're, we're putting a lot of placing our bets on is that these markets are going to continue to grow and evolve. More capital is going to come in, there's going to be a higher demand for even more demand for access to early stage and startup companies and venture. And we're certainly putting a lot of our product roadmap around that vision. Yeah.
- [40:41]
Joel Palathinkel
And then when you talk about, you know, you mentioned liquidity, I think two exit points that immediately come to mind is obviously selling your pro rata rights. You can, you know, spin up an SPV and give those pro rata rights to people and then you can also just kind of sell into the secondaries. Are there any other exit points for liquidity? I mean probably just quicker exits. Right. People are strategically making other exits. But just curious if I'm missing anything as far as just other things that you're. Or just things in the future of like vehicles to kind of get to, to quicker liquidity that probably that more. Maybe a real time, not real time, but just much more frequent digests of data and calculations.
- [41:22]
Kelsey
Yeah, it's, it's. The conventional kind of structure of a private equity or venture capital fund is certainly changing and part of that is this notion of liquidity. So what we see in our data is there are liquidity strategies that are truncating that 10 year kind of fund cycle. You can capture venture returns on a pretty quick timeline. And there are liquidity providers, there are secondary funds and capital providers out there that are trying to access those deals at that part of the growth cycle. So definitely I think it's one of the probably most interesting parts of the market is how fund construction, portfolio construction, liquidity strategies is changing and evolving and it's high. This is high frequency stuff we mentioned kind of tiger that's coming in and just doing some pretty incredible things that we haven't really seen happen in venture. And there's so much activity and opportunity to continue evolving for private markets. And just back to my experience as an attorney, there's the way that deals are done in the private markets today I think will look entirely different in 10 years, even 5 years. It looks even different. I've been out of law now for five to eight years and it even looks a lot different. Today than it did when I started practicing.
- [42:46]
Joel Palathinkel
Yeah. And I mean, I've been really going deeper on Web three and there's just a lot more people having a liquid strategy with crypto. Right. They do some Web3 venture deals, but then they also have some holdings that are liquid as well. So I think that's going to be more prominent. And then now there's NFTs, so tracking whatever the cost basis is for that, and then just understanding how liquidity happens. And then somebody also anonymously asked me a question about just funds tokenizing. I mean, I heard a lot of that. I heard a lot and saw a lot of that, like in 2017. But then it kind of went away with the whole ICO craze. But I can imagine probably some of that. It's just the crypto and web3 ecosystem is becoming more mature now. There's more traction. So I see it having a place somewhere. But have you had started to have some inbound, interesting conversations with funds that are thinking about that? Because the crypto strategy is a whole other game. Some of those securities are going public in three to six months on these crypto exchanges. And then I wonder if some of them also have a hybrid strategy with ventures. So I was just curious if you started to hear some conversations on that. And then do those people need a special place too, as far as a different user?
- [44:17]
Kelsey
Yeah. So for me, one definitely falling outside of my general swim lane of expertise. I can tell you our product and technology team is really, really focused on this subject. What I do know is how quickly crypto has come onto the scene and how quickly there's also a very, you know, there's lots of demand for understanding the data and how those markets function and. And just the need for a provider like AMI to come in and analyze that segment. So we're really focused on it. And I know from a technology standpoint, we're really, really focused on it as well.
- [44:51]
Joel Palathinkel
Yeah, no, it's really helpful. Yeah. So any. Any other questions, guys?
- [45:02]
C
Hi, Kelsey. Thanks for the discussion and presentation. I think in earlier stage funds and looking at resources and how you're spending your management fees, do you view that the development of this platform is either making super associates, or do you see those roles kind of disappearing more?
- [45:29]
Kelsey
Yeah.
- [45:29]
C
So tough question. I know, but I guess.
- [45:35]
Kelsey
How I think about how I would want to. Well, one, I think your firm should have a data strategy. How are you going to leverage data? I can tell you the largest and most sophisticated firms are leveraging data. They have entire teams of engineers and folks thinking about data strategy and how they're deploying capital and raising capital. So as a firm that doesn't have nearly the resources of a $400 million seed fund, for example, there is an element of competition there and just wanting to think about how can you level up your, your firm's operations to meet a data strategy that's fit for 2021 and good to know sort of what the big ones are doing and how quickly they're moving. And I mean that in all seriousness, there are lots of resources being allocated within a very large firm around their firm's own data strategy. So I think for, you know, for a solo GP or for an emerging manager, there are platforms and technologies that can allow you to level up to bring and execute on a data strategy that large firms are also looking at as well. Was it that? Did I answer your question?
- [46:48]
C
Yeah, you did. You know, it's always, as I said in emerging funds, as you're looking in terms of allocation of resources, our associates and principals play fairly key roles for us. And I guess where I'm trying to look, as you go through an ROI of looking at technology, I mean, we spend money on PitchBook, Crunchbase, F6S. We are developing our own data platform also. But we do do very manual today going through. We have 35 companies in our portfolio and we spent a lot of time in the deal room. It is a big time sink. But as I said, I was flippantly asked around costs, but I can kind of assume probably what your platform costs are based on value that it could provide. But really looking in the same. Sorry, I apologize, I have a bad cold, so I sound a bit like Daffy Duck how you make that transition. But is the aim from a data strategy in the sense of making the partners super strong or is it about removing a lot of legwork that happens in the associate and principal side?
- [47:58]
Kelsey
Yeah, it's a good question. And I think I would be hard, I'd be challenged to tell you that anything I'm doing is going to make you a better investor. Right now, I think five years from now, as our platform evolves and these markets evolve, I think, well, maybe have a different discussion about how data can be actually make you better investor, can drive returns. But I do think like at a very foundational level I'm thinking about it is that LP that's looking at 1400 managers and they're trying to get down to 80 to 100 commitments. That's an opportunity where I think you can let data be your differentiator and you will differentiate. If you are very tight around your information, you can answer questions about the portfolio, your investment strategy, how do you think about follow ons? What is the co investor syndicate that look like for you when you make an investment? Who follows on in the rounds that you you lead? Those types of questions are, are really rudimentary, but things that you can answer, if you can answer them and present really well to an LP that's also looking at a $600 million firm that has their operations dialed in very tight. They have entire teams of people that are focused on these types of things. I think if you can kind of match the posture of a large firm from an operations and data standpoint and just from a reporting standpoint, you will differentiate. So I think absolutely. Data, as we evolve as a company, as I think as these markets evolve, I think leveraging data to make you a better investor, to allow you to raise better funds and find signal and alpha faster and in a more unique way is certainly possible. But I think how we're even approaching it today is just trying to go back to my three pillars. Raising capital, picking good companies, managing and running your firm. I would rely on scalable solutions that help you kind of manage the firms, manage your firms, the operations and the data to free you up. I mean, your time is limited. I know how much, how hard you all are working. And so if we can free you up to do the things that you're just uniquely positioned to do, which is pick good companies and raise capital, that's a win for us.
- [50:01]
Joel Palathinkel
Yeah. You know, Doug Dyer came in. He was awesome. You know, he used to be an LP and he had a really good Excel spreadsheet, which was like a budget. And it was like, you know, it tied into the management fee. So the management fee would flow into a really thorough analysis of like your budget. Right. So if you have a salary, you know that's going to be taking up a portion of your management fee. So you need to be thoughtful of that. And then there is a fixed amount of money that you have for different software and tools, whether it's Omni and Calendly and Zoom, all those things add up. So I think another thing that you want to think about is if you save money, but then you're creating more overhead because you have to do a lot of manual work, then I think you could have to pay more money for the pain of fixing the mistakes that you made. If you made a really costly mistake where you have to pay a fine or there's a Compliance issue, then that would, you know, thinking through that. Right. That could probably cost a lot more than having to pay for a solution or a software that could, that could help you not deal with that. So I think part of it is also, you know, valuing your time and then the risk versus, you know, and then just balancing that out with your budget as well.
- [51:18]
Kelsey
So yeah, if you could, we talked about pro rata, but if you should have, based on market data and based on other firms that are similarly situated, if you should have had pro rata rights and you don't actually have those rights and you get elbowed out of a follow on round that I can guarantee you the returns or the missed returns there are going to cost you a lot more than what you're going to spend sort of understanding those rights in the first instance. So making sure you have them.
- [51:48]
Joel Palathinkel
Yeah, yeah. Fred Wilson wrote a post about that, about just honoring the pro rata rights. But do you see, you know, I guess from a legal standpoint and then just kind of from the tech side, is that a common thing that happens? People just, they just decide to box you out or, you know, I guess how can that, how can firms prevent that, I guess from not getting boxed out? Is it just better communication? Is it something in writing to kind of mitigate that? Or how have firms tried to handle that risk, I guess, or is there not a solution for it? You just try not to let it happen?
- [52:29]
Kelsey
Well, yeah, I think the best approach is to get them contractually it's part of your investment. And I think sort of in addition or even in a substitute for that, it does come down to relationships and you can get allocations in later rounds because you're a really trusted advisor to the founding team. And those can be contractual or not. You can also get elbowed out for those same reasons. And the alignment of interests can change among investors and founders at different stages too. So a lead investor to later round might in some ways be more aligned with the founders than you are as a seed investor, for example. So contractual rights can de risk a lot of those things. But still, ultimately I think comes down to relationships and your ability to add value to the founding team or to the company as an investor.
- [53:21]
Joel Palathinkel
No, that's really helpful. Yeah, I think, you know, that's just kind of a lesson that I've learned just in my career and venture. Just, you know, one thing that's helped with me also is really just the currency of connecting people. So I'm not sure if you resonate that with that too but, you know, if there's like an LP that maybe is focused on health care, connecting them with maybe another LP that's also interested in healthcare that could have a synergy, and then also possibly even connecting them with a fund manager that maybe has access to those networks and communities. So, you know, definitely, you know, in my, in my experience, you know, being a connector in general has been really helpful as well. And I just found that pro rata article, so send that to you guys as well. It's pretty good, Pretty good reading. So, you know, we got about five minutes left, so if anybody else has any final questions, chime in. What I always do at the end, Kelsey, is I asked the. The guest speaker to just kind of share any, you know, words of wisdom from maybe a mentor that they had or, or from, you know, maybe a leader at their. At one of their past jobs or family members. So any just general words of wisdom for, you know, emerging managers or people just trying to start their, you know, maybe maybe get into their second, you know, fund from. From fund one.
- [54:42]
Kelsey
Yeah, that's a. That's a good one. There's lots of nuggets. There's a lot of how I. Yeah, man. I think the human capital part of what we're all doing is so important. It came up in just the pro rata question. Your relationship with Founders Matters. LPs are investing in people and I think establishing, establishing trust and really approaching sort of understanding that dynamic in these markets. I mean, it is. This is a business and we're investing capital, but so much of it operates on relationships and interpersonal dynamics. So it might be the case that you fall in love with an LP and for whatever reason, that LP can't make the commitment to you in fund one. But if you work and develop that relationship, they might show up in a later fund with a very large check. So it is part of building out your network. And some of this does take time to marinate, but you just never know later when people could show up and actually be a really valuable relationship for you. So for me, I guess human capital relationships and do right by people.
- [55:49]
Joel Palathinkel
Yeah, I mean, one thing that I'll also add just from getting all these insights from you and Tony is really just building a solution to a problem. So, you know, whether you're in business development or marketing, you know, if you're really solving a problem, then you're really, you know, hopefully able to change the world. Right. So you guys saw a problem and you guys solved it. I think when you're building a firm, you know, trying to find, you know, what your thesis is and maybe align to that. And that could be something that's of interest to the LP. So kind of to your point, you mentioned targeting LPs, so. So if there's definitely LPs that are trying to get into really exciting fintech deals, they've had a problem getting boxed out or just not included, and you're the one that can kind of give them that unique expertise. I think that's really interesting. And then there's another fund. He's not here today, but he focuses on fintech in Southeast Asia. So I feel like that's a really unique niche and there's a lot of high interest in that sector, especially in that region. So if there isn't too many other players, then you have really a huge competitive edge.
- [56:57]
Kelsey
You.
- [56:57]
Joel Palathinkel
You definitely stand out because it's just a super, you know, very, very focused area to get into. So that's. That's what I'll say. Just kind of to. To add on to some of the insights that you guys gave. But. But yeah, Kelsey, thanks so much for your time. Jake, everyone else from the Omni team just giving you guys a shout out. Appreciate all the support. And for everybody else, thanks for joining. And, you know, you can reach out. Looks like Jake pinged his email, so you can reach out to those guys if you guys need anything. So thanks for everything.
- [57:30]
Kelsey
Awesome, Joel, thanks a lot.