How I Invest with David Weisburd
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.
00:33:41 · David Weisburd, Jerry Ye
[00:33:41] S0: Talk to me about that. [00:33:42] S1: You have data that might source for things outside of the network. Right? And generally, that might actually be what you want is to tune it. You don't wanna see the same companies that you would have otherwise gotten from your network anyway. So you do wanna be able to quantify, like, how many of these companies could we have met with earlier because this flagged it. Right? But that's just a list of companies. Right? That's your numerator. Right? The denominator in this case is how many of these companies were actually done, right, by you or other top tier firms. You could do the same analysis for a principal or, you know, like a GP as well, is of all the meetings, of all the emails that they actually interacted with, that's the same denominator. Right? But how many of are actually done by, you know, the firm or other firms that you respect?