# PE10X - World's 1st Secondary Fund - Andrew Reilly, Managing Director, VCFA

An episode of [VC10X - Investing, Venture Capital, Asset Management, Family Office, Wealth Management](https://invisiblenetwork.ai/podcast/1632806986), 6 May 2025, 58 min.

Audio: https://anchor.fm/s/a453ddd4/podcast/play/102268667/https%3A%2F%2Fd3ctxlq1ktw2nl.cloudfront.net%2Fstaging%2F2025-4-6%2F399720231-44100-2-067c3e9b38293.mp3

Andrew Reilly is a Managing Director at VCFA, the world's first secondary focused fund. Andrew joined VCFA in 2017 primarily to focus on origination and development of venture and growth equity secondary opportunities. Links: ⭐ Sponsored by Podcast10x - Podcasting agency for VCs - https://podcast10x.com VCFA website - https://vcfa.com/ Andrew Reilly on LinkedIn - https://www.linkedin.com/in/andrew-k-reilly-5782a019/ 🎙️ Hosted by Prashant Choubey Follow Prashant on X - https://x.com/ChoubeySahab Follow Prashant on LinkedIn - https://www.linkedin.com/in/choubeysahab In this episode we talk about - - The history of VCFA and being the first secondary fund - The different types of secondaries they deal in at VCFA - How they buy winners at a discount - The difference between direct secondaries VS GP leds VS LP interests - How do they evaluate a VC portfolio for a secondary transaction - Sourcing high quality secondary deals - What is the risk/return profile of secondaries & lots more Timestamps: (00:00) Introduction (02:49) History of VCFA and Dayton Carr, founder of the secondary industry (07:31) Types of secondaries: GP-led transactions, LP-led deals, and direct secondaries (11:11) Evaluating a VC firm's portfolio for acquisition (13:34) Why sellers would sell assets at a discount (35:27) Sourcing high-quality secondary deals (41:08) Risk-return profile of secondaries (47:08) Goals for the new fund, including potential expansion into real estate secondaries (52:28) Rapid fire round of questions about VCFA's investment strategy For sponsorship or guest appearance requests, write to prashantchoubey3@gmail.com Subscribe to VC10X on Youtube, Spotify, Apple Podcasts.

## Transcript

[0:00] Dayton car is largely regarded as, you know, the the the person
[0:04] who started the secondary industry, but not many people
[0:07] know he was a he was a venture capitalist in the 1960s, if he
[0:11] could believe that. So Dayton was lifelong friends
[0:15] with Tom Perkins and Eugene Kleiner.
[0:19] Matter of fact, a little side note, believe it or not, Dayton
[0:22] was the reference letter to endorse Kleiner Perkins one the
[0:27] funds that got them going. So Dayton helped get them
[0:31] started. What we are looking for is great
[0:34] growth companies trapped in older funds.
[0:38] That's the dynamic we're we're looking for.
[0:43] Hey everyone. This is Prashanth and I'll be
[0:44] host of the VC10X podcast. And today we have Andrew really
[0:48] with us. Andrew is Managing Director at
[0:50] VCFA, the world's first secondary focused fund.
[0:54] Andrew joined VCFA in 2017 primarily to focus on
[0:58] origination and development of venture and growth equity
[1:01] secondary opportunities. In this episode, we talk about
[1:04] the history of VCFA and being the first secondary fan in the
[1:08] world. The different types of
[1:10] secondaries they deal in at VCFA, how they buy winners at a
[1:15] discount, the difference between direct secondaries versus GP
[1:19] let's versus LP interest. How do they evaluate a VC
[1:23] portfolio for a secondary transaction, Sourcing high
[1:27] quality secondary deals, what is the risk return profile of
[1:31] secondaries and lots more. So without wasting any time,
[1:34] let's dive straight in. This episode is sponsored by my
[1:37] own podcasting agency called Podcast 10X, where I help
[1:40] venture capitalists, asset managers, allocators and family
[1:43] offices and starting their own podcast and building a strong
[1:46] brand. Podcast NX is designed in a way
[1:49] to work well with the busy schedule of investors where we
[1:53] handle every aspect of podcast production so you can focus on
[1:56] investing. If you're looking to build a
[1:59] strong investor brand, starting a podcast should be right up
[2:03] your priority list. It's the only form of marketing
[2:06] where you can showcase your strong network.
[2:08] In other words, access to limited partners and founders
[2:12] and grow that network further. And contrary to what most people
[2:15] here, it's still very early to start a podcast.
[2:18] There are at least 10X more newsletters and thousand X more
[2:21] blogs than there are podcasts in this world.
[2:25] You can learn more about our podcasting services at Podcast
[2:28] ten-x.com. I'll make sure to add the link
[2:31] in the description below. Enjoy this episode.
[2:34] Hey Andrea, so good to have you on the VC10X podcast.
[2:36] How are you doing? Great, great.
[2:39] Thank you very much. It's great to have you.
[2:41] And to start with, can we first have the history of VCFA and it
[2:46] being the first secondary fund that's out there?
[2:50] Yeah, thanks. And Prashant, thanks so much for
[2:52] having me. It's been great to get to know
[2:55] you a little bit. But I always love sharing the
[2:57] the history of VCFA because it really goes back to the
[3:01] beginnings of secondary and a lot of people are are slightly
[3:04] familiar with the story. But I'll give you the, the, the
[3:07] more detailed 1 is we, we were founded in 1982 by a gentleman
[3:11] named Dayton Carr. And Dayton Carr is largely
[3:13] regarded as, you know, the, the, the person who started the
[3:17] secondary industry. But not many people know he was
[3:21] a he was a venture capitalist in the 1960s, if he could believe
[3:25] that. So he was running a venture fund
[3:30] started in the late 60s by he and a gentleman named Tom
[3:34] Watson. Tom Watson was the chairman of
[3:37] IBM and we think Watson wanted a purview to what was going on in
[3:42] what was to become Silicon Valley.
[3:44] Wasn't even called that then. And and so Dayton, armed with
[3:48] money from the Watson family and a big personality, sort of
[3:53] started making fast friends with what you think of now as the
[3:57] Seminole names of venture capital.
[3:59] So Dayton was lifelong friends with Tom Perkins and Eugene
[4:03] Kleiner. Matter of fact, a little side
[4:06] note, believe it or not, Dayton was the reference letter to
[4:10] endorse Kleiner. Perkins won the fund that got
[4:14] them going. So Dayton helped get them
[4:17] started and and not to go too into deal, but but Rick Burns of
[4:22] Charles River Ventures, Sandy Robertson and Robertson Stevens.
[4:25] I could go on and on. Dayton was Co investing and
[4:28] became fast friends with those folks in the late 60s and into
[4:32] the late 70s. And remember that group was
[4:35] private equity at the time. If you think of KKR and Apollo
[4:39] and all these things, they were still fundless sponsors with
[4:42] this, with this group actually invented was private equity as
[4:45] we know it in the 2 and 20 model.
[4:48] So a fee to go find deals and, and things on committed capital
[4:52] and, and all that. And then and then big buyout
[4:54] folks adopted that later. So if you think of private
[4:57] equity in the late 60s and 70s, it was venture capital.
[5:04] Anyway, Fast forward to late 70s.
[5:08] Now the venture fund that Dayton Carr was running for Thomas
[5:12] Watson, is now a bit aged with still several assets left in it.
[5:17] Well, Watson gets tapped by Jimmy Carter to be ambassador to
[5:21] the Soviet Union. He goes to Dayton.
[5:23] He says Dayton, I have to divest my private equity and and get
[5:26] out of it before he goes into the State department.
[5:29] So Dayton buys them out at a very good price.
[5:33] Four months later, one of those remaining portfolio companies at
[5:37] the in that older venture fund sells Dayton makes a great
[5:41] return and says, hey, maybe there's a business here buying
[5:45] later and cheaper into the venture capital or the private
[5:49] equity life cycle. So Dayton after that started a
[5:53] series of small funds in the early 80s VCFA one being in 1982
[5:59] was the founding and and that was the first fund to prove this
[6:03] theory of buying later and cheaper or buying on it, buying
[6:06] private equity interest on a second hand basis.
[6:09] And so that's how the, the secondary industry was, was
[6:12] born. And, and Dayton has not only,
[6:16] you know that in his, in his history, but also I think he
[6:23] helped build the industry because when you think of the
[6:26] largest players today and you go way back, Jeremy Caller was an
[6:30] analyst at 1 of VCF as early investors loved the business so
[6:37] model so much. He called Dayton Carr and said,
[6:39] Hey, Dayton, I'd love to meet with you.
[6:41] And Dayton kind of helped Jeremy Caller get going.
[6:45] They had a, a very good relationship and, and I, I could
[6:48] go on and on. But what Dayton realized is, you
[6:51] know, he might have been a a the founder of the industry, but he
[6:55] realized that the industry couldn't be like a one man band.
[6:58] He really helped a lot of other people.
[7:00] And if you look at the the firms and funds that have been around
[7:03] more than, you know, 30 years, Dayton really probably had at
[7:08] one point or another helped those firms get going.
[7:13] Absolutely. That's that's quite an
[7:15] interesting story. So there are different types of
[7:18] secondaries as well. It's great to listen to the
[7:20] story of how the industry was born.
[7:22] But now let's talk about what are the different types of
[7:26] secondaries that are out there and what's the type of
[7:29] secondaries that you deal in at VCFA?
[7:32] Yeah. So there's, there's typically
[7:34] three types, although there's always emerging types of
[7:37] secondaries coming up, but there's a lot of, you know,
[7:40] structured transactions that are coming, coming into the fall.
[7:43] But the general speaking, the the most common types of
[7:47] secondaries today are three. There's GP LED transactions or
[7:51] fund restructurings as they used to be known as LP LED deals.
[7:56] Those are limited partnership purchases on a second hand basis
[8:00] and directs. Directs are where you would buy
[8:05] a stake in a venture backed company or PE backed company
[8:11] second hand from either a early founder employee or early
[8:16] investor. And so those are the three
[8:18] types. We do all three and again given
[8:22] our history, we we have have kind of been doing all three of
[8:28] those for a long time. GP leads are something that is
[8:31] kind of new and hot in the market.
[8:33] Again, we've kind of been doing them since 1992.
[8:37] I think Dayton was kind of a pioneer on those as well.
[8:40] When I think the first one we know of is when we bought the,
[8:43] we spun out Northrop Grumman Ventures so that there was a,
[8:48] there was a full venture capital firm as, as known these days as
[8:52] CVC corporate venture capital firms in, in at Northrop Grumman
[8:57] and, and Dayton bought the whole thing out and restructured the
[9:00] whole thing in 1992. Is a, it was a landmark deal for
[9:04] VCFA cause the returns were so good on it.
[9:07] But it was also, we believe it's hard to track these things, but
[9:10] we believe was the first real GP LED transaction.
[9:15] So those, those transactions GP LED still tends to be what we do
[9:20] most of. So although they've gotten hot
[9:23] lately, we've been doing, we've been putting about 2/3 and and a
[9:27] high 60s percent of, of, of our last several funds into GP
[9:32] leads. We kind of we specialize in the
[9:34] smaller more complex GP LED transactions in the venture
[9:39] growth space. And then about 20 to 25% of what
[9:43] we do would be LP deals where we're buying LP interests in
[9:46] funds. We tend to focus on the lesser
[9:49] known funds. These are good GPS, but the
[9:52] reason we do that is there's, there's typically other firms
[9:58] and, and buyers and Roefers rights of first refusal where
[10:03] the, where someone for, you know, let's just say our Kleiner
[10:06] Perkins fund, Sequoia, Mayfield benchmark.
[10:09] You know, if you, if you look at those real high names, someone's
[10:12] usually willing to pay a lot more than us for those because
[10:16] they're giving a lot of, a lot of price uplift to who the GP
[10:21] is. We're more company centric.
[10:25] So we tend to buy or focus on LP buying LP interest in what we,
[10:33] we say the lesser known but higher high quality venture and
[10:37] growth GPS directs are very straightforward.
[10:40] Whether you're any type of stakeholder in a good growth
[10:46] venture backed company, we'll take a look at buying, you know,
[10:51] direct interests on a second hand basis.
[10:54] Absolutely. That's quite interesting.
[10:56] And when you're evaluating, let's say VC firms portfolio for
[11:01] a fund, what are the key things you're looking for and what are
[11:04] the key factors you look at to see if that's a good portfolio
[11:08] to acquire or not, right? Yeah.
[11:12] So we're, we're really looking for growth and, and let me
[11:15] preface all of that by we call ourselves and we're known as a
[11:21] venture growth secondary, but I'll caveat the venture part of
[11:25] it really of end of life venture investor.
[11:28] We don't invest in early stage, mid stage or or even anywhere
[11:33] near before the very late stage of venture capital assets.
[11:40] Now we can be buying assets from an early stage venture fund, but
[11:44] one that's like 14 years old where the assets themselves or
[11:47] what I like to call end of life venture, meaning they don't need
[11:50] another venture round to survive, right.
[11:54] They can make it to profitability or they already
[11:58] are profitable. So that's one caveat.
[12:02] But really what we are looking for is great growth companies
[12:06] trapped in older funds. That's the dynamic we're we're
[12:10] looking for. So we love to see, you know, a
[12:12] company that a venture capital or growth equity firm invested
[12:17] in 8-9 ten years ago and now is backed.
[12:22] You know, maybe they invested in the B round and now in the F
[12:27] there's even H rounds now, right, But it but in the later
[12:29] rounds, some large growth equity capital SLKKR, you know, general
[12:35] Atlantic finale. These are these are a lot of Co
[12:38] investors we have in the companies we buy in a secondary
[12:41] basis, but we're we got there by buying later and at a discount
[12:46] to maybe an insight partners who got in for months a year ago.
[12:51] And we're typically trying to buy into those great growth
[12:55] companies, but we're buying them from you know an older, older
[13:00] fund and buying them at a discount to the last round.
[13:03] So it puts our investors in a really nice position to win.
[13:07] Absolutely. That, that's quite an
[13:08] interesting approach. So you're buying great assets
[13:11] later and at a discount, right, So.
[13:14] That's. Right.
[13:15] So we're talking about the existing holders of those, that
[13:20] portfolio, let's say. Why would they sell at a
[13:23] discount? If it's a great asset, they can
[13:26] sell at whatever price it's worth today.
[13:29] That's one approach or maybe try to make a profit off of that.
[13:32] So why would they sell at a discount to you?
[13:36] Prashanth that's the question we get the most.
[13:38] Like honestly, we when when even our own investors sometimes say,
[13:42] well, who would have ever sold you, you know, that company at
[13:45] that price when they knew it was going to go public?
[13:47] And like, why do people do that? And so this is really the crux
[13:53] of VCFA and how we navigate the market and what kind of deals we
[13:58] look for, etcetera. And it's the secret of of
[14:02] recognizing an opportunity and not just chasing your tail and
[14:06] chasing, you know, opportunities that are never going to get
[14:08] closed. So, so we get it all the time.
[14:11] Why would any, why would someone have ever sold you those assets
[14:15] at that price? And the right answer is, I don't
[14:19] think what we're doing is really complicated all at all.
[14:24] But sometimes it's not obvious. And what's not obvious is really
[14:28] what we're, what we're doing is we're banking on an arbitrage of
[14:32] time, right? So if you think of IRR, the
[14:34] measure of all investments, right, is your net IRR.
[14:37] Yeah, double my money in three days.
[14:39] Awesome. Double my money in 20 years, I
[14:42] probably should have stayed in the public markets, right?
[14:45] So, So what we're looking to do is, you know, get a good return
[14:50] for our investors in a shorter amount of time.
[14:54] And so when we look at investments, we're typically
[14:57] looking investments that don't have that profile, that have
[15:00] typically been pretty long in the tooth and where investors
[15:03] need liquidity, but there's a lot of opportunity out there.
[15:06] So how do we pick and choose the ones where we'll, we'll be able
[15:10] to get that question, why would anyone have sold you that great
[15:14] asset at that discount? That's, that's when we know
[15:16] we're doing things right. And here's when you, you take it
[15:20] one step further. Well, who's selling to us?
[15:22] People who aren't smart. No, just the opposite.
[15:24] We buy from very intelligent people.
[15:26] And a lot of times we're not buying from an individual, we're
[15:29] buying from a committee to usually maybe there was even a
[15:32] consultant there doing modeling the, the, the return.
[15:37] And so we have to look for the very best deals among the large
[15:43] amount of deal flow we get. And usually it's this.
[15:46] So I'll, I'll, I'll use an example, Prashad, suppose you
[15:49] put a $10 million commitment into a fund 12 or 13 years ago.
[15:54] And right now you're sitting there with 1.6 X your money
[15:57] back. So you're at least feeling this
[16:00] has gone OK, right? It's a venture investment.
[16:02] I'm at a 16. I hope it does a little better.
[16:04] And your your remaining value from the last statement the GP
[16:09] sent you is a .4 XRVPI remaining value.
[16:14] So on paper, you have a 2X in your pocket, you have a 1.6 X
[16:19] OK. But the GP saying it's going to
[16:21] take three to five more years to play this out average life of
[16:25] venture fund 17 years, right, sounds all sounds about right.
[16:30] You don't like our $2,000,000 bed when you first see it,
[16:33] you're going wait, wait. I have 4 million if it's the
[16:35] $2,000,000 this is. But once you understand I'm
[16:39] underwriting to about a 2X and that the universe of potential
[16:44] buyers for this probably isn't going to underwrite much less or
[16:47] maybe or could be underwriting more than that.
[16:50] In other words, if you're selling this to an investor,
[16:52] they're going to want to make some money for their investors.
[16:54] OK, So we're not an unreasonable, we're not
[16:57] underwriting to a 5X or this or that.
[16:59] We're underwriting to a reasonable PE rate of return.
[17:02] So, so we at least establish that that we're not sharks and
[17:06] we're not bottom feeders, we're actually underwriting to that.
[17:09] So my $2,000,000 bed, well it doesn't look good on your
[17:11] formula assets. I can present to you an argument
[17:14] that says right now at the 16 you're at your IRR is almost 20
[17:21] probably in that range, right net IRRS if the, if the
[17:24] investment period was drawn out, you're probably at a venture
[17:28] like decent rate of return. And I can show you if it plays
[17:33] out three to five more years and you do achieve the 2X, you might
[17:37] do so at like a 13 or 14% IRR so that you're past your Max IRR.
[17:46] So if you're an investor and you're smart and you look at a
[17:49] lot of new opportunities and you need liquidity to fuel capital
[17:54] calls from your winning and your IRR positive investments, you as
[17:59] a very smart investor may realize it's better to sell at a
[18:03] 50% discount to me, clock your 18X and your 19.5 IRR rather
[18:09] than try to get the 2X and the 14 or 15% IRR three to five
[18:14] years from now. Now we're both taking risk
[18:16] there, right? We both have to assess that
[18:18] situation. I have to assess the situation
[18:21] that these marks are real and I can make my 2X, They're not 2021
[18:25] valuations and I'm I'm going to get a 1.2 X.
[18:28] So there's, there's risk on both sides, but two intelligent
[18:31] parties can, can model their returns and arrive at a good
[18:37] decision of selling good growth assets at 50% discounts in that
[18:41] case. So now we've been around a long
[18:43] time, that's what we're looking for, right?
[18:46] And So what we're looking for in a portfolio or someone is where
[18:49] 80% of that investment like in this case is played out, that
[18:53] 20% remaining RVPI can't wag the dog.
[18:57] Your, your total investment is kind of baked there.
[19:00] And whether I pay you $0.75 on the dollar or $0.50 on the
[19:03] dollar, go model that out someday, it it really doesn't
[19:07] matter, right. So you can be a very smart
[19:09] seller somewhere in those ranges and take that capital and go put
[19:13] it in that IRR up direction up into the right direction
[19:17] investments. So that's really the key to, to
[19:20] what we do. Yeah.
[19:22] Yeah, I think that's very intelligent.
[19:24] And I think with the very attractive market of the
[19:27] secondary space right now with companies staying private for
[19:30] longer, it's obvious that VC funds are going to be dragged
[19:35] out beyond the 10 year mark, which we are already seeing.
[19:38] And we are also going to find a lot of good assets that are
[19:41] remaining in the front even after that 1012 year mark.
[19:45] And a form like VCFA with this investment approach can benefit
[19:50] from that while also the fund manager also benefits that they
[19:54] are able to clock those returns at that time and which would
[19:58] look more attractive to their LP's for subsequent funds than
[20:03] you. Know keeping that there, you
[20:04] bring up a great point because for venture growth investors in
[20:09] the secondary space and there's you know there's several of us,
[20:13] there's far more focused on the big buyout space and that's
[20:16] where you know 90% of the deals and capital is.
[20:19] But for those of us focused in venture growth 1 dynamic in the
[20:23] market has definitely served the secondary market very well.
[20:28] And that is companies are staying private longer because
[20:34] to exit both in M&A and IPO, they have to be bigger and
[20:37] better than they used to be. So if you look at when Apple,
[20:41] Amazon, except when they went public, they're pretty small
[20:44] companies when they went public. Look at the last several, look
[20:47] at the next to come. I mean, look at where Stripe is
[20:51] today still private. Look at where SpaceX that is
[20:53] still private. Look where Uber was when it
[20:55] where it went public. It's, it will be, that was a
[20:58] large IPO. It will be small compared to
[21:00] the, the, the larger IP OS coming.
[21:04] So companies are staying private longer and that just created a
[21:08] much larger Tam. So just Margaret, for venture
[21:12] and growth equity secondaries of much higher quality assets much,
[21:16] you know, much more visibility to the strength and and
[21:20] direction of a company. And that's, you know, that's
[21:24] really been a great dynamic shift in venture and growth that
[21:31] have that has served secondary investors very well because now
[21:35] they can buy later and at a discount, but into a much larger
[21:41] more predictable set of assets and companies.
[21:47] That's a major shift in the last decade and 1/2.
[21:51] Yeah, absolutely. And in a previous call, you
[21:54] mentioned that how VCFA is more asset focused than GP focused.
[22:00] So I would appreciate if we shed more light on that.
[22:03] Yeah. So there's there's several types
[22:05] of secondary firms out there and whether you're focused on buyout
[22:09] or venture growth or some credit other, I think there's two
[22:13] different ways. I generally have seen it where a
[22:18] lot of of the people who are in secondaries either came from
[22:23] kind of a direct investing background.
[22:25] It came from a fund of funds world or a fund management at
[22:28] the at an institutional side world.
[22:30] Those I, I think that's what for me explains why some people are
[22:35] a little bit more top down where I say GP focused and others are
[22:40] a little more bottoms up or just assets focused.
[22:43] Our firm and even starting with Dayton tended to be more
[22:47] entrepreneurial, entrepreneurial and venture focused.
[22:49] So we're, we're definitely bottoms up.
[22:51] We let we call ourselves a deep value investor and venture.
[22:54] It's hard to do, but that dynamic I just described allows
[22:57] us to do it. We can buy at meaningful
[23:00] discounts great growth companies and that's, you know how we do
[23:03] it. Whereas if you're putting lots
[23:06] of money to work, if you have to, if you have a $20 billion
[23:08] fund to, to put to work in secondary over a 3-4 period,
[23:13] it's really hard to do that. You really almost need to be a
[23:16] little bit more tops down and, and trust the managers, trust
[23:19] their track records and put the money to work that way.
[23:22] So I, I, I always say there's two different strategies and
[23:27] both can perform very well if you, if you have a good
[23:30] secondary manager. We just tend to be the company
[23:35] focused bottoms up value investor, whereas a lot of
[23:39] people are GP. Now there's a few in the
[23:42] secondary venture growth equity, top tier, for example, top tier
[23:47] is their name. They, they want to get their
[23:49] investors into, you know, the top decile GPS and make those
[23:54] bets. That's a, it's a great strategy,
[23:57] right? Those, those managers tend to
[23:58] perform well. And what we are is we're a
[24:03] little bit different in that we're going bottoms up when we
[24:06] care a little less who the GP is.
[24:08] Obviously we want to invest in reputable good GPS, but not all
[24:12] of those are household names like, you know, Kleiner Perkins
[24:16] and Sequoia and and and Andries and Harwood.
[24:19] So we tend to focus on that, that lesser known, lesser loved
[24:24] by the OR out of the top decile because some of them are very
[24:30] good investors and some of them even have better track records
[24:33] than than than many people think.
[24:36] But what we're trying to just pick off companies.
[24:38] And so we look a lot more like a venture growth equity fund in
[24:42] terms of a team. We're speaking with C Levels,
[24:45] CEOSCROS, heads of sales, chief financial officers and that's
[24:51] the bulk of our diligence as opposed to sitting with GPS and
[24:56] going through a deep portfolio. So I I think the fact that we're
[25:00] investing much later in the cycle and we're really trying to
[25:04] pick hot great growth companies where the risk is taken out.
[25:09] In other words, they don't need any more venture capital to live
[25:11] and all that. That's just a more natural way
[25:15] to invest given our skill sets, right?
[25:18] So both, but you can make money in both.
[25:21] There's they're both good strategies.
[25:23] Ours happens to be let's, let's pop the hood, take the engine
[25:28] out in the carburetor part. Look at the companies.
[25:30] The other one would be let's just buy the best trucks we can
[25:34] and, and, and hope they keep running like they they have
[25:38] historically. And so those are the two
[25:40] different approaches. And and like I said, there's
[25:45] proof that both work. Yeah, absolutely.
[25:47] Quite interesting. And share more on what goes on
[25:52] once you have, let's say, acquired A portfolio, what is
[25:56] inside the term, you know, GP restructuring, fund
[26:00] restructuring, right? What goes on after the deal is
[26:03] done? Yeah.
[26:05] So if it's a GP LED as opposed to an LP transaction or a direct
[26:12] there mostly on the underwriting it's the same thing.
[26:17] We're really like I said bottoms up looking for investment of the
[26:22] great companies. But post transaction it can be a
[26:25] little different, right. So say we've LED AGP LED
[26:29] transaction and it's one where it's large and we may have even
[26:33] syndicated the transaction to some some of our LP's and Co
[26:37] investors. We're really taking a little bit
[26:41] more of an active role of that GP.
[26:44] We're we're much closer touch. We would be the call it, call it
[26:48] the Super LP or the president of the LPAC.
[26:50] The way we the way we would design a new fund is really that
[26:53] we have a lot of control over that new fund structure that
[26:56] bought the assets out of an old fund and rehire the manager to
[27:00] continue. So we want to make sure we have
[27:02] a lot of a lot of oversight and control there.
[27:05] So just think of that as a super LP friendly structure.
[27:09] And we're kind of the lead dog LP in in those.
[27:13] Yeah. And.
[27:13] Then the GP remains the same still is it?
[27:17] In most cases, yes, it's either a subset of the GP and maybe
[27:21] some wanted to go do something else.
[27:22] If it was an older fund that was, you know, not going to
[27:25] raise a new fund, which which we've done those deals or it's
[27:30] just the GP who's, you know, basically getting liquidity to
[27:33] old investors in an old fund, either all of them or a subset.
[27:37] And so we become on that new fund structure, we become kind
[27:40] of a, a super rights LP, if you will.
[27:42] We and again, there's a bit of a negotiation back and forth on
[27:45] that. But by the same token, I think
[27:48] we're known and we have a good reputation for being fairly
[27:51] passive in that. We hope that we've already made
[27:55] the good bet, right? We've we've vetted that GPA lot
[27:58] of the deals we do too on the GP leads.
[28:01] We've known this GP or we've known of these assets for a very
[28:04] long time, you know, many, many years in, in many cases we just
[28:09] closed 2 GP lads where the first time we looked at the deal was
[28:13] over five years ago, right? So you get a good, you get a
[28:17] good feel for people. There's very few larger GP LED
[28:22] deals that we do in 90 days and it's the first time we met and
[28:27] then we're closing the deal. So, so they have a a little
[28:30] different better relationship set up to them in an LP LED
[28:34] deal. We like to be very passive and
[28:37] we say to the GPS where we are an LP, look we want to be
[28:42] helpful if we can. So we're happy to help.
[28:45] In terms of we have a very broad portfolio, as you can imagine,
[28:49] we do about 30 transactions per fund, but that actually means up
[28:55] to 40 underlying GPS because remember sometimes we're buying
[28:58] portfolios of LP interest, sometimes we're buying larger
[29:01] portfolios on on GP list. So we have, we have anywhere
[29:04] from 125 to 200 portfolio companies in in one of our funds
[29:10] with a concentrated position in a little more than 1/4 of those.
[29:15] And then a lot of other, you know, smaller minority stakes
[29:18] that come as a result of LP interest and things.
[29:21] So what we say is look, we open up and we say look we have a
[29:24] pretty interesting portfolio here.
[29:27] If we can be helpful in introductions that help your
[29:29] business or please let us know. But we're not an activist,
[29:34] right? We're really, we really like to
[29:36] place our, you know, investments in the right managers at the
[29:41] right time and then you know, and then have an outcome.
[29:45] Now that all being said, we do end up getting pretty involved
[29:48] in some of our investments either because we need to and
[29:51] things aren't going exactly the way we and other Co investors
[29:55] want or because we can be helpful.
[29:59] We've been very helpful introducing some of our
[30:01] companies to either some of our investors who include CEOs of
[30:05] the largest airlines and the other.
[30:07] So, so we're active and passive at the same time and where we
[30:13] can be helpful. I think we've we've got a great
[30:16] track record of bringing real value add to some of the GPS
[30:19] we've we've invested in. Absolutely.
[30:21] Quite interesting. And what happens when you're
[30:24] having the same GP again to manage the fund with you?
[30:27] What's the incentive structure like?
[30:30] I believe the same 2 and 20 section would not hold now, So
[30:33] what? What does?
[30:33] That mean, right. Yeah.
[30:34] So, so, so we're big on incentives.
[30:37] I think there's a lot of folks out there.
[30:39] They tend to be more the early, earlier entrance into secondary.
[30:42] And you've probably, you know, heard this before.
[30:45] I don't pay any fees. I don't pay any carry.
[30:47] I don't, you know, it's like, well, you know, I looked into
[30:50] that one time. I was like, boy, wouldn't that
[30:51] be nice? Imagine if we were able to get
[30:53] away with that and say we can't pay fees or carry.
[30:55] And when you quickly look back at VCF as over 4 decade history,
[31:02] the best performing deals we had was where there was a lot of
[31:05] alignment and where the, the GP there was highly incentivized to
[31:10] get us a great return. I so I can only find the
[31:14] correlation where the incentives are are good for the GP is where
[31:19] deals go well. Now some of those have have not
[31:23] gone well, but for the most part I think the correlation is much
[31:26] more towards alignment than it is where there's been no fee, no
[31:30] carry, no incentive is where I think you know there's more of a
[31:34] propensity to like walk away from a deal if things get hard.
[31:37] So we obviously don't want to pay a lot of fees and a lot of
[31:42] carry on a deal that might impact our investors, but we do
[31:45] want to be perfectly aligned. So with the way we do that as we
[31:49] price in into our price for assets is anything that we
[31:53] believe that price of alignment is.
[31:56] So now if we're doing a GP LED, we're like everyone else, we
[31:59] like that GP to roll their carry.
[32:01] In other words, if the event that we're doing generates
[32:04] carry, we like them to reinvest that carry into the deal
[32:07] alongside of it. That's usually not a tough
[32:10] argument. Most GPS are going to do that,
[32:13] so then they're reinvesting their own real capital at the
[32:16] price we're getting in at. OK.
[32:18] And then what we typically do is we like to work off something
[32:22] what we call an operating budget.
[32:23] It costs money to have Price Waterhouse, you know, audit a
[32:27] fund. It costs money to have good
[32:29] legal representation. It costs money for good tax
[32:32] advice. So all that costs some money.
[32:34] We have a very good understanding of what that
[32:36] costs. We've 11 funds and five car
[32:40] investment vehicles and we've done that a lot.
[32:42] So we know and we've done it very efficiently.
[32:44] So we know what an operating budget of a cost.
[32:46] So we give, we give a nice operating budget, which would
[32:49] include if they're efficient and, and run funds as
[32:53] efficiently as we know we can. There's some headroom in there
[32:55] for what would be leftover as a fee.
[32:57] So if you run it or if if you run it and you can keep the
[33:01] operating budget under where we said and you, there's something
[33:04] there for you, but we want it to be far more about the carry.
[33:07] So typically what we're doing is a tiered carry.
[33:10] If we get a 1 1/2 X, we'll give you a small carry five 7%.
[33:14] And if you get a 2X, which is really our mid case or a return,
[33:18] we'll give you a good ten 1015% carry and then over a 3X will
[33:22] really will really give a high incentive carry.
[33:26] We find that really is great alignment, you know, because a
[33:28] lot of times when it when, when things are going as expected and
[33:32] that's like a better than two X return for us.
[33:36] We find the managers who have that 3X tier or something,
[33:39] they're really trying to hit it. We don't want there to be such a
[33:42] perverse incentive that that that is so much better than
[33:45] where they are that they hold out and perhaps do foolish
[33:48] things trying to, you know, hit the upside.
[33:51] So we try to balance all those factors and every deal we do and
[33:54] we price all of that into the deal in the first case.
[33:58] So we need we need a discounted transaction such that it pays
[34:02] for that and that our net returns are two to two and a
[34:05] quarter X model than our Med case.
[34:08] So that's really how our model and how our underwriting work as
[34:10] we're the whole cost is the cost of everything, including
[34:14] incentives for the GP and do that.
[34:17] Now when we're doing LP deals, it's, it's usually just it's,
[34:21] it's, it's very, you know, easily modeled and we're doing
[34:25] direct deals. We tend to be folks that don't
[34:29] go into SP VS already have fees carry and, and and other
[34:34] language. We'd like to be right on the on
[34:37] the cap table, but that doesn't mean we won't.
[34:41] If we can price in a a transaction that we think is
[34:43] going to absolutely, you know, have high confidence hit our
[34:46] expected rate of return and we can bake into our price, you
[34:50] know, of a carry or something like that, we'll do it.
[34:53] So we're not we're not we're not a know.
[34:56] We'll never pay fee. We'll never pay carry type of
[34:58] investor. Certainly if we can, if we can
[35:01] bake that into our price and and leave our underwriting to just
[35:05] what we do best is, you know, buy high growth companies at at
[35:11] good discounts closer to their exit then then we're fine.
[35:15] Absolutely. That's quite an interesting
[35:17] approach there. And some of these secondary
[35:20] deals can be out in the dark, you know, hard to find, right.
[35:24] So how do you go about sourcing high quality secondary deals?
[35:28] Yeah, it it's, I think it's a real barrier to entry.
[35:31] Some of the newer entrants in the market think, hey, you know,
[35:34] we'll just show up with money and and the deals will come the
[35:41] intermediary business short for investment banker that brokers
[35:47] secondary deals. But the intermediaries in the in
[35:50] the space, when you start with like Evercore who's largely
[35:53] known as the largest than some of the large banks, you know,
[35:57] UBS and others have secondary ibank teams or intermediary
[36:03] teams. If you're a new entrant to the
[36:05] market and you just show up at all the auctions, that's a tough
[36:09] way to that's a tough way to be successful and secondary.
[36:16] I think the successful firms who have are folks that have been
[36:19] around a long time or the new firms that are spin outs from
[36:23] people have been in the industry a long time and that is that
[36:29] I've seen that be proven out. So if you take us, we're lucky.
[36:35] Look, we've been around I think and honestly say we've been
[36:38] around longer than anyone, right.
[36:39] So, so, so we've, we're, we've been around 4 plus decades.
[36:43] There is only firms you can count on one hand that, that
[36:47] have that going for them. And I think we all have one
[36:49] thing in common is that probably half of the deals we look at
[36:53] just come over the transom, right?
[36:55] So if there's a sub $40 million venture growth complex fund
[37:00] restructuring going on the market and we don't see it, that
[37:03] would be kind of weird, right? Because all intermediaries,
[37:06] there was a probably no, you know, David, Tom and Drew Reilly
[37:11] should probably take a look at that at at least, you know, to
[37:13] see if there's a fit as well as, you know, maybe four or five
[37:17] others. So, so we're in a a nice unique
[37:20] position there. The other half is hard work.
[37:24] So the other half is we're constantly doing outbound
[37:27] programs. When liquidity got tight in
[37:30] 2023, late 2223, we had a hunch that corporate venture capital
[37:36] groups who typically really ramp up their programs and hot
[37:40] venture high growth markets. And then usually when things
[37:43] crash, they really all of all of a sudden a lot of those things
[37:46] they invested in strategically aren't so strategic anymore.
[37:49] We thought that would be a good place to go.
[37:51] It worked. So Andy Koch, who's the Vice
[37:54] President of our team LED a outbound program where we're
[37:57] just reaching out to corporate venture Capital Group saying,
[38:00] look, you know, this market you know, has changed.
[38:03] We have a long history of working with corporate venture
[38:06] capital groups either in restructurings or LP's or, or
[38:10] direct deal buyouts, strip buyouts.
[38:12] And we we did quite well there. So we found a lot of very large
[38:18] conglomerates around the world globally who were who had
[38:23] appetite to sell their non strategic assets at very good
[38:26] prices to us. So that's being creative.
[38:28] So at any given time we probably have a creative outbound
[38:33] strategy going on. Those tend to go well to the
[38:37] point where by the third e-mail e-mail group that Andy was
[38:41] sending out, we said ho stop. You know, we kind of have, we
[38:45] got to work through the pipeline that just two outbound emails
[38:48] generated before you can do a third.
[38:50] So they tend, if you do them right, you have the right, your
[38:53] cannons pointed in the right direction.
[38:54] Those outbound programs tend to tend to go well.
[38:57] The other is just maintaining relationships.
[39:00] David, Tom, my partner and myself have been around a long
[39:05] time in this industry and have a lot of different relationships.
[39:10] And so we just, you know, you have to constantly stay in touch
[39:12] and remind people, hey, we're investing from Fun 7 now have
[39:16] dry powder if you see any interesting deals and just
[39:19] constantly reminding people what our appetite is because people
[39:22] here all the time. You know what, what, what other
[39:26] people's appetite is and they, you know, sometimes and often we
[39:30] get deals that we just say, look, this thank you very much,
[39:33] but this is not, you know, our fit.
[39:35] There's a little too earlier stage.
[39:36] These companies all need more capital.
[39:38] We know, we know where you should go with us and we'll help
[39:41] them help direct that to the right potential buyers and gain
[39:45] goodwill. So it's it's constantly work to
[39:51] develop and keep a very robust pipeline.
[39:55] And and I tell our team all the time, it's our job to look at
[39:58] everything. It's our job to look at
[40:00] everything. And so even if sometimes, you
[40:05] know, you get a deal that we wouldn't do, you know how much
[40:08] goodwill you can gain by taking say a lower mid market deal that
[40:11] we can't touch. But it's a seller that's
[40:13] desperate, needs money by Friday and you can buy a good LP
[40:17] interest at this deep discount at this name.
[40:19] Well, that goes a long way if we pass that to one of our LP's or
[40:23] somewhere. So again, always listen to
[40:26] everything, look at the look at the right opportunity and
[40:29] everything. It might not just be something
[40:30] we'd invest in, but it might be, you know, passing that on to
[40:35] another secondary firm that's going to then think of us next
[40:39] time they have a deal that they know.
[40:40] So we're constantly being opportunistic and, and, and to
[40:45] be honest with you, you're trying to be, build
[40:47] relationships in a market that sometimes GPS are short 1st in
[40:55] their own space, not very friendly.
[40:58] So we try to, we try to buck that trend and, and really try
[41:01] to, you know, gain as much goodwill as we can no matter
[41:05] what the the opportunity or situation is.
[41:08] Yeah, absolutely. And what would be the risk
[41:11] return profile for secondaries? Yeah.
[41:15] So that's that's a great question.
[41:18] Hard to calculate risk, I think in private equity in general,
[41:23] right. Some would say if you're
[41:26] investing in a mega buyout fund, that's low risk, I would buy
[41:29] that because you're you're really investing in multibillion
[41:34] dollar companies. And how often do those go out of
[41:36] business? So, but sometimes, you know, you
[41:38] see they get over levered and the equity can get, you know,
[41:42] crushed. So it really, you know, there
[41:45] sometimes there's risk where you don't perceive it in the mid
[41:49] market. That is even more so true.
[41:54] Where we invest is in that growth stage where you don't, we
[41:58] really want to make sure a company doesn't need more
[42:00] capital to survive. I would say we're cutting a lot
[42:04] of that risk out. If you've ever seen the, you
[42:06] know, the Valley of deathslide and venture capital, everyone's
[42:08] seen it. Company starts and then it
[42:10] starts burning money. And then there's the cash flow
[42:13] break even. Well, we we invest kind of at or
[42:16] above that cash flow break even, but before you know say buyout.
[42:23] And the reason I think we've taken most of the risk out there
[42:27] is we're usually our value drivers of the companies we're
[42:30] really investing in our underwriting are either
[42:33] profitable or our clear path, strong balance sheet, a proven
[42:36] technology and are growing. The one difference people
[42:40] overlook there is that what your buy in price is, and I'd like to
[42:45] think we even de risk a lot further by buying in at the
[42:49] discounts. So if you take growth equity
[42:51] investors and the prices they tend to buy out to buy into
[42:55] these companies that we tend to look at that as wow, full price,
[42:59] you're paying premium, you're paying, you know, over the
[43:01] counter price for these companies.
[43:03] We like to get in cheaper and we think that de risks it.
[43:06] So we like to think and there's no, I mean, you'd have to really
[43:09] start getting deep, deep, deep into math to calculate risk on
[43:15] this. But I kind of feel like we've
[43:17] moved the risk out to the right on the safety scale more towards
[43:22] like later stage buyout, bigger company by buying where growth
[43:26] equity investors do at a discount because that discount
[43:29] is very friendly, right? So if we're buying companies
[43:33] that are on a high growth trajectory, we're buying at a
[43:37] discount closer to an exit. I think what we've done is we've
[43:43] we've underwritten the expected rate of return of venture, but
[43:48] we've invested our capital later and cheaper and we've offered
[43:52] less which which has taken your risk down.
[43:54] So if you take 2008 the global financial crisis and venture
[43:59] capital, the the really along with private open the crash, but
[44:04] it was down, you know 20s not quite 30%.
[44:08] Well, VCFA historically has invested at greater than a 40%
[44:13] discount. So the markets can global
[44:16] financial crisis again and we're still sort of have bought in a
[44:20] little cheaper than, you know, the markets can come down.
[44:23] So when it comes to risk and reward, it's a very hard thing
[44:27] to actually calculate. We tend not to do it because
[44:30] it's you're never going to be accurate and someone can always
[44:34] point holes because you're always having to make some
[44:35] assumptions. But what I think we've done with
[44:38] our model is by investing later into the cycle of these
[44:45] companies with whichever method, GP LED, LP LED direct later into
[44:50] that cycle where they seem to be safe and out there.
[44:55] The key to all that or the risk is that we're investing when the
[45:00] cap tables are still long and deep, right?
[45:04] Buyout. If you look at buyout, most
[45:06] buyout or control buyout, right? Everyone wants control.
[45:09] So if you want to buy, buy a great, even a growthy buyout
[45:11] company, you're going to talk to the GP who controls it or maybe
[45:16] the GP who Co controls it with a Co investor.
[45:18] So you're probably not going to buy that asset at an attractive
[45:22] price because they won't sell it to you if they like the company
[45:25] where we're talking about, we have investors 8000 rows deep in
[45:29] a cap table, some of which got in 11 years ago at a much less
[45:33] valuation. So you actually have a potential
[45:36] seller base in a, in a cap table that's really deep.
[45:40] That includes people who who have been in there for over a
[45:42] decade, whereas in buyout you don't have that.
[45:45] That's why we really, you know, we're biased.
[45:47] That's a biased, but that's why we really love what we do
[45:50] because we can buy great growth companies later cheaper.
[45:55] And how can I validate that statement?
[45:58] Well, because all of those companies live through AC round
[46:00] A, round B, round D, right? You typically not every kind of
[46:03] typically. So there's a good chance that
[46:07] someone in that cap table will sell to me at a discount because
[46:12] they've been in long enough and rewind to the beginning of our
[46:15] conversation, probably less than 20% of their overall investment
[46:20] is at stake in that company or that fund.
[46:24] And it makes sense to sell to us at that price at that time.
[46:27] So that's, you know, in a nutshell.
[46:29] I think we've, you know, kind of come full circle.
[46:31] That's what we're looking for and that's how we de risk it.
[46:35] I, I can say we often try to, we put ourselves in check every
[46:38] time we're in investment committee and trying to do a
[46:41] deal. And what we try to do is just
[46:42] keep keep it simple because Dayton's strategy for the whole
[46:46] industry was buy later and cheaper.
[46:49] But that that's the simple premise of secondaries.
[46:53] That's what we're trying to do. Yeah, yeah, quite interesting.
[46:57] I love that analogy there horse races thought turn amazing,
[47:02] Great. So moving to the last question
[47:04] before we try to wrap this up, this is what's what's the goal
[47:07] with the new fund? Yeah.
[47:10] So you know VCA as you said been around a long time as a pure
[47:15] play venture growth secondaries investor and that's our main
[47:21] flagship fund series which is called VP Venture Partners Roman
[47:25] numeral. So we're currently investing
[47:27] from Venture Partners 7 and that was $122.5 million fund that
[47:34] we've just recently closed. Those funds have tended to be
[47:38] between 125 to 250 million in size and and that strategy we're
[47:46] we're keeping right forward with.
[47:48] So I think we'll probably be out in the market again about a year
[47:50] from now raising fund eight. One thing and and I touched on
[47:55] this a little bit earlier because we've been around a long
[47:57] time, we see a lot of opportunities.
[48:01] We are embarking on an exploratory phase of starting a
[48:06] real estate secondaries fund. And the reason is we kind of, to
[48:13] be honest with you, we've almost had enough of seeing such great
[48:16] opportunities in the space and passing them off to others that
[48:19] we said we should probably do something about this.
[48:21] And we see very much like what we see in venture and growth
[48:26] opportunities, smaller, right, smaller transactions, a little
[48:32] more complex. You need some understanding to
[48:34] do the deals. We see that a lot in PE real
[48:37] estate. So PE real estate is a big
[48:39] market and you're big players in a Blackstone to AEW, to Lupert
[48:43] Adler to it was just a a huge swath of players in that market.
[48:48] And their investor bases today look a little unique.
[48:55] They have most of those top tier players have money from all over
[48:58] the world, pension, sovereign wealth fund, etcetera, money
[49:02] that invests literally at 100 to $400 million check sizes in
[49:07] those firms. Then they have pages of single
[49:13] family offices, multifamily offices at 10,000,005 million, 3
[49:17] million and $1 million investors.
[49:19] If you're in those pages of investors and it's your 10 and
[49:22] you want to sell APE real estate, it's a tough thing to
[49:25] sell, right? So there are some great larger
[49:29] PE real estate secondary's groups.
[49:32] Jamie Sunday at Landmark has been around forever.
[49:35] You know, there's there's probably not too many deals of
[49:38] size that that would ever get by Landmark.
[49:42] Step Stone has a group believe Goldman Sachs has a very group
[49:45] and these are multibillion dollar dry powder at any given
[49:50] time funds. So by their nature they can't
[49:53] really focus on a $1.3 million NAV or even a $5,000,000 NAV
[49:58] fund that might need some work. So what we think is there's sort
[50:01] of we think there's a, a good place in that market and a
[50:04] couple of our peer have started to you know play a little bit
[50:08] because they have more open mandates in their funds.
[50:11] But I can tell you we have several times passed off, Hey,
[50:14] how would you like an LP interest in XYZ fund at a 65%
[50:19] discount to NAV catches you have to close by next Friday because
[50:24] the seller really, you know, needs to get rid of.
[50:26] So we're going to, we've embarked and we've gotten some,
[50:29] you know, pledge capital and a long term relationship with
[50:34] someone who has all the capacity to underwrite those types of
[50:38] transactions. And we're embarking on that.
[50:42] And then we also are looking at some other spaces.
[50:45] And So what we're doing as VCFA is we think that perhaps one of
[50:50] the most genius things Dayton ever did was to stay small.
[50:54] All right, we probably look our, our track record is quite good.
[50:59] I think at some point in the life cycle of VCFA, Dayton
[51:03] probably could have gone and started raising half a billion
[51:06] billion then $3 billion plus size funds.
[51:08] I, I believe that was certainly something that was a choice to
[51:14] either do or not to. He stayed small.
[51:16] I think the main reason was I don't think he ever wanted to
[51:19] manage a lot of people. Dayton liked having a small
[51:23] boutique firm and a small firm. But whatever the reason, David,
[51:26] Tom and I now are, are here managing a smaller firm.
[51:31] And we love the fact that, you know, 90% of our deals are
[51:35] proprietary and we can buy at the discounts we do.
[51:38] We're not showing up at best and final auctions all the time.
[51:40] So we think this is a great place to be.
[51:44] And so rather than grow, you know, vertically and try to take
[51:47] our venture partners mainstay business into the billions, we'd
[51:51] like to you know grow that 2345 maybe $600 million fund sizes
[51:55] over the next several funds and then grow horizontally into
[52:00] other spaces. Or it can be the small go to
[52:02] player for sellers of sub 20, five, $30 million, you know,
[52:07] portfolios or transactions. So even though we've been around
[52:11] forever, we're still looking to scale and grow, but horizontally
[52:15] into neat, neat new niche places where we can still be true to
[52:20] our smaller, lesser competitive kind of more boutique end of the
[52:25] market. So that's that's where we're
[52:27] headed in the future. Love the plants, they're
[52:30] awesome. I wish you all the best for
[52:31] that. And now let's do the rapid fire
[52:33] down, wherein I'll ask you 6 quick questions about the
[52:37] investing you're doing and you have to give 6 quick answers,
[52:40] right? So the first one is what are the
[52:43] sectors and regions you invest in?
[52:46] Yeah. So we're we're not necessarily
[52:50] sector specific and the only two things by mandate we won't
[52:55] invest in is legacy energy and real estate in our main funds.
[53:02] So those are the two things that are technically mandated out in
[53:07] the regions. We tend to be mostly North
[53:09] America, like 90%. That's not necessarily appetite
[53:14] driven, it's just market driven. If you look at the later stage,
[53:17] it's like I think 88% of that market is North America and a
[53:20] little bit of Western Europe. So that tends to be where we
[53:24] play and it's tends to be in our risk reward analysis on every
[53:27] deal we do, it tends to be there.
[53:28] That's not to say we wouldn't. We do look at China LP
[53:31] interests, we look at some things in India.
[53:33] We look at, we look at that stuff, but it tends to be the
[53:36] deals that we close and, and and that tends to be, you know,
[53:41] pretty much 90% of North America focus so.
[53:46] What's the typical stage you come in at?
[53:49] Yeah, again later. So we we want to know that this
[53:52] is end of life venture and really solid growth, growth
[53:55] stage of a business. The text played out doesn't need
[53:59] more money and it's it's time to grow and, and typically what
[54:03] we're looking for is something that's exit ready.
[54:06] Yeah, it may not exit next year, but it's exit ready.
[54:09] Awesome. So you mentioned the types of
[54:12] deal you're doing. So you're acquiring entire
[54:15] portfolios, you're acquiring LPLS and then also directs,
[54:19] right? That's type of secondaries you
[54:20] do right? Awesome.
[54:22] Yeah. And and we will lead rounds.
[54:26] We need what I'd say syndicates more than rounds.
[54:29] So we'll lead secondary deals that's typically either for a
[54:34] portfolio of LP interest that's larger than our check size or
[54:38] AGP LED where we're the lead and typically on just about I think
[54:42] I don't know about one or two and we do mostly GP LED deals.
[54:45] We're typically the lead even peers in our space would a lot
[54:49] of times they'd rather us leave the deal and they Co invest with
[54:52] us. So we're typically lead on the
[54:55] GP leads we do. That's awesome.
[54:57] What's the typical check size that you like to put in?
[55:02] So if if you look at our typical check size, it's typically in GP
[55:08] leads or where there's a diversified portfolio and GP
[55:11] leads or diversified LP portfolio, we can invest up to
[55:14] fifteen, $20 million check sizes.
[55:18] What we always backing into is in, in this latest fund, say 125
[55:23] or $1,000,000 fund, we don't want more than 5 or $6 million,
[55:26] maybe top end $7,000,000 exposure, any single asset.
[55:30] So if we're doing say a small GP LED with five companies left in
[55:33] it and there's three companies left and it's a $17 million
[55:36] portfolio, we want to make sure that our exposure into single
[55:40] companies even when we're doing a deal, it doesn't exceed that.
[55:45] So that's, that's one measure. And then we will also do a
[55:49] $500,000 LP interest or direct deal to get A to get a toehold
[55:54] when we think there's an opportunity to buy more, right.
[55:58] So we're really open minded in terms of our check sizes, but
[56:03] opportunistic. Sure, where you can founders,
[56:06] fund managers, LP's get in touch.
[56:10] Oh, I think the best way is just to go directly to our website,
[56:16] www.vcfa.com. You can get in touch with us
[56:20] that way or we're, we're all easy to find on LinkedIn and and
[56:26] also I'm I'm an open communicator as well.
[56:31] So AREILLY a.riley@vcfa.com if you have a questions, have a
[56:38] deal, etcetera. I'm I'm easily easy to find so.
[56:44] Awesome, last one, where can our listeners follow you?
[56:48] You know, I'm not a active social media participant only
[56:55] because I think it can be a time suck and I don't have that much
[56:59] free time. So again, the best way is
[57:01] probably to hit our website and our chief admin officer in our
[57:07] firm who's been with us 30 years, believe it or not,
[57:10] susan.harrissharris@vcfa.com is, is the best quarterback of any
[57:16] small firm in the world. So she, she can always find
[57:19] David or I at at at any time. So yeah.
[57:24] That's awesome. It's been great having this
[57:27] conversation with you. Very insightful on the
[57:29] secondary's market and the unique approach you're taking to
[57:31] it. And right now, it's an amazing
[57:34] time to be in the space. So thank you for sharing all
[57:37] these insights and I wish you a happy and resting.
[57:40] Thanks, Michelle. It's great to great to be with
[57:41] you today. Likewise, Thank you.

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