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- [00:00]
A
Wait, hold on. Oh, yeah. It's so proud. It's life. Oh, my God. Hi, Rachel. Welcome to Venture with Grace.
- [00:07]
B
Thanks so much for having me.
- [00:08]
A
I'm excited to be here to starve the show. I would love for the audience to kind of know you a little bit more. So you have work at. So you have work at Bain company as a consultant. And then later on, I think one of your biggest like career break is like at Uber, which you started your career as a general manager running the DC area and then you ended as like the VP of head of New Mobility. Because before founding Construct Capital, maybe we could talk about like, what were some core lessons that you've learned early on in your career, kind of shape you into who you are today.
- [00:40]
B
Yeah, well, first of all, thanks for having me. This is fun. It's always fun to talk about the journey and hopefully will be interesting and helpful to other people. So, you know, I started my career, as you mentioned, as a consultant. I think for me, I was born and raised in New York. My parents had no. Were far from the business world themselves. They were academics. And so, you know, really I was kind of like figuring it out, you know, very much for myself. And I was really lucky to, to get an internship and then a job at Bain in New York, which, you know, again I had. I went to Amherst. Amazing, you know, amazing school, liberal arts, but nothing having to do with business. So I was very much, you know, brain was just an amazing training ground for kind of how to see, you know, a lot of parts of business and get paid to do that. And then, you know, went to business school, I should actually mention I spent six months doing an externship at Bain, which was a cool, you know, program that you got to do there. And so I spent that time working at a place called ML bam, which was the online new media part of Major League Baseball. And so I wanted to do something in sports. That was very much what drove that opportunity. Figured when else in my my life I was a college athlete, when else in my life am I going to get to work in sports? But really it was actually one of the first online streaming platforms that existed. And so it was really this like digital startup that was owned 1/30 by each of the Major League Baseball teams. And it was all about of putting operations in a tech company. So actually became very relevant later. Went to business school, went to Stanford, actually spent my summer and then a year working at Clorox after that. Knew I wanted, loved the general manager skill set. And it Was very clear to me. Like marketing was the one thing I had not touched at all. And so use the Clorox experience to frankly get some marketing training. Thank God they, you know, were willing to. The other skills I had, the marketing skills I definitely didn't when I started there, but quickly realized there that you know, being able to move up quickly in an organization was important to me. I'm not the most patient person and definitely didn't have the patience to say okay, spend 10 years to make, you know, be able to be, be a director there or do the next job. But I think one of the things that was advice that I got coming out, coming in at a business school and one of the things I really, the experience at Clorox really drove home for me is you know, you want to do what a company does to make money. And so those are the functions when you're thinking about a bigger org. Like those are the functions that are really going to be the power centers and are ultimately going to be the ones that are the decision makers. And so you know, it's very clear like if you're a brilliant engineer, being, you know, being at Google is great, right? If you're a great marketer or in the marketing org, being at a place like Clorox or PNG is where you want to be. If you're a great finance person, like are you going to have, you know, you're, if you're at Apple, you're not necessarily kind of in the epicenter, right. And so I think that was definitely one of the things that, the key kind of things I learned in terms of the Clorox experience. That marketing role was very much the GM role. And so I had always been fascinated by tech and I've always was excited about startup world but it's actually hard to find tech companies that where ops is or non technical people actually can drive like the business. And so I think that's one of the things and we can talk about sort of the post Uber, you know, kind of mafia and I think why one of the things that made Uber so special as a startup, particularly for people that didn't have a big, you know, advanced technical degree beforehand, was that the ops teams very much especially in the early days were what drove, were what drove the business. So as you mentioned joined Uber in the fall of 2011. They had, you know, had only raised a series A in terms of, you know, in terms of where they were stage wise. There were about 25, 30 people at the company at the time and, and Joined to start the business in Washington D.C. which was one of the first markets that Uber, that Uber launched in. And so you know, and the way the job description was written and I think this definitely rang true when was, you know, you were kind of CEO of your city and so it was kind of this like risk free way almost to be an entrepreneur to really you were pretty. Each team at the time was like, you know, a little bit on an island but you had the product and the tech resourcing of the broader Uber Org and you had, it was almost like you were in an accelerator with like everyone else who was doing the same business that you were and you were all equally incentivized on each other's business. So as soon as you figured something out around how to help a Com, how to help a city grow, you know, I would share it with the New York GM and we'd share it with the San Francisco GM and you know it was very collaborative around learning and you know, because it was this super decentralized organization particularly at the time and so having um, anyway, so that was kind of a little bit of the beginning of the journey and then happy to talk more about about the Uber experience and growth of course there.
- [06:31]
A
I love what you shared. I think like I was taking notes when you were talking. I know I like I'm so old school. I am typing notes and then people are like use note taker all the time. But one thing is like I think I thought what you said was really cool is like you said like you learned the general management skill. So I think that's such a skill that like people lack of in the startup land because I think the 0 to 1 is like I, I don't think it's easy. It's just take one set of like personality. A lot of it's like business development and then like product management, like slash like trying what works and develop the product. But I think like the general management because like when you add a certain skill and like you have to like kind of skill up the business, you need someone who like is like operationally lean and then like making sure that they are like kind of founder minded to like manage the whole company. So I wanted to learn more about like what you thought about like general management. What has that meant for you and then what were some skill set that you work of like developing back then?
- [07:27]
B
Yeah, that's, that's a good question. And I think you know one of the things I learned and I think business school was good at kind of reinforcing this for me is I was the kind of person who was, like, pretty good at everything, but, like, didn't necessarily spike on any one thing, right? So there are people who are like, the best finance people or like, the best marketers or, like, you know, the best operations people. And I was kind of one of those people who's, like, pretty good at a bunch of stuff. And I think that's part of being a gm, right? Is. Is. And I think Bain was great at reinforcing this. Like, it was about problem solving, right? You were like your. The problem set that you were facing could be so different on any one day. I remember the first time Uber, Uber and dc, which is. Which is the market that I joined to start originally, was the first real city. We had, like a big regulatory fight. And I remember really early in that conversation, we had just, you know, we had just had. And I can give you the full backstory, but basically, like, a vehicle, a driver's vehicle was impounded by the taxi cab commissioner. And it was kind of like a little bit of a press stunt. They called the press to come to the Mayflower Hotel. He took the Uber to the Mayflower Hotel and then had the car impounded. Unlike the Friday before a long weekend, which meant it had to sit an extra day in the impound lot. So it was kind of a, you know, it was a. It was a political stunt as much as anything else. And I remember, you know, talking to Travis at the time and saying, like, okay, what do we need to do? And he's like, we need to get a lawyer. And, you know, there were no lawyers at the time, by the way, at Uber. And, you know, and kind of a regulatory person. I was like, okay, like, how do I select one? And he's like, interview them. I was like, what do I ask? You know, I had just. I never interviewed a lawyer in my life, right? And so I think that was a quick, like, just as that example, there wasn't, you know, there wasn't a training ground for, like, how to. At the time, particularly, like, how to deal with a city that wants to shut your startup down, right? There weren't, you know, there weren't sort of playbooks for so many of the things we encountered. It was really about problem solving. It was really about, like, how am I going to solve this, you know, this problem today? And those problems could be policy and comms related and could be financially related and they could be operationally related and they could be tech related. And part of it was figuring out, you know, Understanding enough to figure out how you problem solve in a totally different arenas maybe than the ones that you're like trained in.
- [10:08]
A
For sure. I wonder so like how do you kind of like figure out this thing? And then the other part is like I think one of the things that you just said earlier was like you need to pick like you need to do what a company does to make money.
- [10:24]
B
Yeah.
- [10:25]
A
Basically getting closer to the revenue. I feel like that's kind of my realization as well. Like, like, you know, for example, like in Silicon Valley I feel like being an engineer at most tech company is like the main category of work and then people kind of like show the respect like a lot higher than if you're doing anything else. But same as like you know, if you were at like I don't know, Goldman Sachs, you'd probably be better doing stuff. Yeah, exactly. So for that like I guess like for a person, if the person is like non technical intact or like doing something the com is not like in the main company function like what would be your suggestion for them to kind of like stepping into the arena of like maybe not their expertise but like also like it's a company center.
- [11:10]
B
Yeah. I mean I think just to be clear, first of all it's like it doesn't mean that people who are lawyers at Uber isn't important actually in fact it's very important. Yeah. Actually like I've actually talked to a whole bunch of policy people who have left Uber and we're are kind of like it's not quite the same because policy was so strategic to what, to what the company was doing to be successful versus what policy might mean in most organizations. But I think, I think what you need to do is figure out like there's no. I, I think that the reality is if you're an ops, you know, kind of an ops person or a GM and you know you're, you're, you know, and you're going to an AI company today, right. That that role is going to look different. You're going to have to figure out how to, you know, you may not be the decision maker on as many things and I think again I don't think it's like a, it doesn't mean you can't contribute, it doesn't mean you can't have a great experience in a company when you're in a more ancillary function. But your role is different. Right? Your role is one of support, it can be one of providing finance person's a great example. Like you might be providing like all of this really critical data to help somebody make the make a smart decision. But like that's different than being a banker at Goldman to your point, right? And kind of being the epicenter of what the company does. And so I think like, especially early in your career, like, I think it's a more of an early career particular piece of advice where you probably have the opportunity to kind of rise up faster, to be trained by people who are better where. Where that is kind of one of the best places you can go for your skill set. You're gonna, it's gonna look a little different than it would at a, you know, in an organization, I think, where it's a little less core for sure.
- [13:20]
A
I wonder another thing, what you said was really interesting was like you said like, oh, you, if you figure something out, you would call the New York GM sfgm. Like, so everybody just kind of like share notes. Like this may be like a really like nuanced question, but like I think like one of the question I had was like, so for example, how do you deal with like, I think like for.
- [13:42]
B
I don't.
- [13:43]
A
I think theoretically, obviously everybody share would be great. But also like in different companies, this is not like particularly for you or for Uber. It's more of like for a company that you're in like you are in a team that like you are sharing the resources but sometimes like there's conflict of interest. So for example, you know, it's not, I want to say it's a competition, but I would say like, you know, a lot of people are having competitive mindset of like, oh, we want to be the best, like region, blah, blah.
- [14:12]
B
Right.
- [14:12]
A
So how do you think about like or like what's your mental framework on like, you know, sharing the best practices or like, you know, even sharing resources within like a company to also stand out among like other.
- [14:26]
B
Yeah, I mean I think, I think the reality is so one is I think Uber gets a reputation particularly kind of Uber 1.0 of being like ultra competitive and like there was no infighting. Like we all. I think what people need to realize, particularly at startups and I think this is like so true at startups that are growing quickly. Like if the company is growing quickly, your trajectory is growing at the rate the company is growing. Forget about what role bumping up roles. And I used to tell people on my team all the time, like, particularly, you know, I think in today's day and age, like people would say like, oh, I haven't changed roles. And like it's been 12 months or it's been 18 months. And I'm like, but the, but the city that you manage, right, has grown 3x5x. In that time your responsibilities have gotten 3 to 5x larger. That's amazing. Like, that is an insane trajectory for like any other, for most other organizations or for most careers. And so I think one of the things that people miss sometimes in all, in all these things is like the best thing you can do for your career, particularly if you join a startup, is to join the right startup. It actually doesn't matter as much that your role moves in that startup or anything like that. Like your, and forget about even the financial like just implications, but just from the implications of like your own career management. Like the best thing you can do is join a great startup and hang on and watch that startup go up. And so I think one of the things that was so special at Uber is like, we were all, all part of this like incredible rocket ship. And, and frankly we're much more concerned about like the, what was happening to the whole. And particularly in the early days because the growth was so incredible and dramatic. And of course now AI companies are doing this much more frequently. But the growth of tech in the real world was like truly unprecedented when we were at Uber. And, and I think that, you know, I think, I think we kind of all like inherently were very aware of that and we're just excited to kind of be on board. And then, you know, we had, we had teams that were kind of best practice sharing teams. And, and there was like a pride that you took in building something that was good enough to be used by others. And so those kind of informal, you know, that kind of informal sharing and then it became a little bit more formalized was very much a point of pride for us. It wasn't, you know, you wanted to, maybe you wanted to build it first, right? Or build it better or improve upon what other people had built because that was how like the beauty of decentralized teams is speed, right? There are other problems to be clear, that come from decentralizing teams. But the beauty of kind of the way Uber was built in the old days, these very decentralized ops teams were almost. You had these like a B tests running constantly in different cities. And so those only matter if the best things are shared.
- [17:49]
A
I have a question for you on this. So I mean, I feel like you mentioned about like it's a decentralized team and that like people are running a B test, like how frequently do you guys communicate? And then like do you feel like people are incentivized? Like what are people incentivized by beside like money? Because I think if you are joining Uber at an early stage, you probably don't. It's not like the money that like kind of is like exciting. It's the most exciting part basically. So I guess like what do you feel like incentivize people and then what is the infrastructure for? Like when people are sharing these like information across like city and like what's a cadence? Like it's like a Monday morning 9am to like 11 and like everybody like go through a presentation or what's vibe.
- [18:37]
B
I think like just whenever you're thinking about org structure and I talk, you know, we'll talk to startups that construct about this all the time. Like people say like what's the best org structure? And it's like there's no one like ideal org structure. Right. You've got to think about like strategy, then structure, then people. Right. And so Uber strategy was about speed. Like there were network effects in the ride sharing business and speed mattered. And so our ability to win globally as you know I think at this point Uber has, was very much dictated by our ability to get in and get large in cities as quickly as possible. And so that's, that works better, that is easier to do when you have a decentralized organization. And, and and GMs were deeply empowered to help do what it took to drive the success of a given, you know, in a given city or of a given organization and of a given market. And so you know we had a pro team pr, like that's what they were called, the pro team. And they were very much kind of responsible for helping to do the things that needed to be centralized across teams and helping to disseminate best practices. Because like, and you were asking like the US teams were you know, talking a lot and the Europe teams were talking a lot and then there'd be some talk between the US teams and the Europe teams just to use that as an example, a little bit harder because of time zone changes. A little bit easier for the US teams than the latam teams to talk just to use examples. And so you know that was very much so there was the pro team was kind of the more formal piece but we did an all hands every week and I think it was up until we had about 35 to 40 markets. Every single all hands the GM would, would share the results and the dashboards of the metrics in their city. And you know, Travis would dig in in front of the whole company around, hey, why was, why was your completed to request ratio? You know, why was the completed request, that's like a common Uber, you know, metric, right? Which is basically how many people requested a ride and how many rides were completed, which is a sign of like the city market health, right? And so if, if that was like 70%, he would say like, what's going on? Why haven't you added enough drivers? Why isn't supply, you know, high enough? What was, you know, why were there spikes in demand? What you know, why couldn't you fulfill it? Why weren't you better prepared? And so there was a deep sense also of metric visibility, which is really important when you're decentralizing and accountability across. You were responsible for knowing your metrics, you were responsible for why, you know, for, for being able to explain literally to the entire company. And by the time we got to 38 markets, by the time you got to 38 markets, I think it was like pretty boring for the engineers because you're like, do we really need to hear like a detailed explanation of like why Minneapolis was not. Didn't perform last week? But it was really all about accountability. And, and then the other thing was just the date, the visibility of data. The whole organization had a tremendous amount of data visibility. And so that inherently created accountability. And so yes, we were decentralized, but like you could, you still had a tremendous amount of accountability and responsibility that kind of came with that.
- [22:24]
A
Do you feel like this would only work in like a paid company? Or do you feel like any organization, let's say like volunteering based organization, can also pull this off? Because I think like, if everybody's like in like, I know that people are not incentivized my money, but like, but they are there to earn like a salary, right? So like they have to like kind of show like, oh, here's our metrics. But if you are kind of like, do you think this can work for people who are like non paid?
- [22:50]
B
Basically, I think it completely depends on the. What is the strategy of the org, right? So I'll give you an example of like the, the where this backfires, right? So an example is when things need to be really consistent. Like that was not uber strength at the time, right? So like take an example of like compliance, right? You don't need to innovate on compliance, right? You just need to like do it right every time, right? If, if compliance is like a very core piece of an, of an organization, nonprofit, for profit, whatever it is, like that speaks to more centralization.
- [23:30]
A
Right.
- [23:30]
B
Because like you need one team of experts to like deeply be responsible for making sure something is accurate. And so I think it's really hard to say, like there are trade offs that come with every structure depending on like what you're optimizing for. I think Uber was optimizing for speed. I think they, you know, the descent at the beginning. And then over time we became more and more centralized as. As what, you know, as what mattered to the strategy changed. Right. Over time being, you know, more efficient, being, you know, not having duplication matters more, not having, you know, fewer mistakes, fewer errors. The. The stakes around making a mistake are higher when you get bigger. Like that speaks to more centralization. And over time, Uber moved in that direction. Rightly.
- [24:27]
A
I wonder. So like, I guess like another question I had was, you know, when you are. Maybe we could start talking about like construct. Because I feel like, I know time is like literally almost half, but like, I find it so fascinating. I think Uber is such a really fast growing organization and I think a lot of people could learn from it. And then when you mention the lawyer, actually beset like, you know, Kevin from Rock House. And then like actually Bradley Task should be like, for second, first lawyer. He was on our pot too. I was like, I was thinking about the Uber.
- [24:59]
B
Not on legal side, but yes.
- [25:01]
A
Yeah, yeah, there were so many. I feel like.
- [25:04]
B
Yeah, closely.
- [25:08]
A
Yeah, very, I guess like quote unquote, like Gen Z word cracked people on the team. Maybe we could talk about like the construct capital that you have built. Maybe talk to us about like, you know, the first one. I think the first one was like 130 or 140 million. You were trying to raise 100 million, but you over raised like 40 and now like the most recent one was like 300 million. Maybe we could talk about even like, I mean, I didn't really want to bring up the women piece because of. I feel like it's kind of like on. They're selling you as like, you know, I don't want to just compare new women, but like, it's like literally I. I think across gender, like this is a really big race for people's like first like three funds. And maybe we could talk about like, like, you know, your journey on like fundraising from being an operator at Uber to like raising your own fund. And then this is only five years. Within five years, you already build up this kind of infrastructure for like three funds, which is like very impressive.
- [26:09]
B
Well, thank you. Actually, today we will activate our third fund. So a momentous day as well. But you know, I think when we went out to fundraise or let me even back up like I think both. Dana Grayson, who's my co founder Construct and I had spent quite a bit of time in around the spaces that we were excited about investing in. Dana was a partner at NEA for eight years before we started Construct. She invested in a whole bunch of like really successful companies at nea. And I think, you know, for us, I think first and foremost like we were able. We both had sort of track records of success. Mine wasn't like a venture track record, it was an operating track record. Dana had the venture track record. And, and so I think, you know, we, it was our first fun but we, you know, we were like, we weren't first timers at kind of like coming into the business world. Dana was definitely not a first timer at you know, being part of fundraising in the venture world as well. So I think we definitely benefited from deep experience that we had before. And our whole funds thesis is really around this concept of foundational industries as we describe them. Areas like supply chain and manufacturing, logistics, mobility certainly as well. And these are areas that are like deeply underinvested in from a technology perspective. If you look at what that has meant for the US from a productivity standpoint, what we have seen is that the, you know, the sectors that have invested a lot in technology have, have grown, you know, 28% I think is the numbers in the last, you know, just since 2015. And the sectors, these sectors have declined. And largely if you look at why, you can see the technology uses are very, very different. And so we were so our whole thesis was really around like when you can bring technology into these place into these areas. They are massive markets with huge tams and very little incumbent competition. And so, and we've actually taken a look at how that thesis already has played out in the public markets. And if you look at, you know, what we have described as tech first industrials and compared them actually even to the best tech companies, they're a parody with the Mag 7 over the last two years in terms of revenue and stock price performance. Like you can't find a sector which has performed as well. And it's. And we would say the reason is these text, these tech first industrials have done so well is because massive markets, low tech incumbents, very low competition in general. And so when we went into the funds thesis we were probably like a hair early which is kind of where you want to be on the venture side around this Thesis and, and so there was a little bit of education admittedly on the beginning of fund one. It was, we started fundraising five weeks before COVID started in 2020. So it was also a really interesting time to you know, LPs had never @ the time invested in people they hadn't met in person. And so here we were a first time partnership, first time fund, you know, and trying to kind of get through that, you know, that, that barrier that all LPs were having around like how to think about the market and capital deployment in 2020. So we were very fortunate to you know we kind of did a first close in July and then as the markets kind of opened up a little bit more between July and the end of the year of 2020, we're able as you mentioned to, to surpass our, our, our target raise. Actually we raised our hard cap as well to 140, but very clearly like wanted to constrain it there. So you know, we have a big belief that construct that concentrated portfolios enable not just driving the best returns but enable us to support founders in the best ways possible. And so we didn't want to have you know, a large spray and pray portfolio to kind of use the venture term. You know, it really was about getting, you know, being able to partner deeply with entrepreneurs in particular in these sectors. And I think what entrepreneurs realized quickly is who we're trying to build in these sectors, that experience in these areas really mattered. Right. When I, when I joined Uber in 2011, everyone told me I was crazy to go join a taxi company. Their words, not mine because transportation is slow moving and heavily regulated and high capex and you're never going to get a venture breakout in a sector like that. We heard a lot of those same echoes at the beginning of 2020. And then I think as there became just more visibility through Covid, through you know, in some ways also through kind of government policies and other things. But really just through visibility and some really strong entrepreneurs starting companies in these spaces. I think it really kind of awoken, you know, more people to the opportunity that we were excited about. And I think you know we've seen there's actually we just looked at the data. Since 2020 to today there's been a 20x increase in series B and beyond capital that have gone into these spaces which is great for our companies because we're early stage investors, we're investing at the seed and a. And I think one of the like early potential knocks people had on construct was like who's going to do the next rounds. Who's going to do the next rounds? And I think, you know, now these spaces kind of like are very in vogue and a number of, you know, larger funds have people dedicated to them. There's other funds now that are more and more focused on these areas, which, you know, we, we view as a good thing for the ecosystem, for sure.
- [32:32]
A
I feel like it's such a popular sector nowadays to invest in like the quote unquote, like traditional sexy company. And I wonder. So, like, maybe we could talk about like the portfolio construction. Since you mentioned it's like concentrated portfolio approach. And you know, also I wanted to talk about like the partnership between you and Dana. So because I think like for everybody, a lot of like the experience VC because of they are like, they spend a lot of time just like being a career vc, so like, they didn't have like much of an operating experience. So like, people want to partner with like a great operator like yourself. Like, how do they kind of like find you? Or like I know that you guys met at like nea, but I guess like from like the bra. I guess like just on a broader level, like, how do you ever find a partner to like build enough trust to be like, okay, let's go on like raise the capital. Because, Because I think it's just a lot totally.
- [33:24]
B
I mean, it's, it's one of the most important decision whether it's a co, you know, it's a co founder relationship, right? It is the person you need to trust deeply. You need to trust their judgment, you need to trust that they'll do, you know, that you guys are aligned around what you want to build. I actually think in the case particularly that, that Dana and I felt, you know, that we were, in our case, it like helped. We were in the same phase of life. Like we both really wanted to build something that was great and wanted to build something for the next 20 years together. And so, you know, when we, you know, we spent a lot of time before we even started construct together, I had, I was a scout at nea, so I. We've done a little bit of work, but like, you know, we hadn't worked together formally. And I think particularly from some LPs perspectives, like they view that as like a knock, right? Does this mean there's like breakup risk? Right? Because obviously if you're an lp, you're just trying to, you're trying to minimize beta, right? And so that was one thing that I think we had to get over in the first one. But the Beauty of not having had, having overlapping careers and not having had totally overlapping skill sets is we are set up differently and I think better to help founders.
- [34:49]
A
Right.
- [34:50]
B
And Dana knows, you know, venture inside out. Like I have learned so much from her around. How do you, how do you lead? Like, what is leading a deal really mean? What is winning a deal really mean? Very different than angel investing. Right? Very different than just kind of like following top firms. But like what, how do you show your value through a diligence process? What is, what is running a, you know, an institutional grade firm mean? And, and I think, you know, we've done a very good job of doing the, you know, what those things that help train our team, help provide confidence to LPs that we are assessing risk appropriately. But also, you know, I think the, the, in particular the operator experience like founders really appreciate. Right. And, and so one of the decisions Dana and I made early on that's like a good example of a decision like you can't go back on is, you know, there is no attribution at construction. And so what does that mean? That seems really inside baseball perhaps to like a non VC person, but actually dictates so many different kinds of incentives. So that means there isn't deals that are, oh, that's Dana's deal. Oh, that's Rachel's deal. Oh, that's, you know, Eugene's deal. Right. Of course there's like a project manager on a team and a point person for, for CEOs because otherwise like nothing, you know, would exist. But no one is more incentivized to help some companies than they are to help others in our portfolio. And so that means we're able to bring an extremely team based approach to helping the companies that we think are going to be the most, you know, that are going to generate the most returns for our LPs. Right. That's ultimately the, the business we're in. And so part of that, and I think it's why Dana, not the complementary skill sets that Dana and I have, she has spent, you know, prior to construct, had spent 12 years for 13 years, 14 years prior to construct in BC. I won't totally, you know, you can add five to that, but you know, and I had spent sort of this intense decade, know on the operating side. And so, you know, that combination I think is really powerful. But I don't know that you could.
- [37:25]
A
I don't.
- [37:26]
B
I think it'd be very hard to build a firm without somebody who's had institutionalized VC experience. And I think and I think it would be very hard to support founders as effectively without someone who's had operating experience. And so even in the team and the people we hire on our team, we very much like that combo of experiences as well. You know, as we think about sort of rounding out the full skill set.
- [37:51]
A
Of the construct team, I wonder so like maybe we could talk about like the. Well one is like the incentive eyes for everybody to like equally contribute. I know it's like by design I think like last week I chat with like John from like True Venture. He started True. And then like I think their partnership is like very equal. But I think that's like I want to say downside but like I think the contrarian view is like I think Venture a lot of people like lifetime goal is to get on the Midas list and like you know, being that guy who like you know, invest in Uber. So like how do you think about like you know, incentivizing people to like contribute and like you know, not being the project manager of this deal but like also I guess like if you are not the project manager or like the lead investor on this deal like you can still like being prompt to like you know, help with other stuff.
- [38:47]
B
I mean I think you know the, the corollary and this would be the Uber corollary too is that the, the team here has Carrie. Like that's not. And and you know that doesn't, that doesn't it. In many firms until you get to a certain level of, of seniority you wouldn't have Carrie the funds. Right. And so just like a startup, right? At a startup everyone was incentivized to contribute to the success of the company because they're incentivized to do so. Like we very much view it the same way. Like any long term role has Carrie at construct including like you know, our office manager. Like that's part and I don't think that exists at, at at most places. And like we want everyone to be incentivized and, and, and and then of course like we have other we have you know, workload spreadsheets. Like we are a small enough team that we are watching very carefully. Like we're not into free riders here either. Like if you aren't contributing like you won't be here for the long term and and we'd like to keep a small team. We want to make sure you know, we run, we run construct like a startup. And I think you see the difference when you work with vcs that also like our fundraising are also kind of like doing all the things in terms of how they support companies as well because they're not like, you know, I think there are easier ways to do VC than starting your own firm for sure.
- [40:29]
A
Well, I wonder when you are thinking about I guess like portfolio construction since you guys are like doing like a high concentration approach, maybe we could talk about like, you know, how many deals do you invest in each fund and then like what's a general strategy you lead follow or like combination and why.
- [40:49]
B
Yeah, so we, so we tend to lead or co lead deals. We are from a portfolio construction perspective. We have about 25 companies in each fund, give or take a little bit. We do about 2/3 of our initial investing at the seed, one third at the A. And that having both I think enables a couple things. One is just a little bit of time diversification, right. That you get within a fund which you want to do. 2 I think is the ability to come back to a deal that you may have passed on at the seed because for one of a variety of reasons. But if, you know, for us, if we kind of haven't started to see the early signs of product market fit or if the technology hasn't been quite built out like that enables us to have kind of another bite at the apple in a deal we really like. And we've done that a couple of times and gone back and invested later in, in, in deals we've passed on at the seed. And, and I think you know, but the concentrated portfolio fundamentally, I mean you also asked about a little bit about, you know, what the incentive structures are like. We know every, what everyone is doing for each of these companies because we don't have that many. And you know, we do a portfolio review process every quarter where we go and tick through company by company. What do we think the core difference maker is going to be for that company over the next quarter? And each person has to go through and, and indicate what we think is going to make the difference. Sometimes honestly it's like just support the company as they build product. Right. There's not a lot we can do but sometimes it's, you know, help introduce them to new investors. It's a key hire, it's a key customer introduction. Right. Those are the things we're thinking about. And so then at the end of the quarter we go back and we said did we do them right? And so again I think there's a lot of ways to like create accountability and frankly I think that's a little bit of the operator part coming through right When I, you know, we, we only talked about sort of the beginning of Uber. But I, you know, I started as the GC GM and then ran the whole U.S. and Canada business, which was $20 billion or so in gross bookings. When I, you know, when I stopped running it, then ran the whole new mobility business. But when you've got 30 cities running or 30 regions running in a market like, you also need to create accountability and create the systems and processes to make sure, you know, that each GM or each city is, is doing it. It's very much the same thing, you know, in venture. And I think Dana brought some like awesome best practices from nea. Like I was able to bring some best practices from Uber and then we've evolved them like into the, how we want the construct way to work as well.
- [43:43]
A
I wonder from the, I guess like one thing is the, from the fundraising perspective, do you feel like you have a system for that too? Because you guys obviously are very amazing at fundraising. And how do you think about the approach is that like, you know, you go for the LP intro and I go for the pitch and they're like.
- [44:06]
B
It'S less sort of like systematized like that. I think, I think we've done, we've done it. So first and foremost, like we did a good job in our first fundraise of having a very institutionalized LP base. And so that means these are LPs that are used to coming back, you know, multiple fund cycles with an investor. And that's a little different than, for example, like if you were doing your invest, if you were doing a lot of like friends and family, right? Friends and family may be more, and that's obviously a colloquial term, but like, you know, individuals that are investing, you know, much smaller amounts are much more used to probably startup investing, right? Where like you invest once and then you watch what happens from, from a, from a venture perspective, ideally what you want is the vast majority of your capital base to come back fund after fund after fund. So, and, and we, we were, we've been very fortunate to have our fund. You know, I think virtually every single fund, one LP is still an LP with us in fund three. And so the vast majority of the capital base has, has come back and actually in many cases expanded right in terms of the total dollar value. So when we're talking about raising a new fund, we're only adding like three or four new LPs a cycle, which makes it a much easier, a much easier process. And, and then frankly, like it's like any sales process, right? This is like us, you know, us doing sales. This is saying, okay, how many prospects should we have, how many first meetings should we have? How many do we think are going to move through the funnel? And so, and for us, we really wanted to keep the fund size constrained. And so we actually put both our target and our hard cap is 300 for this fund, which was a little scary to do most of the time. Like you, you can kind of hedge, oh, the target is this and the hard cap is this. So if you, you can make the target and maybe if you don't make the hard cap, it still seems you can still declare victory. Right, because you've, you've beaten your target. I, we decided to put them as the same amount, which for us was very much saying, okay, what is the right strategy? What is the right fund size for our strategy? And like let's have some conviction in what the right fund size for our strategy is and go out with a single number. But that also means, and fortunately we were lucky to have ended up There for Fund 3 is, you know, not we had to turn away capital because you know, we, we very clearly said like we are keep, we're keeping it at 300. We think 300 is the right number for our team size, for our fund strategy to drive the best returns. And so we're not going to keep increasing and increasing, increasing. And I think, you know, we believe kind of that 250 to 350 is where we want to stay. Like we do not anticipate expanding beyond that perhaps ever. And I think, you know, there's, I think discipline is important and I think, you know, otherwise you have to continue to scale the team, you have to continue to scale the partners, you have to continue to, you can't support entrepreneurs in the same way. And we think one of the beauties of the way construct is, is organized and designed from a fund structure perspective is you know, a three or five million dollars check like really matters to us and can drive differential outcome. And I think it's very hard today for some of these multi billion dollar, multi stage funds to say that with a straight face.
- [47:58]
A
For sure. I wonder. So like one of the other things I found really interesting was like you mentioned about like showing value in the diligence process and then building like an institutionalized great firm. What do you think kind of like struck you as like the difference between like being an angel to like institutionalized great firm and how do you kind of like show value in the diligence Process. It's not just like, maybe I intro you to like, you know, let's like vet your startup idea with this design partner from Google or like, you know, what's.
- [48:32]
B
Yeah, I mean, I think some of it is, I think it's important that the deal, you don't outsource the diligence process. You may make customer intros during the diligence process. You may listen in to those customer potential customer intros. You may listen in to those potential customer intros. But you're not investing based on whether the customer says, I think this is a good investment. Right. I think that's all about investor judgment and honing kind of having, you know, honing your investor judgment. I think what. But, but, but using customer intros as an example, like really understanding like what is the, why does the customer like it? Why do they think they're going to use it? How will that change over time as technology changes? How will that change over time as you know, in terms of where you think that market or industry is going? And you know, one of the examples we, I, there's one company I'm thinking of in particular a couple of years ago that we were diligencing and the customer intros were all, I mean the customer feedback was all great, but every customer liked the product for different reasons and had a totally different use case. And it became very clear like as the company scaled and, and was going to continue building, like they were going to be pulled by their design partners. And these were design partners in like very different directions. And at some level, like early on, these design partners, it was like they were almost an outsourced dev shop for each of the, for each of the design partners rather than being having a set of software. Right. And I think that's like one of the, just to use that as an example, like one of the really important things you can uncover by, and customer intros is just one example. But, but really trying to understand like who in your network can help help answer the very specific questions you have about where an industry is going, where technology is going. But you're not saying, do you like this company? Right? That's like a very different question. You know, it's part of the diligence process. And I think being able to pull like a good investor is pulling all sorts of data points together around the founder, around the team, around the technology, around the market, around the product and you know, trying to fast forward in as many ways as you can to say, okay, what is this going to look like in 2 years 5 years, 10 years. And is that view of the future one that I think will ultimately generate, you know, a, a game changing company?
- [51:22]
A
For sure. I wonder maybe like so I want to be mindful of the time maybe we do one real question and then what if I run I guess like in terms of like sourcing, winning, diligencing and when like. And then like eventually thinking about potentially exiting. Maybe we could use like any of your portfolio companies to like walk through their journey and like how do you meet them and then to like basically diligence them to like think about winning and potentially exiting.
- [51:52]
B
Yeah. So I think you know, for, for us obviously each different companies come in. Right. In different ways. But I think one of the things that makes construct different from other venture funds. Right. Is we are, we're thesis focused. We're focused on specific sectors and so we have, you know we're constantly building what we, what we call points of view. Right. But points of view in various areas to say okay, here's an interesting area. Like let me spin up a quick point of view on what's happening in a certain sector in a certain space and you know, and, and continue to use that. The, the, our point of view is probably a good one. That's the overall fund's point of view that's on the upper left there. But that's kind of the bigger vision around like what is happening in foundational industries. And then of course we layer that down into like more about what's happening construction, you know, and manufacturing, more of what's happening in production, more of what's happening. We've got an AI one you know, on the, on the website certainly as well. But I think for us and physical AI and kind of what that means but I think you know, having a point of view coming in. So that means companies can come in through our, you know, kind of come into our orbit through a bunch of different ways. It can come from us seeking out those companies because we know they're in a, you know, because we've done a market map. We know they're in a space we're interested in, they're in a sector we're interested in. And you know, being able to say we need to get to this founder because we've heard they're doing something really interesting in this space. Sometimes it means 100 lists by the way, I think.
- [53:38]
A
What was that? Yeah, sorry, there are like 100 early stage company list. Yeah, we did a ranking and then actually I think at least like maybe so since like we launched the list in like September, A lot of them, like a lot of the companies on our list were like, raised the next round already. Yeah, but. Yeah, okay, so. Sorry.
- [53:57]
B
No, no, no, not at all. No. And I think so. Then, then for us, part of having the point of view is already starting the diligence process. Right. It's already saying some of those things I mentioned. How is the market going to evolve? What, what makes a space investable?
- [54:13]
A
Right.
- [54:13]
B
And again, investable is different than, like, interesting. And, and so for us, really having that point of view coming in is really important. When we meet, meeting a founder, spending is, you know, and I think one of the beauties right now of like, AI is you can automate a lot of things around, you know, everything except for like really spending time with the company, spending time with the, with the, the founder, really making sure there's a, you know, the, the founder sees how you can help evolve their company. And it's not just at one stage. And I think that's something different that construct does than, you know, than a number of other funds. We're not, yes, we're stage specific, but we're not about just getting you to the next round. We ultimately want to be about full life cycle help. And I think, you know, early on that might mean hiring help, that might mean customer intros, but then as a company evolves, those needs change. Right? It might be, you know, it might be M and A help at some point, it might be other, you know, help at other points kind of in, in the journey and, and life cycle of a company. And so we really kind of position ourselves as, as a firm that can help for the full life cycle. And I think the fact that Dana's seen companies from the, you know, from the seed to IPO is part of that. The fact that I've, you know, was at Uber from the series A through the IPO is part of that. And I think. But you need investors that have seen the full life cycle. And we think that full life cycle in these sectors makes a big difference. And I think it's hard to find another firm that has, you know, that kind of has as much experience, had as much experience kind of in these spaces as Dana and I and the Construct team have for sure.
- [56:12]
A
I want to be mindful of time, so maybe we'll do a quick firearm for you. What's your favorite book?
- [56:18]
B
Oh, my gosh, that's. That's a hard one right now. Most of the books I read, admittedly, are books that I have to read that I get to get to read, not have to read, get to read to my kids. But American Kingpin, one of my favorite books.
- [56:34]
A
I'm writing this down because I have a two year old. So.
- [56:37]
B
Yeah, this is not the book for the two year old. This is the book for. For the rest of us.
- [56:42]
A
The rest of us, exactly. This is.
- [56:44]
B
This is the Ross Ulbricht Nick Bilton book. So it's a great book.
- [56:49]
A
Oh, my God. Who would you invite to your dinner party?
- [56:59]
B
Serena Williams.
- [57:02]
A
Amazing. Amazing, guys. Okay, so who made the biggest impact in your career?
- [57:11]
B
You know, Travis.
- [57:13]
A
Where can we find you? Also at work.
- [57:18]
B
With my family as much as possible. And I still try to hit the tennis courts.
- [57:25]
A
Love that. Oh, my God, you're so good at this firearm. Typically people take like five minutes on the firearm, but you're like 30 seconds.
- [57:32]
B
All right, let's go. Exactly.
- [57:34]
A
Love that. Thank. Wait. Also shout out to Shastaria for, like, commenting. So, like. Well, Rachel, thank you so much for coming on the pod today. It was such a fun conversation. It's like a master class for operation and building a fund.
- [57:48]
B
Thank you so much for having me. Really appreciate it.
- [57:51]
A
Let me quickly answer.