Investor Stories 344: Best LP Question (Kaiser, Jones, Jain)

This episode delves into the most insightful questions venture capital investors have received from limited partners (LPs).

1. LPs' questions can significantly influence venture capital firms' internal processes.
2. Effective LP inquiries often probe the decision-making criteria of venture capital investments.
3. Understanding consumer behavior through the lens of LPs can offer valuable insights for venture capitalists.
4. Feedback from LPs is crucial for identifying blind spots and improving business strategies.
5. The relationship between venture capitalists and LPs is deeply collaborative and extends beyond mere financial transactions.

1: Introduction

Nick Moran introduces the episode's theme and guests. Focus on the unique interaction between venture capitalists and their LPs. Nick Moran: "Welcome to the podcast about venture capital..."

2: Joe Kaiser's Insights

Discussion on how deal processing and decision-making occur within Joe's firm, showcasing the importance of structured decision-making. Joe Kaiser: "The question that Kevin asks really gets to the heart of the matter."

3: Mike Jones's Perspectives

Mike shares how deep LPs can go in understanding specific sectors and consumer mindsets, illustrating the strategic depth of LP questions. Mike Jones: "I like it when they share how they think the consumer mindset's changing."

4: Gaurav Jain's Experiences

Gaurav discusses the constructive feedback he receives from LPs, which helps refine their investment strategies and operations. Gaurav Jain: "LP's that are willing to share their perspective help you identify blind spots in your business."

1. Engage deeply with inquiries: Whether you're an investor or entrepreneur, engage deeply with the questions posed by your partners or stakeholders to uncover underlying insights.
2. Value feedback: Always seek and value feedback as it is crucial for continuous improvement.
3. Understand the decision-making process: Whether in VC or business, understanding and refining your decision-making process can significantly affect outcomes.
4. Study consumer behaviors: Staying informed about changing consumer behaviors can provide competitive advantages in many fields.
5. Prepare for varied cycles: In investment, always prepare for different economic cycles by understanding historical patterns and advice from experienced players.

On this special segment of The Full Ratchet, the following Investors are featured:

Joe Kaiser Michael Jones Gaurav Jain

We asked guests to share the best question they've ever been asked by an allocator.

The hosts of The Full Ratchet are Nick Moran and Nate Pierotti of New Stack Ventures, a venture capital firm committed to investing in founders outside of the Bay Area.

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People

Joe Kaiser, Mike Jones, Gaurav Jain

Companies

Mercado Partners, Science, Afore Capital

Content Warnings:

None

Nick Moran

Welcome to the podcast about venture capital, where investors and founders alike can learn how VC's make decisions and reach conviction. Your host is Nick Moran, and this is the full ratchet.

Welcome back to TFR. On today's special segment, we ask guests. To share the best question they've ever been asked by an allocator. Here's the segment called best LP Question.

On today's special segment, we have Joe Kaiser of Mercado Partners. Joe, what's the best question that an. LP has asked you? I've got two. I've got two.

Joe Kaiser

Two of my favorite LP's. First, Kevin King at nationwide. One of my favorite LP's. He and I spent a lot of. A lot of time ribbing each other.

What's time? Little known about Kevin is he is an aspiring professional pickleball player. But the question that Kevin asks that really resonates with me is really oriented around the process of how a deal moves through our IC. And if you think about our business, wow, what a consequential question and consequential decision making process is, do you just is, I see, just kind of a hand waving exercise. And, you know, if Joe's got a deal, he just tells his partners, I love this, and they just stamp it.

Definitely not the Mercado way. Or is it, do you have gridlock and everyone's deals? The best deal, and yours is not as good as mine, and nothing gets through. And that's also not the Mercado way. But I think that is that his question and how Kevin asks his, his questions really gets to the heart of the matter.

Another instance, though, another LP that I just love to spend time with. His name is Chris Schelling. Chris is one of the great private equity thinkers in the market today. He's at a truly exceptional money management firm now called Caprock. The first time I met Chris, I.

Read a lot of his postings on social media about how he thinks about private equity and gps and all the things that GPS do wrong. And I was, admittedly, I've spent time with Steve Schwartzman, and I was still intimidated the first time I sat down with Chris. And shortly after my first meeting with. Chris, he sends me an email and he says, hey, I want you to take this quiz. Take a quiz?

What the hell is this? So Chris sends me this quiz, and. The first, I felt like I was. Sitting down for the GMAT again, the first part was just a math test. I'm like, huh?

Is there something that I'm missing? Like, he's too smart to be asking me algebra questions, but I take it. And then the second one was. The second half was a bit of a personality test, and it's not unlike the GMAT. You don't get your score back immediately.

And so here I am. I'm like.

Nails on desk for weeks, waiting to catch up with Chris about this. Did I flunk his test? Like, what part of my personality, like, did my parents raise me wrong? And now I'm not gonna be a good investor? Lo and behold, he said, yeah, your math scores are right where they should be.

And contrary to what my partners may. Believe, my math scores are right where they should be. And on the personality side, thankfully, I'm not an axe murderer. And that came through in these tests. So that was definitely a unique question.

A series. I've heard that one before. Important thing to screen for, though, making sure that you're not an axe murderer.

On today's special segment, we have Mike Jones of science. Mike, what is the best question an LP has asked you? I mean, I've had LP's go super deep tactically with us that I really appreciate when they're kind of really questioning, you know, the way certain companies are growing or how they're thinking about it. So I like to go deep within sectors. I like to also talk really heavily about how we all think the consumer mindset's changing.

Mike Jones

That's obviously a big theory for us. And so I like it when they ask us questions, and I like it when they share how they think it's changing. Like we all have. We're all living in this world. We're all consumers of these products and services.

I think it's super relevant to hear how people feel about it personally, how their family feels about it, how their peer group feels about it, and that might change the way we think about it. So I'm always looking for knowledge where they're not only asking us about our thesis, but also how they're sharing their. Experiences around it, too. To.

On today's special segment, we have Gaurav Jain of a four capital Gaurav. What's the best question that an LP has asked you? I don't know if there's one question, but I'd say, like, the one. One thing we really like about LP's are when they're not just asking you questions frankly, but giving you feedback. Right, because.

Gaurav Jain

And I apply the same kind of methodology when I'm meeting founders. Right. Of course I want to ask questions because I want to learn about their business and their backgrounds, but I try to also add some value in that meeting because I've got a certain vantage point that the founders don't have. And similarly, lP's have a certain vantage point that we don't have. We were very lucky to partner with institutional investors from day one who'd been doing venture for far longer than we had, who'd seen many more cycles than we had, who'd seen venture across all kinds of stages and so on and so forth.

And they pushed us, actually, one of them pushed us a lot on portfolio construction, for example. Right. Because we went in thinking, oh, we're going to do 60 precedes because it's highly risky, and then we're going to double down on seeds and, like, something really pushed us on, like, no ownership really matters. Or make sure you have a rainy day fund, because, yes, right now things are great. And turns out they were right, you know, doesn't last forever, you know, but we'd only seen a certain, you know, certain cycles, I think, you know, lP's that are willing to share their perspective, help you identify blind spots in your business, and help push your thinking through.

And that's sometimes we really enjoy the fundraising process as much as taxing. It is sort of just being out there and sharing our story. Getting feedback actually helps us run our business better. Right. And I think that to us, we feel like we get value.

Even in cases within a passing, we still get value out of that conversation. Yeah. Sound very similar to the founders that you back. So try our. Try our best.

That will conclude this installment of investor stories. If you're enjoying the program and would like to see it continue, take a moment and leave a five star review in iTunes. Okay. That will wrap things up for today. Until next time over, prepare, choose carefully, and invest confidently.

Thanks for joining me.