How I Invest with David Weisburd
00:25:39 · Jerry Ye
[00:25:39] S1: It's a very interesting question. And I think initially when I started, I would have said that it's difficult to quantify the largest portion of that equation, and that is access and the ability to be able to, you know, get into the room of of a company. But what I've seen over the past few years, especially, you know, talking to other peers at large firms or even small firms, there's a common exercise that all venture funds do, or I hope they do, is you're essentially looking at deals that are done. Right? Deals that are announced in TechCrunch, which shows up on Crunchbase, PitchBook, and you are triaging whether you were actually in the room or not with with the company. Right? And at what point in time. Right? So if you look at it from funding announcements, like, were they actually connected with the founder at some point? Was there emails? How many emails? Was there a meeting? How many meetings? Was there a term sheet? Did it go to IC, partner meeting? What did they decide? Right? And all of that stuff is actually in the CRM. Right? The thing is most most firms kinda see it as like a to do list of, you know, this is who to follow-up on. But it's actually a gold mine in terms of understanding and even quantifying a firm's ability to access deals. Right? Because if you join what deals are done with your CRM, you can start adding a score essentially to how much access does this firm have to a particular sector, particular geo. Right? So let's say you covered 85% of all AI deals done in the Bay Area, but you only cover 15% in New York. Right? That is a reason to add a partner in New York. If you ended up doing only, you know, 2% of the deals from the best papers at NeurIPS, you have like a research and academic conference, you know, hole in your sourcing. Right? So it's a reason to add a partner there. Right? So what's actually interesting is that, like, if you look at this full circle from, an LP perspective, right, is just imagine if someone's... Of another fund is fundraising, and you ask for the a... API key to their affinity or their CRM. You can actually quantify this. Right? Like, if if a new firm says, you know, we have access to all the AI vertical deals in Europe. Well, you can see from the meeting. Right? You can see that, well, if this partner just left a large firm and say that they brought all these relationships. Right?
00:28:27 · Jerry Ye, David Weisburd
Is that true? And that's actually like a very interesting part that you can quantify as well. [00:28:34] S0: It's fascinating because this concept of track record, people talk about it in venture capital as if it's the 10 commandments. It's it's it's these tablets that everybody goes around. Everybody looks at the same 10 commandments and says, the... These are the commandments. In reality, even the most sophisticated LPs in the world, they've gone to podcast, they all say the same thing. It's very difficult to understand attribution of track record. There's this old saying that success has of a thousand fathers and failure is an orphan. This is a real problem in venture capital on every level. VCs trying to hire VCs from outside the firm. How do they know that they're actually did these deals? LPs trying to invest in VCs and across... And even startups trying to pick the GPs that actually did the deal versus somebody, you know, else in the firm that that kind of actually did did the hard work and did the value add for for the startup. [00:29:29] S1: Yeah. Definitely. And all that data is there. Right? It's in the email inbox or the CRM. The big question is, you know, like, is anyone actually gonna be willing to share this? Right? I I think even the top LPs have problem getting into funds as well. Right? And getting them to actually share this data is probably not going to fly for a lot of a lot of large firms. Right?
00:29:29 · Jerry Ye, David Weisburd
[00:29:29] S1: Yeah. Definitely. And all that data is there. Right? It's in the email inbox or the CRM. The big question is, you know, like, is anyone actually gonna be willing to share this? Right? I I think even the top LPs have problem getting into funds as well. Right? And getting them to actually share this data is probably not going to fly for a lot of a lot of large firms. Right? [00:29:53] S0: Yep. Venture capital is this access class where it's it's kind of reverse selling. The LPs are trying to get into the top funds, the top 15 funds or so, and and they're very cautious about it. They they don't wanna anger the GPs or then they get in the back of the line for for allocation to the fund. If an LP did want to do that diligence, and let's say the GP was willing to share that diligence, talk to me about what you would ask for from a GP, and specifically what you would ask for. [00:30:21] S1: It's a lot easier to do now with Cloud. Need a API key to their CRM. Right? And this will pull in all their emails, calendars, how many meetings, how many emails, etcetera. And might want something about their network data as well. And so then you kinda know if they're actually connected or not. If there wasn't an... [00:30:44] S0: Something outside of LinkedIn? [00:30:46] S1: Yeah. So probably... I think generally, probably around, like, getting their network dump or something. Right? But then this is joining that along with what deals were actually done. Right? And then you could do different cuts of it by geo, stage, sector, you name it. Right?
00:30:46 · Jerry Ye, David Weisburd
[00:30:46] S1: Yeah. So probably... I think generally, probably around, like, getting their network dump or something. Right? But then this is joining that along with what deals were actually done. Right? And then you could do different cuts of it by geo, stage, sector, you name it. Right? [00:31:07] S0: Yeah. It's... The calendar meetings are a very obvious in retrospect and strong indicator because founders, again, it's reverse selling. The LPs are pitching to get into the top GPs, and the GPs are pitching to get in top founders. What are the odds that a founder will meet with a partner five times, 10 times, and not give them allocation to next round? I would argue it's probably close to zero depending on how how big their check size is. So you could use this calendar and these meetings as this upstream indicator of a GP's access. [00:31:40] S1: Yeah. And it's even even a proxy for, you know, like, decision making before it even gets to an IC or a term sheet. [00:31:47] S0: I wanna go back to what you said about evaluating a firm overall and its strengths and weaknesses, not from an LP perspective, but from a GP's perspective. They wanna get ahead of the ball. They wanna make sure they don't miss the next OpenAI, Anthropic, name your top disruptive company. Talk to me about that. How should GPs use data in order to get a better picture for what's going on inside the firm?
00:31:47 · David Weisburd, Jerry Ye
[00:31:47] S0: I wanna go back to what you said about evaluating a firm overall and its strengths and weaknesses, not from an LP perspective, but from a GP's perspective. They wanna get ahead of the ball. They wanna make sure they don't miss the next OpenAI, Anthropic, name your top disruptive company. Talk to me about that. How should GPs use data in order to get a better picture for what's going on inside the firm? [00:32:10] S1: At least on the data side. Right? There's actually like a parallel to this. Right? So it's not just, you know, did the GP talk to this company, the email. You you can also do the same analogies in terms of given the datasets that we have and the systems that we have, did we identify this deal beforehand as well? Right? So that's kind of the North Star KPI for... [00:32:29] S0: In in other words, let's take instinct. Yeah. There's two mistakes you could have made. One was not seeing it, which you could argue probably is a bigger mistake, and two is seeing it and passing.
00:32:29 · David Weisburd, Jerry Ye
[00:32:29] S0: In in other words, let's take instinct. Yeah. There's two mistakes you could have made. One was not seeing it, which you could argue probably is a bigger mistake, and two is seeing it and passing. [00:32:39] S1: Exactly. Right. So it is tying in the data side of... Did you see it from, like, a inflection point or market mapping or, you know, like, was there a news article on it? Was there a GitHub repo on it or something? And then tying that in with, you know, like, your investor meetings, their emails. Right, like, did they see that? So combined, those two give a pretty good holistic view of that. In terms of more broadly as a firm, I mean, there's probably efficiency things that you can quantify as well. Right? It's like, what is the hit rate? Not just a term sheet or ten years later what the valuation is, but what's the hit rate of this new principal that joined the team in terms of meeting everyone that in in this sector, right, where the deals were done a couple months later. Right? So you can quantify this in terms of hit rate, and what's actually been interesting that other firms have done is just comparing that in terms of, a data hit rate versus, like, a junior associate hit rate versus, a senior partner hit rate. Right? [00:33:41] S0: Talk to me about that.