EP135: How to Access Top Quartile Venture Capital Funds w/Mel Williams
Digest
This podcast details True Bridge Capital Partners' investment philosophy and strategies. They focus exclusively on venture capital, boasting a strong track record and impressive returns. Their partnership with Forbes on the Midas List highlights their access to detailed performance data. True Bridge employs a multi-faceted fund-of-funds strategy encompassing core and seed funds, direct investments, LP secondaries, and blockchain investments. They manage the volatility of blockchain through concentrated portfolios and careful position sizing. Their success stems from pre-existing relationships and a rigorous process, including an annual forced ranking of fund managers to ensure capital allocation to top performers. Their international investments follow the same rigorous bottom-up underwriting process as their US investments. The podcast concludes with reflections on fundraising challenges, the impact of the global financial crisis, and the advantages of fund-of-funds versus direct investment.
Outlines
True Bridge's Venture Capital Strategy & Midas List Partnership
True Bridge Capital Partners' exclusive focus on venture capital, their best-in-class returns, and their role in the Forbes Midas List, including data collection and list generation, are discussed. Their multi-faceted fund of funds strategy, encompassing core, seed, direct investment, LP secondary, and blockchain funds, is also introduced.
Portfolio Management, Blockchain Risk, and Firm Building
The podcast covers True Bridge's approach to managing risk in volatile markets like blockchain through concentrated portfolios and position sizing, along with their firm's growth from inception, emphasizing the importance of pre-existing relationships and the Kaufman Fellows Program. Their annual forced ranking system for fund managers is also explained.
International Investments and Future Outlook
The discussion covers True Bridge's international investment strategy, highlighting their consistent underwriting process regardless of geography, and concludes with lessons learned, including challenges in early fundraising, the impact of the global financial crisis, and the comparison of fund-of-funds versus direct investment approaches.
Keywords
Venture Capital Fund of Funds
An investment vehicle investing in multiple venture capital funds, offering diversification and access to a broader range of opportunities.
Midas List
An annual ranking of top-performing venture capitalists, compiled by Forbes with data from True Bridge.
Forced Ranking
A portfolio management technique ranking fund managers annually, leading to a concentrated portfolio focused on top performers.
LP Secondary Investments
Investments in existing limited partner positions in venture capital funds, allowing capital recycling and access to potentially undervalued assets.
Blockchain Fund of Funds
A fund-of-funds strategy specifically focused on investing in blockchain-related venture capital funds.
Power Law Distribution of Returns
A concept in venture capital where a small number of investments generate most returns.
Deal Flow
The stream of investment opportunities available to a venture capital firm.
Venture Capital
Investing in early-stage companies with high growth potential.
Q&A
What are the key advantages of investing in venture capital through a fund of funds like True Bridge?
Fund of funds offer diversification, access to top-tier managers, professional management, and often a more efficient fee structure.
How does True Bridge manage the risk associated with the volatility of the blockchain asset class?
True Bridge uses a concentrated portfolio strategy, carefully sizes positions, and anticipates higher manager turnover.
What factors influence True Bridge's decision to not reinvest with a core portfolio manager?
The primary reason is the opportunity to allocate capital to a higher-performing manager. Other factors include team turnover, strategy drift, and scalability issues.
What is the key difference in True Bridge's underwriting process for international versus US fund managers?
There is no fundamental difference; the same criteria apply to both.
How does True Bridge's seed portfolio relate to its core portfolio?
True Bridge views its seed portfolio as a "farm team," identifying promising managers who may eventually graduate to the core portfolio.
Show Notes
Highlights:
The Midas List Partnership: How TrueBridge collaborates with Forbes to curate the definitive VC ranking and what it means for the industry.
Fund of Funds Strategy: The five key investment strategies that shape TrueBridge’s unique venture approach—core venture, seed, direct, secondary, and blockchain investments.
The Power of Forced Ranking: A disciplined framework for ranking fund managers and how it enhances returns.
Gaining a Competitive Edge: How TrueBridge’s relationships with elite GPs provide them unparalleled access and insight.
Navigating Blockchain Volatility: TrueBridge’s philosophy on investing in blockchain and adjusting for its extreme market cycles.
Scaling Venture Funds Effectively: Best practices for fund managers to grow while maintaining their competitive advantage.
International vs. Domestic Venture Investing: How TrueBridge evaluates and ranks global venture funds against U.S.-based managers.
Lessons from Building TrueBridge: The realities of raising early funds and scaling a top-tier fund-of-funds platform.
Debunking the Fund-of-Funds Fee Myth: How TrueBridge offsets the double-fee structure through strategic overcommitment and capital recycling.
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Guest Bio:
Mel Williams is the Co-Founder and General Partner at TrueBridge Capital Partners, a premier venture capital fund-of-funds specializing in backing top-tier venture firms and startups. With a background in institutional investing at the University of North Carolina Endowment and the Rockefeller Foundation, Mel brings unparalleled expertise in fund selection, portfolio construction, and venture capital strategy. Under his leadership, TrueBridge has cultivated one of the most coveted LP portfolios in the industry, leveraging deep networks and a research-driven investment approach.
Our Podcast now receives more than 200,000 downloads a month. Are you interested in sponsoring an episode? Please email David Weisburd at dweisburd@gmail.com.
#VentureCapital #VC #Startups #OpenLP #AssetManagement
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Stay Connected:
Twitter:
David Weisburd: @dweisburd
LinkedIn:
David Weisburd: https://www.linkedin.com/in/dweisburd/
Mel Williams: https://www.linkedin.com/in/mel-williams-00584a5/
Links
TrueBridge Capital Partners: https://www.truebridgecapital.com/
Questions or topics you want us to discuss on How I Invest? Email us at dweisburd@gmail.com.
(0:00 ) Episode preview
(4:38 ) Investing in blockchain and managing volatility in venture funds
(5:51 ) Building relationships and the forced ranking system in portfolio management
(10:21 ) Criteria for adding or removing venture fund managers
(14:43 ) Best practices for scaling and international venture investments
(20:23 ) Challenges in raising funds and the venture industry evolution (2012-2021)
(24:17 ) Comparing fund of funds to direct venture capital investments
(26:51 ) Efficiency and key aspects of TruBridge's fund of funds model
(29:05 ) Closing remarks
Table of contents
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