Hey - Eli here.

Welcome to another edition of 2&20. We’re here to fill the void that exists between emerging fund managers and the information they need to excel. As always, I’m here to help you grow the two things that matter: AUM and Alpha.

So many changes since the last edition. I’d like to keep Two and Twenty going at a more regular cadence. To make that happen, my goal will be…

• The Operating Manual: A longform newsletter every two weeks, on Thursday. This is the Main Idea section of past editions. Deep dives into topics you probably didn’t think you needed to know. Cool stuff on my radar. Interesting reads. Sans “Dank Tweets.”

• The Feed: The tagline of Two and Twenty is “chronically on X so you don’t have to be.” I built this to be the highly curated news source I wish I had. Every Tuesday and Friday, I will share my favorite news highlights from the trailing days. Expect this to be super short.

A taste of the last few weeks:

As always, please hit me back with feedback and comments—I’m constantly seeking ways to make this newsletter a more valuable read.

Diving right in and keeping things brief:

On my radar:

• I WANT to send you deals. No strings attached. Fill out our deal sharing form to have relevant deals sent to you!

• I would love for you to introduce me to the 2 coolest people you know! My email is here :)

• I would love to meet anyone in your network who is an expert at consumer product GTM. Someone who has blown up a brand, regardless of what category it was in.

• Been starting to dabble in commercial & multifamily real estate… if you know anyone in the real estate world, would love to connect with them!

The Main Idea

Tax season is around the corner. There’s a good chance you’re about to get hit with a few surprises. Not because you did anything wrong, but because nobody sat you down and walked you through how venture fund taxation actually works.

Plus, a second, bonus topic, that’s a little sensitive for most.

This one’s going to be dense. Grab a coffee.

Part I: The Tax Stuff You Should Know (But Probably Don’t)

Your fund doesn’t pay taxes. You do.

Starting with the basics because I’ve seen this trip up more first-time GPs than I’d like to admit. Your fund is almost certainly structured as a limited partnership. LPs are pass-through entities for tax purposes - the fund itself doesn’t owe the IRS anything. Instead, all income, gains, losses, and deductions flow through to you and your LPs via Schedule K-1s.

Sounds simple until you realize what it actually means: your LPs are relying on you to get those K-1s out on time, and the information on them needs to be right. Late or inaccurate K-1s are one of the fastest ways to erode LP trust. If your fund admin is slow, that’s your problem to solve. Not theirs.

The deadline: Partnership returns (Form 1065) are due March 15 (or September 15 if extended). K-1s go out with the return. Most funds file extensions, which is totally fine and normal - but communicate that to your LPs proactively. Don’t make them chase you. Nothing makes an LP question their investment faster than radio silence during tax season.

Carried interest: the 3-year rule that catches people

Good news first: Congress didn’t kill carry in the One Big Beautiful Bill Act (signed July 4, 2025). We live to fight another day. The bad news is that the 3-year holding period rule under IRC Section 1061 is still very much alive, and it’s the thing most emerging managers misunderstand.

Here’s the deal: for your carried interest to qualify for long-term capital gains treatment (20% federal rate instead of 37% ordinary income), the underlying assets need to be held for more than 3 years - not the standard 1 year that applies to everyone else. This is specific to carried interest holders. Your LPs only need the normal 1-year holding period.

So if your fund exits a position at month 30, congrats on the return, but that carry is getting taxed at ordinary income rates. For a GP in California, that’s potentially 37% federal + 13.3% state. Over 50% of your carry, gone. On what you thought was going to be a capital gains event.

The play: When you’re thinking about exit timing, the 3-year mark matters more than you think. If you’re sitting on a secondary offer at month 28, do the math on whether waiting 8 more months saves you and your carry recipients a meaningful chunk of tax. Obviously don’t let the tax tail wag the investment dog, but be aware of it. I’ve seen GPs leave six figures on the table because they didn’t even know this rule existed.

A little caveat: Hopefully your profits interest in the GP is vesting… if you filed an 83(b) election within the window for your GP to vest (when it was worth close to zero), you locked in ordinary income tax on that near-zero value at the time of the election. The upside: any future appreciation on that carry is taxed at long-term capital gains rates after just 1 year of holding - not the 3-year rule under Section 1061 that normally applies to carried interest. The 83(b) effectively converts your carry from a profits interest subject to the 3-year holding period into a capital asset subject to the standard 1-year holding period. The downside is that if the fund never generates carry, you can’t recoup the tax you paid or claim a loss on the election. For most emerging managers, the tax at grant is negligible (you’re electing on something worth pennies), so the risk is minimal and the potential savings on a successful fund are massive. If you didn’t file one within 30 days of your carry grant, it’s too late - the IRS is strict on that window, no exceptions.

The management fee deduction trap

Here’s one that burns LPs and most GPs don’t even know about it.

Management fees paid to your fund are classified as investment expenses. Since the Tax Cuts and Jobs Act (2017, now made permanent by OBBBA in 2025), miscellaneous itemized deductions, including investment management fees, are permanently non-deductible for individual taxpayers.

In plain English: your LPs who are individuals (not institutions) are paying your management fee with after-tax dollars and getting zero deduction for it. On a $100K commitment with a 2% management fee, that’s $2K/year your LP can’t write off. Over a 10-year fund life, that’s $20K in non-deductible fees on a $100K commitment. Not great.

Why this matters to you: Sophisticated LPs know this already. It’s one of the reasons institutional LPs push so hard on fee reductions. If you’re raising from high-net-worth individuals, this is a quiet pain point worth acknowledging. Even if you don’t reduce fees, showing awareness of it builds credibility. It tells LPs you actually understand what it costs them to be in your fund.

Management fee waivers: the move most emerging managers don’t know about

This is one of the more powerful and underused structures in emerging fund land. I genuinely think more people should be doing this.

A management fee waiver lets the GP forgo some or all of their cash management fee in exchange for a profits interest in the fund. Instead of taking $200K in fees taxed as ordinary income, you convert that into a deemed capital contribution that participates in fund profits - potentially taxed at long-term capital gains rates.

Two big benefits:

1. You convert ordinary income (taxed at up to 37%) into potential capital gains (taxed at 20%). That’s a 17% spread on every dollar.

2. You increase your GP commitment without writing a check, which LPs love to see. Suddenly your alignment numbers look a lot better.

The catch: this needs to be structured properly from the start (ideally in your LPA), and the IRS has been paying closer attention. There’s an “entrepreneurial risk” requirement - the waived fee needs to be genuinely at risk of loss. If your fund tanks, you don’t get that fee back. It’s not free money, it’s a bet on your own fund.

But if you’re confident in your portfolio... it’s one of the smartest tax planning tools out there.

Talk to your fund counsel about this before your next fund. Not after. Before.

QSBS just got way better

If you’re not tracking QSBS for your portfolio, you’re leaving real money on the table. Full stop. We have discussed this in past editions, including the upgrade to QSBS, but worth mentioning it again because it’s freaking huge.

The One Big Beautiful Bill Act expanded Qualified Small Business Stock benefits significantly. For stock acquired after July 4, 2025:

• Partial exclusions now available at 3 and 4 years (50% and 75% respectively), with full 100% exclusion still at 5 years

• Gain exclusion cap increased from $10M to $15M, indexed for inflation

• Gross asset threshold increased from $50M to $75M, also indexed for inflation

For venture funds, this is massive. More of your portfolio companies now qualify (the $75M gross asset threshold covers most Series A and B companies), and the benefits kick in earlier. You no longer have to hold for the full 5 years to get something.

But here’s what most GPs miss: QSBS benefits flow through to your LPs on the K-1. If you’re not tracking which portfolio companies qualify and flagging it for your fund admin, your LPs might be missing significant tax savings. And for your own GP commitment and any co-invest you’ve done personally, you could be leaving hundreds of thousands of dollars on the table.

Action item: Ask your fund admin or tax advisor to specifically identify QSBS-eligible positions in your portfolio and ensure proper reporting on the K-1s. If they look at you like you’re speaking a different language, get a new fund admin. Seriously.

The multi-state filing nightmare nobody warns you about

You operate your fund in LA. Your portfolio company is in New York. Your LP is in Texas. Where do you file state taxes?

The answer, unfortunately, might be all three. Welcome to nexus.

States have been getting super aggressive about establishing nexus for fund management companies. California, for example, will assert income tax nexus over your management company if your total management fees from California-sourced clients exceed $500K - even if your management company has zero physical presence in the state.

And here’s the fun part: if your fund has portfolio companies in multiple states, the income from those companies could create filing obligations in those states too. Depends on how the income is characterized and whether the state treats the fund as having nexus through its portfolio investments.

Most emerging managers are either unaware of this or actively ignoring it. I get it - nobody wants to file in 7 states. But the penalties for non-filing are much worse than the cost of compliance. This is one of those “pay now or pay way more later” situations.

The SALT deduction and PTET workaround

Quick one but it’s basically free money if you’re not already doing it.

The SALT cap got bumped from $10K to $40K under the OBBBA (for tax years starting after December 31, 2024, through 2029). Better, but still a cap. The real move is the Pass-Through Entity Tax (PTET) workaround, which survived the OBBBA intact.

If your management company is structured as a partnership or S-corp, you can elect to pay state income taxes at the entity level in states that offer PTET regimes. This effectively converts a non-deductible individual SALT payment into a deductible business expense, bypassing the cap entirely.

California, New York, Connecticut, New Jersey, and many other states offer this. If your accountant hasn’t brought this up, bring it up yourself. Today. This week. I’m not exaggerating when I say this could save you tens of thousands of dollars annually depending on your income level and state.

Phantom income: the call from your LP you don’t want to get

This one’s a classic and it hits every fund eventually.

Your fund is doing great on paper. Markups across the portfolio, unrealized gains climbing. But you haven’t distributed a dime because you haven’t had any exits.

Your LPs still owe taxes on their share of the fund’s net taxable income, even if they haven’t received a dollar in distributions. This is phantom income. And it’s one of the most common sources of LP frustration. “You’re telling me I owe $15K in taxes on gains I haven’t seen a penny of?” Yes. That’s exactly what you’re telling them.

The worst version: your fund recognizes ordinary income from a portfolio company (interest payments on a convertible note, a short-term gain on a secondary) and allocates it to LPs on the K-1. Now your LP has a tax bill with zero cash to pay it.

Best practice: If your fund is generating meaningful taxable income without corresponding distributions, make tax distributions. These are distributions specifically sized to cover LPs’ estimated tax liability on fund income. Most well-drafted LPAs allow for this. If yours doesn’t, put it in the next one. Your LPs will thank you.

I felt like just talking about taxes would have been a little light, given I missed last week’s edition. A second topic, that I think might be pretty relevant for most, given the conversations I’ve been having over the last few weeks…

Part II: What to Do When Your Fund Dramatically Misses Its Target

First: can you even close below target?

Usually, yes. Most LPAs set a minimum fund size (often 25-50% of the target) below which the fund can’t operate. If you’ve hit that minimum, you can hold a final close and start investing. If you haven’t hit the minimum, you may need to either extend the fundraising period (with LP consent) or wind down and return capital.

The answer is in your LPA. Go read it. Like, actually read it. I know it’s 80 pages. Read it anyway. Or at the very least, throw it into Claude.

Do you have to return LP capital?

Not if you’ve hit the minimum close and the fund is operational. The capital is committed and callable. The question isn’t whether you return it - it’s how you deploy it.

Where things get tricky: if your LPA has a concentration limit (say, no more than 10-15% of committed capital in a single deal) and your fund is much smaller than expected, your check sizes might be too small to be competitive. A $20M fund with a 10% concentration limit maxes out at $2M per deal. That might work for pre-seed, but good luck leading a seed round that’s now routinely $3-5M.

The portfolio construction problem

This is the real challenge. Your fund model was built for a $50M fund. You raised $15M. Everything breaks.

What needs to change:

• Fewer bets. You can’t do 25 deals at $600K each and expect to matter. Better to do 8-10 deals where you have a meaningful position and the founder actually takes your call.

• Lower reserves. Your original plan to reserve 50% for follow-ons? Probably needs to come down to 25-30%, or you won’t have enough for initial checks that move the needle. This hurts, but it’s the math.

• Tighter thesis. A smaller fund forces focus. This is actually a feature, not a bug. Pick a lane and own it. “We invest in everything” doesn’t work when you can only write 10 checks.

• More co-invest. Structure SPVs alongside your fund deals to give LPs additional exposure when you find winners. This also helps portfolio companies get bigger rounds filled without you needing more fund capital. Side benefit: your LPs appreciate the deal flow.

The messaging

This is where most GPs completely fumble it. They either pretend the miss didn’t happen (your LPs aren’t stupid, they can do division) or they over-explain and come off desperate.

The right frame: “We closed the fund at a size where we can execute our strategy with discipline. We’d rather be concentrated and high-conviction than over-diversified with a larger fund that doesn’t match the opportunity set.”

Short. Confident. Forward-looking. Don’t apologize. Don’t explain.

What you never, ever say:

• “We struggled to raise”

• “The market was tough” (everyone’s market was tough, you’re not special)

• “We’re still hoping to add more LPs”

• Anything that invites the listener to calculate how far you are from target

Timing the next fund

Conventional wisdom: raise your next fund after deploying 60-70% of the current one, typically 2-3 years in. But if you significantly missed your target, the calculus changes.

You need proof points before going back to market. That means:

• At least 2-3 portfolio companies showing real traction (revenue growth, follow-on funding from name-brand investors)

• A clear, data-backed narrative on why your smaller fund was actually a better setup

• Ideally at least one marked-up position that demonstrates you can pick

If your fund is too small to generate a meaningful track record, consider whether an SPV strategy makes more sense for your next vehicle rather than a traditional blind pool. Some GPs have successfully used a series of SPVs to build a track record and LP relationships before coming back with a proper Fund II.

The honest timeline: If you missed your target badly, expect 3-4 years before raising again. Not 2. That’s okay. Deploying well and generating returns from a smaller fund is infinitely better for your long-term career than rushing back to market with nothing to show. The LPs can smell desperation. Don’t give them a reason.

The relationship game

Here’s the thing nobody says out loud: most of the LPs who passed on your fund are watching. They didn’t disappear. They’re waiting to see if you can actually invest.

Stay in touch. Send quarterly updates even if your fund is small. Share portfolio company wins. Be transparent about the losses too. The LPs who passed on Fund I and see you execute well from a smaller base? They’re your best prospects for Fund II. I’ve seen this play out over and over.

And the LPs who did commit at your lower raise? They took a bet on you when it was hardest. When everyone else was passing, they wired money. Never forget that. Over-communicate. Over-deliver. Make them look smart. Those relationships compound harder than any carry check ever will.

Closing

No cool stuff or interesting reads this week, I’ll have it back for you the next edition! Had to type this one out on the go :)

Thanks for taking time out of your Thursday to read. Since you made it this far, a little easter egg for you…

As always, you can find me on X and LinkedIn, and I’d love to hear from you via email. Whether it’s talking startups or just shooting the shit, I’m always happy to connect.

Onto the next!

//Eli

reach eli

Hey - Eli here.

Welcome to another edition of 2&20. We’re here to fill the void that exists between emerging fund managers and the information they need to excel. As always, I’m here to help you grow the two things that matter: AUM and Alpha.

Happy 2026 (even though Larry David would tell me it’s too late to say that).

I’ve been busy:

It’s been a minute since the last edition… lots has happened. We have officially passed VC winter, which means you should all be back in the office after your time in St. Moritz or Aspen. I hope 2026 is filled with lots of funds raised, deals done, and DPI.

As always, please hit me back with feedback and comments—I’m constantly seeking ways to make this newsletter a more valuable read.

Diving right in and keeping things brief:

On my radar:

• I WANT to send you deals. No strings attached. Fill out our deal sharing form to have relevant deals sent to you!

• I got a new username on X. @elikia so please go follow me.

• Please, introduce me to your favorite investors. I <3 making new friends.

• I’d like to do 2 editions a month in 2026, but each one currently takes me ~8-10 hours to write. I need to fix something in this equation.

• Take a look at our Fund II deck and let me know if there’s anyone you think I should chat with! We went through a little bit of a pivot.

  Fortify Ventures Fund II Deck

The Main Idea

This week we’re talking sales. Like every job, venture is a sales game. Selling LPs, selling founders, selling partners - but the one that often gets left out is selling shares on the secondary market. This has been my challenge for 2026… finding liquidity.

When companies are staying private longer, secondaries are the much needed release valve. And when crashes can happen unexpectedly, leaving companies to go belly up overnight, it might not be a bad idea to hedge. But the age old question: is your pullout game strong enough?

Let’s walk you through exactly how to sell shares on the secondary market, from the moment you decide you want liquidity to the moment cash hits your fund’s bank account…

Before we start: two things most people get wrong

First: You do NOT need the company’s permission to sell on the secondary. If they’re cooperative and willing to furnish materials you can share with buyers, that’s awesome. But whether or not you can sell your shares is dictated by your SPA and investor rights agreement, not the company’s feelings about it.

Second: The best time to sell is at or around a financing round. Is it unethical? Maybe. But it’s when demand for shares is at its highest. The company is top of mind, recent data is accessible, and you have two plays: sell at a discount to new investors who want more than their allocation, or sell at a premium to investors who couldn’t get into the round at all.

Step 1: Gather your documents

Before you talk to a single buyer, you need to know exactly what you own and what restrictions exist. This is where most first-time sellers waste weeks.

Go find these right now:

• Your stock purchase agreement (SPA) from when you invested. Contains the transfer restrictions that govern whether and how you can sell. If your SPA has funky restrictions you don’t understand, send me an email - I have a friend who can help.

• The company’s certificate of incorporation and any amendments. Tells you what share classes exist and what rights attach to each.

• Any investor rights agreement, voting agreement, or ROFR agreement. Often bundled together. Contains the ROFR provisions that determine who gets to buy your shares before you can sell to a third party.

• Your share certificate or a copy of it. You need the certificate number and exact number of shares.

• The most recent cap table. Buyers will want this. You may or may not have access - you’re at the mercy of the company.

Do a little research:

Find your SPA and investor rights agreement and throw it into my good friend Claude. Then just copy and paste this prompt:

I’m planning to sell my shares in this company on the secondary market. Please review these documents and answer the following questions: 1. Can I sell my shares to a third party? Are there any outright prohibitions on transfer? 2. Does the company have a right of first refusal (ROFR)? If yes, what’s the notice period and process? 3. Do other investors have a right of first refusal? If yes, which investors and what’s the process? 4. Do other investors have co-sale (tag-along) rights that let them sell alongside me? 5. Are there any holding periods or lock-ups still in effect? If yes, when do they expire? 6. Do I need board approval to transfer shares? 7. Are there any other transfer restrictions I should know about? 8. What is the required format and delivery method for any notices I need to send? For each answer, please quote the specific language from the documents and tell me which document and section it came from.

Extract out the info, and make sure you really understand what you can and cannot do.

Make a one-pager:

Once you’ve got answers, create a simple summary you can share with potential buyers:

• Company name, sector, one-line description

• Your share class and number of shares

• Last priced round (price, date, lead investor)

• Current 409A if you have it

• Your ask (price range or “exploring market pricing”)

• Transfer restrictions summary (ROFR, lock-ups, board approval)

• Your contact info

This one-pager will save you hours. Every buyer asks for the same info, so save yourself from having to copy and paste a weirdly formatted email.

Step 2: Talk to the company

This is the step most GPs want to skip. Don’t skip it.

You need to have a conversation with the company before you start marketing your shares:

• You may need their cooperation to close (ROFR waiver, cap table update, consent to transfer)

• They may know of buyers already interested

• They may be planning a tender offer you don’t know about

• If they find out you’re selling from someone else, it damages your relationship

The script:

Email or call the CEO or CFO. Keep it simple:

“Hey Eli, I wanted to give you a heads up that I’m exploring some liquidity options for our shares. Our fund is [approaching end of term / rebalancing the portfolio / whatever is true]. I want to be transparent with you and also make sure I understand any restrictions or process on your end. Do you have 15 minutes this week to chat?”

What you’re trying to learn:

• Is the company aware of any interested buyers?

• Is the company planning any liquidity events (tender offer, secondary program)?

• Will the company cooperate with a sale, resist it, or stay neutral?

• What’s the process for exercising or waiving ROFR?

• Who at the company handles cap table transfers?

The three outcomes:

Best case: “Actually, we’re planning a tender offer in Q2, you should wait for that” or “We’ve had inbound interest from X Ventures, want me to connect you?”

Neutral case: “We’re not going to help you find a buyer, but we won’t block a transfer as long as the buyer is acceptable and you follow the ROFR process.”

Worst case: “We really don’t want you to sell, it sends a bad signal.” In this case, you have a decision to make. You can still legally sell (check your docs), but you may damage the relationship.

If the company is hostile:

Sometimes founders get upset when investors want to sell. They see it as lack of conviction. A few things to keep in mind:

• You almost certainly have the legal right to sell, subject to ROFR

• The company can make the process slow and painful, but they usually can’t block it entirely

• Consider whether the relationship damage is worth the liquidity

• Sometimes the right move is to wait 6 months and try again

Step 3: Find buyers

Everyone says “use a broker or go direct.” That’s not helpful. Here’s what actually works.

The broker landscape

I’ve talked to all of them at this point. Here’s the breakdown:

Forge is the biggest. Most liquidity, largest buyer network. But they’ll shop your position broadly, which can get back to the company or other investors. Best for positions $500K+. Fees are 3-5%.

Hiive is more seller-friendly. Better price transparency, less aggressive marketing of your position. Easier to work with for positions in the $250K-2M range. Fees are 3-4%.

EquityZen aggregates smaller positions into SPVs. Good if you’re trying to move something under $500K that other brokers won’t touch. Slower to close because of the SPV structure. Fees around 5% plus SPV costs.

Rainmaker is white glove for larger institutional blocks ($2M+). Lower fees (2-3%) but they’re picky about what they take on.

NPM (Nasdaq Private Market) is really only useful if the company is already running a formal liquidity program through them.

Caplight isn’t a broker - it’s price discovery. Free data on where companies are trading. Invaluable for understanding the market before you talk to anyone.

And then obviously there are all the broker-dealers / placement agents / search funds / etc. who would happily try to help you offload your shares for a small cut.

Before you sign with any broker, ask:

• What’s your fee structure?

• Do you require exclusivity? For how long?

• How many transactions have you closed in this company specifically?

• What’s your typical timeline from engagement to close?

• Who are your likely buyers for this position?

• Do you have any current buy-side mandates that match my position?

Watch out for:

• Long exclusivity periods (more than 60 days is too long)

• Fees that apply even if you find the buyer yourself

• Brokers who want to “shop” your position broadly without your approval

Before you sign an engagement letter, ask for their “recent closed transactions” in your company or sector. Selling shares (or assets) is a relationship game - if they don’t know buyers, you’re screwing yourself by signing that engagement letter.

Going direct

If you want to avoid the 3-5% fee, here’s where to look:

Tier 1 - Highest conversion:

Other investors on the cap table. This is your first call. Email every investor from prior rounds. They already did the diligence, they already believe in the company, and they may want to increase their position at a discount.

Script:

“Hey Eli, I’m exploring liquidity options for our position in 2&20. Before going to market, I wanted to see if X Ventures had any interest in adding to your position. We’re looking at 10% discount to the last round. Let me know if this is worth a call.”

Investors who passed on the last round. Check Pitchbook for who was in the process but didn’t close (but Pitchbook might not be accurate… so hopefully you have a friend at the company who can tell you who was chatting with them about the last round). They already spent time on diligence and said no at that price. A discount might change the math.

The company’s inbound list. Ask the CEO or CFO: “Have you had any investors reach out about buying secondary shares?” Most growth-stage companies have a running list of funds who’ve expressed interest. Ask for warm intros.

Tier 2 - Medium conversion:

Funds that invest in the space. Search Pitchbook or Crunchbase for funds that have invested in 3+ companies in the same sector. They understand the market and can move fast on diligence.

Your own LPs. Some LPs want direct exposure to specific portfolio companies. Especially true for family offices and HNW individuals. Check your LPA first - some have restrictions on LP co-investment in portfolio companies.

Secondary-focused funds & search funds. Industry Ventures, Lexington Partners, Whitehorse Liquidity Partners, NewView Capital, Euclidean Capital. They’re slower (60-90 day diligence) but can take larger blocks.

Tier 3 - Lower conversion but worth a shot:

Slack and Discord communities. Private LP/GP communities where secondary opportunities get shared: Hampton, OnDeck Angels alumni, Sidebar, various fund manager Slacks.

Twitter/X DMs. If you know someone at a fund that would be a logical buyer, a direct DM often works better than email. Keep it short.

Strategic acquirers. If the company has obvious strategic buyers, those corporates sometimes buy secondary positions to build a stake before M&A. Reach out to their corp dev team.

Step 4: Price discovery

Before you commit to a buyer or a price, you need to understand what the market will actually pay.

Start with data:

• Check Forge, Hiive, EquityZen, and Caplight for any recent trading data on your company

• Look at the last priced round and when it happened

• Look at comparable companies that have traded recently

• Ask brokers (even if you’re not using one) what they’re seeing

The discount benchmarks:

Secondary shares almost always trade at a discount to the last priced round. Here’s what I’ve been seeing:

• AI company, round less than 12 months old: 0-10% discount, sometimes premium

• Strong performer, round less than 12 months: 10-20% discount

• Solid company, round 12-24 months old: 20-30% discount

• Stale round (24+ months), flat growth: 30-50% discount

• Company struggling or down round expected: 50-70% discount

Heads up: buyers will ask for the 409A and try to use it to lowball you. Don't fall for it. The 409A is intentionally conservative - it's for tax purposes, not what the shares are actually worth. The last priced round is your anchor.

Step 5: Run the process

You’ve got interested buyers. Now you need to run a process that gets you the best price and terms without dragging on forever.

If you have one serious buyer:

Keep it simple. Move to a term sheet or LOI (letter of intent) that covers:

• Price per share

• Number of shares

• Total transaction value

• Key conditions (ROFR waiver, company consent, etc.)

• Exclusivity period (keep this short, 30 days max)

• Expected closing date

• Who pays for what (legal fees, transfer fees)

Once you have an LOI, you’re in a bilateral negotiation. Move fast.

If you have multiple interested buyers:

You have leverage so use it.

Start getting offers… compare bids on price, certainty, and speed. The highest price isn’t always the best bid. A buyer offering 5% less but who can close in 2 weeks with no conditions might be better than a higher bid with 60 days of diligence and multiple outs.

What to negotiate beyond price:

• Escrow: Some buyers want 10-20% held in escrow for 12 months. Push back or negotiate smaller (5-10% for 6 months).

• Reps and warranties: They’ll ask you to make promises about the shares (you own them, they’re not encumbered). This is normal. What’s NOT normal is making reps about the company’s performance. Push back on anything that makes you liable for how the company does.

• Indemnification: Cap your liability at the purchase price. Some buyers want 2x or uncapped. Don’t agree.

• Exclusivity: Keep it short (30 days) and make sure it terminates if they don’t perform.

Common buyer tricks:

• “Subject to due diligence” with no clear scope or timeline. Pin them down: what diligence, how long, what would cause them to walk?

• Asking for 90-day exclusivity. Shoot for no more than 30 days.

• Renegotiating price after exclusivity is signed. This is called “re-trading” and it’s a sign of a bad actor. Walk away if you can.

• Sharing your position with the company to create pressure. Be direct with the company first so you control the narrative.

Step 6: Leverage your shareholder rights

Your early stage shares hopefully have some rights associated with them… important to make sure you leverage those rights to maximize the outcome of your secondary sale!

Information rights:

A few things people miss:

What you can share: Your information rights are for you, not your buyers. Sharing confidential info with a prospective buyer without company consent could breach your IRA. The workaround: ask the company to let your buyer into a data room under NDA, or request a limited data package specifically for the sale. Frame it as “I want serious offers from informed buyers so we don’t waste your time.”

Do the rights transfer? Usually no. Information rights are granted to you as the original investor, not attached to the shares. Your buyer won’t inherit Major Investor status - they’ll need to negotiate that separately with the company. Some buyers will ask you to help facilitate this as part of the deal.

Pro rata rights:

You can sell your shares but keep your pro rata. Or sell the pro rata separately to a different buyer. Most IRAs allow assignment of pro rata rights unless they explicitly say otherwise - check yours.

If the company is hot and likely to raise soon, bifurcate the deal. Sell the shares at one price, sell the pro rata at a premium to someone who wants in on the next round. Two transactions, better total proceeds.

Board seat or observer rights:

These don’t transfer with your shares. But if you’re selling your entire position and giving up the seat anyway, offer to help the buyer get appointed. Requires company cooperation, but it’s a real sweetener - I’ve seen it add 5-10% to the price.

ROFR as a tool:

The ROFR isn’t just an obstacle. You can use it:

• Price discovery: Submit a notice at a price higher than you expect. If the company exercises, great. If they waive, you’ve established your floor.

• Forcing function: A formal ROFR notice starts a legal clock (usually 30 days). If the company has been slow-walking you, this forces them to engage.

• Leverage: If the company cares about who ends up on the cap table, ask for something in return for finding an “approved” buyer - faster processing, waiver of transfer fees, help with docs.

Step 7: Handle the ROFR

Almost every company has a right of first refusal. Here’s how it works:

1. You negotiate a deal with a buyer at $X per share

2. You notify the company of the proposed transfer, including price and buyer identity

3. The company has a set period (usually 30 days) to decide whether to exercise and buy the shares themselves

4. If they exercise, they buy your shares at the price you negotiated. Deal done, you got your liquidity.

5. If they waive or don’t respond in time, you proceed with your buyer

6. Other investors with ROFR rights may also get a chance to exercise pro rata - check your IRA

The ROFR notice:

Your attorney will draft this, but key elements are:

• Your name and number of shares

• Proposed buyer’s name and contact info

• Price per share and total consideration

• Other material terms

• Request for waiver or acknowledgment

Send to the company’s legal contact or CFO via the method specified in your IRA (usually email + certified mail to a specific address). This starts the clock.

Speed it up: Ask for an early waiver before you formally file. “I have a buyer ready to close. Can you confirm in writing that you’ll waive ROFR so we can proceed?” If they don’t intend to exercise, most will give you a waiver letter and save everyone 30 days.

Co-sale rights:

If other investors have tag-along rights, they may be entitled to sell alongside you at the same price and terms. Your buyer might not want the extra shares. Work this out early - check your docs for who has co-sale rights and how much they can tag. Sometimes you can negotiate with the co-sale holders to sit this one out, especially if your buyer has a hard cap on size.

Step 8: Close the deal

You have a signed LOI, ROFR is waived, you’re moving to close.

Stock Purchase Agreement (SPA):

Buyer’s attorney usually drafts. A few things to watch:

• Reps about the company. You can rep that you own the shares, they’re not encumbered, and you have authority to sell. You should NOT rep anything about the company’s business, financials, litigation, or prospects. Buyers will try to sneak these in. Read every rep carefully - if it starts with “the Company...” get rid of it asap.

• Indemnification cap. Standard is 1x purchase price. Some buyers push for 2x or uncapped for “fundamental reps” (ownership, authority). Push back. If they insist on a carveout for fraud, that’s reasonable. Anything else, you probably shouldn’t cave.

• Survival period. 12 months is standard. 18 months is aggressive. Some buyers try for 24 months on “fundamental reps” - don’t agree unless the deal economics justify it.

• Escrow. If they want a holdback, 10% for 6-12 months is market. 20% is aggressive. Negotiate a “mini-basket” or deductible so they can’t claw back escrow for trivial claims. Also negotiate that escrow releases automatically if no claims are filed by the release date - don’t let it require mutual signature to release.

• Opinion letters. Some institutional buyers ask for a legal opinion that the shares are validly issued and freely transferable. This costs $5-10K extra. Push back unless it’s a dealbreaker - most secondary deals close without one.

Other documents:

• Stock power. The actual transfer instrument. Sometimes it’s a standalone document, sometimes it’s built into the SPA. Make sure your signature matches exactly how you’re listed on the share certificate.

• Section 4(a)(1½) opinion or rep. Most secondary sales rely on the 4(a)(1½) exemption (often called the “4(a)(1-and-a-half)”). Your attorney and the buyer’s attorney will both need to confirm the transaction qualifies. This is usually just reps in the SPA, but some buyers require a legal opinion. Know which one you’re dealing with before you budget legal fees. ChatGPT this for more detail.

Legal fees:

Budget $5-10K for a clean deal, $15-25K if there’s heavy negotiation on reps and indemnification or if the buyer requires opinion letters. If the buyer asks you to pay their legal fees, counter with a cap or walk.

Step 9: After the sale

Money’s in the bank. Party time (almost).

Fund accounting:

Get this to your fund admin within 48 hours:

• Executed SPA or closing statement

• Original investment docs (for cost basis)

• Wire confirmation

• Share certificate or cancellation confirmation

They’ll update NAV, LP capital accounts, realized gains/losses, and DPI. If you sold at a different price than your last reported fair value, be ready to explain the delta in your next LP letter.

Tax timing:

The gain is recognized when the transfer is “complete” - usually when the company updates the cap table, not when you receive funds. If you’re closing in December and want the gain in the next tax year, delay the cap table transfer until January. Conversely, if you want to recognize the gain this year (maybe to offset losses), make sure the transfer completes before December 31. Coordinate with the company and your tax advisor.

Recycling:

If your LPA allows recycling, you can reinvest proceeds instead of distributing. But most LPAs limit recycling to the first 2-3 years of fund life and cap it at 110-120% of committed capital. One nuance: some LPAs allow recycling of return of capital but not gains. Your attorney / fund admin can tell you if you can recycle the money.

QSBS:

A few things people miss:

The 5-year clock starts when you receive stock, not when you invested. If you invested via SAFE or convertible note, your holding period starts at conversion, not when you signed the SAFE. That Series A you thought you’ve held for 4 years? If the SAFE converted 2 years ago, you’re only at 2 years for QSBS purposes.

QSBS requires holding until a qualifying exit… so acquisition or IPO. Secondary sales don't qualify for the exclusion on the shares you sell, regardless of how long you held.

The $10M / 10x cap is per taxpayer, not per investment. If your fund is a pass-through entity, each LP gets their own $10M cap. If you’re investing through a C-corp blocker or your fund is structured as a C-corp, the fund itself is the taxpayer and gets one $10M cap total.

Partial sales are a gray area. Some practitioners argue you can sell some shares on secondary and preserve QSBS on the rest. The law is murky. Conservative tax advisors will say any secondary sale taints the entire position. Get an opinion in writing before you assume you can sell half and keep QSBS on the rest.

State taxes:

Your fund’s domicile determines where you pay tax, not where the company is incorporated. But if you have LPs in multiple states, the pass-through gains may create nexus issues. California is particularly aggressive - they’ll tax gains if the company has any CA presence, regardless of where your fund is based. Flag this for your fund’s tax advisor before closing, not after.

4D chess: be a secondary buyer

Now you know how the process works. That’s valuable on the buy side too.

Most LPAs restrict you to a single strategy - you can’t suddenly become a secondary fund. But buying secondary in companies you already own or have diligenced is usually fair game. Check your LPA for language around “follow-on investments” and “related transactions.”

A few plays:

Double down on winners. Portfolio company is performing and an early angel wants out? Buy their position. Often cheaper than waiting for the next priced round, and you’ve already done the work.

Get into deals you passed on. That Series A you passed on is now a rocket ship. Reach out to the cap table. Angels sitting on big paper gains often want some liquidity. You get in at a discount to the current round, they get cash. Works for everyone.

Founder goodwill. Providing liquidity to an early investor is a favor to the founder - they don’t have to manage the process, cap table stays clean. It’s also a way to build a relationship before leading their next round.

Sourcing tip: Ask founders you’re close with if anyone on their cap table is looking for liquidity. They usually know. Angels ask founders about secondaries all the time.

Timeline expectations

• Best case: 5 weeks (buyer lined up, company cooperative, clean docs)

• Typical: 10-12 weeks (need to find buyer, standard ROFR, normal negotiation)

• Complicated: 4+ months (difficult company, messy docs, hard negotiation)

Dank Tweets

You can click any image below to see the original Tweet.

Interesting things I’ve read

A really interesting life read: Reset your life

This one is top secret: cognitive enhancement

The inception of Databricks

Some cool stuff on my radar

• The dump:

  

  • Louis Vuitton Pocket Organizer

  • Many AirPods

  • Apple Watch Ultra 3

  • Yubikey + Flash Drive (not pictured)

  • Benchmade 940

  • Tactile Turn x WOE Standard Pen

  • Glock 19

  • Dr. H Lip Care Stick

  • Oliver Peoples Sheldrake Sun

  • WHOOP Life

  • LynchNW Pry Bar

  • USB C cable

  • Olight i3E

  • Peak Design Tech Pouch, which holds everything so well

    

I missed a Black Friday post.

So what I was going to write is:

Ladies and gentlemen, it is here. My Superbowl. The greatest creation of the United States of America: Black Friday. After stuffing your face with the most disgusting bird available, we shop!

But I missed Black Friday. Totally let you down, I am sorry. Instead, I have to just share a regular “cool stuff” list.

Here are the items I copped, things I’ve wanted, and objects I’ve seen since Black Friday:

1. I traded up from an Aeron to an Embody, and it was one of the best choices I’ve ever made.

2. A Rorra water filter (thanks mom).

3. A TymeWear chest strap (so I can truly know my HR zones).

4. I upgraded to an iPhone 17 Pro Max, and the bigger screen has been life changing (thanks T-Mobile). Paired with the ultra slim Pitaka case, which I love but hate that it’s not USA made.

5. The topic of the perfect carry on has been very top of mind for me, I own all of these:

   1. Patagonia Black Hole 40L Roller (the best budget)

   2. Tumi Merge (the best nice brand)

   3. Peak Design Roller Pro (the nicest one, period)

   4. Patagonia Black Hole 55L (the most spacious)

   5. Rawrow (the most unique)

6. Yeti 46oz bottle is an absolute beast for the gym.

7. Momentous Whey Isolate is the best protein powder.

8. Cognitive supplement stack

   1. Alpha GPC - 600mg

   2. Taurine - 2,000mg

   3. L-tyrosine - 1,000mg

   4. L-theanine - 200mg

   5. Creatine - 5-10g

Closing

Thanks for taking time out of your Wednesday to read. Since you made it this far, a little easter egg for you…

As always, you can find me on X and LinkedIn, and I’d love to hear from you via email. Whether it’s talking startups or just shooting the shit, I’m always happy to connect.

Onto the next!

//Eli

reach eli

Hey - Eli here.

Welcome to another edition of 2&20. We’re here to fill the void that exists between emerging fund managers. As always, I’m here to help you grow the two things that matter: AUM and Alpha.

Annyeonghaseyo! Greetings from Seoul. A peek behind the curtain of what it takes to write this newsletter:

As always, please hit me back with feedback and comments—I’m constantly seeking ways to make this newsletter a more valuable read.

Diving right in and keeping things brief:

On my radar:

• We have been seeing some AWESOME deals lately. Fill out our deal sharing form to have relevant deals sent to you!

• We’ve been full throttle on fundraising mode. Have an LP to introduce us to? I’ll buy you lunch.

• I want to write an angel check into a cool CPG deal. Anyone know of anything? Pls share!

As a reminder, I am not an attorney, I am just a humble youngling trying to build a venture fund. Please, I beg, do not take anything I say as legal advice. That is what your overpriced attorney is for!

The Main Idea

This week we’re talking compliance… again! This time, we’re talking through policies and tracking for funds.

Everyone says “institutional LPs want institutional processes.” That doesn’t mean bigger logos or fancier decks. It means you can survive an audit tomorrow. My goal with this week is to help you do that.

Items to track

During the life of the fund, things will change: LPs will be added, money will be wired into the fund, investments will be made out of the fund, distributions will (G-d willing) be made to LPs, etc. Keeping things organized is the key to success - or rather, the lack of painful headaches.

LP tracking

Most LPAs require the GP to maintain a List of Partners. Usually LPAs just require that the name, address, and wiring instructions of LPs be maintained, but it would be silly to only keep track of that.

We use Flow to manage LP onboarding + communications, and it does a great job of collecting and retaining data. But what happens if you forget to make the payment for that year, or Flow goes down? You’ll find yourself SOL. To quote my prepper friends, “two is one and one is none,” so it helps to have a backup that you control directly. Here is how I made & maintain mine:

1. Track LP information

   1. Address

   2. Investment info

   3. Accountant info/tax info

   4. Contact info

   5. Mailing address for holiday gifts

   6. Wiring info

   7. ERISA tracking

   8. GP contribution tracking

2. Track money in + out

3. Subscription documents (store PDFs of:)

   1. AML/KYC documents from fund admin

   2. Signed subscription documents

   3. Any LPAC documents

   4. Any side letters

Now I’ve told you what I put in mine… so it’d be silly to make you build it from scratch. Here’s a gift for you:

Side letter tracking

Side letters are private agreements between you and specific LPs that give them customized terms. Most fund managers have no idea how much of a compliance risk they can be, though. Every special term you grant needs to be tracked. If you forget even one, you could unintentionally breach your own LPA. Uh oh!

Here’s what I recommend tracking:

• LP name and signature date

• Every clause in the agreement (fee break, reporting cadence, MFN eligibility, ESG or DEI reporting, co-invest rights)

• Internal owner of each clause (fund admin, GP, counsel)

• Status (pending, fulfilled, ongoing)

• Proof of completion (a link to the document or email)

• MFN window open and close dates

Expense and fee tracking

Even though your fund administrator tracks expenses, you are still responsible for what gets charged to the fund. The goal is to make sure fund money is only used for legitimate fund costs and that you can explain every charge later if needed.

Here are the columns I like to track in my Notion page:

• Vendor name

• Invoice date

• Amount

• My explanation of what the purchase was for

  • For example, “legal services for LPA and subscription documents” since sometimes the invoice doesn’t actually explain what the “product” was

• Expense category (Fund or GP)

• Expense type

  • I use labels like: legal, admin, tax, regulatory, fundraising, etc.

• Approval and review

  • Our policy is that every invoice should be reviewed by one person and approved by another. I like to keep a record of who reviewed and who approved.

• Payment date

• Payment method

• Notes, for things like offset or reimbursement

Once per quarter, reconcile your list with your fund admin’s ledger. Fix errors immediately and document what changed, ideally in the CYA folder that you have. Some banking systems (we use Rho) also allow you to tag/filter transactions, which can help you quickly find expenses on the backend, too! Highly recommend doing this.

Compliance tracking

By now, you probably get the idea. This is a list of what regulatory filings (Form D, ADV, Blue Sky, tax filings, etc.) have to be done, who drafted the filing, approved the filing, submitted the filing, paid the filing fee, when it was approved/received, confirmation number, all of that. Just helps you have a record of what was done, and by who.

Adopting policies for the fund

There are countless policies you can (and should probably) “adopt” for your fund. When our attorney first pressed us about this (it was before we had even started ideating the thesis of the fund) my immediate question was: why? Her answer was simply, “so I don’t have to become a defense attorney.”

All kidding aside, the policies you adopt for your fund serve not only to guide decision making and direction, but are also a crucial CYA for fund managers. The LPA gives you the “what.” Policies define the “how.”

We’ll dive into a few ideas and examples. Most fund admins have templates they can provide to you for free.

Valuation policy

The purpose of a valuation policy is to help the fund price the fair market value of its assets. If you remember, in Week 25 we covered NAV, or net asset value. NAV represents the total value of the fund’s holdings at a specific point in time. The valuation policy defines how that NAV is calculated, who approves it, and how frequently it is updated.

For early-stage funds, valuation is inherently uncertain. It all comes down to what you, or a third party are willing to pay - usually not based in revenues or tangible assets. Most assets are private and illiquid.

So here is what your valuation policy should include/instruct:

Frequency

Your fund admin should be driving here, with reminders before financial statements go out. It helps to look at valuations of your portfolio quarterly, with a formal review at year-end for audit.

Use quick check-ins between your main quarterly valuations for companies that have real changes in value. If a portfolio company raises a new round, struggles, or gets a follow-on investment, update that one position right away instead of waiting for the next full review. This is not a full revaluation of the fund. It is just a small update where something meaningful has changed. Record what happened (future round of funding, sunset, etc) and note the reason.

In your valuation policy, prescribe a frequency for each step, from you coming up with valuations to when you plan to review them with your fund admin.

Methodology

The easiest, most fair, and widely used method is the ASC 820 fair value hierarchy. It was created by the Financial Accounting Standards Board, and its goal is to standardize how organizations define and measure fair value.

ASC 820 defines “fair value” as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. It gives you a three-level hierarchy for the quality of valuation inputs. It ranks valuation inputs by how observable and reliable they are. It’s designed to make your valuation process transparent and reduce assumptions - so anyone reading your financials can see whether your numbers came from real market data or your own judgment.

1. Level 1: Based on quoted prices in active markets for identical assets.

   1. Fact

   2. An example of this is public securities that trade on an exchange, like shares trading on the NASDAQ. Each share is identical, so really easy to see the market price/comps.

2. Level 2: Based on observable inputs other than quoted market prices.

   1. Reference

   2. Think of it like one step removed from level 1. This includes prices for similar assets or recent transactions that are observable but not identical. For example, a private company that just raised a priced round led by a new institutional investor. The data is real but not public, and you may need to make adjustments.

3. Level 3: Unobservable inputs, based on your own models or assumptions.

   1. Opinion

   2. When there’s no market data available, you build a fair value using your own assumptions, like revenue multiples, comparables, or discounted cash flows. Early-stage VC investments almost always fall into Level 3.

When possible, you should try to use the highest level (level 1) of data available to you, and then make your way down if none of that data is available. Venture funds mainly live in Level 3 because private company data is limited and subjective.

When you value a company, your job is to find the most realistic price that a third party would pay today - not the highest one you can justify. The best valuations blend data with judgment. Start by looking for real transactions or observable data, then adjust based on what’s changed since that event. If there’s no new financing, think about progress: growth, customer wins, team expansion, or missed milestones. Your adjustments should always connect back to something tangible.

A good test is to imagine defending your number to an auditor or LP. Could you explain your reasoning in two sentences and show the data behind it/cite sources? If not, simplify the approach until you can. Fair value doesn’t mean optimistic or pessimistic; it means credible. The mark should make sense to anyone reading your report without needing you in the room to explain it.

For convertible notes or SAFEs, base fair value on the most recent preferred round and adjust for conversion terms.

In your valuation policy, create a clear framework for a) what methodology you plan to use, and b) how you will actually go about applying that methodology, step by step.

Documentation

Prepare a one-page memo for each company, following a template. Include the last financing round, ownership percentage, method used, comparable metrics, and conclusion. Make sure you share access to these memos with your fund admin so they can reference them for NAV updates in quarterly statements, etc.

In your valuation policy, you should clearly describe what documentation will be used to record valuation changes. Who can create the memos? Do certain people need to sign off on the memo? Do the memos need to be readily accessible by every LP (check your LPA for that one)?

Typically from a governance standpoint, valuations should be prepared by the GP, reviewed by the administrator, and approved by the LPAC. So having a clear packet of documents is important.

Expense and fee allocation policy

The purpose of an expense and fee allocation policy is to make it clear what the fund pays, what the GP or ManCo pays, and how reviews and approvals work. I feel like this edition is getting long, so I’ll try to breeze through it.

So here is what your expense policy should include/instruct:

Categories

Fund pays: audit, tax prep, fund administration, formation and compliance filings, KYC, custodial or banking fees for the fund, deal legal tied to closing, portfolio insurance tied to the fund, SPV costs tied to fund-led investments.

GP or ManCo pays: fundraising and marketing, PR and website, general travel and meals, office rent and software for the team, conference sponsorships that are not tied to a specific deal.

Shared items: portfolio tools, founder events, research services. Define a fixed split or formula and record it with each invoice.

Broken deals

Define when the fund absorbs diligence costs and when the GP or ManCo does. For example: fund pays once counsel is engaged for a live term sheet. GP or ManCo pays for scouting and preliminary work.

The boring stuff

For approvals: One person prepares. A second person approves. Set dollar thresholds for a second approval. List the roles by title.

In terms of frequency: Your fund admin should push a monthly expense listing. Review monthly. Reconcile to the general ledger quarterly. Fix errors quickly and note the correction.

For documentation: See above! I explain how I like to track it.

Governance: Prepared by the GP. Reviewed with the fund admin. Summary shared with LPAC each quarter if requested or mandated by your LPA.

This is getting long…

So here are some ideas on other policies you should adopt, let me know if you want me to share details with you on any of them 1:1:

• AML/KYC procedure: how you’ll go about clearing AML/KYC for each LP. Usually whoever is doing your AML/KYC will have this they can provide to you.

• Investor verification protocol: whether or not you’ll be using the new changes in 506(c), and how you’ll be verifying accreditation (I explain more here).

• Capital call policy: when & how you’ll ask your LPs for money, how much time you’ll give them to wire, etc.

• Side letter and MFN policy: turn negotiated terms into tasks with owners, dates, and proof. It prevents missed promises and MFN mistakes.

• Compliance tracking policy:

Summary and concluding thoughts

When you set procedures, actually follow them. The only thing worse, in my opinion, than not setting procedures is willfully ignoring them after you’ve set them.

If you need recommendations of fund admins & attorneys that can help you with this, feel free to reach out. I have a roster of about 75 folks between the two categories, covering every price point and approach.

Hope this was helpful! I’m doing my best to try to provide new info on topics that most fund managers have already heard about :) if you found this helpful…

Dank Tweets

You can click any image below to see the original Tweet.

Some cool stuff on my radar

• Now for my favorite part of 2&20… here’s this week’s pocket dump (from LA, not Korea):

  

  • Louis Vuitton Pocket Organizer

  • All the AirPods (currently in the process of growing 6 more ears)

  • Omega Speedy 38 Auto

  • Yubikey + Flash Drive

  • CRK Umnumzaan Glass Blast

  • Tactile Turn x WOE Standard Pen

  • Sig Sauer P365 X Macro

  • Superstition Concealment Holster

  • Dr. H Lip Care Stick

  • Oliver Peoples Sheldrake Sun

  • Mous Case

  • Aroundsquare

  • MacBook Air

  • iPad Pro

  • WHOOP Life

• I’ve been using Fenn recently to search for files and it’s been great. Not quite yet a Finder replacement, but getting pretty damn close.

• I know this seems ridiculous, but I recently switched from OneDrive to Dropbox. I must say, it’s somewhat lifechanging. To all the people who have been victims to my OneDrive file sharing, I apologize. I have seen the truth.

• When living in NYC, I had to upgrade my jacket game. It sparked an appreciation for nice jackets. Now that I’m back in LA, I’ve been transitioning it to be more LA-friendly. My core jacket has now become the Arcteryx Atom SV. Pretty close to perfect.

• Looking for an everyday watch? New Unimatic.

• I’ve been traveling a lot lately and really enjoying my Aer Go Pack 2.

• Have liked my Aer Street Sling Ultra as an EDC/CCW bag.

• Tallisman talit.

• Allett travel wallet.

Interesting things I’ve read

1. Amazon is turning Whole Foods into anti-Whole Foods.

2. Prosumer software is on the rise.

3. Showing traction before you have traction.

Closing

Thanks for taking time out of your Wednesday to read. Since you made it this far, a little easter egg for you…

As always, you can find me on X and LinkedIn, and I’d love to hear from you via email. Whether it’s talking startups or just shooting the shit, I’m always happy to connect.

Onto the next!

//Eli

Hey - Eli here. I missed you.

Welcome to another edition of 2&20. We’re here to fill the void that exists between emerging fund managers. As always, I’m here to help you grow the two things that matter: AUM and Alpha.

It’s been a minute… lots of life updates: my time as a New Yorker is officially over. I’m an Angeleno again! I still plan to be back on the east coast every ~4 weeks - I need an excuse to use the winter jackets I now own…

Distilled Intelligence happened last week. I am still buzzing from the energy of it. I am so incredibly proud of our Fortify team, grateful to our partners, and excited for the founders who were there with us. More below, but here’s a vibe check:

As always, please hit me back with feedback and comments—I’m constantly seeking ways to make this newsletter a more valuable read.

Diving right in and keeping things brief:

On my radar:

• Connect me with your favorite LA investors and founders! I <3 making friends.

• We’re officially going hard on fundraising mode for Fund 2. If you have any intros to make, I would greatly appreciate it.

• Please let me know if you’d be willing to give feedback on our Fund II deck!

• Fill out our deal sharing form to have relevant deals sent to you!

The Main Idea

I’ve spent the last ~year mentioning Distilled Intelligence on here. I’ve shared milestones from the website going live all the way to investor tickets going up. Last week, it actually happened.

The story behind DI

Distilled Intelligence was born in 2011, with the start of Fortify Fund I. Needless to say, I was not around back then. The first DI featured 55 companies, and was hosted in Loudoun County. It attracted some really great startups at the earliest of stages, like Social Tables, TroopSwap (later named ID.me), TRX Systems, and Venga. It was so damn good that the only logical thing to do was to do it again. So in 2012, DI 2.0 happened in the Carnegie Library. For the second iteration, it was double the size - 100 companies competing on stage in front of a LOT of investors.

For both DIs, the main focus was the pitch competition. It was three rounds, with each round becoming smaller and smaller. The first round was 60 seconds with the company’s logo behind them, then three minutes with a deck, and lastly, 5 minutes of Q&A. If founders went over time, a gong would sound.

Following the second DI, Fortify underwent some changes. The fund pivoted to more of an accelerator, with an in-person space called The Fort. The partners went back to being founders, and a third DI never happened. Well, until now.

The build up

When Jonathon and I met for the first time a few years ago, I could tell that DI was special, if for no other reason than the way he talked about it. His face would light up - as though he was talking about one of his own children.

A few months after that, we had coffee to talk about bringing Fortify back to life with Fund II. Jonathon brought two things with him to that coffee: the program book from DI 1.0, and the program book from DI 2.0. It was clear to me that Fortify and DI were inseparable.

That said, Jonathon is the optimist and I am the pessimist. When the time came about a year ago for us to start planning DI 3.0, I protested. After months of back and forth, we finally reached the perfect middle ground: a pivot for DI. Rather than solely being a pitch competition, we decided to make DI a three-day summit at the Lansdowne Resort in Loudoun County.

Founders attend for free, and can choose to participate in the pitch competition (called The Gong Show after the original format) or to be there as a resource for other founders. We invited hundreds of friends - investors, operators, and service providers with an interest in the startup ecosystem. But in the months leading up to DI, there was a lot of uncertainty about how it would all play out.

The things that made a 10x difference

Planning DI really felt like running a startup - there was a lot of figuring things out on our own: iterating versions of the “product,” the messaging, and GTM strategy, without knowing if any of it would work. The process to convince each stakeholder group to attend was totally different, and there was no one who had done it with the same approach as us. No playbook. So we tried everything.

Now, with the clarity of hindsight, I can say there were a few things that were 10x, direction-shifting decisions for us:

1. I sent this total stranger named Andrew Yeung a cold DM on X:

   

   I had only been to one or two of his events. Never met him in person. But he replied immediately with “how can I help.” Speaks to the kind of guy that Andrew is - and it’s so fitting given the theme of DI 3.0 (more on that later). Over the course of two months of conversation, Andrew and his team joined as co-hosts to Distilled Intelligence. I think it’s pretty obvious what followed…

2. We decided to go all-in on brand. We partnered with Tamir from Koru Studio to build out the most insane brand we could possibly fathom:

   

   The DI brand spoke for us - it conveyed exactly what kind of event DI would be. I strongly believe that DI would not have had the same caliber of attendees, or the same vibe, had our brand not been so on point. Koru Studio crushed it - from the perfect website to insane physical assets like badges and banners.

3. It took us about 5 months to accept the first half of founders. It took 3 weeks to accept the second half. Asking founders to introduce us to their favorite friends was one of the highest ROI asks. It put an end to hunting for a needle in the haystack of inbound applications. It immediately put us in touch with people who were building the perfect company, and who were the perfect vibe for DI.

4. Start building the vibe before the event. Introducing people before they arrive, and making them feel comfortable/safe is a huge part of what made the event a success. We had almost zero no-shows because most people were coming to meet a friend. Whether that friend was us or someone else, they felt like they had a reason to be at DI, and their “buddy” going into the event.
   

Things I wish I knew or paid more attention to

• Communication cadence matters. Most people have a very hard time building trust after the first time of seeing your face or hearing your name. It takes multiple interactions before they’re willing to take a bet on you. There’s no shame in email retargeting, constantly posting on LinkedIn, or asking for their trust a few times. I wish we had set up tools like Klaviyo sooner, and I wish we did a better job of asking people for their contact info. It would have made our lives much easier.

• People are more generous with their money than they are with their time. Asking people to spend 3-5 days of their busy lives with you takes a lot of trust. If you offer people ways to de-risk it, no matter how expensive, they will.

• Being human is the best sales tool, especially in a world of AI. Being able to talk to people like an actual freaking human is what allows them to build trust in you. Especially when it comes to a multi-day event, no one wants to hang around a bunch of bots. Standard, cookie-cutter messaging doesn’t work. Being proper and uptight isn’t helpful. Dropping down to your normal self, and treating everyone like a real friend is what allows people to open their minds, networks, and doors to you. I really embraced treating everyone like a friend of 10+ years. How serious am I about this? This is what went out to every single DI attendee before the event:

  

• Fun sells, every time. We spent a lot of time lining up the perfect speakers, the best programming, and curating an awesome attendee list. Ultimately, the best founders came because we promised them a fun time with pickleball and a campfire. Post-DI, I don’t think the pickleball was the most impactful part of their experience. But it certainly played a big role in getting them there.

Right before DI

In the months leading up to the event, we spent a lot of time setting expectations and hypothesizing about what the experience would be like. We spent a lot of effort trying to curate the vibe, and Jonathon spent a lot of money to make sure the experience was as perfect as could be. Going into DI, the nerves were high.

What if we didn’t do enough? What if people don’t show up? What if everyone gets food poisoning on the first day?

For two weeks leading up to DI, I had recurring nightmares that it would be the startup version of Fyre Festival - the resort burns down, and everyone’s sleeping in tents on the golf course.

The actual event

October 13th finally arrived, and the tension slowly started to release.

Day 0

We started DI with what was essentially a big pre-game. We had about 1/3 of the attendees arrive on Monday for some fun activities and a welcome dinner. Brad Feld jumped on stage, answering questions and sharing some wisdom. He gave a sneak preview of the topic of his fireside chat the next morning: ‘Give First.’ Giving with the radical expectation of nothing in return will oftentimes be the highest return investments.

But the second we started to feel a moment of true calm, panic broke out. The badges weren’t organized yet. But everyone was arriving in the morning! What the hell are we going to do if we can’t hand people their badges?? The state of emergency felt all-consuming. It was all hands on deck.

After 5 minutes of panic, Jonathon and I looked at each other simultaneously. We each knew what the other one was thinking. “What if badges are an obstacle to people really getting to know each other? We didn’t have badges tonight - and everyone seemed to be getting along just fine. If anything, it forces you to remember someone’s name. What if we just experiment with no badges… and if someone asks for theirs, we can find it for them?”

And that’s exactly what we decided to do. We changed the default to no badges, with an explanation as to why. If someone asked for their badge, we happily handed it over. To our surprise, people loved it.

That moment set the tone. From then on, nothing could shake us. It disarmed the feeling of panic within us for the remainder of the event. The few things that didn’t end up going as planned, actually ended up being blessings in disguise that helped make the event even better.

Day 1

As Day 1 started, the remainder of the attendees poured in. By 10am, the place was packed. Just shy of 300 attendees, with only standing room left in the ballroom.

Brad Feld & Steve Case kicked off the day with a fireside chat - firing everyone up. We then moved to some great panels: founders who had previously attended DI, Andrew Yeung + Andrew D’Souza (founder of Boardy), and myself + Haley Bryant + Sriram Gollapalli + Eugene Wan.

We then finished off the day with some really fun activities (tennis, pickleball, golf, etc.), dinner, and some great conversations by the bar with some live music. By the end of Day 1, it was clear that DI was on the path to be the best event of the year.

Day 2

Waking up on Day 2, it was clear that there was a big energy shift. Everyone was well rested and excited to take on the day. Everyone was 10x more chatty on Day 2 than on Day 1, and were eager to really roll up their sleeves.

The day kicked off with a panel that featured Anna Mason and Tim Chi, with founders immediately sprinting over to the auditorium to get ready for The Gong Show. The auditorium was packed - literally all 165 seats were taken, with folks standing in the back of the room and hallway to hear the pitches.

We received just over 2,000 applicants this year. We selected 65 companies (100 founders) to attend Distilled Intelligence. 42 companies pitched, 21 moved on to the semi-finals, and 10 moved on to the finals. By the end, we had 4 winners. Quite a distillation!

The honest truth is, it was really humbling to hear the pitches and watch the judges deliberate. The quality of the pitches were so beyond what we ever expected. Incredible founders, with such brilliant ideas and great execution. All 42 who pitched undoubtedly have the potential to be billion dollar companies.

The day finished off so incredibly strong. Leading up to DI, I had this lofty, kumbaya dream that everyone would leave DI as best friends. Despite the fierce competitive energy of the pitch competition, it was clear that this dream had come true on the second day. Founders were stepping up, organizing games like mafia and making plans to grab dinner the next day after DI had ended. The awkward wall of energy between founders and investors had broken. And service providers were (literally) grabbing the mic and singing their hearts out. If you don’t believe me, here is just one of the many videos from the hotel bar…

Day 3

Day 3 had a somber energy to it. In a weird way, it is the best energy we could have asked for. Everyone had a look on their faces like they were kids going home from summer camp… exhausted and run down, but dreadfully sad to be leaving their friends.

This was the validating moment for me. I watched founders hug each other goodbye. Investors exchanged phone numbers instead of LinkedIns. Despite being physically exhausted after 68 hours of non-stop activity, there was a renewed energy and excitement to go out into the world and build.

DI Debrief

With the event behind us, I can say with complete confidence that it could not have gone any better. Before DI, we shared five rules. Rule #1 was the most provocative: “No A-holes.” Everyone at DI embraced this rule fully. Warmth and kindness flooded every room and conversation. Ultimately, that’s what made DI so different.

The real differentiator wasn’t the panels or the production (although they helped) - it was the people. Every conversation felt like Give First in action. Everyone put their phones in their pocket, turned their egos off, took the time to listen to each other, and asked “how can I help,” just like Andrew did four months prior. It reminded me why we build communities in the first place.

After the event, friends have shared some really kind words about DI. All so incredibly humbling and flattering. I have a few quotes I want to share…

I’ll say, at first I was gonna say hmm this is gonna be formal. Not good or bad, but formal. But what ended up happening is you made it approachable and tight. Almost like a family business inviting their extended family. An example of that is Jonathan shouting to Eli from the side don’t forget to say xyz. Just makes it human! Never change guys.

From the gong show to the workouts, panels, and being the catalyst for DJ Mihailo - you created an environment that was equal parts productive and human. It’s rare to find an event that balances ambition with community that well.

It’s been a hectic year, and this event gave me far more than I expected - a much-needed break, meaningful new connections, and most importantly, a renewed perspective.

Goes without saying, we’ll see you at DI 4.0.

Some cool stuff on my radar

• Here’s this week’s pocket dump:

  

  • Tactile Turn x WOE Standard Pen

  • Sig Sauer P365 X Macro

  • Superstition Concealment Holster

  • Custom Spyderco Para 3 in M4

  • House Keys + Yubikey + Flash Drive

  • Louis Vuitton Pocket Organizer

  • Triple Carry AirPods (memes at this point honestly)

  • Santa Barbara Hives

  • USB-C data cable

  • Oliver Peoples Sheldrake Sun

  • Koala Kloth

• I copped a new shaving razor, and I’ve been loving it. Paired with the Gillette Blues, it does an incredible job.

• I decided to ditch my 11 inch iPad Pro for a 13 inch MacBook Air. The 13 inch MacBook Air really is the perfect travel device - so much more capable than an iPad.

• If you know me (and read my annual productivity lists), you know I love my MX Master mouse. Well guess what - the MX Master 4 is now here.

• I found the best pen refills: Pilot V5 RT. It’s in my Tactile Turn pen right now.

• Kith x Tumi goes really, really hard.

• Also discovered the best water bottle in existence: HydroFlask trail series. It is scary light and fits in a car cupholder.

• Ricoh GR IV is now available for pre-order. If you know me, you know it’s my favorite camera:

• I’ve been asked what I’m reading recently:

  AT

  Exploring the physical world's frontier

  By Ron Bhattacharyay

Closing

Thanks for taking time out of your day to read. Since you made it this far, a little easter egg for you…

As always, you can find me on X and LinkedIn, and I’d love to hear from you via email. Whether it’s talking startups or just shooting the shit, I’m always happy to connect.

Onto the next!

//Eli

Welcome to another edition of 2&20. We’re here to fill the void that exists between emerging fund managers. As always, I’m here to help you grow the two things that matter: AUM and Alpha.

Been living my best life in LA these last few weeks. Heading back to NYC to pack up the rest of my stuff, and then I’ll be in LA full time. Woohoo! Some pics from my time back:

As always, please hit me back with feedback and comments—I’m constantly seeking ways to make this newsletter a more valuable read.

Diving right in and keeping things brief:

On my radar:

• Distilled Intelligence investor tickets have gone live. You can check them out here! Use code STARTUP for a discount, we’d love to have you there.

• The new office is in full swing. Shoot me a message, and let’s put my Nespresso machine to work (thank you, Prime Day).

• I made a new X account. Please follow me here. Thnx.

• Meeting awesome founders and investors, from literally any space/focus, is super helpful to me right now. Intros would be highly appreciated - I can reciprocate :)

• I have a little bit of free time… if you or someone you know is looking to bring someone on part-time as an investor or operator, give me a shout.

• Fill out our deal sharing form to have relevant deals sent to you!

The Main Idea

I’ve been having a hard time thinking of topics for main ideas. My goal is for the content to be helpful to a broad audience - topics that your average fund manager doesn’t already know about. When I do think of something, I realize it isn’t much more than a few paragraphs. To make this as helpful & brief as possible, I may include a variety of short topics, like in this week’s edition.

Mixing and matching.

Covering a few topics this week from different areas: tax, strategy, fundraising, and sourcing.

Service providers

One of the things I find myself helping friends with the most are intros to service providers. When we were re-starting Fortify, we really took our time to scope out the entire landscape of service providers. Our guiding belief was that our service providers are not just partners, but members of our team. We had a few pieces of criteria:

1. Cost: we didn’t want to skimp on quality service providers, but given the fact that lots of our service providers are paid for by the fund, not management fees, we wanted to be good fiduciaries. We didn’t want to be nickel and dimed, and wanted transparency into expected costs.

2. Interchangeability: We wanted to be able to hot-swap different service providers if the relationship wasn’t working out. If one piece of the puzzle wasn’t working, we didn’t want other services to be affected. A good example of the opposite of this are providers like Carta (no shade to them), because they often fill multiple roles.

3. US-based: It was important for us to have a US-based communication team. It makes it easier to chat live when there’s time zone overlap, and it added a layer of legal accountability. We have no problem with work being delegated overseas (so long as security standards remained high), but wanted the confidence of having folks we could easily meet in person.

4. Dedicated POC: Group email inboxes, big teams, and missed emails weren’t going to work for us. We wanted one dedicated point of contact, who could integrate into our team. Whether it’s a text chain or adding them to our Slack, we want the ability to have direct access.

5. Autonomy and expertise: We are hiring service providers to free up our own time. Is it hard to figure out how to send K1s and get licensed ourselves? Probably not. But a better use of our time is fundraising, supporting portcos, and generating alpha for our LPs, not doing administrative work.

6. Scalable: We want the relationships we create now to carry over into Fund III, Fund IV, and beyond.

7. Synchronicity: We ask our service providers to communicate directly with each other wherever possible.

8. Mutual partnership: We want to help our service providers with referrals and benefits, and ask they do the same for us. Whether it’s helping expand our network or providing strategic support, we hope they go the extra mile because we are their best clients.

Service provider types

This is a list of the various service providers we talked to when re-starting the fund. We decided to engage in some categories, and decided others weren’t important for us at this stage:

1. Fund formation attorney: We talked to a bunch, and the vast majority of them were way too expensive for our comfort level. The quotes we were getting, just to get the fund up and running, were low to mid-six figures. Most firms were happy to offer deferred fees or other service perks, but the cost was just too steep for us to feel comfortable passing it on to our LPs. We were lucky enough to be introduced to a few great options that were a fraction of the cost of the big firms, and so far we’ve had nothing but a great experience.

2. Deals attorney: The most important factor for us here was experience and up front fees (fee caps). We wanted a firm who could not only be an attorney, but also be an advisor - sharing what they see as standard in the market today, and giving us a temperature check before we send out a term sheet. It helps to have a second set of eyes from someone who spends all day doing this. We were able to find some big firms who were happy to offer us low fee caps.

3. Fund admin: We spoke to more fund admins than any other category. Most we spoke to were immediately disqualified based on the criteria above - way too expensive or not US based. Finally, we landed on what we thought was the goldilocks answer. We were engaged with a time-and-materials fund admin for roughly 6 months before feeling taken advantage of. We received bills commensurate to some of the mid-tier fund admins we spoke to, with little to show for the dollar amounts spent. We quickly pivoted away, and found a new flat-fee firm who we have nothing but great experiences to share. Funny enough, the intro to our fund admin now came via our LP portal account rep!

   1. Some interesting data for ya: seed-stage funds (< $25 M) are now paying a median $42-50K/yr flat for admin + tax + audit, while $25-50 M vehicles hover around $60-75K; time-and-materials invoices routinely spike 1.4-1.7× after the first close once K-1 prep and quarterly statements hit. Onboarding still averages 11–13 weeks, with KYC/AML and bank KYB checks accounting for half that clock. The SEC’s 2024 Private-Fund Adviser rules added an extra $3-5K/qtr at many admins for the new “PFAR” quarterly statements—unless the provider has automated tables. Use these guardrails to negotiate and to sanity-check any outlier quote.

4. Tax accountant: It seems like the options were far more limited for tax folks than other categories. There were maybe 3 or 4 firms that were well regarded for having venture fund experience, with nominal price differences between them. We ended up selecting the accountant who we believed had the most experience and could be most helpful to our situation.

5. Valuation service: Ultimately, we decided to not engage a valuation service. We feel confident in our ability to value our own assets with a strong valuation policy, and loop in a firm on an ad hoc basis for more complicated matters.

6. CFO service: Another thing we decided we could live without! Between our own skillsets and support from our fund admin, we decided that a CFO on the ManCo end of things would not be worth the cost for us - not enough for them to do!

7. LP portal: We took a look at quite a few options. Most of the fund admins we spoke to had their own, and they all sucked. Outdated UI, unreliable tech, and questionable security. It seems like there are 4-5 quality options on the market, but all but one of them were a) super insanely expensive or b) only half the solution (portal and onboarding are separated).

8. Broker-dealers (now called promoters, I think?): Super helpful for selling shares on secondary and for capital raising. Because most will take either a small retainer or no retainer, we decided to not go with an exclusive partner, and instead engage a bunch of placement agents, (careful that they don’t sell or solicit the same folks).

9. Banking partner: I think this is the one I’ve been most public about here - we use Rho, ALL of our portcos use Rho, and we have nothing but good things to say. They have amazing perks, sign up bonuses, tech, and rates. If you check them out, please do so here.

10. Registered agent: This was the least differentiated service provider we looked at. Our biggest requirement was that they have a good relationship with our attorney, so we were happy to go engage whoever that was. I think we’ve talked to our registered agent maybe once or twice? That’s it.

11. Tech platforms like LP and company databases: This could be its own deep dive, but we demoed all the tools: PitchBook, Preqin, FINTRX, Crunchbase Pro, etc. I’ll leave this for another edition, and we can really dive into it :)

Things I wish I knew or paid more attention to

• Fund admins are acquiring other fund admins left and right. When you talk to two separate companies, you actually may be talking to two arms of the same body. Do some research to see what unique options are out here.

• Insert a right to terminate without penalty if the provider is acquired or merges. M&A is rampant (30-plus admin deals since 2022), and service quality tends to dip in the first 6-12 months post-transaction.

• Make sure your contracts with service providers allow you the right to collect ALL your materials from them within 30 days (or even better is “shall return or destroy all Client Documents and Confidential Information in its possession or control by the earlier of: (i) the last day of the current fiscal quarter, or (ii) thirty (30) days from the date of this Agreement, of account termination.”). Make sure you’re not going to have surprise bills related to transitions or closing fees.

• Understand where service providers make money - and cut down on the high margin items (like in-house tech or software). If you’re getting billed $20k/year for your fund admin’s LP portal or a file management software, it’ll be the easiest category to negotiate down.

• See if your LP portal offers offsetting services, like AML/KYC. It’s often cheaper than having your fund admin do it.

• Ask if your service providers will bill you to communicate with other service providers. If yes, set a cap so you don’t receive random bills for unnecessary communication between them.

• The SEC’s 2024 Private-Fund Adviser Rule (PFAR) forces quarterly fee/expense statements - admins without automation are quoting $3-5k/quarter, per vehicle, to comply, whereas tech-enabled shops absorb much of the lift. Try to optimize for shops that automate.

• Don’t take someone’s word for “SOC 2 compliant.” Ask for the full Type II report, list of carve-outs, and last two bridge letters. Roughly a third of admin shops exclude their fund accounting stack from scope; you only find out when an LP diligence team requests the report.

Summary and concluding thoughts

I know this was more of a data dump than a guide or explainer. Service providers are such a personalized thing, that it’s hard to cover in a general newsletter. One of these days, I’ll sit down and make a matrix of all the service providers we talked to, comparing them to each other.

If you’re looking to move away from more typical platforms like Carta or realized that you need to find a new service provider, reach out to me here and I’ll be happy to guide you in the right direction.

However you choose to tackle this, take the time to really think about optimal goals and outcomes. My list of criteria above is what allowed us to be so satisfied with the outcome of our selection process.

Dank Tweets

You can click any image below to see the original Tweet.

Some cool stuff on my radar

• Here’s this week’s pocket dump. I’ve been in full LA mode:

  

  • Louis Vuitton Pocket Organizer

  • Moscot Lemtosh

  • Montblanc Meisterstück

  • AirPods 4 ANC

  • AirPods Pro 2 (double carry FTW)

  • Rolex GMT Master II

  • Yubikey + Flash Drive

  • CRK Umnumzaan Glass Blast

  • Car key

  • Leatherman WAVE+

  • Oliver People Gregory Peck

• I have been using Comet & Dia as my browsers - both have a long way to go to compete with Arc, but the vision is there.

• I just got a Nespresso for the office, but I should have bought the Moccamaster.

• I have gotten really into shaving. Using a good safety razor and good technique, I get a crazy nice shave without annoying my skin. Here is my setup:

  • Shaving soap

  • Brush

  • Bowl

  • Razor

  • Blades

• Fish.

• I have been loving my Magnanni Dumas shoes - so summery and comfortable. Obviously not an everyday shoe, but great for a nice dinner out. The only thing I will say is the sizing is crazy, go down by like 3-4 shoe sizes if you get them.

• Rorra showerheads are up!

• Might have already mentioned this but I am LOVING superwhisper for voice to text.

Closing

Thanks for taking time out of your Wednesday to read. Since you made it this far, a little easter egg for you…

As always, you can find me on X and LinkedIn, and I’d love to hear from you via email. Whether it’s talking startups or just shooting the shit, I’m always happy to connect.

Onto the next!

//Eli

Welcome to another edition of 2&20. We’re here to fill the void that exists between emerging fund managers. As always, I’m here to help you grow the two things that matter: AUM and Alpha.

It was 104 degrees in NYC yesterday, and Mamdani won, which is my sign to get the hell out of here: Aug 1st I’ll be an Angeleno once again. I anticipate I’ll still do LA>SF>NYC>DC on repeat, just spending significantly more time in LA than the others.

Also, am I the only one who has been using hyphens instead of em dashes to prove that it’s me writing and not AI?

As always, please hit me back with feedback and comments—I’m constantly seeking ways to make this newsletter a more valuable read.

Diving right in and keeping things brief:

On my radar:

• Samphire Neuroscience funding announcement has gone live! I realize I am yet to talk about it on 2&20… if you want to hear the story, read it here.

• We’ve made our fourth investment, which we’ll announce in the coming weeks. They’re revolutionizing the intersection of health and future-of-work. If you want to learn more, I’ll be happy to share about it 1:1.

• Investor tickets for Distilled Intelligence are officially up. You can check them out here! Use code STARTUP for a discount, we’d love to have you there.

• I was in LA last week to set up my new office. There’s a great view of the Hollywood Sign from my desk, which is pretty epic. If you’re local, swing by and say hi once I’m back full time in Aug! I have 4 empty desks, so plenty of space for you to come co-work.

  

• Have been having lots of coffee, meeting lots of cool people. Thank you to all the friends who have been making intros for me, helping me grow my network. Keep ‘em coming!

• Please introduce me to your portco founders, we’d love to have them at Distilled Intelligence! Attendance is totally free for founders, hotel & food included.

The Main Idea

Lots of feedback in the last few weeks… thanks for the positive comments. The biggest suggestion was to keep things short, so I’ll do a better job of that this week.

The topic of this week is LP communication - covering how I personally tackle LP communication (specifically, materials provided) at each step of the fund cycle. Total commitments to first-time funds dropped to about $26.7 billion in the first three quarters of 2024, the lowest level in years. Nailing LP communication is more important than ever.

LP Types (context)

Brief context: the different kinds of LPs that are out there. This will be worth skipping over for most.

1. Institutional LPs are not investing their own money, and are full time LPs. They are more formal, and have higher reporting standards. It’s not your 75-year-old uncle who made some money… it’s a big organization who invests in funds all across the world. Examples include:

   1. Pension funds

   2. Endowments

   3. Insurance companies

   4. Fund of funds

   5. Sovereign wealth funds

2. The opposite of an institutional LP is a retail LP. Retail doesn’t mean unqualified or amateur, it just means the person making the investment decision and the person is usually the same person who owns the capital.

   1. High Net Worth Individuals

   2. Family Offices

Institutional LPs usually have protocols or reporting requirements that they have to abide by, given that lots of them have some sort of fiduciary duty. They’ve been around the block, and know what to ask for. Audits, quarterly financials, robust data rooms, etc. They may ask for information in a standardized manner, so that they don’t have to sort or normalize data - makes it easy for them to compare performance across various investments.

The retail LPs usually want digestible, easy to understand reporting. Plain English, with more of an emphasis on portfolio construction.

Both, however, have an aversion to vanity metrics. According to PitchBook, ~64% of commitments to sub-$100M funds still come from individuals and family offices. So for the purposes of emerging fund managers, we’ll focus primarily on retail investors.

Information at different stages

To best explain how and what to communicate, I’ve broken it up into stages of the fund’s life. At each step, the expectations shift and evolve. It’s worth mentioning that there’s no one-size-fits-all. Your fund admin or attorney will be the most helpful in customizing the information presented here.

Pitching to LPs (pre-VDR)

The most important thing to start with is your grip on reality. They want to understand how you view the future of the world, given that your ability to predict future trends is what will guide how and where you build conviction.

According to VC Lab, successful GPs often need to engage 300+ potential LPs to secure around 50 actual commitments, roughly the minimum needed to close a small fund. The average Fund I size is currently sitting at $14.5M.

Before building our fund deck, I spent a ton of time developing our Playbook. I took inspiration from the Bloomberg Beta Operating Manual, a publicly available document that outlines how they plan to deploy cash, and what trends they have identified as having the highest potential for alpha generation.

Once you have a thesis & world view developed, a deck is the next step. Clearly articulating strategy, team, fund model, and track record is super important. Basically, you should have:

1. A long form explainer piece that provides a lot of context on why the fund even exists - what trends you believe are worth investing in, and how you see them as able to produce outsized, risk-weighted returns.

2. A send deck that is comprehensive, explaining:

   1. Thesis

   2. A fund summary (target size, number of checks, ownership target, etc.)

   3. Differentiation

   4. Track record

   5. Team (experience, skills, etc.)

   6. Unique deal sourcing engine

   7. How you plan to win competitive deals

   8. A simplified fund model

   9. Service providers

3. A pitch deck that you can talk over, containing the same information as above, but with a lot less words. Expect to talk over the slides, rather than allowing the LPs to read through it.

4. A short memo, that looks almost like an investment memo. How should LPs underwrite this investment, and why is the risk worth the reward? Why are you the right fund manager (and asset manager) to be controlling their money? The bottom line here is, why should they trust you?

5. A lot of LPs will want a term sheet at this stage. We have an actual legal term sheet prepped by our attorney, as well as a summary term sheet I made. I basically took our full term sheet and turned it into plain English on a Notion page.

6. Optional, but what has been helpful for us, is a 90 second video of the GPs talking about the fund. People have short attention spans and hate reading… walk them through everything super quickly. It also gives them a chance to see your face and hear your voice.

Obviously, pitching these materials is crucial. Whether it’s in a warm intro, cold email, on a call, or following up from an IRL meeting, you should have templates that allow you to quickly send off this info to capture attention.

In 2024, 43% of emerging managers had to meet with 150 or more prospective LPs (up from 27% in 2023). 45% of managers said it took at least five meetings for an LP to finally commit (up from just 27% the year prior).

85% of emerging managers took more than 6 months to close their fund - and over half (52%) took more than a full year to reach a final close. 32% of surveyed emerging managers ended up reducing their target fund size.

Deep conversations (pre-commitment)

Once you’ve gotten past the initial pitch and have captured the LP’s attention, they’ll want to dig in deeper. This is basically the VDR stage, when they’ll want to really look under the hood. The more information you provide, the better, so long as it is all still relevant. Don’t just bury them in documents, but LPs also want to see that you have actually taken the time to flesh out your thesis and that what you’re saying is legit.

We are not shy to ask for an NDA at this stage. There’s tons of sensitive portco data in our VDR, and we want to make sure that LPs don’t go around telling other fund managers they have invested in who may have invested in competitive companies.

What I included in our data room is:

1. A walkthrough document that explains each piece of the data room, and helps them find an order to go through it. I have seen too many data dump VDRs that are impossible to navigate. No one can read your mind, so best to give them a guide.

2. A folder with past fund performance:

   1. Past investor updates.

   2. Audited DPI and MOIC numbers.

   3. A summary of past funds’ portfolios.

   4. Teams from past funds (helps LPs track changes over time).

   5. News articles, pictures, founder testimonials, and other social proof.

3. Your introduction video.

4. Your fund deck.

5. Your Playbook and/or memo.

6. Your offering documents:

   1. Term sheet.

   2. LPA.

   3. Subscription Agreement.

   4. AML/KYC supplement.

   5. Investor suitability questionnaire.

   6. GP Agreement

   7. ManCo operating agreement.

   8. Incorporation docs for all relevant entities.

7. A folder for platform, showcasing how you interact with portfolio companies:

   1. Testimonials from your current founders (in this portfolio).

8. A team folder:

   1. Written bios for everyone on the team.

   2. I included a 5-10 min video from everyone on the team talking about their background and work experience. Think of it like an intro in a job interview.

   3. Links to our LinkedIns.

   4. Calendar booking links so they can book time to have 1:1 conversations with everyone on the team.

   5. References for folks on the team.

9. Info on investments for this fund:

   1. Investment memos for each deal.

   2. Closing documents, including side letters.

   3. Diligence materials we collected from the company.

   4. Summaries (if not already in the investment memos) on how we negotiated the deals, landed on a price, round dynamics, etc.

10. A financial folder that includes:

    1. Sample reporting.

    2. A comprehensive fund model.

    3. Valuation policy.

11. Service provider information and contact info.

    1. Fund admin, and the people working on your fund.

    2. Attorney.

    3. Accountants.

    4. Other service providers.

12. Some folks include the ILPA Due Diligence Questionnaire. We do not, but worth considering if it is a fit for you.

Everyone will have different info to include. For us, it was about giving LPs as much information as they could reasonably digest, and that would actually be helpful in informing an investment decision. I wouldn’t be surprised if some people are outraged by what we did or did not share, and if people disagree with our necessity for an NDA at this stage.

Subscription process (post-commitment)

Once you get the yes, it’s easy to feel like you can take your foot off the gas and get comfortable. In the beginning of our fundraise, this is actually where we saw the biggest drop off/churn. Having a really clear cut process is what helped us improve that churn.

1. I made an “LP intake form” that collects all the data I need to send out sub docs. Entity type, phone number, address, email, etc. You’d be surprised how many people want their attorney to just take care of the sub docs, or they don’t realize that wiring from a trust is an issue after they just signed all the docs as an individual. Having this completed will hugely help prevent voided sub docs, AML/KYC issues, or having to chase down info when K1 time comes around. Ours is super short, this is the average response time on the TypeForm:

   

   I ask for:

   1. Name.

   2. Email.

   3. Phone number.

   4. Address.

   5. Investor type (individual, joint, entity, trust).

   6. ERISA subject?

   7. Investing entity name.

   8. Investment amount.

   9. Contact for anyone else they’d like CC’d on sub docs.

2. Once I have the above info, I send out sub docs using Flow. We love Flow, they have good pricing, and do a good job of both onboarding and investor portal. Happy to make an intro for anyone who’d like.

3. The really important/standout piece here is the onboarding instructions that took me forever to make. I have it as both a Notion room, and a Loom. We have 6 versions, customized to the different variations of the sub docs we send out. These instructions are super comprehensive… it literally explains each question, and shows the LPs how to navigate every step of Flow. Customized to our docs, and helps them avoid answering questions incorrectly.

4. Our fund admin will then go through and do the AML/KYC.

5. I will then verify accreditation (we’re a 506c fund) using our Investor Verification Protocol that I created a few months back. I can then keep direct line of communication with the LP if we are missing any docs to verify accreditation.

Collecting money (post-subscription)

Okay, now the LP has been admitted to the fund. AML/KYC and accreditation checks are done, and you’re ready to take their money. This is when I loop in our fund admin, although they usually are aware of a new LP by now given that they had to do the AML/KYC. The fund admin does what they have to on the backend (creating a capital account, etc.).

We allow our fund admin to reach out directly to the LP, but I am still fully in the loop at this point. A capital call will go out, and the LP will be required to fund. We like to send wiring instructions ourselves, because we’ve found that LPs get sketched out when they receive a capital call with wiring instructions from someone they’ve never met. I always offer to verify the wiring info over the phone.

Capital calls and initial docs all get uploaded/communicated via Flow. It helps us have accurate timestamps, and allows the LP to keep their contact information updated without having to tell us about the change.

Quarterly reporting (post-funding)

After the LP has made their first contribution and they’ve been admitted to the fund, it’s time to start sending the updates as required by your LPA. For some its audited financials, but for us, we do quarterly financials. We always try to provide within 30 days of the end of the quarter. Our quarterly reporting usually has:

1. Some market commentary and a letter from the managing partner. We provide highlights, and a high level overview of what we’ve been up to. This is usually called an MD&A (Management Discussion & Analysis).

2. A portfolio summary (valuation changes, new investments, exits).

3. Fund-level performance (TVPI, DPI, IRR).

4. NAV summary.

5. Capital account statements (per LP).

6. Material events (M&A, shutdowns, fund audits, etc.).

7. Fees and expense disclosure.

It’s so important to make sure that these updates are easy to understand, transparent, and consistent. This is where trust is built to increase the chances of the LP becoming a repeat investor in your next fund.

Other communication

Ad hoc reporting and other communication is just as important as everything above. It’s a balance to be helpful & informative, but not spammy. We try to provide our LPs with the option to receive commentary from us, like thoughts on news in the startup world.

Other important communication for us with our LPs include:

1. SPV opportunities that we have.

2. Regulatory notices.

3. New portfolio company announcements.

4. Portfolio company failure news.

5. Events (ranging from DI to other fun events we’ll be attending).

6. Round tables with some of our founders.

7. Asks on behalf of our portcos.

8. Abilities to get involved with the portfolio companies on the platform side.

9. LP meetings, or relevant notes from LPAC meetings.

We’ve learned that our retail LPs, especially the ones with smaller checks in the fund, LOVE getting involved and helping out. We’ve never had a negative response to asking them for help with a problem a portco is facing - they always jump on the opportunity to roll up their sleeves. We’ve also learned that our LPs love seeing deals we’ve passed on, but that they may want to invest in personally.

It’s also helpful to reflect back on your promises and vision. Go back to your Playbook and update it often… reflect on what you got right, and what you got wrong. What lessons have you learned that will make your next fund even more successful?

During the life of the current fund, work on creating a retrospective so you can drop it into your VDR of the next fund.

It feels silly to mention, but I’ve seen it happen way too often: be responsive to your LPs. The way I personally see it (this is not a view of the fund), founders are your customers, and LPs are your shareholders. I always reply to our LPs within 15 mins, even if it’s just “I’m super slammed today, will get you a comprehensive answer tomorrow.” They are the engine that enables your fund, so treat them with the highest level of respect, especially your early believers.

Dank Tweets

You can click any image below to see the original Tweet.

Some cool stuff on my radar

• Here’s this week’s pocket dump. It’s been HOT in NYC:

  • Tom Ford cardholder

  • Ricoh GR

  • BOLD Bar

  • TT Bolt Pen

  • AirPods 4 ANC

  • AirPods Pro 2 (yes, I am double carrying)

  • Apple Watch Ultra

  • Yubikey + Flash Drive

  • Antibiotics

  • OP Sheldrake Sun

  • Dr. Hauschka Lip Balm

  • Sunbum Stick (UV 10 today, thnx)

• They’re not quite as nice as the Sheldrakes, but I’ve had my eye on the Lemtosh from Moscot.

• Jean Memory has been my favorite MCP the last few weeks.

• Rimowa made an aluminum toolbox, so freakin cool.

• I really want a TRMNL for my desk at the new office. Would be so handy, in addition to my 2 (will be 4) monitors.

  

• Tennis in the Hamptons this summer? The Wilson x Kith is the only way to do it. You can also use it to play tennis at Distilled Intelligence.

• Cool pullover from Spc/Lst, since it’s so cold out right now.

• Osprey pouch is my daily driver… I have over a dozen of them. Cables in my backpack, wet clothes from the gym, everything.

• Been very much enjoying my new Rockwell 6C razor.

Closing

Thanks for taking time out of your Wednesday to read. Since you made it this far, a little easter egg for you… Google the company on the shirt :)

As always, you can find me on X and LinkedIn, and I’d love to hear from you via email. Whether it’s talking startups or just shooting the shit, I’m always happy to connect.

Onto the next!

//Eli

Welcome yet another edition of 2&20. We’re here to fill the void that exists between emerging fund managers. As always, I’m here to help you grow the two things that matter: AUM and Alpha.

I think my time in NYC is nearing its end… I’m planning to make the switch back to the west coast in the next few months. Whether I end up in LA or SF is TBD, but the venture ecosystem in NYC is a bit too narrow for my liking. Plus, really would love to be spending more time on my bike & helping rebuild the Palisades.

We’ll be talking about money this week. Cash in, cash out, cash up, and cash rainin’ down.

As always, please hit me back with feedback and comments—I’m constantly seeking ways to make this newsletter a more valuable read.

Diving right in and keeping things brief:

On my radar:

• Fundraising is currently our biggest bottleneck. I think there’s this weird culture in VC where people like to pretend like they just snap their fingers and money appears… I’d like to be the one to talk about the struggles of raising a fund a bit more honestly.

• DI has pivoted, and it’s now a general summit. Golf, tennis, run club, fun dinners, happy hours — think of it like adult summer camp for really interesting people building really cool shit. If you, or anyone in your network, would like to attend, please reach out.

• NY Tech Week is definitely top of mind this week. Been having fun running around events and supporting friends, but man, it’s a really poor use of time. My schedule this week has been fun events from 9-5, and then work at the office from 5-10.

• I want to meet more investors. Please, introduce me to your friends.

• We had Somble 2.0 launch day

  

The Main Idea

Raising a fund is one thing. Running it is another. I think there’s a lack of transparency about how money actually flows through your fund, how it gets tracked, who pays for what, and how performance is measured. Most folks know that their fund admin will handle this, so they tend to not learn it.

I’m going to start a little basic here… please forgive me. I think it’ll be helpful for some of the analysts who are reading.

Capital Commitments, Capital Calls, and the Clock

A capital commitment is a signed promise from an LP to fund a specific amount over the course of your capital call schedule/period that you outlined in your LPA. A capital commitment is not the cash you have in your bank account, it’s what the LP has promised. If they default on this commitment, there are usually some pretty harsh penalties.

Some first time fund managers miss that you only get that money when you call it. While it’s a capital commitment it’s not real cash you control, but once you do a capital call, it becomes cash in the bank.

Each capital call triggers a clock. That capital is now “contributed” and starts affecting your performance. Specifically, it affects time-bound performance metrics, like IRR. Your MOIC and DPI don’t really care about timing.

Example: If an LP commits $2 million and you issue a 10% call, they wire $200,000. That $200K becomes part of their contributed capital. If you wait three months to deploy it, your IRR suffers, since the money has already been in your possession for 3 months, not earning anything. The gamification of this becomes that fund managers try to do everything possible to wait to call capital, and to not have any capital sitting idle in their bank account.

Procedurally, you send a formal capital call notice, usually drafted with your fund admin. It includes the total call amount, due date (usually 7 or 10 days), fund wire instructions, and a brief description of use (investment, expenses, reserves). Admins track this in a cap call ledger, which must reconcile with each LP’s capital account.

The balance becomes: call as close to deployment as possible, without risking delays. Over-calling capital early drags IRR. Under-calling slows deals.

Treasury Management

Capital that’s been called but not yet deployed should not sit in a checking account. You’re literally burning IRR.

Even if it’s not a 20% IRR yield, you want that money to be earning something to lessen the blow. Treasury accounts are usually the highest yield while still keeping cash accessible, liquid, and relatively low risk. My favorite product right now is from my friends at Rho. Happy to make an intro, just hit me up here!

Drawdown Lines: Credit Instead of Cash

On the other side of this, to bridge gaps between capital calls, many GPs use a drawdown line, a short-term credit facility backed by uncalled LP commitments. It lets you wire an investment today and issue the capital call tomorrow.

For example… you need $1.5 million now for a fast-close round. Rather than calling LP capital, you borrow on the drawdown line. Then you issue a capital call for $1.5 million, use the incoming LP wires to repay the line, and keep your IRR cleaner.

Your bank (assuming they work with venture funds & have credit) underwrites the credit based on the quality of your LP base. If you’ve got a few endowments or big family offices, you’re more likely to qualify. The fund pays interest, usually a few hundred basis points over SOFR, plus standby fees. Wait… what are SOFR and standby fees??

SOFR (Secured Overnight Financing Rate)

SOFR is a benchmark interest rate. It reflects the cost of borrowing cash overnight in the U.S. Treasury market.

In practice, when you see a drawdown line offered at “SOFR + 300bps,” that means the fund pays whatever the current SOFR is, plus an additional 3.00 percent annual interest.

So if SOFR is 5.2%, your borrowing rate would be 8.2% annually. You’re only paying interest on the drawn amount, and only for the time it’s outstanding—so if you borrow $1M for 15 days, you’re only paying interest on those 15 days.

Standby Fee (aka Unused Commitment Fee)

This is a fee the bank charges you even when you’re not using the line. Think of it as a payment for keeping the facility available in case you need it. Rent for an empty office, basically.

Standby fees are usually around 25–50 basis points (bps) annually, applied to the undrawn portion of the credit line.

For example, if you have a $5M drawdown facility and never touch it, you might still owe $12,500 to $25,000 per year just to keep it open.

Capital Accounts

Each LP has a capital account. This is not a bank account, it’s a record of how much they’ve contributed, what it’s worth, what they’ve received, and how fees and carry affect them. Think of it like an accounting ledger.

A capital account includes:

• Contributed Capital: What the LP has actually wired.

• NAV: Their pro-rata share of what the fund currently holds.

• Distributions: What they’ve received in cash or stock.

• Carry Accruals: Their share of carry impact.

These accounts get updated quarterly by your admin and are used to calculate everything from DPI to final distribution waterfalls. Let’s say an LP has committed $2 million and you’ve called $500K. That $500K is their contributed capital. If you distribute $100K from an early exit, their DPI is now 0.2x. If the rest of their share of the fund’s value is marked at $600K, their TVPI is 1.4x. These numbers are calculated directly from their capital account.

All honesty, you could not pay me enough to manage and track Capital Accounts. Pure accounting that I want nothing to have to do with…

IRR, MOIC, DPI, and the other annoying acronyms

This literally took me one year to really learn and get clarity on. And the conclusion was… there is no real definition or procedure. I challenge you to find one, because you won’t. So, I’ll give you my definitions:

MOIC is what I am considering to be a “net” metric. You subtract all the bullshit. It’s, in my opinion, the best metric around how good a fund manager is. Total invested capital divided by total fund returns. It includes GP money in the numerator, but management fees are deducted. In the denominator, you take the pre-waterfall number. The reason I like this is because it shows what was actually done at the portfolio/fund level, and takes GP compensation out of the picture.

DPI is the number LPs like more, and for good reason. I consider it to be a “gross” metric… it is just looking at gross inputs and gross outputs. I contributed $1M, I got back $3M at the close of the fund, so 3x DPI. Simple, clean, easy. You literally just divide your total called capital by your total distributions, and on an LP basis ONLY. You leave GP money out of the equation.

IRR is time-sensitive. It’s a clusterfuck to try to calculate… there’s no equation I am going to give you, so just leave it up to your fund admin. But basically, if you return 3.0x MOIC over one year, your IRR might be above 150%. If that same return takes five years, your IRR drops to around 25%. MOIC tells you how much. IRR tells you how fast.

Gross IRR excludes fees and carry. Net IRR includes them. LPs really only care about the net.

Add NAV (the value of the fund’s holdings) to DPI and you get TVPI (total value to paid-in). That’s your full story: both what’s been realized and what’s still on paper.

Expenses (Fund vs. ManCo)

You have 3 entities (we covered this in Week 19 below).

The GP is more or less a pass-through entity from an accounting standpoint. Nothing really gets paid for by the GP. So it’s really just the ManCo and the Fund who are paying for things.

The ManCo gets paid 2% in management fees. In the average fund, only 40-60% of the management fees become salaries. The rest are spent on operations. If the management company had less in operations expenses, it could perhaps pay more in salaries! That’s where fund expenses come in…

When something is expensed to the Fund, it means the expense is taken out of the LP bank account, rather than it being taken out of the management company’s 2%. For this reason, GPs want to expense as much as humanly possible to the LP.

However, the Fund should really only pay for activities directly related to investing and the existence of the Fund. This is typically outlined pretty explicitly in the LPA. It includes:

• Legal fees for transactions (although, it’s typically covered by the company)

• Legal fees for the Fund

• Diligence-related travel

• Fund admin, audit, and tax prep

• SEC filings, Blue Sky fees

There’s no hard and fast rule for what gets expensed to the Fund… it ends up being a little bit of a negotiation between GP and LP. Some GPs opt to cover travel and diligence costs, and instead pass Preqin or PitchBook costs onto the LPs.

Traditionally, though, the ManCo pays for:

• Salaries

• Fundraising travel

• Office costs

• LP marketing and events

• Things like lunch, coffee, etc. when meeting with founders

Some LPs also require management fee offsets. If you earn board stipends or consulting income from a portfolio company, a portion of that must reduce the management fee charged to LPs.

Recycling

Recycling lets you reinvest returned principal into new deals without calling more capital. It’s capped in your LPA, usually at 110% to 120% of committed capital, and only applies to the original check, not the gain. Say you invest $1M, exit for $2M, and recycle the $1M into a new deal. That second company exits for $3M, and now you’ve generated $5M in distributions from just $1M of called capital. The gains still go back to LPs, but the principal gets a second life.

To do this, your LPA needs the right language, and you usually have to notify LPs in writing. Recycling boosts IRR and DPI without bloating fund size, but delays some cash returns and adds complexity to capital accounts and carry math. Still, if you’re in a fast-exit market or running concentrated bets, it’s one of the most powerful levers you’ve got.

Distribution Mechanics and Waterfalls

When a company exits, your fund admin runs the waterfall. The waterfall is the sequence of how cash gets distributed. First comes return of capital to LPs. After that, the remainder is divided, usually 80% to LPs and 20% to the GP. This is called the European waterfall, and from what I’ve seen, it’s the simpler and most typical way that it’s done.

In a European waterfall, LPs must receive all their capital back across the entire fund before the GP sees a dollar of carry. However, some funds employ a deal-by-deal waterfall. In deal-by-deal structures, carry is taken as each individual deal exits, even if the fund overall hasn’t returned full capital yet. Deal-by-deal tends to show up in PE or GP-led vehicles where the sponsor has meaningful skin in the game. It’s great when things go up and to the right. It’s clawback bait when they don’t.

If you mess up distributions or carry allocation, you’ll lose LP trust and potentially face clawbacks. Speaking of…

Clawbacks and Holdbacks

If you take carry early (say, after a big win), but the rest of the fund underperforms, you might owe some of it back. That’s a clawback. Most LPAs include this protection, with the GP personally liable.

To manage this, many funds hold back carry in escrow until final fund liquidation. It’s slower, but safer. If you’re raising Fund II while Fund I is still distributing, it’s often wise to over-reserve for clawback risk, even if it doesn’t look likely.

A fringe case

Okay, this is a bit of a fringe case, but I think it’s an interesting example of putting all of this into practice. I think it’s also a good example of how you can really take what we talk about here, and find some crazy niche situations to apply them to.

Let’s say you raise a $20M fund, call just $5M, and hit a massive early return. Can you stop there… skip the remaining $15M, return proceeds, and close the fund? Technically, yes. Capital commitments are contingent: LPs are only obligated to wire funds once you issue a capital call. If you never call it, they never fund it. DPI and IRR are calculated based on actual cash flows, not committed capital, so your 10x DPI on $5M contributed is real.

But here’s where it gets nuanced. Most LPAs give the GP discretion over timing and sizing of capital calls, but you still owe a duty of care and good faith. If you simply stop calling capital without formally terminating the investment period or dissolving the fund, you create a weird limbo state. LPs still have callable obligations on their balance sheet. Your administrator still has to report. The fund still exists.

To wrap cleanly, you’d need to (1) terminate the investment period, (2) formally cancel remaining capital commitments, and (3) begin the dissolution process as outlined in the LPA. This usually requires LPAC notification or consent, and final audited financials.

Strategically, a partial-deployment fund looks great on paper if the returns are huge, but it can complicate your story. Your “fund size” will get haircut to reflect actual dollars deployed. Some LPs may ask why their committed capital sat unused, especially if they passed on other managers to back you. And if you ever want to raise again, you better be able to explain why you left 75% of the fund on the table.

Dank Tweets

One of you asked for screenshots so you don’t have to click each link. Brilliant! You can click any image below to see the original Tweet.

Some cool stuff on my radar

• Here’s this week’s pocket dump. It’s been rainy in NYC:

  • Tom Ford cardholder

  • Benchmade 940 Carbon

  • TT Bolt Pen

  • AirPods 4 ANC

  • AirPods Pro 2 (yes, I am double carrying)

  • Omega Speedmaster

  • Yubikey + Flash Drive

  • Prednisone

  • HydroFlask 28oz

  • LMNT

  • Patagonia Houdini

  • OP Sheldrake Sun

• Have you seen the Rorra water filters? You should go buy one.

• This house in LA is so nice…

• I’ve seen these fancy tumblers all over my Instagram but am yet to try it.

• I just copped a Suncraft Senzo paring knife, and it’s absolutely wicked. Highly recommend you check them out.

• Ricoh just released the new GR4, right after I got one like two weeks ago. Nice.

• Apple released CarPlay Ultra. Gonna go cop an Aston so I can try it.

• ACL jacket is sick, although I don’t think it’s really needed for NYC summer.

Closing

Thanks for taking time out of your Wednesday to read. Since you made it this far, a little easter egg for you:

As always, you can find me on X and LinkedIn, and I’d love to hear from you via email. Whether it’s talking startups or just shooting the shit, I’m always happy to connect.

Onto the next!

//Eli

Welcome to the FIRST week of Two and Twenty. Killer name, I know. We’re here to fill the void that exists between emerging fund managers.

Our new domain is 2and20.vc. This newsletter is getting more dialed in as time goes on. The Slack has been nuked — way too complex & distracting. Instead, I’ve added a “chat” feature here so I can send news & shitposts I see on X.

As always, please hit me back with feedback and comments—I’m constantly seeking ways to make this newsletter a more valuable read.

Diving right in and keeping things brief:

On my radar:

• Version two of the Distilled Intelligence website is live – would love your feedback. Version three will be coming soon.

• We’re hiring a Distilled Intelligence Intern to help me with finding awesome companies to attend. We’re paying $20-ish an hour, referrals would be much appreciated. You can share this application.

• DI is going to pivot a little bit. Rather than have the event be a pitch competition, we’ve decided to widen the aperture and make it more of an ecosystem summit. It’ll allow us to have more founders who are there to broadly meet investors and learn from each other, rather than making it a competitive event to raise money.

• Apply to Distilled Intelligence here. Be sure to mention that NNR sent you!

• Whoop 5.0 tomorrow at 10am ET. LFG.

The Main Idea

Decision Trees

This week’s topic: decision trees. I totally tuned this out while sitting in 311 at Marshall… turns out it was actually important info, so I’ve spent some time re-learning it. Hopefully my little explainer will serve as a good refresher, or will teach you from scratch so you can take advantage of this very useful tool.

Context

Venture capital involves making decisions under conditions of uncertainty. In most cases, you’re operating with incomplete data. You only have the current snapshot, not the full trajectory. Still, you have to deploy capital, pass on opportunities, choose which founders to support, and determine where to allocate your next dollar.

Many investors lean on intuition or pattern recognition when facing complex decisions. But there’s a practical way to add structure and clarity: decision trees. They help break a decision into parts, quantify the possible outcomes, and surface the option with the strongest expected value.

A little intro to decision trees

A decision tree is a tool used to analyze decisions that involve risk or uncertainty. It looks like a branching diagram—like an upside-down tree—where each branch represents a possible path your decision could take. You start with a specific decision (like whether or not to invest in a startup). Each action leads to uncertain outcomes. You estimate the chance of each outcome happening, and you assign a financial value to each outcome. Then, using a simple formula, you calculate which decision gives you the best expected result.

There are three building blocks used to create a decision tree:

• A square represents a point where you have to make a decision. This is called a “decision node.”

• A circle represents a point where something happens outside of your control. This is called a “chance node.”

• A triangle marks the final outcome at the end of a branch. This is called a “terminal node,” and it shows the payoff (how much money you’ll make or lose).

The basic math behind decision trees uses a formula called expected monetary value (EMV). This tells you the average amount you’d expect to win or lose if you could repeat the same decision many times under the same conditions.

The formula is super simple, but kind of hard to explain…

EMV = (Probability of Outcome A × Payoff A) + (Probability of Outcome B × Payoff B) + …

You’ll see what I mean by this as we dive in further. You’re just multiplying the dollar amount yield (either positive or negative) of a decision, by the chance that the outcome actually happens. You then add them all together for each note.

Once you’ve assigned EMVs to all possible outcomes, you work backward through the tree to see which initial decision leads to the best expected result. This process is called rollback analysis.

Building decision trees

The best way to explain how to build a decision tree is with an example. In this case, our example will be deciding whether or not to participate in a follow-on round for one of your seed investments.

Step 1: Draw a square to represent the decision you need to make. This is where your tree begins. In our example, the decision is:

Should you invest $1.5 million to maintain your pro-rata in a company raising a Series A?

This square is the decision node. From it, draw two branches, one for each action you could take.

Step 2: List out each action you’re considering. In this example, you have two options:

• Option 1: Invest the $1.5M to maintain your 7% ownership.

• Option 2: Do not invest, and accept dilution to 3.5%.

Label these clearly as you branch out from the square.

Step 3: Now think about what might happen next under each action. These are events you can’t control. For example, if you invest, the company might:

• Exit at $500 million

• Exit at $100 million

• Fail completely and return nothing

Draw a circle at the end of each action branch. From each circle, draw three branches, one for each outcome. These are your chance events.

Repeat this for the “Do not invest” action. The outcomes might be the same, but the payoffs will be different because your ownership stake will be lower.

Step 4: For each outcome under each chance node, assign a probability. These should reflect your best guess at how likely each scenario is. Your probabilities must add up to 100% at each chance node.

For example, let’s say you believe the following:

If you invest:

• 40% chance of a $500M exit

• 30% chance of a $100M exit

• 30% chance of failure

If you don’t invest:

• 20% chance of a $500M exit

• 50% chance of a $100M exit

• 30% chance of failure

Write these probabilities next to the corresponding outcome branches.

Important: You don’t need perfect accuracy here. The point is not to predict the future, it’s to force yourself to clearly state what you believe will happen. This process makes your assumptions explicit and gives you a way to test different scenarios later.

Step 5: Now assign a payoff value to each outcome. This is how much money you (or your fund) would make under each result.

Let’s walk through this for both options.

• If you invest and maintain 7%:

  • At a $500M exit: 7% × $500M = $35M

  • At a $100M exit: 7% × $100M = $7M

  • At a failure: $0

• If you don’t invest and get diluted to 3.5%:

  • At a $500M exit: 3.5% × $500M = $17.5M

  • At a $100M exit: 3.5% × $100M = $3.5M

  • At a failure: $0

Write these next to the terminal nodes (the triangles at the end of each path).

Step 6: Now perform the actual calculation to determine the expected value of each choice.

For the “Invest” option:

• (40% × $35M) + (30% × $7M) + (30% × $0)

• = $14M + $2.1M + $0

• EMV = $16.1M

For the “Don’t Invest” option:

• (20% × $17.5M) + (40% × $3.5M) + (30% × $0)

• = $3.5M + $1.4M + $0

• EMV = $4.9M

Step 7: Now you have a quantitative comparison. The final step is to compare the EMVs of your options and choose the one with the highest expected return. Based purely on expected value, investing is the better option.

But don’t stop there—consider other factors, like how much capital you have left in reserves, how this fits into your overall portfolio, or whether new information might change your assumptions. Still, this method gives you a clear baseline for decision-making.

By the end, your decision tree should look something like this (please excuse my messy handwriting):

Factoring in additional info

Once you’ve built your initial tree, you may get new data that changes how you see the future. This is where posterior probabilities and sample information become useful.

A posterior probability is an updated probability estimate that incorporates new evidence. Suppose your original guess was that the company had a 40% chance of having a big exit if you invested. After seeing a huge customer onboard and a new round led by a top-tier firm, you might revise that estimate to 60%. That new number is your posterior.

Sample information is the evidence that helped you update that belief. In venture, this includes customer interviews, product metrics, investor interest, or changes in the competitive landscape. The more relevant and high-quality the information, the more reliable your updated tree becomes.

You can plug these posterior probabilities into your original tree and re-run the EMV calculations to reflect the new reality.

Where they’re most helpful

Follow-On Investments: This is the cleanest use case. You can compare the expected returns of exercising pro-rata vs. walking away. Here, decision trees will account for dilution, stage of company, outcome probabilities, and payoff size. It makes follow-on allocation more rational. Filing a decision tree in your CYA folder or investment memo can be really helpful to give LPs insight into why you re-upped if the company failed.

Initial Investments: Early-stage deals are highly uncertain and driven by long-tail outcomes. A decision tree helps you map the risk/reward balance. Even if the chance of success is small, if the upside is large enough, the EMV might justify the investment.

Portfolio Construction: You can build a model of your whole fund using trees for each company. This helps you understand your expected fund-level DPI, identify whether you’re overexposed to one type of outcome, and adjust capital reserves accordingly.

Exit Timing and Liquidity: Trees can model different exit timelines and sizes, showing how choices today impact future distributions and fund pacing.

Pre-Mortem Analysis: Use the tree in reverse: what paths could lead to failure? You can model the probability of each and use that to proactively manage risk.

Dank Tweets

• Josh Kopelman on big funds

• No carry for VCs??

• Michael Milken has a website

• NYC vs SF

• Windsurf’s hiring advice — or rather advice to not hire

  Truework has been acquired by Checkr

• OpenAI is teaching you how to build AI agents

• How to use AI for learning

• Very cool read on the gut microbiome

• “Red Bull just launched a €200M venture fund. Red Bull Ventures will focus on early-stage investments in sports tech, sustainability, media, and human performance. The fund marks a strategic shift as the brand moves deeper into innovation and venture investing — with plans to back founders who share its edge.” Fitt Insider

• “NewLimit, a biotech startup co-founded by Coinbase CEO Brian Armstrong, Blake Byers, and stem cell expert Jacob Kimmel, has raised $130 million in a Series B round led by Kleiner Perkins to advance its mission of developing age-reversing treatments through epigenetic reprogramming.” - from TradedVC

• Selling Your Winners on 20VC

Some cool stuff on my radar

• Here’s this week’s pocket dump. It’s been rainy in NYC:

  

  • Tom Ford cardholder

  • Toor Knives Jank Shank

  • GilTek RUK Ti

  • Davek Umbrella

  • Grimsmo Pen

  • AirPods 4 ANC

  • Yubikey + Flash Drive

  • Bioderma Lip Balm

  • Canon S100

  • Olight S1R

• Magnesium Taurate has changed my life:

  

• Got my first order of Create gummies today. They arrived less than perfect, so haven’t tried them, but 5-star customer support!

• Copped this sick Stetson hat. Commence summer.

• Craighill made a cool sunglass lanyard. Still dorky, but cool.

• The M4 Pro is basically the same as the M1 Pro. I learned that the hard way.

• My second favorite pencil is on sale.

• Pelican made a carry on bag and it looks SICK.

Closing

Thanks for taking time out of your Wednesday to read.

As always, you can find me on X and LinkedIn, and I’d love to hear from you via email. Whether it’s talking startups or just shooting the shit, I’m always happy to connect.

Onto the next!

//Eli

Welcome to another week of No NDA Required. We’re here to fill the void that exists between emerging fund managers.

I have successfully wrapped with Yossi Farro. What’s next on the bucket list? Be on an episode of TBPN. Coming soon.

I am nuking the Slack community. It flopped.

As always, please hit me back with feedback and comments—I’m constantly seeking ways to make this newsletter a more valuable read.

Diving right in and keeping things brief:

On my radar:

• Have your portcos apply to Distilled Intelligence here. Be sure to have them name-drop NNR!

  • If you’re an investor, shoot me an email here and we’ll get you on the ticket pre-order list.

• Heading up to SF tomorrow — will have some free time Friday morning for coffee chats.

• I’ve been eating BOLD Bars like there’s no tomorrow. Order some here, if they aren’t sold out.

The main idea:

This disclaimer will always be here: I am not an attorney. I am not an authoritative source. Question everything you read on the internet. Trust but verify. Do not listen to me. More importantly, do not sue me. Thanks!

Securities licenses for fund managers

Let’s dive into this week's topic: Securities Licenses: the Series 7, 63, 65, CFA, CAIA alphabet soup. Do you, as a venture capital fund manager, really need to care about this stuff? How do licenses affect you, your fund, regulatory filings, your liquidity, and possibly even create some extra income?

Context

In finance, credentials like the Series 7, CFA, and CAIA aren’t just resume boosters—they define what you can legally do, who oversees your work, and where you sit in the broader ecosystem. Some, like the Series 7 or 63, are licenses. You need them if you’re selling securities or giving advice, and they’re regulated by FINRA or state agencies. Getting licensed requires sponsorship from a registered firm and passing the right exams.

Others, like the CFA or CAIA, are designations. They’re not legally required, but they carry serious weight. The CFA signals deep expertise in public markets; the CAIA does the same for alternatives. Both take years of study, multiple exams, and ongoing membership to maintain.

In practice, Series licenses are common for brokers and retail advisors. CFAs show up most in research and portfolio management. CAIAs are often found in private markets and hedge funds. Fund managers themselves might not need a license to run a fund—but understanding who does, and what each credential allows, is key to navigating capital markets and staying compliant.

License types

There’s no end to the different kinds of licenses, certifications, or designations. Here are some of the options:

1. Series 7 License: Allows the holder to buy and sell a broad range of securities products.

2. Series 63 License: Covers state securities laws and permits the sale of securities within a state.

3. Series 65 License: Qualifies individuals as investment adviser representatives, focusing on investment strategies and ethics.

4. Series 66 License: Combines aspects of Series 63 and 65, for those with a Series 7, covering state securities laws and investment advice.

5. Series 79 License: Qualifies professionals for investment banking activities including mergers, acquisitions, and securities offerings.

6. Series 82 License: Specifically permits representatives to conduct private securities offerings.

7. Chartered Financial Analyst (CFA): Recognized globally, focusing on investment analysis and portfolio management.

8. Chartered Alternative Investment Analyst (CAIA): Specializes in alternative investments, including hedge funds and private equity.

9. Certified Investment Management Analyst (CIMA): Focuses on advanced portfolio construction and wealth management strategies.

10. Certified Portfolio Manager (CPM): Provides training in portfolio management through a structured education program.

11. Certified Fund Manager (CFM): Concentrates on fund management skills, including investment analysis and fund administration.

You could spend a whole lifetime studying for and taking these exams. But which ones are actually necessary, and which ones might actually hurt you by having them?

The most common ones

The most common licenses that fund managers have are:

• Series 7/63

  • Having both the Series 7 and Series 63 licenses allows a person to legally sell securities (or ownership in a blind-pool fund like a venture fund) and earn commissions on those sales (also called a success fee).

  • Stock brokers, placement agents, brokers of secondary transactions, and investment bankers are the crowd who usually have their 7/63.

  • Think about broker-dealers. They take a commission on money they raise for you or they take a fee when selling securities on the secondary market. That’s really what this license is for.

• Series 65

  • The Series 65 License allows a person to provide investment advice to the general public and manage assets for a fee, rather than earning commissions from managing, buying, or selling securities.

  • The people who usually have their 65 are wealth managers, investment advisers, or financial planners. In some states, having a CFP can replace the need for having a 65.

  • The key here is that a Series 65 allows you to give this advice to the general public. Think about your money manager or an advisor who you pay a few thousand bucks a month to tell you how and what to invest your money in.

• CAIA

  • The Chartered Alternative Investment Analyst (CAIA) designation is designed for professionals who want to dig deeper into the world of alternative investments—think hedge funds, private equity, venture capital, real estate, and commodities. It helps you build the skills to put together well-diversified portfolios, tackle complex risk, run solid due diligence, and analyze investments at a high level.

  • It is not a license, but rather a designation. It doesn’t give you any more power or ability, it just signals that you know what you’re talking about.

• CFA

  • The Chartered Financial Analyst (CFA) designation is one of the most popular credentials globally. It’s similar to the CAIA, but more broad (and less about alternative investments). There’s debates about the actual value of the CFA, or if it’s more just a flex.

  • Like the CAIA, it is just a designation.

  • In some states, it might replace the Series 65.

• TLDR:

  • Series 7 & 63 → securities sales & broker-dealer activities.

  • Series 65 → investment advisory services (more common/valuable for venture fund managers).

  • CFA/CAIA → respected credentials, but not regulatory licenses.

Often times, the folks who came from more “hard finance” backgrounds like ex-investment bankers or ex-placement agents are the fund managers who have their licenses. If you don’t already have them, there’s little benefit to getting them.

Are any of these necessary?

The short answer is: no. In fact, most venture fund managers don’t have any of these licenses or designations. Why you don’t need any of them is because:

• You're probably managing a private fund with qualified investors.

• You aren't selling alongside a broker-dealer.

• You typically don’t transact publicly-traded securities directly (you're making private company investments).

What do you gain or lose by getting these licenses?

Benefits:

• Series 65:

  • You can raise money from non-accredited investors if you’re registered in certain states. This allows you to side skirt 506(b)/506(c) limitations when managing small SPVs or syndicates.

  • It allows you to advise on things like rolling funds or founder secondaries without having a broker-dealer actually help you (and taking a cut).

  • It can let you charge separate advisory fees for SPVs, or with consulting work. You can be advising someone on how to be making investments into alternative securities, and getting paid for it.

  • If you’re running SPVs without a traditional fund structure, which is typical for solo GPs or early-stage platforms, having a 65 lets you legally manage investor capital and charge fees, all without the complexity of a full fund or the need for a fund administrator.

  • You can use your 65 to charge advisory fees for VC investments, building your investing track record pre-fund.

• Series 7/63:

  • Help others (your portcos, your friends who are fund managers, etc.) fundraise, and also get compensated for it with either carry, a retainer, or a performance/success fee (commission).

  • You can sell your fund’s interests on the secondary markets without having to shell out a few percent to a broker-dealer. It can help you squeeze liquidity before a wider liquidity event. Yay DPI!

  • You can provide opportunistic opportunities (is that silly to say?) to your LPs. What I mean is: if you want to create access vehicles around late-stage secondaries or secondary LP interests (esp. in hot rounds), 7/63 allows you to do so, without relying on an external placement agent.

• CFA and CAIA

  • Having a CFA or CAIA can give some institutional LPs some confidence knowing that your team knows what it’s doing when it comes to diligence. Some institutional LPs might even use it as screening criteria when putting a fund through their IC.

  • It can be really helpful knowledge if your fund has annual audits. It gives you insight into what the auditors might be looking for, and can help give you a confidence boost that you’re not doing anything wonky from a compliance perspective.

  • If you’re building a team and don’t yet have a full-time CFO, having someone with a CFA or CAIA can give you a proxy set of internal standards for valuation, reporting, risk management, etc. It de-risks internal ops while you’re still lean, and will keep your attorney happy.

Downsides:

• Series 65

  • If you have your 65, you become an RIA. If you register as an RIA, you’re no longer exempt under the Exempt Reporting Adviser (ERA) rule. That means full ADV filings, surprise exams, annual updates, and regulatory scrutiny — even for a small fund. Could be expensive, and definitely really sucks.

  • Advising non-accrediteds can jeopardize 3(c)(1) status. Under Reg D, 3(c)(1) funds can accept up to 35 non-accredited investors only if those investors are passive and not receiving individualized investment advice. If you’re a Registered Investment Adviser (via Series 65) and provide advisory services to non-accredited investors, such as recommending specific fund investments, they may be reclassified as advisory clients rather than passive LPs. This can blow your Reg D exemption, trigger fiduciary obligations, and expose you to RIA custody rule issues and SEC audits unless carefully structured with proper disclosures and separation of roles.

• Series 7/63

  • Series 7 and 63 aren’t standalone credentials — they’re only valid if you’re actively registered with a FINRA-member broker-dealer, which takes on responsibility for supervising all securities-related activity, including investor communications, marketing, and deal execution. This affiliation comes with real operational overhead: compliance reviews, pre-approvals, communication logs, continuing education, and monthly fees that often run $1K–$5K+. Without that active broker-dealer sponsorship, your license lapses and you lose the legal ability to raise capital, sell fund interests, or receive compensation tied to a deal.

  • LPs may question whether you’re acting in their best interests or just earning commissions. For example, your LPs might think you’re selling prematurely just so you can take a 2% brokerage fee for selling the fund’s securities on the secondary. It can create optics issues or even legal ones if you don’t disclose properly.

• CFA and CAIA

  • There’s no real legal upside. These don’t help you avoid audits, raise from new investor classes, or reduce regulatory friction. They’re expensive, time-consuming, and mostly brand-oriented.

  • Because it’s so brand-oriented, you might get clowned by founders and other fund managers. You know what I mean here — there’s a certain cool kid, laissez-faire attitude you have to have as a VC, and having a CAIA designation next to your name on LinkedIn is the absolute opposite of that.

All this in practice:

Most fund managers don’t need to be licensed — and in a lot of cases, chasing credentials can add more complexity than value. Unless you’re actively managing outside capital beyond your main fund (like SPVs, rolling funds, secondaries, or advisory work), it’s usually smarter to stay lean, stick with ERA status, and focus on performance and your story.

If you’re looking to unlock new revenue streams, here’s the general playbook:

• Series 65 can let you charge for advisory or run non-fund syndicates legally. Just watch the state-by-state AUM thresholds so you don’t accidentally trigger full SEC RIA registration.

• Skip Series 7/63 — if you’re trying to monetize deal flow or structure founder secondaries, it’s easier to partner with someone who already has a broker-dealer license.

• CFA/CAIA aren’t essential unless your LPs care about institutional credentials or you’re doing public markets/research work. They won’t reduce compliance risk, and they don’t unlock capital on their own.

If you’re after clean, low-friction income, set up lightweight SPVs, offer structured access to deal overflow, or provide portfolio advisory under safe harbor rules. Just keep it transparent and clearly separate from fund activity — LPs won’t blink if it feels aligned. If your LPA allows it, maybe get involved with some of your portcos (or their friends) on a consulting level!

Icing on the Cake:

Distilled Intelligence! Want to raise money? Come to Distilled Intelligence. Want to source great companies? Come to Distilled Intelligence. Want to help your portcos succeed? Tell them to come to Distilled Intelligence.

Some cool stuff on my radar

• Here is this week’s pocket dump:

  

  • Bold Bar

  • Tom Ford cardholder

  • Chris Reeve Umnumzaan (glass-blasted with a Lynch flat clip)

  • Pilot V5 Pen

  • AirPods 4 ANC

  • Oliver Peoples Gregory Peck

  • Yubikey + Flash Drive

  • Dr. Hauschka Lip Care Stick

  • Plaud Pin

  • Mighty Hank

  • Car Key

  • Garmin Instinct 2S Solar

• A garden hose that doesn’t suck.

• This Logitech smart light that takes your Zoom calls to the next level and automatically turns on when you start calls.

• The Third Wave by Alan Toffler

• A textbook that explains how AI works

• Chorus, the AI multitool. I’ll have a promo code for you next week, hopefully.

• Summer is coming, so this wearable UV monitor might be helpful.

Closing

Thanks for taking time out of your Wednesday to read.

As always, you can find me on X and LinkedIn, and I’d love to hear from you via email. If you want to learn more about me, the best place to do so is at kia.vc. Whether it’s talking startups or just shooting the shit, I’m always happy to connect.

Onto the next!

//Eli

reach eli

Q1’25 has come to an end. Happy Q2 to all who celebrate. I hope you all sent out your quarterly LP updates!

Since we’re at the end of the first quarter, I’ll be catering to the only thing people actually want me to write: my 2025 productivity flow. If you haven’t seen editions from years prior, you can check out 2024 here and 2023 here.

Diving right in and keeping things brief:

My workflow for maximum productivity in 2025

If you know me, you know I love my productivity tools. I hate spending time on the menial bullshit, and want to do everything I can to turbocharge my day. While it pains me (and my wallet) to have more subscriptions than anyone else on planet earth, I am confident that it puts me in a position to be a good future-of-work investor. Trying products in this space really is a hobby for me.

The prices displayed are the prices I pay for the platform. Some have free versions as well, but if a price is listed, I decided the free version was insufficient for my use. If you choose to try any of them, I ask you to use the link listed here — I get a free month or some other perk from a few of the referral links here. Thanks!

What’s stayed:

• 1Password: $2.99/mo

  • The best password manager to ever exist. Works seamlessly across devices and has very few bugs.

• Manico: $5.99 for Pro

  • Use keyboard shortcuts to launch apps and switch between them.

• Superhuman: $30/mo

  • Breeze through your emails in no time.

• BetterTouchTool: Free with Setapp

  • Create hyper-custom shortcuts and automations. I use it to change the action of keys on my keyboard.

• HazeOver: Free with Setapp

  • Bring your current application into focus, blurring out distractions.

• Rectangle: $9.99

  • Effortlessly snap windows to fit your screen. Really helps keep things organized.

• Setapp: $9.99/mo

  • One subscription for access to hundreds of premium apps.

• InYourFace: Free with Setapp

  • Blocks out your screen when you have a scheduled meeting. Never be late again.

• Cron: Free

  • The greatest calendar app ever created. It’s now called Notion Calendar.

• Raycast: $10/mo

  • Replace your Spotlight search with a powerful AI tool.

• Clay: $120/yr

  • A personal CRM to keep track of relationships.

• Todoist: $5/mo

  • The best task manager in existence.

• Bartender: Free with Setapp

  • De-clutter and organzie your menu bar.

• Grammarly: $144/yr

  • Keeping your spelling & grammar in check. It’s spellcheck on steroids.

• OneDrive: $69.99/yr

  • Keep all your data synced & secure.

Hardware:

• Logitech MX Master 3S for Mac

  • The fastest and most comfortable mouse ever made.

• Cellular iPad Pro

  • Work from anywhere without worrying about WiFi.

• MacBook Pro 16-inch

  • The absolute beast.

If you have any questions about how I set up the hardware to maximize productivity, I’m happy to walk you through it. Just click here to shoot me an email.

What’s new

Howie — $29/mo

Sign up here, I get nothing from your sign up!

Howie makes me feel like I’m rich enough to have an executive assistant. All I do is loop Howie into my email threads, and it takes care of scheduling for me. There’s nothing I hate more than going back and forth with sending times, or having to cross compare someone’s Calendly link to my calendar. Howie does that all for me.

With the new Howie 2.0, it’s crazy how smart Howie is. Most people have no idea it’s AI.

Granola — $10/mo

Sign up here, I get nothing from your sign up!

Granola is a notetaker built for the venture ecosystem. It gives you a notepad to jot down important things you hear on a call, and then uses those as kernels to produce AI-enhanced notes. You can always see your original notes, if you aren’t a fan of AI filling in the missing details. I find myself coming to Granola to chat with it and ask questions about long calls, or have it produce a list of follow up action items.

The best part? It integrates with Affinity.

Zcal — $9.50/mo

Sign up here and we both get a free month!

Sometimes Howie isn’t practical, because you’re scheduling over text or don’t want a back and forth thread. Instead of Calendly, I use Zcal. It’s a fraction of the price, and has so much more customizability than Calendly.

Scapple — $20.99

Download here, I get nothing from your download!

Creating charts and graphs isn’t easy, but as a visual person, it’s incredibly important to me. I use them to visualize operational workflows, decision paths, and more. Scapple is the best tool I have found for doing so. Super easy to use, and quite dynamic.

TextSniper — $11.99

Download here, I get nothing from your download!

Nothing drives me crazier than those articles online that don’t let you copy/paste them. It’s such an impediment. TextSniper lets you quickly copy any text that’s on your screen to your keyboard, even if it’s in an image.

NotchNook — Setapp Included

Sign up here and we both get a free month!

NotchNook is a handy little hidden shortcut that lives in the notch of your Mac screen.

Sip — Setapp Included

Sign up here and we both get a free month!

If you’re a designer and are frequently trying to find the hex codes of colors, Sip makes it really easy. Lives within Bartender on your Menu Bar, making color codes of anything on your screen super accessible.

Paletro — Setapp Included

Sign up here and we both get a free month!

If you couldn’t tell by now, I am a sucker for keyboard shortcuts. Paletro allows you to have a Command + K-style shortcut/command bar for any app.

Not new but never mentioned

Arc — Free

Download here, I get nothing from your download!

Arc is my browser of choice. Makes it easy to separate work & personal, uses some great keyboard shortcuts, super fast, and great for organization. If you use Arc right, you’ll never have millions of open tabs or windows.

CleanMyMac — Setapp Included

Sign up here and we both get a free month!

I think the name is pretty self explanatory… de-clutter your computer. My favorite feature is the “deep uninstall” feature which gets rid of old application logs you didn’t even know existed.

iStats Menu — Setapp Included

Sign up here and we both get a free month!

The default menu bar sucks. It gives you no information about the things you actually care about. You can customize it in nearly any way that you want, showing important info from network connectivity to CPU usage. I have been a long time user, and it’s one that will never leave my workflow.

Captin

Click here to download for free.

I always struggle to remember if my caps lock is on or off, and often would fail to realize that I clicked the caps key by accident. Captin gives you a HUD alert when caps lock is turned either on or off. Way more helpful than you could imagine.

One Switch — SetApp Included

Sign up here and we both get a free month!

One Switch places a bunch of handy quick commands into your Menu Bar. Whether you want to hide your desktop icons for a presentation, or lock your keyboard so you can wipe it down, it makes random tasks a lot easier.

New hardware

• Apple Studio Display

  • I recently added the pricey Apple Studio Display to my setup. I got a killer deal on one, so I decided to bite the bullet and haven’t looked back since.

  • It feels like you’re looking at your MacBook Pro display, on full brightness, at 2x the size, all the time. If you’re doing any kind of creative work, it’s a no-brainer to have one.

• Dell 4K Monitor (Dell S2722QC)

  • I have 7 monitors across my different desk setups (2 in LA, 2 in NYC). Obviously, it’s not financially possible for me to have 7 Studio Displays. These relatively inexpensive Dell monitors are a good substitute.

  • The monitors are decent quality, have good brightness & colors, and use a USB-C PD, just like the Studio Displays. The included stand allows you to rotate it 90 degrees with ease, to use them as end-cap monitors.

• Apple Touch ID Keyboard with Number Pad

  • I upgraded my keyboard from the non-Touch ID version to the one with Touch ID. I close up my laptop when docked at my desk, and the Touch ID keyboard allows me to unlock my computer and 1Password while it’s docked and away.

• Logitech G240 Mousepad

  • I tried about half a dozen mousepads before finally landing on this one. I use the size medium version.

  • It’s thin, soft, tacky on the bottom but slippery on the top, and easy to clean.

Icing on the Cake:

Some cool stuff on my radar

• Here is this week’s pocket dump. I’ve been running to IRLs today, so it’s a hefty one:

  

  • Garmin Fenix 7SSS

  • Tom Ford cardholder

  • Plaud AI Pin

  • AirPods Pro 2

  • Oliver Peoples Sheldrake Sun

  • Apple EarPods (better for calls than AirPods)

  • Anker 633

  • Yubikey + Niteize G Series Size 2

  • Burt’s Bees

  • GilTek RUK

  • Office Key

  • Fisher Space Pen

• Sweet Haven, the dankest candy I have had in quite a while.

• These Koala Cloths are some of the best screen microfibers I have found.

• My favorite Alexa-compatible light switches are on sale for so cheap. $12 to be able to say “Alexa, lights off” is a bargain.

Housekeeping

Thanks for taking time out of your Wednesday to read.

Fill out the form below if you’re in the startup ecosystem and would like to join the open-source community I’m building.

sign up for NNR

As always, please hit me back with feedback and comments—I’m constantly seeking ways to make this newsletter a more valuable read.

You can find me on X and LinkedIn, and I’d love to hear from you via email. Whether it’s talking startups or just shooting the shit, I’m always happy to connect.

Onto the next!

//Eli

Welcome to another week of No NDA Required. We’re here to fill the void that exists between emerging fund managers.

My morning routine consists of chugging 2 scoops of pre-workout mixed with Saratoga and eating a David protein bar. What about yours?

The Slack community is live & slowly growing. Think of it like the group chat you wish you had with a bunch of other investors. Join here.

Fill out the form below if you’re in the startup ecosystem and would like to join the open-source community I’m building.

sign up for NNR

As always, please hit me back with feedback and comments—I’m constantly seeking ways to make this newsletter a more valuable read.

Diving right in and keeping things brief:

On my radar:

• Have your portcos apply to Distilled Intelligence here. Be sure to have them name-drop NNR!

  • If you’re an investor, shoot me an email here and we’ll get you on the ticket pre-order list.

• Thinking of putting together an emerging fund manager/VC dinner sometime before summer starts… maybe one in LA and one in NYC? Shoot me an email here if you wanna come!

• Special edition NNR next week focused on productivity & prosumer FoW tools.

The main idea:

Same shpiel as last week… I am not an attorney. I am not an authoritative source. Question everything you read on the internet. Trust but verify. Do not listen to me. More importantly, do not sue me. Thanks!

506(c) got a makeover

Regulation D

The best starting point to talk about this is by explaining Regulation D (commonly called Reg D). Regulation D sets out how VC funds can offer and sell interests in the fund to investors without doing a full SEC registration. It comes from the Securities Act of 1933, and is a framework of rules that makes it easier for companies and investment funds to raise money without registering their securities with the SEC.

For more context on registering with the SEC, check out last week’s edition":

Reg D basically outlines what the rules of engagement are for VC funds. It tells funds to file a Form D, sets solicitation rules with 506(b) and (c), mandates compliance with Blue Sky Laws, and enforces certain disclosures.

What are 506(b) and (c)?

Both 506(b) and 506(c) are SEC Reg D exemptions that allow venture funds to raise money without going through a full SEC registration.

From a flow perspective, 506(b) and (c) sit at the bottom. The Securities Act outlines Reg D, which contains Rules 506(b) and 506(c) as exceptions. See my poor attempt at visualizing this below:

When filing a Form D (the filing tied to this Act), a venture fund would check a box indicating which exemption they are relying on. The Form D must be filed electronically with the SEC (within 15 days after the first sale). But which box should you check? Traditionally, this has been the criteria:

506(b):

• No general solicitation or advertising, meaning that you can’t publicly market the offering (e.g., no open website pitches, social media campaigns, or mass email blasts).

• There is no cap on how many accredited investors you can have in the fund. See the definition here, it’s not worth getting into that here.

• You can include up to 35 investors who are not accredited but can demonstrate sufficient knowledge or experience to evaluate the risks of the investment. Because non-accredited investors are involved, you’re typically required to provide more thorough disclosures akin to what you’d see in a registered offering.

• The investors would “self attest” to the fact that they are accredited, by literally just checking a box on your subscription documents.

• In order to solicit someone, there must be a “pre-existing, substantive relationship” with that individual or entity. Basically, you can’t connect with them just for the sole purpose of soliciting the fund. Most attorneys recommend having an existing relationship for at least 30 days before soliciting the fund so as to clearly separate solicitation efforts.

506(c):

As interesting context: In 2012, Congress created the JOBS Act. Before the JOBS Act, only 506(b) existed, which did not allow for general solicitation. As part of the JOBS Act, Congress asked the SEC to update rule 506 to allow funds and startups to publicly advertise their raises — as long as they verify all investors are accredited. To allow for this, the SEC then created 506(c).

• General solicitation is allowed, meaning you can publicly market the offering in almost any format (podcasts, social media, announcements).

• You can have literally 0 non-accredited investors. They must all be accredited, with no exceptions.

• Importantly, you must verify each investor’s accredited status (e.g., by checking tax returns, net worth statements, letters from a CPA/lawyer, etc.). This has been the biggest hurdle to 506(c) given the privacy concerns that LPs may have. The most common portal for this has been VerifyInvestor.com.

  • The rule gives examples of how to verify accredited status but says companies don’t have to use those examples. Instead, companies can look at the specific situation to decide what’s reasonable. The SEC also said that using a minimum investment amount is one valid factor in the verification process.

So all in all, 506(c) is a pretty new thing, and there isn’t an ultra-clear cut process on how it all works.

So what is changing?

No-Action Letters:

The SEC released something called a No-Action Letter. Let me start by explaining what that is, for context:

An SEC no-action letter is basically a public signal from the SEC staff saying they don’t plan to take enforcement action if you move forward with a specific plan — even if that plan might otherwise raise legal questions under securities laws. It’s not a formal approval, and it’s not legally binding, but it does offer some reassurance: as long as you stick to the exact facts you laid out in your request, the SEC isn’t likely to step in.

To get one, you submit a detailed explanation of what you want to do and why you believe it doesn’t break the rules. If the SEC staff agrees, they’ll respond with a letter saying they don’t intend to pursue enforcement — again, assuming everything stays exactly as you described.

Companies usually ask for these when the legal landscape is uncertain, especially with new financial products or technologies. In that sense, a no-action letter is a cautious green light. More importantly, these letters often give a window into how the SEC is approaching newer or evolving areas — like crypto, crowdfunding, or alternative fund structures — without the agency having to formally rewrite the rules. That’s why people pay close attention to them: they hint at where regulation might be going next.

The recent No-Action Letter in response to Latham Watkins’ request:

On March 6th, Latham Watkins sent this letter to the SEC. They outlined that they plan to approach rule 506(c) investor verification by leveraging the total investment amount as their method. More practically, they “believe that an issuer in a Rule 506(c) offering will have taken reasonable steps to verify the accredited investor status of the purchasers by using the minimum investment amounts and related conditions described below”:

1. Individuals

The company gets written confirmation that:

• The investor qualifies as an accredited investor under Rule 501(a)(5) or 501(a)(6).

• They are not using financing from someone else for this specific investment.

And the investor agrees to invest at least $200,000 (this can be in installments if agreed in advance).

2. Entities Qualified by Assets

The company gets written confirmation that:

• The investor is an accredited entity under Rule 501(a)(3), (7), (9), or (12).

• They are not using outside financing for this investment.

And the entity agrees to invest at least $1,000,000 (can be in installments under a binding agreement).

3. Entities Qualified Because All Owners Are Accredited

For entities that qualify only because all their owners are accredited, the company gets written confirmation that:

• The entity qualifies under Rule 501(a)(8) because all owners are accredited under Rule 501(a)(3), (5), (6), (7), (9), or (12).

• Each owner has committed to invest at least $200,000 (if an individual) or $1,000,000 (if an entity), either directly or through the entity.

• Neither the entity nor any of its owners is using financing for this investment.

And the entity agrees to invest either:

• $1,000,000 total; or

• $200,000 per owner if there are fewer than five individual owners.

4. No Knowledge of Misrepresentation

In all cases, the company must not know anything that contradicts the investor’s claims, either about being accredited or not using outside financing for the investment.

Because this proposed method relies on written statements, no outside financing, and a high minimum investment, they believe this combination meets the standard of "reasonable steps" in Rule 506(c).

On March 12th, the SEC published this No-Action Letter in response to Latham Watkins’ letter, “agreeing” with their stance, echoing that a high minimum investment can be a helpful factor when verifying if someone is accredited. They once again stated that if someone invests a large amount of money and it’s not financed by someone else, then it's reasonable to assume they are accredited — unless there are red flags.

They highlighted the three pieces necessary in addition to the large check size would be:

• The investor would provide a written confirmation that they are accredited.

• They’d confirm that neither their investment, nor that of any equity owner (in the case of some entities), is financed by a third party.

• The company would not know of anything that contradicts those claims.

Based on these representations, the SEC agrees that it would be reasonable for the issuer to conclude that the investor is accredited.

All this in practice:

So now we understand the context & the changes (hopefully). The next logical step is, what do we do with this information? If you’re already registered as a 506(c) fund on your Form D, then you can skip to “Step Two" (the next paragraph). If you are currently registered as a 506(b) fund, then you can’t currently take advantage of any of this, and you must first re-file as a 506(c) fund. I highly recommend you talk to your attorney about this to find out what your options are.

Once you’re certain you’re a 506(c) fund, then the next step is to meet with your fund admin, your attorney, and your LP onboarding portal to make the necessary changes. I don’t know what those changes will look like (I’m not an attorney & it’s case by case) but my best guess is that there will be an additional addendum to your subscription documents that make sure the check size meets that minimum, and that they self attest to the points above, depending on what kind of investor they are.

The thing to keep an eye on is if you’re currently a 506(b) who has non-accredited LPs in the fund. Talk to your attorney about what happens to those LPs, and if there is a way to still take advantage of these new changes — I honestly don’t know.

Headlines

• Apparently, David protein bars have been causing anal leakage. Just eat real food, people.

• 11x is deep into a debacle… basically, they lied about their customers and traction. It’s all getting uncovered now, and a16z is PISSED. Apparently they’ve also been paying their employees late, which is bad bad bad. ZoomInfo is now suing 11x, because 11x used their logo as a “customer,” even though ZoomInfo has never been a customer…

  • The Series A was led by Benchmark, with participation from 20VC, Quiet Capital, SV Angel, Lux Capital, Abstract Ventures, Operator Partners, Visionaries, Activant, HubSpot Ventures, Project A, 20Growth, and 20Sales. The Series B was led by Andreessen Horowitz (a16z), with no additional investors explicitly listed for that round. (source)

• Browser Use is leading the charge on web-enabled AI agents. They just closed a $17M seed round led by Felicis’ Astasia Myers with participation from Paul Graham, A Capital, and Nexus Venture Partners.

• Perplexity is apparently in talks to raise $1B at an $18B valuation. Just stoooopid.

• XEIA Venture Partners invested in Vonova’s seed round, a company that uses minimally invasive transvascular technology to help treat neurological disorders.

• Long Journey raised a $181,818,181.8 fund because of Lee Jacobs’ post-Oct 7th connection to Judaism. He explains how the “repetition of 18s, embodies a personal commitment to life and creation and mirrors what Long Journey has always been about: recognizing and amplifying belief.” An amazing Kiddush Hashem.

• Bar Keepers Friend, founded in 1882, was acquired by Forward Consumer Partners. What’s the IRR for the funds who invested at seed?

• 23andMe has filed for Chapter 11 bankruptcy to reorganize its debts and facilitate a court-supervised sale of its assets. CEO Anne Wojcicki has resigned but plans to bid for the company as an independent buyer, citing her commitment to its future. The company has secured $35 million in financing to sustain operations during the bankruptcy and sale process.

• Waymo is coming to DC.

• Napster was acquired for $207M by Infinite Reality. The company is now 25+ years old… this feels a bit like the Bar Keepers Friend acquisition timeline.

• Aardvark Weather replaces traditional forecasting pipelines with a single AI model, enabling predictions in minutes on standard desktop computers. It outperforms the US GFS system with just 10% of the input data.

• Bryan Johnson is doping.

• Silna announced a $27M seed & series A led by Accel and Bain Capital. What made me laugh are the round participants. It looks like the sponsor section of TBPN:

  

• Paid AI raised 10 million euros from EQT Ventures and Sequoia.

Icing on the Cake:

Distilled Intelligence! Want to raise money? Come to Distilled Intelligence. Want to source great companies? Come to Distilled Intelligence. Want to help your portcos succeed? Tell them to come to Distilled Intelligence.

IRL events

• a16z is hosting an event for AI voice founders in SF here.

• Andrew Yeung is hosting his next founder poker night on April 1 in NYC here.

• Startup Fundraising Summit for VCs & Founders on April 8 in NYC here.

• He’s also hosting a cool fireside chat on April 10 in NYC here.

• Brex Social Club for Fintech on April 22 in NYC here.

• The Info is hosting an event on April 28 in NYC here.

Some cool stuff on my radar

• Here is this week’s pocket dump:

  

  • RHK XM-18 3”

  • Tom Ford cardholder

  • Aroundsquare Knucklebone

  • Montblanc Meisterstuck

  • AirPods Pro 2 (they were in my ears lol)

  • Oliver Peoples Gregory Peck

  • Yubikey + Niteize G Series Size 2

  • Burt’s Bees

  • Revue Sport Watch

• Someone should please buy this house so that you can invite me over. If I had $32k/mo, I would spend it all on this. It’s perfect.

• I recently invested in a salad spinner and I must say, it’s pretty life changing.

Honestly haven’t seen too much cool shit this week! Sorry folks!

Closing

Thanks for taking time out of your Wednesday to read.

As always, you can find me on X and LinkedIn, and I’d love to hear from you via email. If you want to learn more about me, the best place to do so is at kia.vc. Whether it’s talking startups or just shooting the shit, I’m always happy to connect.

Onto the next!

//Eli

reach eli

Welcome to another week of No NDA Required. We’re here to fill the void that exists between emerging fund managers.

The Slack community is live & slowly growing. Think of it like the group chat you wish you had with a bunch of other investors. Join here.

Fill out the form below if you’re in the startup ecosystem and would like to join the open-source community I’m building.

sign up for NNR

As always, please hit me back with feedback and comments—I’m constantly seeking ways to make this newsletter a more valuable read.

Diving right in and keeping things brief:

On my radar:

• Have your portcos apply to Distilled Intelligence here. Be sure to have them name-drop NNR!

  • If you’re an investor, shoot me an email here and we’ll get you on the ticket pre-order list.

• Thinking of putting together an emerging fund manager/VC dinner sometime before summer starts… maybe one in LA and one in NYC? Shoot me an email here if you wanna come!

• Putting calls & distractions on hold to go deep into intentional and focused work. I would really love to hear from you with suggestions on how to better manage my time and increase productivity.

• Speaking of productivity, we’re getting really close to the end of Q1, which means we’ll have a special edition of NNR soon.

The main idea:

Picking back up…

As a reminder, I am not an attorney, I am just a humble youngling trying to build a venture fund. Please, I beg, do not take anything I say as legal advice. That is what your overpriced attorney is for!

We’ll be picking back up with our discussion around the General Partnership of a venture fund. As a recap from last week:

• There are three entities in a fund: the LP (the holder of capital and investments), the GP (the General Partner who receives the 20% carried interest), and ManCo (the Investment Adviser who receives the management fees).

• Sunset provisions ensure special LPs in the GP have limited rights, including fees, term length, and control over fund management. This is mostly relevant if your GP and ManCo entity are the same.

• Making a GP entity a C-Corp for QSBS benefits doesn’t work—bad idea due to tax and qualification issues. C-corp would lead to double taxation, and investing advisers don’t qualify under the IRS’ definition of an “active business.”

• Typically 1-2% of fund size, the GP stake aligns GP incentives with LPs but carries personal financial risk. There are creative solutions if you can’t afford this.

• Ensure agreements (LP agreement and GP agreement) allow flexibility for outside (non-conflicting) work and avoid restrictive clauses.

• Selling a GP stake before fund DPI is possible if the LPA/GPA permits it, similar to secondaries.

You can read the last edition (part 1) here.

Picking the right registration for the fund

Hopefully that recap makes sense. Let’s dive into the new material:

Allow me to start with context: your venture fund will HAVE to be regulated by some government entity. These rules are mostly focused on keeping LPs safe and making sure you don’t take advantage of unsophisticated investors. Most of these laws come from the Investment Advisers Act of 1940. The goal of this week’s edition is to help you understand what your attorney is talking about when they say something like “you’re an exempt reporting adviser.”

This is the hardest thing I may ever try to explain on this newsletter, but if I do it right, this is a resource that attorneys will send their clients.

There’s an “optimal” situation here, but I want to present all of the options so it makes sense why the “optimal” is actually the best. Bear with me as we run through a ton of definitions to explain. By the end of this, you should have an understanding of the criteria and the benefits of why you are following certain registration protocols. At the end of the day, your fund formation attorney should be handling this process for you, but it never hurts to have an understanding of what they’re talking about.

Starting with the basics

The SEC, and specifically the Investment Advisers Act of 1940 (often called “the Act”), exist to protect the public from scammy money managers and investment advisers. It outlines a set of rules and regulations for almost every financial industry, and every action of that industry. But like all things that government and lawyers get involved in, it became really complicated, really quick. There is plenty that we will not cover here, simply because it isn’t relevant to your mainstream emerging venture fund manager.

This is focused on your “average” or “traditional” Fund I: a few LPs who are friends and family, smaller fund size, no funky structure, and making investments into pre-Series B companies. The Act is smarter than you or I, and any time you shift the model or strategy of your fund, your regulation changes too, so this doesn’t really make a ton of sense for anything outside private equity.

There are a few good terms to know:

• An Exempt Reporting Adviser (ERA) is an investment adviser that is exempt from full SEC registration but must still file a limited Form ADV. ERAs fall under two main exemptions:

  1. Venture Capital Fund Adviser Exemption (calling VCA for the sake of brevity) is for advisers who manage only venture capital funds. It is defined by Section 203(l) of the Investment Advisers Act of 1940.

  2. Private Fund Adviser Exemption (calling PFAE here) is for advisers who manages < $150M in private fund AUM in the U.S.). It is defined by Section 203(m) of the Investment Advisers Act of 1940.

• A Registered Investment Adviser (RIA) is an investment firm or individual fully registered with either the SEC or state regulators. RIAs operate under strict fiduciary responsibilities and must adhere to extensive compliance and reporting requirements, including filing Form ADV, maintaining accurate records, following advertising regulations, and undergoing periodic regulatory examinations. Unlike Exempt Reporting Advisers (ERAs), RIAs have no AUM restrictions and can serve a broad range of clients, including retail investors, institutional clients, and public funds.

• A Private Fund is usually any pooled investment entity relying on the 3(c)(1) or 3(c)(7) exemption under the Investment Company Act. Most standard venture funds fall in this category.

• When talking about state registration and filings, it’s important to know the term “Blue Sky Laws.” These are state securities laws that regulate offerings, sales, and adviser activities within each state, often requiring notice filings or state registrations if you are not federally preempted.

• The SEC’s core registration and disclosure document is called Form ADV. Part 1 is data-driven (including “Exempt Reporting Adviser” items). Part 2 is the narrative “brochure” you share with clients. ERAs file a scaled-back version, while RIAs file the full form.

• The Form ADV is filed with an organization called the IARD (Investment Adviser Registration Depository). The IARD is sponsored by the SEC and the NASAA, and is the “centralized” filing agency. They share your filings with the relevant government orgs.

• Registering is a formal process that comes as a result of filing. When you are registered, that body actually has supervisory oversight and governing power over you. Think about the R in RIA — they have to follow the SEC’s rules and regulations in huge detail.

• Filing, or Notice Filing, is just declaring that you exist. You can be filed and not be registered, but to be registered you must file. In many cases in this article, you would be filing for an exemption, which is just filling out a form that basically says, “hey I exist, but here is why you don’t have to worry about me.”

Okay, now getting into some of the details that matter here. Hopefully those definitions make sense, and we can start applying them.

VCA Exemption

The VCA exemption is what most venture funds rely on, especially as they grow. It is important to make sure you adhere to this criteria, and many LPs will want to make sure you're doing so by setting really clear guardrails in your LPA and GPA.

The Venture Capital Adviser (VCA) Exemption is defined under SEC Rule 203(l)-1 of the Investment Advisers Act of 1940. It sits as a “subcategory” or “type” of ERA. When you’re filling out the Form ADV, and you’re big enough of a fund to think about filing for exemptions, the VCA Exemption box is the one most fund managers will want to check. To qualify, you must qualify with the following:

1. The Fund must invest at least 80% of its capital in private operating companies that do not trade on public markets. These companies must primarily operate a business, so funds (including SPVs) may not qualify under this 80% unless they meet the SEC’s definition of a “qualifying portfolio company” by being a pass-through entity.

2. The fund cannot borrow or guarantee debt exceeding 15% of total fund capital. Any debt must be less than 120-day loans.

3. There cannot be redemption rights, meaning LPs cannot withdraw capital on demand (i.e., no hedge fund-style liquidity). Their money has to be locked up for the entire fund cycle, usually 7-10 years.

4. The fund must explicitly market itself as a “venture capital fund” to investors.

5. A max of 20% of the fund’s assets can be in non-qualifying investments (e.g., public companies, secondary sales, cryptocurrencies, other funds).

Why do so many fund managers want the VCA designation given that it is so limiting to being a traditional venture fund? The advantages of the VCA exemption over the more flexible Private Fund Adviser Exemption are pretty noticeable:

• There is no AUM limit, like the $150M AUM cap that exists for PFAs.

• Not subject to any SEC examinations, whereas PFAs may be subject to the occasional SEC examination.

• Institutional LPs may prefer VCA due to friendliness by the SEC and states — it’s pretty darn well recognized and accepted for venture funds. So long as you follow the rules, things should be pretty clear-cut.

But now this begs the question — when the hell do you even have to start worrying about this? It’s important to know in the early days, because you have to plan to stay compliant as your fund grows and evolves. Remember: these exemptions are determined at the ManCo level, NOT the fund level. So your early funds can really impact things for you down the line.

The annoying wrench in this situation is that while you have to mentally try to keep VCA in the back of your head, it doesn’t really come into play until you hit certain thresholds. The most immediate “oh yeah, now it matters” triggers are a) operating or having LPs in 15+ states or b) hitting over $100M in AUM. Of course, like all things in law, there are nuanced situations that would cause you to have to register for exemption sooner, but you can usually only register with the states until one of those two things happen.

The filings

So in practice, you (well not you, it’s usually your attorney) will have to file a Form ADV once a year. The Form ADV gets reported to the IARD, so the information you fill out there goes to both the SEC and the states. There are a few options on how you can fill it out:

1. Ignore the SEC boxes and register with the states (ideal for small funds).

2. Just register with the SEC and ignore the states.

3. File for exemption with the SEC and maybe still register with the states, depending on state rules (ideal for big funds).

There are more options, obviously, but these are the most common. Now let’s use this flow chart (that took me a million years to make) to help you figure out what your ADV will probably look like:

You can view & download the PDF form here. As always, this is a simplification and you should defer to your fund formation attorney.

Hopefully, this makes sense. Moral of the story is: how you register depends on a few factors:

• Are you operating in 15+ states in a way that you would have to be registered in 15 states? If yes, then you always have the option to ditch state registration under SEC Rule 203A‑2(d).

• What is your AUM? Over $100M, you have to worry about the SEC. Between $25-100M, you might have to worry about the SEC. Under $25M, the SEC doesn’t even want to think about you. You’ll likely always be dealing with the states, though.

• What kind of assets are you invested in? Traditional VC?

• A bunch of other factors like debt, leverage, liquidity rights, etc.

The ADV

So what does all of this actually look like in practice? Take a look at the Form ADV Part 1. Regardless of who you are, you MUST file a Form ADV. The Form ADV gets reported to the IARD, who then distributes it to either the SEC or your state depending on the information that you filled out.

If you are registering as a venture capital fund between $0-25M that has to only register with 1 state, then you would fill out the ADV with the IARD to register with the state, and not file anything at the SEC level.

If you are registering as a private equity fund at $125M in 16 states, you could either:

a) register with the SEC and totally skip all state registration, or:

b) file with the SEC as an ERA (PFA exemption) and then register with the 16 states.

There are what feels like infinite options on how and where to file — this is where your attorney becomes helpful.

If you want more comprehensive guides (that I think are more legalese and probably harder to understand), I would check out Strictly Business and/or MoFo’s guides on this.

I’m sure I’ll make amendments to this post on Substack as readers suggest corrections for mistakes, so bookmark this for up-to-date changes!

There are two other little tidbits of compliance I want to include here, because I think they are important for emerging managers to know. Again — gross simplification to just put it on your radar, and you should talk to your fund attorney and fund admin about these:

What is ERISA?

ERISA, or the Employee Retirement Income Security Act of 1974, is a federal law that regulates pension funds, retirement plans, and other employee benefit programs to protect plan participants. It enforces strict fiduciary responsibilities on those managing these assets, requiring them to act in the best interests of beneficiaries.

For VC funds, ERISA is significant because pension funds and retirement accounts are often key LPs or anchor LPs. If too much ERISA-regulated capital flows into a fund, the fund itself may become subject to ERISA’s fiduciary rules — imposing significant investment restrictions.

To avoid this, funds must either qualify as a Venture Capital Operating Company (VCOC) or ensure that ERISA investors hold no more than 25% of the fund’s total assets — the “25% ERISA Plan Assets Rule.” If ERISA investors exceed that threshold, the entire fund is classified as holding ERISA plan assets, making the GP an ERISA fiduciary, with all the compliance burdens that come with it.

VCOC Compliance

Venture Capital Operating Company (VCOC) status allows VC firms to avoid ERISA (Employee Retirement Income Security Act) fiduciary & reporting restrictions when managing ERISA-qualified (like pension plan) money.

To qualify, a VC fund must have at least 50% of portfolio investments to be in active businesses with management rights. This is determined at the fund/vehicle level, so you can have one vehicle (like a general fund) that is VCOC compliant, but then an SPV or another vehicle/fund that isn’t compliant.

An important tool to stay VCOC compliant is a Management Rights Letter (MRL) because it gives the “management rights.” An MRL typically gives the investor the ability to access financials, have a board seat or board observer, consult on strategic decisions, and tour facilities or meet with management. It’s absolutely normal for a major investor to ask for and get an MRL in most rounds.

This is especially important for early investments or those that you may plan to warehouse into the fund, as it could pose an obstacle for ERISA LPs coming into the fund if an MRL is missing. It can sometimes be hard to get an MRL after the investment is closed as negotiating leverage disappears after the transfer of cash.

Next time: maybe a quick dive into side letters and the differences between 3(c)(1) vs. 3(c)(7) structures—and maybe we’ll even talk about marketing your fund under 506(c) and the new changes?

Headlines

• The biggest news: NEW NO ACTION LETTER ON 506(C). Funds no longer have to verify accreditation if generally soliciting, according to this. This will probably be a whole edition next week.

• Hinge Health filed their S-1 to go public.

• Whoop and Solidcore just announced a partnership to measure & track Solidcore workouts.

• Susa Ventures just announced Fund V at $175M.

• The Angel Group made an 88x on their $105k investment into Poppi.

• Oh, on that note, Poppi got acquired by Pepsi for $1.95B (which includes $300M in cash tax benefits).

  • Kiva explains this $300M cash tax benefit clearly here.

• Cendana Capital just announced Fund 6 at $400M. They said it was “our fastest fundraise ever, and had interest well above our $400M hard cap.” Flex.

• Wiz is finally getting acquired by Google for $32B, which is an insane valuation premium. Literally they were at a $12B val in May 2024. Wish I bought forward contracts for it…

• Rippling sued the living shit out of competitor Deel over claims that they had embedded a spy into Rippling. According to Parker Conrad (Rippling CEO)’s post on X: “The spy searched “deel” in our systems 23 times per day on avg, letting him spy on Deel’s own customers who were considering a switch to Rippling.” Holy shitsicles if true.

• Sweetgreen opened its 250th store in Richmond, VA. It might start raining kale pretty soon.

• X’s valuation is up to $44B, a big jump from the $10B valuation in September.

• Apple TV+ (their streaming) is losing over $1B a year. The streaming wars are a losing proposition, in my opinion.

• CoreWeave is looking to IPO at about $30B (they JUST filed their S-1).

• Nvidia acquired a company called Gretel.

• Amazon might be releasing some new hardware to take advantage of the AI-enhanced Alexa.

• xAI has acquired Hotshot, a text-to-video startup.

• Sequioa is shutting down their DC office.

• Tesla just got their robotaxi permit in CA, right as Waymo begins training for SFO.

Icing on the Cake:

Distilled Intelligence! Want to raise money? Come to Distilled Intelligence. Want to source great companies? Come to Distilled Intelligence. Want to help your portcos succeed? Tell them to come to Distilled Intelligence.

Some cool stuff on my radar

• I’ve been using & loving my Peak Design 20L this week — man it’s good. Anyone who knows me knows how much I love my Tumi backpacks, but this just feels geeky and over-engineered in a way that gives me the fuzz.

• Starting something I hope to do often (maybe weekly)… honest pocket dumps of what I’m carrying each week. The goal is to help you find cool new pieces of EDC. Here is this week’s pocket dump:

  

  • Benchmade 940-1

  • Tom Ford cardholder

  • Plaud AI Pin

  • Parker Vector Rollerball

  • AirPods Pro 2

  • Oliver Peoples Sheldrake Sun

  • Yubikey + Niteize G Series Size 2

  • Burt’s Bees

• Thinking about getting back into running, and these Craft shoes really caught my eye. Anyone else have recs for a mid-distance training shoe? This looks to be too race for my cup of tea.

• Just putting it out there that Metolius makes the best carabiners. I finally broke one yesterday after what must be 10+ years of hard use.

• I am on the hunt for a snazzy summer shoe and came across the Astorflex. Looks to be a little bit more robust of a build than the Sabahs. Will keep you updated if I cop.

• Drooling over this Bamford x Land Rover titanium watch.

Closing

Thanks for taking time out of your Wednesday to read.

As always, you can find me on X and LinkedIn, and I’d love to hear from you via email. Whether it’s talking startups or just shooting the shit, I’m always happy to connect.

Onto the next!

//Eli

reach eli

Welcome to another week of No NDA Required. We’re here to fill the void that exists between emerging fund managers.

I’m back on the East Coast, enjoying this surprisingly warm weather. SF two weeks ago, LA last week, NY this week, DC next week. My life is a sick, sick joke.

Fill out the form below if you’re in the startup ecosystem and would like to join the open-source community I’m building.

sign up for NNR

As always, please hit me back with feedback and comments—I’m constantly seeking ways to make this newsletter a more valuable read.

Diving right in and keeping things brief:

On my radar:

• Apply to Distilled Intelligence here. Be sure to mention that NNR sent you!

  • If you’re an investor, shoot me an email here and we’ll get you on the ticket pre-order list.

• Thinking of putting together an emerging fund manager/VC dinner sometime before summer starts… maybe one in LA and one in NYC? Shoot me an email here if you wanna come!

• Coachella? Coachella. Coachella!

The main idea:

GPs are really founders and operators.

As a reminder, I am not an attorney, I am just a humble youngling trying to build a venture fund. Please, I beg, do not take anything I say as legal advice. That is what your overpriced attorney is for!

Starting a venture fund is incredibly challenging and expensive. The road is similar to that of an early-stage founder — the start is often bootstrapped, the failure rate is high, and a lot has to be given up to bring in early capital.

Structuring the GP is a complicated thing, but there are some tricks & important things I’ve learned to help with:

• Understanding the entity structure of a fund.

• Giving up GP as a common way to help bring in those first few LPs, giving them a bit of an economic advantage/incentive.

• Making sure you’re following all regulatory & compliance requirements.

• Understanding GP contributions, and how to allow others to make the GP contribution for you.

• Staying tax advantageous.

• Giving yourself some flexibility.

Entity Structure

The entity structure of funds can vary, but most commonly, you’ll have 3 entities when starting a fund: your LP, your GP, and your Management Company.

Your LP is where investors put their money and what holds the assets (usually called X Ventures Fund I LP). The LP is managed by a Limited Partnership Agreement and assigns a general partner to manage the fund. The LP usually pays the big expenses of the fund, like attorneys, accounting, etc., so that it doesn’t come out of the ManCo’s 2% per year.

The GP is the entity that oversees the management of the fund and takes directive control of it. Most times, it is a separate entity from the Management Company. The GP (usually called X Ventures Fund I GP LLC) has its own GP agreement, owners, and makes a contribution to the LP (therefore becoming a limited partner). The GP is the one who signs on behalf of the LP, making decisions.

The Management Company is the actual Investment Adviser (that has to be registered, that receives the management fees, pays expenses, hires employees, etc.). The management company shouldn’t change as you raise more funds (usually called X Ventures LLC). When you buy coffee for a meeting with a founder, it comes out of the ManCo’s bank account, not the LP.

Sunset Provisions

Explicit sunset provisions to limit a special LP’s interest in the GP to only that specific fund. This is especially important if you do the silly thing of having the management company be the GP to the fund. If you do make the mistake of having the ManCo be the GP, make sure you create an agreement ahead of time with those special LPs to limit:

• their right to management fees

• how long they receive their GP interest (when it terminates)

• their controlling rights with regards to investment decisions, management of the fund, influence over the hiring process, etc.

• how much GP they have (is it a percentage of the actual LLC, is it just a cut of the carried interest, etc.).

It can also be important to limit the control power that LPs on the GP schedule have, whether through the management company or a dedicated GP LLC. Ideally, you want to give them economic interest in the GP, but not controlling interest. You can do this by creating different classes of shares in the GP.

Tax Strategy: QSBS

I think I mentioned last week that you might be able to have your GP entity be QSBS compliant by making it a c-corp… however, I take it back. To qualify for QSBS, you must devote 80% of your assets to “a qualified trade or business (most service-based businesses, finance, and real estate do not qualify).” So the GP would have to engage in some other kind of activity. If it engaged in some other activity, it could then cause problems for ERA exemption. Being a C-Corp would also probably trigger double taxation on distributions.

Long story short, it’s a shit idea and I eat my words. Sorry.

GP Stake

When you, or anyone, makes a GP contribution, they (usually) contribute the money to the GP. The GP then aggregates all the contributions, and puts up the GP stake as an aggregate check. What this means is that if you only make a GP contribution, you aren’t technically an LP; the GP is the LP.

This is where your GP agreement matters a lot — make sure you have clearly articulated how paybacks/distributions work within the GP. For example, Joe contributes $100k, Bob contributes $200k. There are 2 other people on the GP schedule. How do Joe and Bob get paid back before the 20% carried interest is distributed to the 2 non-contributing GPs? Do they all benefit from the upside/growth of Joe and Bob’s contribution?

Typically, GP stakes are 1-2% of the total fund size. Most often, anyone who is on the GP can qualify as their money being a part of the GP contribution.

LPs love a high GP stake because it aligns the GP’s incentives with LPs. But it also means personal exposure! If the fund underperforms, those who contributed to the GP stake may not recoup their investment. Ideally, it gives the fund managers a personal downside to poor performance, rather than just a personal upside to good performance.

There are GP Staking Firms, like Blackstone GP Stakes or Petershill Partners, all of which have different financial incentives to provide fund managers with GP contributions.

LPA and GPA

When starting a fund, the likelihood your year 1 (or even year 3) management fees will be enough to pay you a decent salary is relatively low. Unless you just sold your last company to Papa Bezos, you’ll probably need the cash to continue flowing.

A good thing to keep an eye out for is limiting/restricting clauses in your LPA or GPA. Yes, of course you want to promise your LPs that you’ll be managing their money to the best of your ability, and not only spending 3 hours a week on VC. Hopefully your GP stake will make them understand you’re aligned here. However, if you plan to do work on the side (it has to be non-competitive to the fund, not a conflict of interest, etc), it’s important to make sure that the LPA and GPA give you the flexibility to do that without forfeiting your interest to the benefits that come with being the GP or fund manager.

GP Sale

Sometimes, fund managers need cash before the fund sees any DPI. If the TVPI is good, and the likelihood of DPI is solid, it’s worth considering a GP Sale. The question becomes: does the LPA and/or GPA allow for it? If yes, then GPs can either sell the whole GP entity, or just their individual ownership, to someone else. Think of it like a secondaries sale where forward contracts exist.

We’ll continue this next week with talking about ERA and VCA exemption, and what it means for the fund managers!

Please don’t come after me with the “well actually there’s another way to do it!” for anything said above. I know, there’s a million ways to do everything I talked about here. I am just providing the “usual” or my favorite way to do things.

Headlines

• Monica Lim left Eniac after 2 and a half years to join Microsoft’s M12 as an Investor. I don’t know Monica, but am stoked for her, even though I personally think the title of “Investor” is pretty bullshit (please see my LinkedIn for the irony).

• TBPN is now 5 days a week. Real big boy shit. Keep it up, gents.

• White House Crypto Summit was on Friday. Trump drove a Tesla today (or was it yesterday? Idk).

• Waymo is expanding the service area that it’ll cover in the Bay, now giving rides to parts of the Peninsula. They’re starting with Palo Alto, Mountain View, and Los Altos.

• Apple delayed the major Apple Intelligence features yet AGAIN. I’ve been hearing that they won’t be ready until AFTER the iPhone 17 launch. Someone remind me to open a massive short position on Apple, please. What startup will eat them for lunch?

• According to The Info: Anthropic has reached $1.4 billion in annualized revenue as of this month, according to a person with direct knowledge of the company’s finances, implying monthly revenue of around $116 million. Holy shitsicles.

• There are reports that OpenAI is planning to charge as much as $20,000 a month for high-end AI agents, while low-end agents might cost a tenth of that. And I thought the $200/mo option was a lot…

• Apparently, Perplexity now has a marketing partnership with The Daily Wire’s The Ben Shapiro Show. Shapiro will use Perplexity to fact check a segment on his show, making for some pretty intense product placement.

• Great video here Senofer Mendoza, of Mendoza Ventures, giving advice to emerging managers.

Deals that caught my eye

• Big congrats to Lu Zhang (I hope you’re reading this, Lu!) at Fusion Fund for closing a $190M Fund VI! This is a huge milestone for Fusion Fund to continue investing in early-stage (pre-Series A) enterprise AI, healthcare, and industrial automation companies.

• Flex, A Brex competitor that provides personal finance software and payments infrastructure for business owners, closed a $25M round at a $250M valuation. I wish I understood, but I don’t. I just don’t.

• Foundation Capital raised a $600M Fund 11. Their fund numbers have fluctuated quite a bit, from $750M in 2008, to $282M in 2013, up to $500M in 2022, and now $600M. They still plan to remain hyperfocused on awesome early-stage founders.

• NOCTAL raised $1.8M in a seed round led by Caruso Ventures. Logic tells me that Justin Caruso, son of Rick Caruso, is now running a venture fund/family office? Can anyone verify?

• Rocket is buying Redfin for $2.4B. Redfin is actually a really interesting case study, HBS has one on them here.

Icing on the Cake:

Distilled Intelligence! Want to raise money? Come to Distilled Intelligence. Want to source great companies? Come to Distilled Intelligence. Want to help your portcos succeed? Tell them to come to Distilled Intelligence.

A couple events

Three events on my radar for after I come back to the city from DC:

1. March 20 coffee meetup

2. March 26 dinner

3. April 2 lunch

Some cool stuff on my radar

• The Cycplus AS2 Pro (my fav mini bike pump) is on sale right now on Amazon.

• I actually got & have been wearing a PLAUD AI Pin. Absolutely love it, I can’t imagine in-person meetings without it. I just couldn’t wait for Granola to release their iOS app.

• I’ve been taking Zest for the last few nights, and it’s pretty game changing. I find myself a little more tired by like 5-6pm, but the mornings feel great.

• Been a big fan of my Magnanni Chelsea Boots. They’re the real deal — high quality leather and pretty comfortable.

Closing

Thanks for taking time out of your Wednesday to read.

As always, you can find me on X and LinkedIn, and I’d love to hear from you via email. Whether it’s talking startups or just shooting the shit, I’m always happy to connect.

Onto the next!

//Eli

reach eli

Welcome to our first week as No NDA Required. We’re here to fill the void that exists between emerging fund managers to de-gatekeep our ecosystem.

I felt that Venture Vantage wasn’t accomplishing my intended goal. It was a great entrance into the world of newsletter writing, but my audience felt unrelated to what I hoped to achieve in the venture ecosystem.

While founders are at the core of what we do, I really love talking to investors and helping them grow their funds. No NDA Required is exactly what it sounds like: a specialized, open forum to share information, events, lessons, perks, and more with our investor community. There’s nothing investors hate more than information behind an NDA, yet we’re quick to exclude others from so many facets of the emerging manager ecosystem. We want access to information, but are often the very ones to limit access.

What I hope to achieve with No NDA Required is a lot more aligned with what I hope to achieve with my personal brand: building an incredible network of mission-aligned investors who believe startups are the best vehicle for change.

People often talk about the challenge of “breaking into” venture, but no one talks about the challenge of “building up” venture. Starting a fund is incredibly challenging, and there are almost no resources to help fund managers. Hopefully, NNR will help provide some clear direction to learn from the mistakes of others.

My hope is that No NDA Required (NNR) isn’t just a newsletter, and that it really evolves into a community. Whether that community manifests as group dinners, a Slack channel, or a rotating circuit of coffee chats, I’ll be happy so long as we’re all meeting some really epic people along the way.

This isn’t just for emerging managers—it’s for anyone supporting an emerging manager, too. Whether you’re applying for your first VC role, or are anything from an intern to a fund admin, there will be plenty here for you.

I know not everyone will be happy about this change, but hopefully there’s still things in NNR you find valuable, even if you’re not working in VC.

I plan to avoid having the repetitive, templated format of VV, and instead have spontaneous and relevant information each week. Some weeks may be long, some weeks may be short, but it should always be valuable.

Thank you in advance for your continued support.

sign up for NNR

Diving right in and keeping things brief:

On my radar:

• Ladies and gentlemen, DistilledIntelligence.com is live! Please check it out and let me know what you think.

• Distilled Intelligence X account just went live here. Please give us a follow, it would be very much appreciated.

• Apply to Distilled Intelligence here. Be sure to mention that NNR sent you!

• Fundraising, fundraising, fundraising.

• Had a great time in SF. Having a great time at Expo West. Meeting so many new people and reconnecting with old friends.

• Meeting other emerging fund managers is currently top of mind.

Industry news

Moving forward, this section will be more focused on the prior week’s news. Think of this as one of the sections that is being brought over from VV. This time around, I’ll be getting caught up on some old news.

8VC goes unicorn

• Context: 8VC just raised their Core Fund VI. It’s a $998M fund to invest in the “American frontier” and solve society’s biggest problems.

• Vantage: This is another big step proving out my thesis that mid-sized funds are getting squeezed—the big “asset manager” like funds are eating them for lunch.

USV raised another fund

• Context: USV just raised what they’re calling their 2024 Core Fund. I can’t imagine it’s any less than a $250M fund.

• Vantage: Doubling down on what I said about mid-sized managers. USV is solidifying it’s place as a “big fund.” Interesting to see LPs still have an apetite to invest even with <1x DPI from the 2019 vintages.

Carried interest tax perks may come to an end

• Context: Trump’s push to tax carried interest as ordinary income reignites debate, sparking industry fears of reduced investment and consolidation, squeeze smaller and emerging fund managers, and push the industry toward consolidation that benefits giant firms. Past efforts to close the carried interest “loophole” have flopped, but there’s a potential for this time to be different.

• Vantage: Most fund managers ensure their portfolio companies qualify for QSBS but overlook that their own GP entity can too. By structuring the GP as a C-corp instead of an LLC and operating an active business beyond fund management, managers can position their equity for a tax-free exit after five years—just like startup founders. This can shield millions from capital gains tax in a GP sale, succession, or liquidity event. But it requires careful structuring to avoid the “investment company” designation, manage retained earnings, and stay QSBS-compliant. Talk to your fund admin about it!

Headlines

This is more general news, that I still think every fund manager should know!

• Sweetgreen now has healthy waffles fries that are actually pretty good. Are they desperate for growth?

• Saks Global has acquired Neiman Marcus Group for $2.7 billion. They hope to make the company super tech-forward to improve the customer experience.

  • Anytime there are consolidations of players at the top, we see an opportunity for a) upward growth and b) new players towards the bottom. I think the new “tech-enabled” play will make investing in fashion/luxury a lot more appetizing for venture investors. I have a thesis around micro-luxury experiences (democratization of luxury) and how personalized luxury will begin to gain even more momentum. Happy to share my thoughts there with anyone interested.

• Late-stage funding is rebounding, up 70% quarter-over-quarter, while early-stage funding remains flat.

• 42% of all VC dollars in 2024 went into AI-related companies.

• Early-stage funding for AI is massive – 74% of AI venture deals last year were seed or Series A.

• Seed valuations hit an all-time high at $16M median pre-money in Q4 2024, showing strong competition for top startups.

• Some LPs are opening up to new VCs again – 41% of institutional investors plan to add new venture fund managers in 2025. Public pensions like Maryland’s are still committing to emerging managers, with a $250M allocation over five years.

• SpaceX is producing 15,000 new Starlink kits per day, a run rate of nearly 5.5 million annually.

• Microsoft’s Dragon Copilot, an AI-powered clinical assistant built into Microsoft Cloud for Healthcare, combines voice dictation (DMO) and ambient AI (DAX) to simplify documentation, reduce administrative tasks, and improve clinician workflows, with general availability starting in May across the U.S., Canada, and parts of Europe.

• Notion launched Notion Mail to compete with Superhuman.

• Ashley Paston joined as a Partner at General Catalyst. She looks to be fairly young which is awesome, love to see it.

Deals that caught my eye

• Renais Gin, the premium spirits brand co-founded by Emma Watson and her brother Alex, has raised $6.18M in a round led by InvestBev and Jean-Sebastien Robicquet of Maison Villevert. More celebrity alcohol/CPG!

• Aescape just raised $83M, bringing its total to $128M. Led by Valor Equity Partners, with participation from Alumni Ventures and NBA star Kevin Love, the NYC-based startup is using robotics and AI to deliver personalized, automated massages for recovery and wellness.

• Safe Superintelligence, founded by former OpenAI chief scientist Ilya Sutskever, is in talks to raise $1 billion at a $20 billion valuation, with Greenoaks Capital Partners leading the deal. This would mark a sharp increase from its previous $5 billion valuation, despite the company not yet releasing a product.

• Ramp has secured a $150 million secondary sale at a $13 billion valuation, marking a strong rebound from its 2023 down round at $5.8 billion, with Khosla Ventures, Thrive Capital, and General Catalyst buying shares. The deal reflects growing investor appetite for high-growth fintech startups, while Ramp focuses on enterprise expansion, AI-driven automation, and maintaining low burn, with no immediate IPO plans.

• Elon Musk’s AI startup, xAI, is in discussions to secure $10 billion in funding at a valuation of $75 billion, a significant jump from its previous $45 billion. Investors in the round include Sequoia, Andreessen Horowitz, and Valor Equity Partners.

• Anthropic has secured $3.5 billion in funding at a $61.5 billion valuation, with Lightspeed Venture Partners leading the round. Investors include Salesforce, Cisco, and Fidelity, alongside existing backers Amazon and Google. They’re gonna hit $1B in ARR!

• P1 Ventures closed a $50M fund to back African startups, focusing on underinvested regions beyond major tech hubs. Investors include African conglomerates, family offices, and the IFC.

• GCM Grosvenor raised nearly $800M to support diverse and specialized emerging managers, offering seed capital and operational support to help them grow.

• Helios, a provider of an AI-powered workforce management platform, raised $15.5M in Seed funding.

• Camber Partners closed a TWO HUNDRED AND TEN MILLION DOLLAR FUND 2. I know, insane.

• Bonfire Ventures closed out fund IV at $245M for B2B SaaS. Long LA, baby.

• Greenfield Partners (based in Tel Aviv) closed $400M for Fund III, bringing AUM to $1B+ to invest in early growth enterprise tech.

Icing on the Cake:

Events I’ve come across

• March 11 / Austin: SXSW Tech Mixer

• March 13 / Austin: Founder/Investor Poker & Dinner

• March 18 / NYC: AI Founder/Investor Dinner

• March 18 / NYC: Brex Social Club

• March 26 / NYC: Founder/Investor Poker

• April 8 / NYC: Startup Fundraising Summit

How I can be helpful

• Happy to talk through fund admin options with anyone. I spoke to 3+ dozen fund admins before hiring ours (Kranz Consulting). I can be a great sounding board and am happy to make intros to a variety of different fund admins.

• Happy to introduce investors to other investors.

• Happy to review pitch decks for founders. I can give a free, quick audit/feedback call and share my thoughts.

• We see a ton of deal flow. Fill out Fortify’s deal sharing form to have the most relevant deals shared with you.

Some cool stuff on my radar

• New iPad Air was just announced, with the new M3 chip. Great time to buy an iPad.

• I bought more Moleskin pocket notebooks and am remembering why I love them so much.

• Great deal on the automatic Speedmasters at Jomashop.

Closing

Thanks for taking time out of your Wednesday to read.

As always, you can find me on X and LinkedIn, and I’d love to hear from you via email. Whether it’s talking startups or just shooting the shit, I’m always happy to connect.

Onto the next!

//Eli

reach eli

Welcome to the seventeenth edition of Venture Vantage. We’ll be exploring topics related to tech and the venture ecosystem.

Apologies for the late edition. I think it’s worth saying: VV will, unfortunately, not be as weekly as I hoped. Last week was busy with travels to the west coast — I’m in the Bay for OneMind’s Investor Day and tons of investor meetings. Expo West next week!

As always, please hit me back with feedback and comments—I’m constantly seeking ways to make this newsletter a more valuable read.

Diving right in and keeping things brief:

News, Deals, and Pretty Things

Latest & Greatest:

• Please continue introducing me to interesting folks in your network: other venture funds, LPs, cool founders, etc.

• If you have any connections to athletic teams at either the collegiate or pro level, I would absolutely love an intro.

• The Distilled Intelligence page is SO close to being live! Applications will be up in no time. Please start thinking of top-notch early-stage companies to send our way.

• Seeing more deal flow than we know what to do with here at Fortify. If you want to join our deal sharing network, click here.

Perplexity’s new early-stage fund

Context:

• In December of this past year, Perplexity, the AI search platform, raised $500M at a $9B valuation.

• Perplexity is putting some of the capital it raised to anchor a new $50M investment vehicle it launched. The fund’s goal is to write pre-seed and seed stage checks.

• Most of the money in this fund will come from outside LPs.

• Aravind Srinivas (Perplexity CEO) is not going to be leading the fund — instead they hired Kelly Graziadei and Joanna Lee Shevelenko from F7 Ventures to be the GPs of the new fund.

Vantage:

• Things are getting out of hand. I don’t like this. Again — this is an example of venture funds breaking outside of the traditional norms. It seems like VCs are leaving to become operators, and operators are becoming fund managers.

• I really wonder what this means for emerging managers. Will this create a more competitive fundraising landscape where traditional managers are at a disadvantage because they don’t make competitive strategic partners? Will more and more founders elect to take dollars from these strategic investors, who will likely be less controlling than traditional VCs?

Humane implodes. Surprised?

Context:

• Humane AI was founded in 2018 by Imran Chaudhri and Bethany Bongiorno. With the ex-Apple background, the founders had a lot of momentum behind them. It took the founders about 6 years to ship a product, which ultimately ended up going out in April 2024.

• The Humane Ai Pin was a screenless personal AI assistant that actually boasted some really cool features. It cost $700 + $24 monthly subscription but had the potential to replace your phone.

• Humane had raised about $241M from some pretty high-profile investors, including Microsoft and Sam Altman.

• One month after launch, Humane went up for sale for somewhere between $750M and $1B. There was virtually no interest at that price.

• Humane will be going dark on February 28th. The company was sold for $116M to HP. It’s unclear what HP intends to do with the assets, besides saying that it will "acquire key AI capabilities from Humane, including their AI-powered platform Cosmos, highly skilled technical talent, and intellectual property with more than 300 patents and patent applications."

Vantage:

• My prediction when Humane launched was that phones are just as much (if not more so) entertainment devices as they are tools. The world is not ready for screenless devices because the world doesn’t want to give up the dopamine-spiking crack pipe we call our phones. This was proven when TikTok went dark — the world descended into panic.

• This is a really unfortunate outcome for such a notable company. I really would be curious to see what their customer discovery looked like. How did they validate that the world was ready for the product? Whatever methods they used should be studied by future innovators in the space as a warning.

Celebrities aren’t pulling their weight

Context:

• We’ve talked about celebrity brands here on VV before. From BERO to the Kardashian popcorn, we’ve explored some of the hype that celebrities can create when “founding” a company.

• The hype of a famous founder isn’t enough to secure funding anymore — especially after high-profile flops in categories like beauty.

• Investors say they’re passing on many new pitches due to a lack of product differentiation, insane valuations, and a lack of long-term brand strategy. Even brands tied to major influencers — like Logan Paul and KSI’s Prime — have seen sales drop after initial hype.

• Some exceptions remain: Kim Kardashian’s Skims and Selena Gomez’s Rare Beauty have scaled past $750 million in revenue, while Gal Gadot’s Goodles is targeting $100 million in sales this year. However, new brands face stiff competition, especially in food and beverage, where dominant startups like Olipop and Poppi are already pulling in hundreds of millions.

Vantage:

• Even with this drop in interest, I feel like there’s been a huge pivot to audience-as-a-strategy in the investor X universe. The founder having a platform and reach has become a piece of baseline criteria for a lot of consumer investors. See the following points for more details.

• This may be a long-winded explanation, but here’s a summary of this argument I remember reading somewhere (I believe it was Molly O’Shea talking about it): in the past, investors have given capital to founders, who then build a product, and pass that capital along to those who have reach/influence to sell the product. Lots of consumer investors are either trying to remove the middle man or change the flow of capital — invest in the content creators and those with an audience, empower them to build products that their audience craves/asks for, and then grow a business. This sounds like the traditional celebrity-founded play that is losing interest.

• Brands that last aren’t just leveraging a celebrity’s audience; they’re building something bigger. Skims worked because it created a new category in shapewear, not just because Kim K was involved. Future winners will follow that blueprint—celebrity as an accelerant, not the entire value proposition.

• It’ll be really interesting to see what happens at Expo West this year in the celebrity department. How many brands will try to flex their celebrity ties? Will BERO be there? Will celebrities take a more active role as founders in their F&B companies?

Rapid Fire

• Context: Elon Musk’s xAI has introduced a “spicy mode” to Grok, allowing premium X users to engage in explicit text and voice conversations with Grok. The new feature is VERY NSFW. The feature is still in beta, but it has sparked a mix of shock, fascination, and discomfort online, with some calling it impressive while others find it gross. | Vantage: This signals a growing market for AI companionship and adult-oriented chatbots, possibly driving new investments in the AI-driven intimacy space. We’ve been seeing more un-traditional apps gaining traction, like polygamous dating apps, but the question remains: will venture funding allow these lucrative businesses to come to life, or will they keep their hands clean of it by calling on their vice clause?

• Context: Chegg is suing Google over its AI Overviews feature, claiming it unfairly uses Chegg’s content without compensation, hurting its traffic and revenue. This marks the first antitrust lawsuit from a single company over AI-generated search summaries, as Chegg considers going private amid declining business. | Vantage: This lawsuit underscores the increasing friction between AI and content-driven industries, hinting at possible regulatory oversight of AI-powered search tools. For startups in edtech, publishing, and content creation, Google’s AI evolution could lead to lower organic traffic, necessitating a fresh approach to distribution and monetization.

• Context: Microsoft is reportedly canceling data center leases totaling a few hundred megawatts, despite maintaining that its $80 billion annual data center spend is still on track. The reason for the pullback is unclear, but it contrasts with broader industry trends, where companies like OpenAI, Oracle, and SoftBank are ramping up data center investments. | Vantage: I feel like this could be a nice gap for startups to solve — if the annual spend is still on track but they’re canceling leases, that means the cost per data center was probably higher than expected. Startups: this is your chance to provide some real cost savings with innovative pop-up data center tech! Make data centers pre-fab for super cheap, please!

Deals that caught my eye

I honestly haven’t had the time to keep track of recent funding, given the travels. Next week’s venture vantage also probably won’t have a hot deals, but to make up for it, I’ll try to share some of my favorite companies from OneMind and Expo West in Week Nineteen.

A hot take

The prep before a company is almost more important than the company itself.

Let me start by saying this is especially true in B2B businesses, and even more true when you have a few really high-ticket customers. But this goes for all areas in the startup lifecycle — from fundraising to sales to hiring, you want to have all the pieces lined up so that when you officially incorporate and the race starts, you’re already ahead. Trying to build investor relationships while you’re building a company is a) hard as hell and b) really ineffective because investors LOVE to say, “Come talk to me for your next round.” Build the relationship early, get them to fall in love with you as a person, build trust, and then finally make them feel like they’re getting in on something special when the time comes. This applies to sales and hiring just as much as it does for fundraising.

Some cool stuff on my radar

• Tactile Turn has released its new Switch Pen. I am a huge fan of the bolt action pen, which lives in either my backpack or in my pocket at all times. It’s missing the deep carry clip I love so much, but instead has TT’s more premium machined clip.

  

• I’ve been on the hunt for a nice leather portfolio for a while. While this isn’t that, the lundi MAYA laptop sleeve seems pretty awesome. It’s a bit out of my price range, but it has definitely made it onto my wish list. No more walking into meetings with an ugly laptop sleeve from Amazon!

  

• More important than a laptop sleeve, though, is a nice briefcase. I don’t have one, but have been on the hunt for one. I am so tired of lugging my backpack around, and would love something that’s slim enough to carry single-handed, but large enough to fit all my work things. The best option I have found is this Rimowa Briefcase, but it’s 🤑🤑🤑.

Icing on the Cake

Continued Reads

This week’s continued read is House of Huawei. Unfortunately, I can’t provide a snippet this week (I got the audiobook and didn’t highlight in the book like I normally do), but you should really check it out! Interesting story about the Chinese mega company.

Read it here.

Word of the Week

This week’s word is:

Convexity: The property of an investment where the upside potential far outweighs the downside risk. In VC, convex bets are those where small investments can yield massive returns, while losses are capped at the initial check size.

The best venture investments exhibit convexity—low probability, high-magnitude wins that skew return distributions. A founder pitching a truly convex opportunity can justify high risk with asymmetric upside. In IC meetings, VCs debate whether a deal has real convexity or just optionality without a clear path to scale.

Closing

Thanks for taking time out of your Wednesday to read.

As always, you can find me on X and LinkedIn, and I’d love to hear from you via email. Whether it’s talking startups or just shooting the shit, I’m always happy to connect.

Onto the next!

//Eli

Welcome to the sixteenth edition of Venture Vantage. We’ll be exploring topics related to tech and the venture ecosystem.

I’ve been reminding myself this week that “sometimes the best deals are the deals not done.” This applies in every area of life, not just venture investing. My guiding phrase to adhere to this has been, “if it’s not a fuck yes, it’s a fuck no.” Remember to only focus on the “fuck yes” things in your life this week.

As always, please hit me back with feedback and comments—I’m constantly seeking ways to make this newsletter a more valuable read.

Diving right in and keeping things brief:

News, Deals, and Pretty Things

Latest & Greatest:

• I just launched a new personal website at kia.vc. I’d love your thoughts & feedback.

• Looking forward to being in SF from Feb 25-28, and at Expo West this year.

• Seeing more deal flow than we know what to do with here at Fortify. If you want to join our deal sharing network, click here.

Is GC even a VC? Is VC even VC?

Context:

• General Catalyst is pushing beyond traditional VC, expanding into wealth management and launching a Fund of Funds for early-stage funds and emerging managers.

• This follows its 2023 acquisition of a hospital system—more akin to private equity—and its support of startups using roll-up acquisition strategies.

• The firm recently hired Tracy Fong to lead fund investments, a move that aligns with similar strategies from Bain Capital Ventures, Sequoia Heritage, and Andreessen Horowitz.

• While this “inside track” approach has gone in and out of favor, General Catalyst’s entry is significant given the drop in capital flowing to emerging funds last year.

Vantage:

• General Catalyst is positioning itself as more than a VC firm—it’s building an ecosystem. This move is less about passive LP returns and more about early access to top founders via emerging managers. I guess the idea is that by having a whole suite of resources at their disposal and a hand in every pot, they won’t miss out on the upside of great deals?

• The blurring lines between VC and PE continue. From roll-ups to fund-of-funds strategies, firms are increasingly acting like diversified asset managers rather than pure venture investors. To me, this is widening the divide between the big boy $1B+ funds who act like asset managers, and the risk-taking emerging fund managers.

• For emerging managers, General Catalyst’s capital is tempting, but it comes with a tradeoff: backing from a larger VC means potential competition for follow-on deals. If I was betting, I would put money on the fact that GC (as an LP) requires that certain pro-rata or ROFR benefits go to GC rather than the emerging manager. But that’s just a guess!

• Watch the check sizes. If they’re large, this is a returns-driven strategy; if they’re small, it’s about influence and sourcing. Either way, General Catalyst is playing a long game beyond just writing startup checks.

Okay, why can no one define VC anymore??

Context:

• Bradley Tusk is a VC, political strategist, philanthropist, and writer. He co-founded and leads Tusk Venture Partners, a NYC-based firm backing early-stage tech startups in heavily regulated industries.

• Tusk raised a Fund I (of unknown size) in 2016, a $70M Fund II in 2019, and a $140M Fund III in 2022.

• Tusk has a history in politics, too: before launching Tusk Venture Partners, Bradley Tusk managed Michael Bloomberg’s 2009 mayoral campaign, served as Illinois’ Deputy Governor (overseeing budget, operations, policy, and communications), and was Senator Chuck Schumer’s communications director.

• Tusk made early bets on companies like Uber, taking equity instead of cash for political advisory work—a move that paid off big (he made $100M+ from that Uber equity).

• Tusk Venture Partners is shifting from traditional VC to an equity-for-advice model, scrapping plans for a fourth fund. This move lets Bradley Tusk sidestep a tough fundraising climate and double down on his political expertise. He pointed to weak exits and the Biden administration’s strict stance on tech M&A as key factors.

Vantage:

• This is a bold but logical move. Tusk’s real value is in navigating regulatory hurdles, not portfolio management. By ditching LPs, he maximizes his upside and eliminates fundraising headaches.

• The strategy resembles a modernized version of the Uber playbook—betting on companies where political maneuvering is make-or-break. In an AI-driven world, this could be a major edge.

• The broader takeaway: even well-performing VC firms are struggling with DPI. Without liquidity events & exits, capital remains locked up, and LPs are hesitant to re-up. Expect more VCs to rethink their models.

• Equity-for-advice just sounds like an advisor or consultant to me, not a venture fund. But hey, I guess you gotta do what you gotta do to make money!

Mercury raises even MORE money

Context:

• Sequoia Capital is in talks to lead an investment into Mercury, the digital banking startup.

• People are expecting Mercury’s valuation to sit at just above $3B for this round, up pretty significantly from its $1.6B valuation in 2021.

• The company recently hit $500M in annualized revenue.

Vantage:

• SVB’s collapse was the perfect catalyst for Mercury’s explosive growth. Their head to head competition with Brex around insurance after SVB’s collapse was a huge acquisition funnel for them.

• Between Mercury Raise and products like invoicing, Mercury’s customers are some of the most loyal I’ve seen in the ecosystem. It’s really impressive how they’ve built such strong brand loyalty.

• Fintech funding & transactions had slowed for quite a while, but I think this round will be good momentum for the industry as a whole. Hopefully, this signals some liquidity for companies like Plaid and Stripe, increasing the appetite of the secondaries market.

Hungry for acquisitions

Context:

• MyFitnessPal acquired AI meal-planning startup Intent to launch personalized meal plans within its app.

• The feature, part of a new $99.99 "Premium Plus" tier, tailors meal plans to users’ dietary needs and goals.

• This is MyFitnessPal’s first acquisition since private equity firm Francisco Partners bought it for $345M in 2020.

  • MyFitnessPal has raised a total of $18 million over five funding rounds.

  • In 2015, Under Armour acquired MyFitnessPal for $475 million. However, in 2020, Under Armour sold the app to Francisco Partners for $345 million, indicating a decrease in valuation over that period.

• CEO Mike Fisher, who took over in January 2024, says this is a long-term growth play, not a quick exit move.

• As of 2020, the platform had more than 200 million users. In 2023, the company generated $310 million in revenue, marking a 25% increase from the previous year. Ho-ly shit.

Vantage:

• AI-powered personalization is becoming a must-have in health tech, and MyFitnessPal is using it to drive subscriptions.

• This is a classic private equity strategy—acquiring features to boost revenue and retention post-buyout.

• Weight loss and fitness apps are shifting from simple tracking to AI-driven coaching, capitalizing on users’ willingness to pay for results.

• Startups in AI health and wellness should take note—acquirers are looking for sticky, high-retention products.

Rapid Fire

• Context: Shopify’s Q4 revenue jumped 31% to $2.8B, with free cash flow up 37% to $611M. | Vantage: Damn, it seems like Shopify is STILL experiencing some incredibly explosive growth. It seems like the appetite for e-commerce still is going strong, with more people shifting purchasing habits to online.

• Context: Olipop secured $50 million in new funding, bringing its valuation to $1.85 billion—an impressive jump from $200 million in 2022. The round was led by JPMorgan Growth Equity Partners. The soda brand, which is profitable and expects to generate $400M-$450M in sales this year, plans to invest in product development, marketing, and expanding distribution. CEO Ben Goodwin suggested this could be Olipop’s final funding round, hinting at a potential IPO or acquisition in the future. | Vantage: Olipop’s rapid valuation growth reflects the rising investor appetite for functional, health-conscious consumer brands. Its profitability signals a broader shift in venture capital priorities, emphasizing sustainable growth over aggressive scaling. A future IPO or acquisition could further validate the category, attracting more investment into the better-for-you beverage space. C’mon Pepsi or Coke, acquire some of these folks!

• Context: Brett Brewer, co-founder and general partner at Crosscut Ventures, is stepping away from the LA-based firm but will continue working with portfolio companies from its first five funds. His exit coincides with Crosscut’s efforts to raise its sixth fund, targeting $85 million, and follows the recent addition of Jon Ylvisaker as a partner. | Vantage: This is the fourth or fifth big GP departure I’ve covered here on VV. It seems like fund managers are starting to leave funds at an accelerated rate — the question just becomes: where the hell are they going? Is VC just not as lucrative as it once was, is raising a fund too big of a pain in the ass? What is happening here?!?

Deals that caught my eye

Here’s the latest and greatest:

• Epicore Biosystems, a company that looks incredibly similar to the Nix Biosensors we covered in Week 12, just raised a $26M Series B led by the Steele Foundation for Hope.

• Edacious, a platform to help give insight into food using labs, raised a $8.1M seed round led by Patagonia’s Tin Shed Ventures, with participation from the Nest Family Office, Trailhead Capital, Grantham Environmental Trust’s Neglected Climate Opportunities, iSelect Capital, First Thirty, Pelican Ag, and other private investors.

Those are honestly the only two deals that have caught my eye this week… seems like it’s been a slow week!

A hot take

UI/UX will become less important as AI begins to find its way into new use cases.

The only use for UI/UX is to create a seamless interaction between humans and platforms. My guess is that in the next decade or so, humans will almost entirely stop interacting with platforms. Instead, AI will take over most of the interaction with platforms, leaving humans to just interact with their AI agents. That leaves us with 2 likely contact points between humans and technology: entertainment platforms and AI agents. Beyond that, I struggle to see where UI/UX would be necessary. Ergo, as AI grows, UI/UX will implode.

Some cool stuff on my radar

• Kiehl’s is running a 25% off sale right now, which is a pretty damn good deal. I love the Facial Fuel — it smells great and doesn’t feel oily.

• I’ve been looking for everyday shoes for NYC for the longest time. Common Projects hurt my feet too much, Asics & Hokas are way too ugly… I couldn’t find what I was looking for, until now. I discovered the VEJA Condor 3, and it’s Hoka-level comfort (maybe even more) with good design. Would I run a marathon in these? No, but I think I could walk a marathon in them!

  

• On the note of footwear, I have been loving these socks from Feetures. Perfect for any occasion, from the gym to the office.

• I recently got a Hypervolt Go2, and while it hasn’t solved all my leg problems, it has been a massive help. At $110, it’s a great price for what you get.

Icing on the Cake

Continued Reads

This week’s continued read is Playing to Win. A snippet:

Winning should be at the heart of any strategy. If you’re not in business to win, you’re in business to fail.

This book reminds me a lot of something I weigh myself: action vs. satisfaction. How much is something feeding your ego, and how much is it feeding your family? Read the book here.

Word of the Week

This week’s word is:

Pro Rata Rights: A term that gives investors the right (but not the obligation) to maintain their ownership percentage in future funding rounds by participating in subsequent financings.

Early-stage investors push for pro rata rights to protect their stake in breakout companies. If the startup takes off, pro rata lets you keep your ownership without getting boxed out by bigger checks in later rounds.

Closing

Thanks for taking time out of your Wednesday to read. This edition was created with Ty from Market Block in mind.

As always, you can find me on X and LinkedIn, and I’d love to hear from you via email. Whether it’s talking startups or just shooting the shit, I’m always happy to connect.

Onto the next!

//Eli

Welcome to the fifteenth edition of Venture Vantage. We’ll be exploring topics related to tech and the venture ecosystem.

For the sake of clarity, I am not ‘daddy.’ Daddy will be referenced below. He is only referred to as “daddy” because of the phrase sugar daddy. If you are offended, go away.

It’s always a good week when the weather gets warmer… it’s a warm 30° here in NYC. Supposed to snow later tonight. I hate the snow. All good vibes.

As always, please hit me back with feedback and comments—I’m constantly seeking ways to make this newsletter a more valuable read.

Diving right in and keeping things brief:

News, Deals, and Pretty Things

Latest & Greatest:

• Scheduling tons of coffee chats with other folks in the VC ecosystem — from interns all the way up to partners. If there are any investors in your network who you love, I would appreciate an introduction.

• I’ll be in SF from February 25-28. Would love to connect with anyone you know there.

• I’ll be at Expo West this year. Coffee on me if you’re there!

• We’re continuing to chug along with the Distilled Intelligence website. I really hope it goes live soon, because I am so excited to share.

• Fortify is seeing more deal flow than we know what to do with. If you want to join our deal sharing network, click here.

• My calendar is PUMPING with in person meetings, and I am loving it. Keep ‘em coming, I love an excuse to consume half a dozen cups of coffee per day.

Rho Platinum goes live

Context:

• Rho is basically a business bank, and the best one to ever exist.

  • They pay an insane rate through their treasury accounts.

  • With the new Platinum offering, they now pay 2% cash back on card purchases.

  • Their expense management platform is cracked out and so simple.

  • They have crazy sign-up bonuses (Fortify portcos have an extra special sign-up bonus).

  • Sign-up is so easy.

  • They will invite you to fantastic events and give you access to some pretty crazy partner perks.

  • No fees, ever. Not for wires, not for cards, nothing.

  • US-based customer support people and dedicated reps.

• Technically, Rho isn’t a bank, and they’re a fintech platform or whatever the structure is, but that actually works in the customer’s favor. Your money isn’t with Rho — it’s with Webster Bank, which has been around a lot longer than Rho. The likelihood of your money disappearing from Webster is, in my opinion, fairly low, which adds to peace of mind when having all your money in a Rho account.

• This is NOT sponsored content. I just really love Rho—they take great care of us (my LLC, Fortify’s LP and ManCo, AND all our PortCos) and have an amazing product so the least I could do is give them a shoutout.

Vantage:

• Last week, I spent some time with the Rho folks while getting our sauna/cold plunge on. We talked about what this new product could mean for the tech ecosystem as a whole:

  • Removes founders’ stress about cash management. They so often have to think about what to do while holding investors’ money, and Rho takes a lot out of that equation.

  • It removes the need for manual expense management. You can lighten a CFOs load pretty intensely with Rho.

  • The most important: Ten years ago, trading stocks just meant you’d be hit with fees and commissions. Nothing you could do about it. In a post-Robinhood world, no one charges commissions or fees on self-directed trades/transactions. Rho is the Robinhood of the corporate finance world. In 20 years, no bank will charge wire fees, and that will be because of platforms like Rho paving the way.

• If you’re interested in Rho for your company, shoot me a message. I’m happy to intro you to the guys at Rho that take such good care of us. I get absolutely nothing for the referral.

X be like: DeepSeek DeepSeek DeepSeek

Context:

• Chinese model DeepSeek released DeepSeek-R1 on January 20th. They claimed in their release note that it is “on par with OpenAI-o1.” This immediately caused a panic on the internet, fearing that the Chinese had caught up with US innovation.

• The buzz that DeepSeek generated caused AI markets to tank (NVIDIA stock crashed at market open this week). It also set off a ton of buzz on X, where it seems like everyone in the tech ecosystem was opining on what this means for US-based AI.

• Announced on Wednesday, OpenAI is claiming that DeepSeek may have improperly harvested its data, leading to a whole slew of issues for the company. This process is called knowledge distillation (click here to learn more), and could give OpenAI a reason to come after DeepSeek aggressively.

Vantage:

• I am not an AI expert. I do not work at an AI fund. Quite frankly, I think a lot related to AI is really stupid. All that to say, my opinions here may be fringe.

• I think this is a prime example of “America innovates, China replicates, and Europe regulates.” Quite honestly, I believe OpenAI’s claims, even though I very rarely do. There is a near zero chance that Chinese technology and innovation is anywhere near US innovation. They struggle to build functioning military aircraft; that alone is a pretty strong signal that American tech should NOT panic because of bogus Chinese claims of innovation.

• OpenAI has released a few new features recently — GPT o3 models, and new features like Deep Research and Operator. Deep Research is the freshest, having been released 3 days ago.

Is Trump America’s new sugar daddy???

Context:

• President Trump signed an executive order to establish a sovereign wealth fund for the US.

  • A sovereign wealth fund is a state-owned investment fund that manages extra cash reserves by investing in global markets. The goal is to diversify a country’s economic exposure to their own economy.

  • The US has not traditionally had one because our government never has a surplus (money is always “needed” in other places) and there isn’t one big commodity that the government owns (like oil in Saudi). The US government is also so layered and separated (departments, federal/state/local, etc.) that it has never made sense to have one separate managing body.

  • In the US, we have instead had localized pension funds (the largest ones include the California Public Employees Retirement System, the Federal Retirement Thrift, and the California State Teachers' Retirement System). The benefit of the pension funds goes to the group of people who contribute to it, rather than the actual government.

• According to Investco, the average breakdown of how sovereign wealth funds are allocated is as follows:

  • Exchange-traded equities (public stocks): 32%

  • Fixed income (bonds): 28%

  • Illiquid alternatives (PE, VC, real estate, infra): 22%

  • Liquid alternatives: 4%

  • Direct investments (typically private companies): 10%

• It is unclear today how big the fund would be or who would manage it, but the US federal government owns about $5.7 trillion in assets, including cash, real estate, and natural resources, that could be leveraged for the fund.

Vantage:

• Holy shit, this could be game changing for US-based venture firms and startups. The US retirement system as a whole (all the pension funds in the country) have a value of about $42.4 trillion. This $1-5 trillion that might end up in the pension fund doesn’t sound like a lot, but let me tell you why it is:

  • Pension funds are, by nature, risk averse. They can only invest so much in early stage ventures because of the risk that VC and startups carry. They have no vested interest in innovation growth in the country, and are strictly chasing returns.

  • A US sovereign wealth fund would, however, have a much larger incentive to fuel and fund American innovation with investments into all stages of the startup lifecycle: early-stage companies through venture funds and growth rounds through direct investment & venture funds. While the goal remains to make money, sovereign wealth is a little bit more selfishly “impact investing” than pensions.

• Trump has gone as far as to talk about using this sovereign wealth fund to acquire TikTok from its Chinese parent company. Most experts in the space say this is super unlikely to happen, though. I also don’t know how I would feel about a state-owned media platform in the US…

Rapid Fire

• Context: 8VC is raising $998M for its Fund VI. 8VC is a fund with investments in star companies like Ramp and Anduril, and their 2023-vintage Fund V was $880M. | Vantage: The hypothesis that venture funding is being consolidated to the top and bottom seems like its proving to be accurate. The small niche (sub-$100M) and large generalist (over $500M) funds seem to be the ones capturing most of LPs’ dollars and attention. It’ll be interesting to see what happens to those midsize funds, and where those fund managers land if they fizzle out.

• Context: Google axed its DEI targets and requirements for hiring, moving to a more merit-based system. | Vantage: It seems like wokeism is starting to disappear in tech. Everyone is based now!

• Context: a16z hired Daniel Penny (yes, the subway choking guy) to become an investing partner in its American Dynamism fund. No, I am not kidding. The fund invests in defense tech and other things tied to US national security, making the ex-Marine a perfect fit. | Vantage: The growing red/blue split in VC is going to be interesting to watch. I am curious to see what happens (over the next year or two) to the quality and volume of deal flow that these publicly political funds receive. a16z was the first fund to publicly support Trump’s re-election.

  

Deals that caught my eye

Here’s the latest and greatest:

• Systole raised a $2M pre-seed round to provide digital care for women’s heart health. The round was led by Benchstrength, and also included January Ventures, J Ventures, and Tom X. Lee (Founder @ One Medical).

• Plot, a platform to help creators analyze social content, raised $4.1M from Seven Seven Six, XYZ Capital, and Trust Fund.

• Indigo, a platform for home negotiations, raised an $8M seed round led by NFX, Era Ventures, and GTM Fund, with participation from 1Sharpe Ventures and Jake Seid.

• Allara Health, a virtual care platform for women battling chronic hormonal conditions, raised $26M in Series B funding from Index Ventures and GV.

• Ivo, a legal document review platform, raised $16M in its Series A from Fika Ventures, Uncork Capital, NFDG, Blackbird VC, GD1, and Phase One Ventures.c

A hot take

I have decided to switch the White Hot section to a hot take about the world of venture & the startup ecosystem. Feedback on this would be appreciated, let me know if you miss White Hot.

AI is not something startups should be flexing; it should be the lowest common denominator for success.

I see AI as a perfect parallel to cloud. The same way cloud was seen in the late 2000s is how AI is seen now. Really, we should be seeing AI the way we see cloud today. It’s a great background technology, and startups should be using it wherever they can because they should always aim to use the best technology available to them. There are very few true AI companies, and any that do exist are mostly infrastructure plays. Selling “AI for x” is kitschy and unhelpful — consumers just want the best experience, and the best value. OpenAI is not selling AI — it’s selling knowledge & creativity. Startups need to start thinking about AI differently.

Some cool stuff on my radar

• I’ve had my eye on The Pool Tray by Illfound. I am a big palo santo fan, and never know what to do with it. I put it in a bowl, but it’s an ugly solution. This functional art solves that problem.

  

• I have recently worn my big fat Canada Goose less, and have instead opted for the Marmot Novus Hoody. I can wear this with just a t-shirt underneath in 30° weather and be totally fine. Kind of insane.

• I for some reason thought that making coffee at home would be cheaper. It’s not. I did, however, get 2 exciting tools to help me make overpriced coffee at home:

  • Yeti makes this great pour over maker that isn’t any more expensive than a generic ceramic one on Amazon.

  • This Timemore C2 coffee grinder is so high quality for the price. The price jumps around (I got it for $56) so keep an open eye.

• I got this SKLZ travel massage bar for my gym bag and it’s a game changer, I must say. My calf really loves to act up after an indoor ride, so it’s nice to be able to get it to release a bit with this. It’s the perfect size and really high quality.

Icing on the Cake

Continued Reads

This week’s continued read is Talking to Humans. A snippet:

You are looking for clues that help confirm or deny your assumptions. Whether you are a tiny startup or an intrapreneurial team within a big company, your goal is not to compile statistically significant answers. Instead you want to look for patterns that will help you make better decisions.

Read it here.

Word of the Week

This week’s word is:

Ratchet: No, we are not talking about someone being trashy. A ratchet is a VC protection clause that adjusts investor ownership if the company raises at a lower valuation (a down round).

Imagine you’re splitting a pizza with an investor. Initially, you each get half. Later, the pizza shop makes the pizza smaller (a down round). With a ratchet, the investor’s slice stays the same size, meaning your slice shrinks to make up the difference.

Closing

Thanks for taking time out of your Wednesday to read.

As always, you can find me on X and LinkedIn, and I’d love to hear from you via email. Whether it’s talking startups or just shooting the shit, I’m always happy to connect.

Onto the next!

//Eli

Hey ;) it’s been a minute. Welcome to the fourteenth edition of Venture Vantage. We’ll be exploring topics related to tech and the venture ecosystem.

I apologize for the brief hiatus—Christmas, then New Years, straight into the LA fires. It’s been a wild time, but the momentum behind VV has only grown. It’s awesome to see the texts & emails of people asking what happened to weekly VV. Rest assured, we’re back to our regular scheduled programming (assuming no more freak natural disasters take place).

I would be remiss if I didn’t start off by acknowledging the incredible loss my community has suffered. Whether you live in LA or not, please consider doing your part to help repair the incredible damage that the Pacific Palisades has sustained as a result of these fires. Whether it’s donating to a family’s GoFundMe, donating belongings you don’t need anymore, or helping assist in the cleanup, no effort is too small.

Walking past the Palisades Barber Shop on Antioch etched this quote in my brain, always reminding me that :

As always, please hit me back with feedback and comments—I’m constantly seeking ways to make this newsletter a more valuable read.

Diving right in and keeping things brief:

News, Deals, and Pretty Things

Latest & Greatest:

New section here. Will give you a quick summary of what has been top of mind for me recently.

• Distilled Intelligence is going to be so epic. We’re beginning to think through programming, sponsors, and event logistics. The branding is looking so, so good. If you’re interested in coming as a founder or investor, add your email here.

• Always looking to connect with great founders & funds. If we haven’t connected in a while (or ever) reply to this email or shoot me a LinkedIn message.

• Been super busy fundraising for Fund II. We’re lucky to have had some great momentum so far. Always happy to connect about that, too, if you have someone you think might be a good fit for the fund.

• Norovirus is really scary. Pro tip: Vitamin A (best in Cod Liver Oil) can help make sure your symptoms are more mild—start taking it today!

TikTok goes dark… and then live again. But probably dark again, too.

Context:

• ByteDance, a Chinese company founded in 2012 by Zhang Yiming, is the parent company & owner of TikTok after it merged with the app Musical.ly.

• There have been broad efforts since TikTok gained popularity to ban the platform over privacy & data concerns. It has been banned from being downloaded onto the devices of federal employees and servicemembers for quite some time.

• On April 24th, 2024, Biden signed a bill that would finally require ByteDance to sell TikTok by January 19, 2025, or face a ban. No substantial effort was made by ByteDance to sell the American side of TikTok.

• On January 10th of this year, the Supreme Court heard arguments about why ByteDance shouldn’t be forced to sell TikTok, but ruled on the 17th that they would uphold the ban.

• On January 18th, TikTok went dark, citing the Biden bill for the deactivation of the platform. On the 19th, it promised to restore its service because of an executive action proposed by Trump.

• On January 20th, Trump signs an executive order, delaying the ban enforcement by 75 days, giving ByteDance until April 4, 2025, to divest.

Vantage:

• It’ll be very interesting to see if ByteDance starts to take the threats of a shutdown seriously, forcing them to sell TikTok no matter at how large of a discount, or if they think they can continue to negotiate their way to maintaining ownership & control.

• Following all of this, there have been reports that Instagram is trying to poach TikTok’s creators, promising them bonuses in the range of $10,000 to $50,000 per month to create content for Instagram Reels. The goal is for them to steal away TikTok’s top creators in a moment of weakness.

• Some folks, like Bill Ford at General Atlantic, think TikTok will be sold to a US company soon.

CES Highlights

Context:

• CES is the Consumer Electronics Show, first started in 1967. Since then, it’s been a place to showcase innovation and unveil new products. When you work in tech, you’re missing out if you’re not there (I was not there this year, in case you were wondering).

Vantage:

• At CES, Uber and Delta announced their new partnership, replacing Delta’s previous partnership with Lyft. The partnership will allow Uber users to earn Delta SkyMiles with each ride and delivery order, starting in the spring of this year.

  • Delta is also getting some 4K HDR screens for its planes, which in my opinion is a much-needed improvement. Air travel entertainment sucks, as does in-flight WiFi.

  • Random tangent, but Delta actually won the WSJ’s “best airline of the year” award. I couldn’t disagree more, but clearly the WSJ knows something I don’t.

• Robotics seemed to be a pretty hot topic at CES this year. From robot vacuums to humanoids, it seems like (and Jenson Huang agrees) that the next big developments in AI will be related to robotics.

• I think there were not enough products & companies embracing the “right to repair” or modularity movement this year at CES. I think there is so much potential for change in the consumer tech industry with this movement, and we need manufacturers to step up to the plate to embrace it.

• Smart glasses seemed to be pretty prominent this year, with some great demos from companies like Rokid. I’m telling you—I’m long glasses.

• It seems like my prediction was right: prosumer modularity for your phone seems to be a growing market, and companies are catering to that market need with things 2TB drives (from makers like SanDisk and ShiftCam).

Stargate: AI for America!

Context:

• OpenAI, SoftBank Group, and Oracle formed a $500 billion joint venture, called Stargate, focused on building AI infrastructure in the U.S., with $100 billion deployed immediately.

• The project aims to create over 100,000 U.S. jobs, with backing from high-profile leaders: OpenAI CEO Sam Altman, SoftBank CEO Masayoshi Son, and Oracle founder Larry Ellison.

• President Trump is the one driving this project, formally announcing it yesterday (Jan 21).

Vantage:

• Stargate is a signal that the big players in the space are going all-in on AI infrastructure, and it’s going to shake things up for startups: startups chasing infrastructure or compute might struggle to compete unless they’re ultra-niche or solving a pain point Stargate can’t touch.

• This move shows OpenAI doubling down on grabbing the compute it needs and breaking free, while leaning on SoftBank’s cash and Oracle’s tech muscle.

  • This hints that OpenAI wasn’t happy with how slow or limited Microsoft’s cloud services were for its needs, so it switched to Oracle. This shows there’s a gap in the market for cloud solutions that can deliver speed, efficiency, or cost-effectiveness at scale. Startups that can fill that gap—offering something better or more tailored for AI workloads—could become funding or acquisition targets.

• With 100,000 jobs on the horizon, hiring in AI is about to get even more cutthroat. Startups will need really positive and infectious culture or mission-driven momentum to steal top talent from giants. Or honestly… founders giving up a ton of equity to early employees might work, too.

• Elon Musk was quick to bash the project, doubting its ability to succeed. Why? My bet is because of his beef with Sam Altman.

Rapid Fire

• Context: Netflix just surpassed 300 million users, with 19 million new members added last quarter. | Vantage: With this milestone in paid users, Netflix also raised their price by 10%. This shows that streaming isn’t quite as “over” as people might have thought—it’s just being consolidated into the big players.

• Context: Crunchbase is reporting that venture-backed startup M&A was up to 289 deals last quarter, making it the highest quarter in 2 years. Also, VC funding in 2024 edged up to $314 billion, with AI leading the charge, taking nearly a third of the total. | Vantage: Seems like markets are becoming increasingly friendly to VC again. I just hope we don’t start hitting valuation bubbles like we did during COVID, and things stay sane throughout this period of growth.

  

• Context: Apparently Perplexity wants to merge with TikTok?? Apparently they submitted a bid for it. | Vantage: Perplexity AI sees the merger with TikTok as a chance to supercharge its AI capabilities by leveraging TikTok’s user base and behavioral data, creating a feedback loop for smarter, more personalized AI products.

Deals that caught my eye

Here’s the latest and greatest:

• Baton closed a $10M Series A led by Obvious Ventures with participation from Burst Capital, FJ Labs, Fluent Ventures, Spencer Rascoff via 75 & Sunny, Divergent Capital, Bloomberg Beta, and Zeno Ventures. Pretty stacked cap table, if you ask me.

• Leap, a data-forward retail leasing platform, raised $20M from Tribeca Venture Partners and DNX Ventures.

• Guidesly, a booking platform for outdoor adventures backed by Aspen Capital Group, YETI Capital, HalfCourt Ventures, and Derive Ventures, just raised a $9.5M round to accelerate it’s vertical AI offerings.

• Nilus, an AI-powered treasury management solution, raised an additional $10M from Felicis and Vesey Ventures and Bessemer. This actually looks like a deal I would totally be into.

• Teal Health might be my favorite company I have seen in a while. This is a deal I am really upset I missed in my sourcing pipeline. They just closed a $10M seed round from Emerson Collective, Forerunner, Serena Ventures, Metrodora, and Labcorp to bring at-home cervical cancer screening to market.

White Hot

Human Health:

• I am just realizing how big of an impediment the cold is to outdoor based workouts. I was always bullish on Zwift, but I truly believe there will have to be more Zwift-like solutions for team & group activities.

• Advanced air filtration systems.

Future of Work:

• There has to be a platform that makes it easy to find people based on criteria. LinkedIn is so full of spam and garbage, that you have no idea who is legit and who isn’t. Imagine a Yelp-like platform where people got verifications and reviews. Using the same approach that data companies like PitchBook use for companies and applying it to people, harvesting verified data. With an AI integration, you could say, “I am looking for a venture fund that will lead my seed round and help me actually raise money.” The platform would then recommend Eli at Fortify (the appropriate person on the team) since they have verified that Eli actually does this. The founder could then rate their interaction with Eli or report if he was a total douchebag.

Infrastructure:

• This feels moronic to say, but there needs to be some serious innovation in the fireproofing space. Whether it’s for homes, or art, or cars, people need to start creating systems to prevent catastrophes like those in LA over the last few weeks.

Some cool stuff on my radar

• This is so incredibly dorky, but I have been LOVING the new Shokz OpenMeet. They were recently released at CES 2025, and they have been a game changer in the office for me. I can hear those around me freely, people on calls can hear me better (mic is 10x better than AirPods), and they are SO comfortable. Shokz, pls sponsor me:

  

• I have decided to buy about 3.2 million of these Osprey pouches—they are so lightweight and practical for everything. I use 4 in my gym bag (wet clothes, clean clothes, shampoo/soap, and toiletries), 3 in my backpack (cables), 2 for my travel bag, etc. You’ll fall in love, I promise.

• Been loving my Parker Vector Rollerball as my pocket pen the last few weeks. Deep carry clip, super lightweight, and cheap enough that I won’t cry if I lose it. 5 stars, highly recommend.

• My favorite trail running shoe (that I also use for hiking) is on sale right now. $99 for the Asics Trabuco Max 3. The highlighter color is cool, I promise.

• Just generally, I’ve been on a supplement tear thanks to feedback from Vitality Blueprint. It’s really a game changing platform, I cannot recommend it enough. Also, been using Zest, which has been pretty good.

• Been loving the Kiehl’s Facial Fuel to keep my face from cracking in this frigid NYC weather.

Icing on the Cake

Continued Reads

This week’s continued read is Ryan Roddy’s newsletter. It’s a great place to learn more about optimizing your health. A snippet:

From his 2025 Predictions: “Neurotechnology will move into the mainstream with devices like wearable neuromodulation headsets and patches designed to regulate stress, improve sleep, and enhance cognitive performance. Affordable home-based neurofeedback systems will also empower users to monitor and adjust brain activity without needing clinical support.”

I couldn’t agree more. Read it here.

Word of the Week

I’ve decided to start a new section: Word of the Week. I’ll be highlighting a term commonly used in venture capital or the entrepreneuerial space in an effort to help you decode this newsletter and sound pro when talking about startups.

This week’s word is:

PortCo: an abbreviation for portfolio company, meaning a company that a venture capital or private equity firm has invested in.

The suffix “Co,” short for company, can also be added to other prefixes. NewCo is used to refer to a new company someone is starting, HoldCo is used to refer to a holding company, OpCo means operating company, DevCo, SpinCo, TopCo, the list goes on and on.

Closing

Thanks for taking time out of your Wednesday to read.

As always, you can find me on X and LinkedIn, and I’d love to hear from you via email. Whether it’s talking startups or just shooting the shit, I’m always happy to connect.

Onto the next!

//Eli

Welcome to the thirteenth edition of Venture Vantage. We’ll be exploring topics related to tech and the venture ecosystem.

To all my NYC friends: it’s time to move to LA. 82° and sunny today, with not a cloud in the sky.

Short edition this week, been hustling to close out Fortify’s biggest deal yet.

As always, please hit me back with feedback and comments—I’m constantly seeking ways to make this newsletter a more valuable read.

Diving right in and keeping things brief:

News, Deals, and Pretty Things

LMNT might kill a baby…maybe?

Context:

• According to Tamara Rubin’s latest report, the Raw Unflavored version of LMNT electrolytes that they tested had higher-than-safe-for-children amounts of lead.

• Heavy metals, unlike vitamins, accumulate in the body over time. This means that your body can’t effectively rid itself of heavy metal consumption, so the levels in your body will just grow over time.

• Heavy metals are given two “caps” for heavy metals in products: action levels are numbers that companies should strongly try to stay under, and maximum allowable levels are legally enforceable limits set by the FDA.

• The FDA allows for maximum allowable levels (MAL) of up to 10 ppb for apple juice, and 20 ppb for other juices. LMNT, despite it not being a juice, would sit over that limit. This might not be such a big deal, though, because the MAL for candy is 100 ppb.

Vantage:

• LMNT is one of the brands that has taken off in the Huberman-fueled health and wellness movement. They provide packets of electrolytes that contain 1,000 mg of sodium, double that of Liquid IV and nearly quadruple that of Gatorade.

• According to LMNT’s Form C-AR filing for 2024, the last SAFE they issued was at a $200M cap. It doesn’t say how long ago that SAFE was issued, but I assume it was quite a while ago since they did $206M in gross revenue in 2023 alone. The company must be worth a fortune.

• It’ll be really interesting to see how much these (no offense to Lead Safe Mama) smaller organizations can influence sales with their lab testing and findings. This will be a good litmus test for how many health and wellness consumers actually care about the health benefits, as compared to the illusion of feeling healthy in a more performative manner.

Another murder this week: NVIDIA killed competitors

Context:

• NVIDIA just announced their latest mini supercomputer for generative AI: the Jetson Orin Nano Super. Wow, that’s a name. Watch out, Simon Bolivar (whose real name is Simón José Antonio de la Santísima Trinidad Bolívar y Ponte Palacios y Blanco), NVIDIA is coming for you!

• The palm-sized computer boasts 70 trillion operations per second (TOPS) with 25W, priced at $250. At nearly twice the TOPS of a new Mac Mini, it’s meant to be an easy and affordable option for everything from advanced robotics to generative AI.

• The Nano Super can run Meta’s Llama 3.2 LLM at 21 tokens per second and only drawing 25W; it’s super power efficient.

Vantage:

• There is no doubt in my mind that NVIDIA is absolutely murdering competitors. I would be so amazed if anyone can actually compete with the quality-to-price ratio (value) and rapid innovation that NVIDIA is spitting out.

• This is a massive door to new opportunities for AI startups. It just made the entry point to AI hardware cheaper and more powerful, in turn making it more accessible for earlier-stage startups.

• I think we’ll see a lot of new startups using AI in innovative ways since they can affordably handle on-board computing. AI home robots coming soon!

Endowment tax might go up

Context:

• The Trump administration is debating hiking the university endowment tax from 1.4% to 35%.

• Endowments are often some of the biggest LPs in venture funds. In 2020, Yale had 22% of their $41B endowment invested in venture.

• Straight from USC’s 2019 report:

  The University of Southern California's (USC) endowment includes a venture capital program that invests in newly formed companies, primarily in the technology sector. The venture capital program is the endowment's best-performing asset class, generating an annualized return of 18.8% over 10 years.

Vantage:

• This shot at one of VC’s biggest LPs could mean trouble for the ecosystem as a whole. Often acting as anchors alongside pension funds and fund-of-funds, endowments end up fueling tons of early-stage tech innovation.

• This can also mean trouble on the university-level. Many universities invest in student or professor run startups through vehicles funded largely or wholly by the endowment fund. If these funds drop in size, it can also decrease on-campus innovation.

Deals that caught my eye

Here’s the latest and greatest:

• Databricks raised an additional $8.6B from Thrive Capital, Andreessen Horowitz, DST Global, GIC and Insight Partners, putting it at a $62B valuation. It desperately needs an IPO soon to give some liquidity to investors, but who knows when markets will be “ready.”

• Grammarly bought Coda, a Notion-competing productivity tool. The price was not disclosed, but Coda’s last valuation was $1.4B at its Series D in 2021. Coda’s founder, Shishir Mehrotra, will now become Grammarly’s CEO.

• LA-based Salt AI raised a $3M seed round led by Morpheus Ventures with participation from Struck Capital, and Irregular Expressions to build out a workflow orchestration tool.

• Kleiner spinout G2 Venture Partners is raising a $750M Fund III. Wow, that’s big.

• A big one one coming soon :)

Rapid Fire

• Context: Masayoshi Son of SoftBank pledged to invest $100B into US projects over the next four years. Trump tried to use a bit of peer pressure to get him to double the amount, but seems like it didn’t stick. | Vantage: This could mean a lot of money flowing downstream to early-stage tech companies. Crunchbase reports $126B has been invested in early-stage venture (TTM), which means that even 10% of the $100B from SoftBank going into early-stage tech could make a big difference to the ecosystem.

• Context: Temu was the most downloaded app on the Apple App Store for the second year in a row. | Vantage: This could really mean trouble for American e-commerce businesses. Will startups have to pivot to adapt to the increasingly Chinese-centric marketplaces? This will surely have a massive effect.

• Context: The WSJ is reporting that Meta asked California Attorney General Rob Bonta to block OpenAI’s planned conversion from a nonprofit organization to a for-profit company. | Vantage: People in the ecosystem (from Elon Musk to Mark Zuckerberg) are unhappy about OpenAI’s growing dominance. Steps will be taken to put a stop to them, opening the door for early-stage competitors to steal some market share.

• Context: Another OpenAI employee who became a critic of the company was found dead. | Vantage: I am NOT saying murder, but that is the theme of this week’s VV…

White Hot

No White Hot section this week… my mind has been occupied with closing out Fortify’s biggest deal ever, and that’s all I can think about at the moment. I’ll leave you with this, though: defense tech to quickly identify if something is a bird, drone, UFO, or hallucination.

Some cool stuff on my radar

• I love good coffee. I love cool ways to make good coffee. I especially love good deals. Ergo, I must love this Alessi Moka Pot. It’s a great deal for a high quality product—excited to give it a try once it arrives this week.

• I know this sounds really silly, but I’m adding this refurbished iPhone to the list this week. Why? Because having what I call a “dirty phone” has entirely changed my productivity and response time. I put all the distractions and annoying apps on one phone (Instagram, Netflix, YouTube, WhatsApp, etc.) and keep my regular phone as “clean” as possible. That way, when my regular phone buzzes, I know it’s something that actually needs my attention. I leave the dirty phone at home when going out, helping me feel a lot more present. When I am vegging my brain at home, my regular phone can be charging. It’s the greatest hack no one talks about.

• Continuing from last week… I’ve been looking for a fancy wine opener, and this L’Atelier one is really awesome. I’ve tried a few so far, and this feels like the best value for a premium corkscrew. Another honorable mention is the Craighill Wine Key.

• A cool one: the IUTD Reusable Film Camera. I’ve been on the hunt for a reusable film camera that isn’t too complex but still high quality, and this looks like the pretty clear winner.

Continued Reads

This week’s continued read is Essentialism by Greg McKeown. It’s about removing the bullshit from your life to maximize the things that actually yield a return. A snippet:

“The executive followed the advice! He made a daily commitment towards cutting out the red tape. He began saying no…He stopped sitting in on the weekly update call because he didn’t need the information. He stopped attending meetings on his calendar if he didn’t have a direct contribution to make.”

Read it here.

Closing

Thanks for taking time out of your Wednesday to read.

As always, you can find me on X and LinkedIn, and I’d love to hear from you via email. Whether it’s talking startups or just shooting the shit, I’m always happy to connect.

Onto the next!

//Eli

Welcome to the twelfth edition of Venture Vantage. We’ll be exploring topics related to tech and the venture ecosystem.

I’m late. Again. I already know my subscribers start looking like this when VV isn’t on time:

Too soon? Anyways, a lot has happened this week, so forgive me. Syria, Franklin Fire, and a childhood friend visiting me in NYC.

As always, please hit me back with feedback and comments—I’m constantly seeking ways to make this newsletter a more valuable read.

Diving right in and keeping things brief:

News, Deals, and Pretty Things

Modern day Romeo & Juliet: Albertsons and Kroger

Context:

• Joe Biden’s mafioso FTC headed by Dictator Khan (am I showing my bias here?) blocked the merger between Albertsons and Kroger. They claimed that the $20B merger would lead to price increases for consumers.

• U.S. District Judge Adrienne Nelson backed the FTC’s decision, leading to the merger falling apart.

• Kroger is the 5th largest retailer in the U.S., and Albertsons is the 10th largest.

• Albertsons is now suing the sh*t out of Kroger, claiming that they did not do anything to alleviate the concerns of regulators that led to the blocking of the merger.

• From Albertons’ release: Kroger refused to offer an adequate divesture package and repeatedly ignored regulators’ concerns, causing the merger with Albertsons to be blocked.

• Albertsons in search of a “$600 million termination fee that Kroger previously agreed to pay and relief for the two years and hundreds of millions of dollars that Albertsons spent seeking approval for the merger.”

Vantage:

• The Albertsons and Kroger execs have said that this merger is what they actually need to be able to provide low prices to consumers: right now, Walmart eats them for breakfast when it comes to buying power, leaving “small players” like Albertsons and Kroger to pay higher prices for similar goods.

• Stocks of both companies have been impacted—going in wildly different directions. See the image above.

• This might be a bad signal for the big retailers with regards to CPG access—although it’s a bit of a stretch: CPG startups may choose to partner with small grocers instead of the big boys because they’re subject to less scrutiny. If the retailer is growing, the startup can likely grow with them.

Quantum computing is real, apparently

Context:

• Google announced a new chip called the Willow that supposedly marks a huge leap forward in quantum computing technology.

• Quantum computers are much faster than traditional computers—with Willow chips, they only take 5 mins to solve the same problem that would take a traditional computer 10 septillion years to solve.

• Quantum computers leverage particle physics (quantum mechanics) to solve extremely complex problems. Most of us learned in our computer science classes that computers use 0s and 1s to store and compute information in bits. Quantum computers can use 0s, 1s, or both simultaneously (called a superposition), in a unit called qubits. This means quantum computers can explore many solutions at the same time, rather than one-by-one like classical computers. Qubits also link together in something called entanglement. When qubits are entangled, changing one qubit instantly affects the other, even if they’re far apart. This connection lets quantum computers work together on problems more efficiently, boosting their power to solve complex tasks. Quantum entanglement, yo.

Vantage:

• The Willow chip and other advancements in quantum computing can help accelerate the time it takes for AI models to go to market. This faster computing can also help train machine learning algorithms more quickly and accurately.

• Quantum computers have the potential to provide a lot of value to all kinds of startups and investors, from helping hedge funds with rapid and accurate financial modeling to helping life science startups with ultra-fast molecule simulations for drug discovery.

Bye bye, Cruise

Context:

• General Motors announced Tuesday that it would end funding for its Cruise robotaxi service.

• GM has invested more than $10B into Cruise, with about $800M of that coming from Microsoft.

• Cruise was founded in 2013, began testing cars in 2015, and then was acquired by GM in 2016. California gave Cruise an autonomous vehicle license in 2021. In October of 2023, a Cruise car called “Panini” hit a woman in SF and dragged her 20 feet.

• After the incident, Cruise had their self-driving permits revoked.

Vantage:

• This is a huge loss for GM, and a huge loss for Microsoft. They really sank a lot of money into this project, and this will likely act as a cautionary tale for other investors who might be looking at autonomous systems in the future.

• This will likely give competitors Waymo and Tesla an edge, since they’re still standing. This race might be won by process of elimination.

• It may also signal that autonomous driving is still not perfect, and has a long way to go. It’ll be a while before it becomes fully mainstream.

• This defeat, combined with the October 2023 incident, may lead to changes in the regulations that autonomous car manufacturers face. Regulators may choose to limit who can become a maker of autonomous vehicles based on the fact that GM failed so horribly.

Deals that caught my eye

Here’s the latest and greatest:

• Ariana Thacker’s NewCo, called MoldCo, just raised $3M in their pre-seed. The company is focused on reclaiming one’s health from mold by providing testing and treatments for mold toxicity.

• Mainframe, probably the coolest company I’ve seen recently is designing generative productivity software. They just raised a $5.5M seed round led by Peter Boyce II of Stellation Capital and Lachy Groom, with participation from Alana Goyal, Akshay Kothari (co-founder of Notion), Weekend Fund and others. Calling it now—I’m going to regret missing this deal.

• Aampe, an agentic infrastructure that enables product and marketing teams to build customer relationships by delivering continuously personalized experiences, raised $18M in Series A funding. The round was led by Theory Ventures with participation from Z47.

• Players Health, a provider of athlete safety and sports insurance solutions, raised $60M in Series C funding led by Bluestone Equity Partners with participation from Mosaic General Partners, RPM Ventures, SiriusPoint and TriplePoint Capital.

• GovSignals raised a $5.5M seed round led by Unusual VC. The company leverages data across the government to generate compliant proposals.

Rapid Fire

• Context: Walgreens might sell to a private equity firm, taking the company private. They’ve been in talks with Sycamore Partners to acquire the company. | Vantage: Walgreens once sat at a $100B market cap in 2015, but that number has shrunk drastically to about $7.5B as of this week. This acquisition might save a failing company.

• Context: Perplexity AI projects $127M annual revenue in 2025 ($10.5M/month) and $656M by 2026, aiming to attract millions of paying users with their Pro plan. | Vantage: This info was apparently leaked as Perlexity was raising their $500M round, which is honestly not a good thing. It shows that investors have no ability to keep their mouths shut—not a good look.

White Hot

Human Health:

• Improvements in real-time injury monitoring. Imagine if doctors could attach or impregnate a device to your body that can keep tabs on how you’re healing from various injuries, whether it’s a wound, fracture, or tear. Even if it could detect infections early—that would be game-changing.

• A platform that provides feedback about environmental factors that could be impacting your health. For example, daily air quality, likely noise or light pollution, temperature changes, local tap water quality, etc.

• I feel like a broken record saying this, but healthy meal replacements. Things like Huel and Soylent suck… and people want real alternatives to a $24 Chipotle bowl for office lunches.

Future of Work:

• Making everyone in the office comfortable is hard. Having a digital smart office manager would be great—one that could make unbiased decisions about where to place people so they aren’t disturbed by noisy people on calls, set the thermostat temperature, and reorder supplies at the best price.

• I think co-working will grow as the freelance wave grows, and therefore I think more support technologies, like member engagement tools, will be necessary.

Infrastructure:

• Improved cooling technology for data centers that use less power, no water, no risk of leaks, etc. The status quo is really sub-par, in my opinion.

• We have self-healing car paint, but we don’t have self-healing waterproofing membranes. This seems like a no brainer to me, and would prevent so much money worth of property damage each year.

Some cool stuff on my radar

• I’m a big fan of the Oliver Peoples Sheldrake Sun. These have replaced the Gregory Pecks as my daily glasses. Can’t recommend them enough. Comfortable, durable, and, most importantly, glass lenses.

• Without exaggeration, I think I own 5 of these Post-It Dispensers. They make it so easy to quickly write things down. The only downside: my desk is COVERED in sticky notes.

• I did a lot of hunting for a high-quality but affordable waiter’s corkscrew. This Hicoup one is the best thing I could find. Feels really premium for a great price.

• I’ve had my eye on these Sabah Fort Worth slippers. They look so comfortable, I think I may have to cop soon.

• I’ve been meaning to try the Nix Hydration patch for the longest time. It looks like a CGM, but instead measures sweat loss. Rather than drinking an LMNT and praying it was enough, Nix is supposed to give you insight into how much you need to replenish after a hard workout. Essential for summer months!

  

Continued Reads

This week’s continued read is Thinking Fast and Slow by Daniel Kahneman. A snippet:

“People tend to assess the relative importance of issues by the ease with which they are retrieved from memory.”

Read it here. Bonus points: The Right It by Alberto Savoia

Closing

Thanks for taking time out of your Wednesday to read.

As always, you can find me on X and LinkedIn, and I’d love to hear from you via email. Whether it’s talking startups or just shooting the shit, I’m always happy to connect.

Onto the next!

//Eli