There is Currently a Surplus of Retail Space
Retail property owners have long thought about creative ways to use their spaces and since 2012 entrepreneurs have been trying to figure out how to hack the retail space without being obligated to it and startups are not afraid to co-work together so when you add these cultural advantages with the mix of excellent online marketing you get the perfect storm awaiting all the empty, Covid-19 driven vacated store space. Retailers were struggling to keep the machine running prior to DTC startups or a pandemic forcing people to stay home. The only hero with a cape here will be startups doing their own pop-ups in existing retail spaces at the fraction of operational cost. 

Startups Know How to Test Consumers 
Retailers are constantly paying big bucks for “data” to understand consumers when the proof might be more in shopping experience itself and what consumers want and need: wifi, an experience to remember, and a connection to a product or products. Startup Perch Interactive works with large retailers for in-store “engagement” which could also be applied for future startup pop ups. Meanwhile, we see brands buying hardware startups like lululemon did with Mirror likely to innovate its own stores and colleges designing new robots to assist retail— what’s exciting about all this innovation being built withstartups are leading the way.   

Amazon Buys Zappos, NY Times (2009)
https://www.nytimes.com/2009/07/23/technology/companies/23amazon.html
 
Facebook Owns four most downloaded apps, BBC News (2019)
https://www.bbc.com/news/technology-50838013
 
Amazon to Buy Audible, Reuters (2012)
https://www.reuters.com/article/us-audible-amazon/amazon-to-buy-audible-for-300-million-idUSN3129158120080131
 
CBinsights Future of Retail Technology Startups (2020)
https://www.cbinsights.com/research/report/retail-technology-startups/
 
Telsa CEO moves to Texas, CNBC (2020)
https://www.cnbc.com/2020/12/02/tesla-ceo-elon-musk-plans-to-move-to-texas-friends-and-associates-say.html
 
American Airlines Partners with Casper, Techcrunch (2017)
https://techcrunch.com/2017/09/28/american-airlines-teams-up-with-casper-to-offer-new-in-flight-sleep-products/
 
Swedish Startup Small Funding, Nordic9 (2019)
https://nordic9.com/news/chimi-eyewear-secured-capital-for-an-eyeglasses-online-operation-news7963784599/
 
Swedish Eyewear Brand Partners with H and M, vogue (2020)
https://www.vogue.com/article/chimi-swedish-eyewear-brand-opens-flagship-collaborates-with-h-and-m
 
GAP Signs Kanye West, BusinessInsider (2020)
https://markets.businessinsider.com/news/stocks/gap-stock-surges-10-year-apparel-deal-kanye-west-yeezy-2020-6-1029346081
 
Landlord Retail Store Creativity (2019)
https://stratafolio.com/creative-ways-landlords-are-filling-vacant-retail-space/
 
Sears and Kmart Closing Stores (2020)
https://www.forbes.com/sites/warrenshoulberg/2020/07/12/total-sears-and-kmart-store-count-going-down-to-just-95/?sh=5020c2d60eb5
 
Lululemon Buys Hardware Startup Mirror, NY Times (2020)
https://www.nytimes.com/2020/06/29/business/lululemon-buys-mirror.html
 
MIT Making Retail Robots (2020)
https://www.cnn.com/2020/07/04/tech/mit-csail-coronavirus-robot-scn-trnd/index.html
 
Wal-Mart Considers Parking Lots As Theatres, CNN (2020)
https://edition.cnn.com/2020/07/02/business/walmart-drive-in-theaters/index.html
 
Canadian Store Becomes Its Own Farm (2020)
https://returntonow.net/2020/06/18/canadian-grocery-store-grows-its-own-organic-veggies-on-rooftop/
 
Amazon Turning Malls Into Distribution, BusinessInsider (2020)
https://www.businessinsider.com/amazon-looks-to-turn-malls-into-giant-fulfillment-centers-report-2020-8
 
Amazon Fund Meets with Startups, Wall Street Journal (2020) 
https://www.wsj.com/articles/amazon-tech-startup-echo-bezos-alexa-investment-fund-11595520249
 
ING Offers Loans to Companies Working with Amazon, FinExtra (2019)
https://www.finextra.com/pressarticle/83130/ing-germany-to-offer-business-loans-to-smes-trading-on-amazon
 

For every investor win, there is the one that got away or the anti-portfolio. That’s the companies that become publicly traded and when you had a chance to invest $10k in their angel round in 2012 or the startup you mentored and almost got a board seat on before your nemesis woo’d the founder away at the last minute. You think about it when you see the founder on TV or a family member buys you Earth-moo socks and you burst into tears “I could have gotten in PRE SEED!!!” Most successful investors always have a thing or two which becomes a big hit but somehow slipped away, for me, my anti-porfolio is myself and original batch of CCMFI VC investments. For me, the one that could have been, the one that got away, are the beautiful 2017 VC vintages CCMFI planned for that we had to change, modify, exchange, withdraw, whatever due to varying delays many of our Batch #1 VC selections. 

​R.I.P Batch #1 I will always love you VC vintage 2017/2018.

​While a tiny country in size, Netherlands is a serious global contender for capital reserves. See above. Looking at the venture capital numbers themselves,  Europe was still emerging at CCMFI’s onset and showed itself on a trajectory towards $50BN+ annually. In 2017 EU venture capital appeared to be growing at a faster pace than NYC venture capital crossing over $25BN. See also The $50BN Elephant for a more detailed analysis. 

After a few rounds of in person meetings with Netherlands on Third Avenue, including with my Board, I made the decision (albeit) quickly that I’d move to Netherlands and build my first-time fund from there. How my super early American LPs were okay with this I will never understand, I think everyone was curious how this would play out. Here is the letter they would later give me which would kickstart living and working in Netherlands. I was excited about it too it seemed Netherlands was loaded with potential. 

Note: If one of my fund managers lived in my hometown and said they were moving to a village in France where they knew not a single soul to launch a fund… I am not so sure if I am that brave. Not all heroes wear capes, Howard. 

​My original timelines with built in buffer for CCMFI had beta (American) LPs entering it May 2018 with pension enrollment around at the earliest 2019 (24-26 mos from april 2017), full close in 2020/2021.Like all funds, the more in placement I had the more I could capital call. I knew a 1BN fund would take time both oboarding LPs and executing safe investment deployments. The thinking, especially for pensions, was that the fund could operate and fund as quickly as possible while growing and maturing its product. 

From the beginning of CCMFI there were fail-proofs or back up to backups to backups, which I would eventually have to tap into much to my amazement. All asset risk modeling I ran ended gave a minimum $1BN fund size and I was already getting feedback and documents from pensions saying diligence could take up to thirty (30) months and since there were multiple Dutch pensions with $100MM+ minimums and they could not individually be more than 20% of the fund, and collectively public pensions could not be more than 30% of my investor base,  any FOF under $700MM in size simply would be too small. 
 
Fund Size: $1,000,000,000 USD
 
Pension Timing: I figured this whole process would take 24-36 months from April 2017 a la pension friendly FOF deploying and calling pension capital as early as May 2019 and late as May 2021. I was also a first-time fund manager, a female, and with a thick American accent. I moved to Europe ready to GRIND not to be Emily in Paris. 
 
Investment Period: Since the fund started investing into VC funds in early 2018; with a three year investing window listed in the funds terms, this also meant any pension or LP delays could be met with one small extension with a small group LPs if needed. Short term this would be low on collecting income or management fees— long term useful to the fund’s integrity. At every fork in the road of this process I always opted for higher quality than quick or useless KPIs. In this way CCMFI is still within its original planned investment window until June 2021 assuming no extensions. 
 
Investments: Since commitments and capital calls are different timing altogether and each fund on its own schedule, the math between the GP and early adopters was tight so we figured out a way to keep certain VC slots or for no charge let cofunds or investors fill when appropriate. In advance I knew that patching fast-paced FOMO VC funds with incredibly slow turtle-power Pensions would be a challenge, so I came up with varying scenarios and would Side Letter or make different timelines for various VC funds. Shuffling time with venture capital funds was not too hard since often I was the lead or anchor and some emerging funds still had to finish raising their funds which can take a normal 1-2 years BUT the 2017/2018 vintage so lit even pulling in long standing favors there’s only so much time I would be able to buy on either side so the hard part would be filtering through hundreds of venture funds to find ones which could fit all of CCMFIs criteria and expediting and prioritizing them as fast as possible. Our Fund Strategy is online here over 1,600 people have found it so thats good. 
 
Investment Diligence: The hotter the funds I got into, the hotter my fund and there’s only so much FOMO pensions will eat they are not the normal LP who can be quickly coerced into a bowl of “fund is totally closing this week.” However I could do my best. See also Managing Venture Capital Relationships. We established hundreds of pages of documentation for our IVG group (VC investment review) sharing it all with Dutch pensions along the way. Everything from risk analysis to common foundation questions. I’ll email anyone a copy of our 2019 IVG group framework which is used by several of our co LPs if you send me a note. I can run the whole thing on one VC fund in a less than an hour if I do it myself, otherwise if followed it could take an junior analyst a few days / week to use to screen a VC fund. 

Low operating costs: Since pensions would be involved cost was always a factor. After review of legal, admin, operating costs I estimated that setting up a $200MM FOF would be about the same setup cost as a $1BN fund. CCMs budget for the fund setup estimated around $300,000 and the budget for the management company set arbitrarily to $700,000 (per year, and with no salary for myself). While LPs share Fund costs we knew early on the management company would take a few years to be profitable, which is normal for any new business. A new management company was in its earliest days and a new fund needed to be made for it. Since the whole idea of CCM is easy access for pensions, we also wanted to make sure costs were as low as possible and processes streamlined.

​From the data I have, I know that we built CCMFI for about the same costs as if a $100MM fund was setup and less in fees if managed in-house my someone. See also Managing Venture Capital In-House for other costs. Often CCMFI would / prefers to commit earlier to a VC to save on fees, any fees saved passed directly to pensions. CCMFI Fund costs are the far RIGHT column below:

Building a fund that gives preference to pensions is no easy feat. Armed with a general manifesto for venture capital investing and penchant for pensions (see also, The People’s Money) there were additional considerations about who could be an LP and how many which all had to be planned out in ADVANCE to the fund’s various documents and rules being made like LPA. 
 
On the surface the main components for LP demographics  worked as such:

• No one LP could be more than 20% of the fund.If I built a fund for even 1 pension, and that pension had a minimum of even $50MM that put a bare minimum fund size of $200MM and for all the cost to pass diligence of ONE pension fund, why have only one pension fund as an investor? That is not diverse. Fund size had to be above $200MM

 

• Pensions as an investor type could not be more than 30% total of a fund for differing opinions and regulations. So if the goal was 1-3 pensions and the SMALLEST check size $50MM = $150MM of pension money X3 = Fund size had to be above $450MM

 

• Venture Capital risk: how could a FOF be designed optimally to (1) let as many pensions in as possible (2) at the lowest possible risk rate associated with a risky asset class like venture capital?The math worked out that 3-5 pensions @ highest rate of return X diversification of risk across venture capital funds meant the FOF LPing $5-$20MM per VC fund and since I as a FOF I could never be more than 20% of the venture funds size ($50MM-$200MM) therefore, my limitation would be $20MM max per VC fund and given risks and properly deploying capital, a pension optimized fund size would be $1BN. (ref: Fund Strategy)

 

• No LP could invest more than 20% of their total assets (more relevant for family offices and corporations. Still a requirement)

 

• No Blood Money. Since many of my LPs are philanthropists at heart, and several religious faiths, we decided early on to do our best to not take any monies from LPs we think might have unethically earned their capital or harmed others in the process even if generations before

With a fund roadmap in hand, I began building my first fund in a faraway land, living mostly off the caffeine of free office coffee and Stroopwaffels. First CCMFI beta LPs came in May 2018 as scheduled and I REALLY knew by February 2019 that a June 2019 (earliest entry date for pensions) would not work since we were still awaiting approvals on various documents from that were submitted the winter before looking to be approved but pending. The corporate LPs were behind the pensions with DDQs falling behind. Without much choice I had to start changing many VC positions in 2019 and changing a super-well-thought-out-plan for investments and LPs to allow other funds to move forward at a faster pace because I could not reduce the quality of the fund. See also You Cannot F**king Ship a fund.  

​I kept trying to convey the urgency in Europe realizing CCMFI needed to be ramped up for a fall 2019 pension onboarding to assume it would take some months, yet everyone was getting ready for European "holidays" while the American VC funds and startups were building (like all thru every night Europe slept) and their valuations were skyrocketing quickly as they should. Since this growth pattern doesn't exist often in Europe its hard to explain to someone who hasn't seen it themselves. 

I will always love you VC vintage 2017/2018!! (Batch #1)
Planning to move around VC positions is stressful and some funds I had found in the deepest corners of the earth or competitively gotten in --I would find many VC funds new LPs to swap CCMFI out. Sometimes you gotta do what you gotta do and I’m lucky to have gotten into that vintage at all, but never again will I do so much work “for free” and I mean that towards pensions too. There's hundreds of venture capital funds in the world but Batch #1 is still the one that got away. That combo. That timing. Those market conditions. Those exact startups, sigh. 

​Another strange thing in Netherlands was that after successfully passing a fairly large EU diligence packet—some bad actors started to pop up, Dutch vendors began to overbill the management company, the Dutch government “coincidentally” entered me into an audit immediately after and withheld the renewal of my residence permit until the audit was done with a reminder that if I left Europe I would not be allowed back, and— It felt like everyone knew my fund was moving forward and wanted a “cut” even though I was only halfway there and a few million deep in expenses (already) and no paycheck (yet). 

​Other quirky things had popped up, I remember being covered in shingles once from stress, while in hour 34 of a 100hr pension compliance packet (DDQ in Dutch) and walking by the office lobby to see a Dutch prince talking to a startup about how to get app users with “ROI” sewn into his jacket; meanwhile I couldn’t find a single person in the building who either knew Dutch well enough or knew venture capital well enough to help me with various forms. I promised myself and the government of Netherlands two years minimum and I am generally a person of my word, but every single DAY after two years passed (formally July 2019) I kept asking myself: why was I trying to do this fund from Netherlands... if another European country be any better... and what was I trying to prove?

​I might as well have been in outerspace: I felt like a female Matt Damon trying to grow potatoes on a space planet which had been beaming signals across the universe that it wanted venture capital for lightyears but really it just wanted my potato seeds and spaceship. I kept hosting several hundred person VC nights in Amsterdam and Zurich with many pop ins to Romania and aside from my former Associate, George Moroainu (who is killing it in Romania having just closed a Seed Round and recently surpassing 1.3BN Euros in sales for his startup post CCM) most the European CCM interns or employees I poured my heart and soul into training ultimately went to safer, easier jobs in academia or banking.

Turns out doing Silicon-Valley-style-fast-deals from Amsterdam is actually stressful to most Europeans not a selling point.  

​On the flip side for every issue related to the lack of venture talent in Europe there was the issue of abundance of venture knowledge in the U.S and a stereotype that usually follows that which is white-dude-greed. I even had an American guy (former Citibank employee, so he should know better) demand more than $200,000 (for a harddrive of data stolen from my fund) paid to him tax free otherwise he would leak a bunch of information about myself and my fund in a way that would be detrimental. Not only did I not cave in but I couldn’t have anyway from Money laundering (AML) polices in place to protect our future pension LPs—as a fund every penny would be counted how could I justify such a payment which would be clearly recorded?  I didn’t cave in to the demands so its no surprise what happened next. 

This is the cover image of the article showing mostly men hanging around and drinking with the few females in the photo being subservient or preyed upon.
 
The article shared identical framing spending pages connecting dots from stolen data into a larger over-arching fabrication construct meant to sabotage CCMFI at exactly the right at a time when pensions were scheduled to be entering my fund. One could argue I was Tonya Harding-d, clubbed before I had even spread my wings. A couple talking points related to that article for anyone who has read it:

• Most of the VC positions mentioned had already been changed or modified. The reporter was going off of  older stolen documents
• My miscarriage of 2018 was completely ignored, even after sending documents (in English and German because I needed two surgeries) the reporter did not explain that was why I had missed the infamous “summer party”
• Like most women my age, my last name would be changed anyway at this time in life but my last name instead changed at 17 when my father died. Nothing shady, I was honored with a few scholarships and appeared on TV under my maiden name. THE VIDEO IS HERE
• There is a mention of a lawsuit with Bitpusher in New York. October 19, 2020 a judge ordered that case was not proper and reversed any orders granted pushing back on Bitpusher for "proof"
• By the time the article finally went live I slept like a baby. All day for MONTHS I was getting hundreds of messages from people the reporter kept contacting (family friends, ex-boyfriends, ex-boyfriends parents, any name mentioned in an email before...) and it was very distracting.  By then I EU pensions who are already skittish and afraid to progress with an takedown pending.  I was RELIEVED it was over and live already
• My current LPs called it a “nothingburger” and since all are American and successful themselves had experienced something similar at some point in all their careers. I took it on the chin. One Dutch bank sent me a message "famous yet ;-)"

​With or without the takedown piece which seemed to only slowly be shared around Europe, there were several environmental factors putting my fund at risk by being in Europe I started to notice more and by March 2020 when all the various country borders locked down. I had months to think about this before deciding to move back to the United States which I did this August 2020.
 
Here are three market components I felt would make it impossible to STAY in Europe if I wanted to continue running a fund-of-funds or even stay in venture capital (aside from even Covid-19 or personal reasons):

(LTV, Long Term Value, not high enough)
By the time I discovered it in March 2020 it was almost too late to move back to the U.S because all country borders were closing but it was clear—most of EU venture capital was American money taking advantage of low startup valuations. The American capital which was more than 50% of Europe annual VC #s was also forcing European startups to setup American LLCs to accept the cash, so the money might have been arriving in Europe via America but it was going right back. It also explained why there was such a small startup workforce and starter founder ecosystem on the ground, particularly in Netherlands. I had a very promising Dutch kid I poured a bunch of knowledge and resources into and a year later he hadn’t absorbed most of it, one of the last times I was in the Amsterdam office he asked me if I knew what a “termsheet is” he said “you know for startups…”
 
I run a fund based whose underlying assets are completely on capitalization tables and startup termsheets and that was the core to everything I had been teaching him #NEXT. 

(TAM, total addressable market too small)
While venture capital is an asset class and tool for empowering young and high growth companies in the private sector, its mixes well with public pension funds getting access to private profits, the base of venture capital is CAPITALISM. Fruit of thy labor. Eye for an Eye. Work hard, make money. Most of the philosophical concepts powering capitalism do not apply or wont stick in Europe. Firstly, European culture does not reward risk or entrepreneurism. Most of the wealth in Europe is from old old old money, likely linked to castles and devastating an entire village (Side note: my college dissertation in college was on inheritance within capitalist societies). Secondly, services in Europe cover most people so that they are not encouraged to think or act professionally outside of the box, everyone is well cared for.

When you combine the two factors of old money and social services you end up with a very rich class of people (“Why would I invest into venture capital to become MORE RICH? I’m already rich” one EU family office once told me) who have no incentive to invest into venture capital and the concept of even wanting or desiring to become rich not common amongst the rich or those in middle or upper clasSes. In America and other countries an entrepreneur who makes their own money is respected however in Europe no one seemingly cares as everyone has their own socially protected life to live. This also seeps into business hours, work ethic, work timing and all other pieces to a puzzle needed for building “rocketships.” How can venture capital be on the rise and “exploding” in Europe if there also no whole set of founders ready to build?

Venture capital is a SPORT as much as its an asset class and the love for the game the way it exists in the U.S simply does not exist elsewhere in the world #AMERICA

​(CAC, Customer Acquisition Cost too high)
As soon as my fund started ramping up traction we had issues with local greed in Europe and people’s expectations that since CCMFI was meant for pensions that somehow money could be wasted / shared. Not true. We had American and Dutch shakedowns with a couple still pending however, for the amount of effort it takes to get even 1 LP in Europe I could have gotten 4 in the U.S. Both sides have their own ways of expressing greed so I pick the one with higher ROI for the hassle. 

Even in hindsight and the things which were in my control I’m not sure there is much I would have or could have changed for CCM’s launch. I think even if I had hired a European grown General Partner, there would have been slowness. I think even if I had caved in and paid off blackmail payments, only more blackmail requests would surface. And I think even if the market data for venture in Europe was more clear that it was mainly (almost entirely) overflow American capital, I still would have gone out there to check it out and see how “emerging” its emerging market is.That said, it’s a pity things could not have launched even two months sooner because I’ve had parking spots in VC funds that have been investing in startups since before 2017. 

Here is where CCMFI would be today had we even remotely followed our launch schedule: the fund would have launched and deployed $100MM by now, with 3x-5x in performance (and growing, some positions are known to already be performing in top percentile internationally) and over 20+ VC LP positions. Assuming LPs entered CCMFI at their projected order that would have put the first pension into the fund June 2019.

While Batch #1 CCMFI funds is almost entirely different today that selected back in 2018, part of it is still my anti-fund and group of talented people I will watch from afar hoping for any chance to support them--once you bet on someone professionally its heartbreaking if your timing fails but it doesn’t change conviction. If Batch #1 had gone to schedule that would have put CCMFI as a top fund in the U.S and world. While starting up I met a half of dozen funds like mine scheduled to be $1BN or more so this size will be common. CCMFI was very forward thinking in its creative structure and ambition which I hope never goes away, despite the bruises. 
​
If CCMFI fully closed last year (not planned) it would have been top in size for Q3 2019, if CCMFI ever reaches $1BN this would be new pack of kids at school. 

​On a personal level and having mainly missed the projected window of my fund’s Batch #1 launch, I lost out on American income during this time for around $1MM ($250k X 4yrs = $1MM), and fund expenses paid back of $300,000, any type of income for running the fund (anywhere from $200k a year to $500k a year X 2 years = $400k - $1MM) 
EUROPE AND DELAYS  =  $1.7MM to $2.3MM lost income
 
Personal income loss aside, I have never worked so hard in my life to get placement, move placement, help placement, build out a robust and strong backend pensions could trust and essentially doing this all from a strange place with minimum resources at hand.  I certainly took some short term loses building a fund from the ground up which is normal for a GP, and the fund itself is performing well considering it all, so even if CCMFI makes up time or launches a new fund, or deploys Batch #2 to VCs quickly… whatever we do it I will never having those Batch #1 vintages and positions in that combination and no markup again. Batch #1 will always be the ones that got away, who I love from afar, my anti-portfolio, the glass stepped on at a Jewish wedding marking both that things will never be the same and never can be. 
 
I have very fond memories for my experiences living and working in Europe now that I'm back in the States. Some of those times were sweet and endearing, other parts I learned about myself and expanded in ways I didn’t think I should.  But if you ask me if I still like Stroopwaffels, the answer is no. 

​============
ABOUT ME:
Venture capitalist having worked San Francisco, New York, Bucharest, Amsterdam, and Zurich. I spent the last few year building an awesome fund-of-funds. For more follow me on Twitter @ecachette or visit elliecachette.com

~~~SOME DISCLAIMERS~~~

1. While no exact media publication is mentioned in this post, CCMFI has a current investor who works at Bloomberg LLP
2. This blog post is for INFORMATIONAL PURPOSES ONLY, to help create transparency in the FOF and venture capital world
3. CCMFI has not and does not accept European investors. This includes family offices, pensions or any EU domiciled investors because the American arm could not longer afford to be held back in timing by a European arm which was resigned March 2020. 

​

IMAGES

1. CCM INTERNAL STATS (LP REPORT, SEP 2018)
2. MANAGING VENTURE CAPITAL RELATIONSHIPS, MONEY 2020 (JUNE 2018)
3. THE $50BN ELEPHANT, ELLIECACHETTE.COM (MAR 2020)
4. CCMFI FUND FAQ, INTERNAL (2020)
5. CCM IVG MANUAL, INTERNAL (2019)
6. FUND BUDGETS, (LP REPORT, SEP 2018)
7. FROM BLOOMBERG.COM ARTICLE (SEP 2019). ARTIST CREDIT: JOSEPH P. KELLY
8. PREQIN / FIRST REPUBLIC US VENTURE CAPITAL REPORT (2019)
9. PREQIN/FIRST REPUBLIC US VENTURE CAPITAL REPORT (2019)​

LINKS AND RESOURCES

1. ​PENSION ASSET BY COUNTRY, MANAGING VENTURE CAPITAL RELATIONSHIPS, MONEY 2020 (JUNE 2018)
2. EUROPEAN VENTURE CAPITAL GROWTH, THE $50BN ELEPHANT, ELLIECACHETTE.COM (MAR 2020). SUB-CITED ITEMS FROM THE $50BN ELEPHANT:
   1. ANNUAL EUROPEAN VENTURE REPORT 2019. PITCHBOOK (JAN 2020)
   2. VENTURE CAPITAL FUNDING REPORT 2019. CBINSIGHTS MONEYTREE REPORT W/ PWC (JAN 2020)
   3. GERMAN VENTURE CAPITAL LANDSCAPE REPORT 2020. WHITESTAR CAPITAL (FEB 2020)
   4. ANNUAL EUROPEAN VENTURE REPORT. PITCHBOOK (JAN 2020)
   5. STATE OF EUROPEAN TECH 2018. ATOMICO WITH DEALROOM,  ATOMICO (APRIL 2018)
   6. ​UBS INVESTOR WATCH REPORT, YEAR AHEAD. UBS (2019)
3. WHY NETHERLANDS MIGHT LEAD (VENTURE CAPITAL), ELLIECACHETTE.COM (FEB 2019)
4. NETFLIX SHOW, EMILY IN PARIS (2020)
5. CCMFI FUND INVESTMENT STRATEGY AND THESIS, SLIDESHARE.COM (MAY 2018)
6. MANAGING VENTURE CAPITAL RELATIONSHIPS, MONEY 2020. SLIDESHARE.COM  (JUNE 2018)
7. MANAGING VENTURE CAPITAL IN-HOUSE W/ COSTS, ELLIECACHETTE.COM (MAY 2020)
8. VENTURE CAPITAL: THE PEOPLE'S MONEY. ELLIECACHETTE.COM (DEC 2018). SUB-CITED ITEMS FROM PEOPLES MONEY:
   1. RILEY: EFFECT OF INSIDER POLITICS ON RI'S PENSION FUND UNDER PERFORMANCE. GOLOCALPROV.COM  (OCT 2015) 
   2. EUROPEAN ASSET ALLOCATION SURVEY OF 2017. FCHUB AND MERCER (MAY 2018)
   3. DUTCH PENSION REFERENDUM ON INVESTING SOCIALLY RESPONSIBLY. PENSEON FEDERATION (NOV 2018)
9. YOU CANNOT F**KING SHIP A FUND, ELLIECACHETTE.COM (JUL 2019)
10. KRON4 BEATING THE ODDS, VIDEO. HOSTED AT VIMEO.COM (MAY 2003)
11. VC INFORMATIONAL NIGHT, AMSTERDAM. SLIDESHARE.COM (SEP 2019)
12. ROMANIAN STARTUP FLIP.RO: 1.3MM EUROS IN SALES FOR 2020. ADHUGGER.NET (OCT. 2020). ENGLISH VERSION 

As investing into venture capital as an asset class is becoming more common than in previous decades, the interest in venture has brought in many new kinds of investors across the world, most new to the space. Some of these investors might invest into one particular venture capital fund as a one-off but assuming the price point of investing into one VC fund (usually at a min. $250,000 and max $10MM per fund) and given the high-risk nature of the asset class, the best way to apply venture capital investing with $1MM or more would be to invest into multiple venture capital funds. Some stick to the 1/3 or 3x rule; for every major win, expect one failure and one break even. If this is the case then new investors to venture capital should be investing into a couple venture funds at a time, which I think many are. 
 
Are Fund-of-Funds Worth it?
There is already a mechanism for investors to invest into one central place and have those monies spread across multiple venture capital fund placements—this is a fund-of-funds or “FOF” structure (example here). If there’s already a fast-tracked way to get venture capital placement and have the risk significantly lowered, as well as shared fund costs with other investors, why wouldn’t any investor investing more than $1MM to venture capital use a fund-of-funds? The simple answer is the fees, the implied “cost.” FOFs charge management fees of around 1% assets managed, and this fee is on top of the fees that venture capital funds themselves charge for management to the FOF which is around 2%. What most investors don’t realize is that the fees in the venture capital funds comes out of the investment itself so the true “out of pocket” cost is still only 1% to the investor if they use a FOF. The worry over the “extra fees” investors might pay for a FOF is short-sighted as managing multiple venture capital investments comes with its own internal costs which I will explain below. So instead of instantly using a FOF or deciding to setup a program in-house for managing venture capital, there are some items to contemplate.
 
Cost: Fund-of-Funds vs. In-House
This is an example of an investor with $10MM for venture capital. The comparison is costs for managing venture capital investments internally vs. leveraging a FOF.  [Cost calculations are based upon common adjusted fees and my own internal knowledge of FOFs operating costs and VC fund operating costs]

If an investor plans to invest into more than one venture capital fund, particularly in the example above the cost is actually higher to manage internally than using a FOF. When considering managing venture capital investments in-house here are five other areas to think about when evaluating if a FOF structure could be valuable to your organization. 
 
Access and Blindspots
Most emerging and hot fund managers first raise investments from within their own network, so unless a FO or corporation already has direct access to founders and emerging managers, any fund pitch that naturally crosses their desk does not have verified quality. The other consideration is that 60% of founders choose to found their endeavors where they are from, so location can also change the type of dealflow an investor can get. Especially for those investors which aren’t coming with “value add” or experience which can uplift a VC fund, if it’s simply a financial transaction then the biggest concern should be VC placement or “access.” How do you vet these VC funds internally? How do you network check an unknown fund manager or otherwise make an investment decision? The time spent on answering these questions or filtering through a dozen VC funds can internally cost a FOs manager half their time for months. I listed this as $50,000 in cost above however considering most FO managers make $250,000-$450,000 annually, even half time would average $125,000-$225,000 in operating time taken up for accessing venture capital funds and doing diligence. 
 
Tracking and Reporting investments
One area often overlooked by FOs and new VC LPs alike is reporting. Everything seems easy enough until there’s a couple different investments moving at different speeds, years, and traction. How are you going to consolidate the data to know how your overall performance is? One VC fund might only report twice a year, another every quarter, some will report numbers from 60-90 days from the data collection date, so at any given quarterly deadline you could have several VC reports to which you will need to find the right common data points to equally evaluate them. To make this more exciting every VC fund REPORTS DIFFERENTLY. VC fund reports come in all sizes, templates, design, what numbers they track, dates the data was collection AND each fund might list reporting in a different order. Fun. With 3+ VC fund placements, any time a FO or asset manager needs to find out overall venture capital investing performance it’s going to cost in time, software, or both. I listed this as $15,000 in cost above although its known that some software programs to assist cost thousands quarterly so the cost could easily exceed $30,000 depending on the manager. In addition to decipher the reporting the manager will need working knowledge of how startups are valued. A cool startup cap table tool for that can be found here.
 
Portfolio Management 
Let’s say everything goes smooth and several venture capital fund investments have been made. The reporting puzzle has been figured out. If managing venture placement directly, there will be little things that come up: amendments to sign, changes to terms, changes of placement. It might be best for your firm to sell a positon on the secondary market, or maybe a fund manager needs to let in a new LP and has to change its own fund rules and needs your confirmation. All these little items around managing a portfolio of venture capital fund positions will certainly add up annually. I estimated this as $80,000 in the cost example above. A FO manager can expect to spend 5% or more of their time on this although the problem will be there is no planning— these items will pop up as needed and when they do can take any amount of time, usually with short urgent deadlines. The decisions themselves will affect portions of profits later on, so the time isn’t the problem it’s the expertise and thus this “on call” type of expertise is not cheap and is paid either via an internal asset managers time or outside law firms (who are even more expensive). Another example of this might be an investor is getting capital called more aggressively than expected and the manager has to go research and figure out why. VC funds in diligence (prior to investment) will give a “projected capital call schedule” to plan when they need capital yet its pretty known any later fund investors will have to catch up, and thus, be on a more aggressive capital schedule than they realized at inception. 
 
Influence as an Investor
As a direct investor into a venture capital fund your % position is smaller than a FOFs position can be. This comes with collective bargaining power that cannot be competed with, so assuming changes will need to happen in the future, most investors gain more power and influence as an investor through a FOF. An example of this might be a FOF negotiates a side deal, special terms, special voting powers or access rights a FO might not even be aware existed. There is also a level of savviness that FOFs carry internally from having done more VC transactions by volume, so in the case of changes or shifts in VC positions most direct LPs who could be FOF LPs have less influence going direct. 
 
Understanding “Vintages” and Performance
Another nuance in venture capital is deeply understanding how the asset class organically performs and expectations. Some examples might be, to know of certain hidden fund costs the first 1-2 years where a fund manager might (logically) hold back up to $300,000 in expenses to wait for the fund to get traction to deduct. This is common practice that shocks FOs at times so see an odd number deducted years later. Another might be a Seed stage startup that hasn’t moved a 1.0x value in 2+ years in an early stage fund that could likely be dead or a “ghost” startup. If they have not raised capital their valuation hasn’t shifted and if their valuation grew a bunch then they would have raised capital—this is the venture capital cycle. So after a while, an experienced fund manager can start calculating how much of a VC fund is “dead” and focus on the winners or, take on additional and different VC fund positions keeping this information in mind. There also needs to be patience: startups need 6-18 months to figure themselves out at the early stage so there can seemingly be no action because the startup in a venture capital fund is busy building. An expert fund manager can tell the difference between which underlying VC assets (startups) are the builders and which ones are “ghost ships” and this expertise is (1) not cheap (2) hard to find in-house. 
 
What is The Right Answer?
When it comes to investing into venture capital by building a management group internally or using existing FOFs, every firm has different needs to consider so there is no one “right” answer and there are no rules—sometime the best is to balance both!
 
For more resources or cited reports visit here. 

For a PDF version of this post click here.

Three years ago when I arrived in Europe with the mission of creating a Fund-of-funds to help spearhead European startup growth as well as be fully global the plan seemed perfect: build a fund compliant with Europe and with the agility of American business building so the best of both worlds could be leveraged. Only while on the ground, and after considerable time working and investing in Europe, the data I was reading was not matching what I was seeing. Having lived through several emerging markets for venture capital, it can be normal for discrepancies between what has been done and what could be done, that is what ‘emerging’ is. Back in 2011 when I moved to New York, the startup scene there was new and upcoming and that is what made things exciting: there were tech events each night, startups coming together to feed and learn from each other, anyone who knew anything wanted to share and make each other better, it was really an exciting time. Back then NYC was doing less than $5BN a year in venture capital, today that number is $17.2BN for 2019. When I was asked in March 2017 if I would move to Netherlands with the concept of building a fund which could help power venture capital in Europe, the answer seemed easy. If NYC was growing so quickly surely Europe was next. 

Source: European Venture Report 2019, Pitchbook

Source: CBInsights MoneyTree Report with PWC 2020 ​

One of the biggest indicators of emerging markets, in particular with venture capital, is when the # of annual deals peak. Because of the nature of valuations, and the constraints of space and people, there are ultimately only so many startups which can launch in any given timeframe of a region, so the # of deals annually eventually will cap out before capital increases as prices go up (in this case startup valuations). In all cases there will be a ‘peak’ and this peak is when the annual deals reach their maximum # but the capital pricing has not reached potential yet. Its hard to know when a peak is happening until data from the later years follow. Once the annual deal count stabilizes, several years will follow where capital will steadily increase before reaching full potential. 

• For Europe we know the emerging ‘peak’ was in 2014: there were 5,504 deals being done across €11.4BN in 2014. Even today the deal count is about the same but the capital spread across deals is more than double approx. with €32BN (2019) 
• For New York we know the emerging ‘peak’ was in 2017: with 930 deals and $13.7BN in capital. Today the deal count is around mid 800s with approx. $17.2BN (2019)

 
Assumptions about European venture growth (back in 2017):

1. Europe has more growth in its future(opportunity)
2. Startup valuations in Europe attractive to investors which allows for more capital growth even if the dealcount does not increase
3. Europe has a considerable amount of local capital it could be using to power venture capital, namely, within its pension systems. Most American pensions funds are invested into venture capital sometimes with 10-15% of total assets (AUM) in venture. If European pensions even started investing 1% of its AUM into venture it could change the game completely

Despite being a relatively small country, Netherlands is a power player in the pension asset space having a lead in GDP as related to pensions (Source: Managing Venture Capital Relationships 2019) 

​From my calculations Europe seemed ripe for deploying venture capital and growing it. As an emerging market all the signs of hyper-growth were there: growing labor pool of expertise, mobility conditions, political stability and of course as seen above, resources of capital.  

​Throughout the years I kept checking various data points on Europe and LATAM getting confused. Many reports were showing capital growth with Europe on a NYC-like trajectory, but on the ground so much was missing in the ecosystem that most EU startup founders didn’t know what a termsheet was or how to value their company. How could this be? Other reports showed LATAM didn’t have much in capital, yet Latin startups are growing and scaling like crazy. It didn’t make sense. Despite being invited to help create a fund-of-funds for Europeans, via Europe, many Europeans are still skeptical of venture capital because no one they know directly have profited from it. Netherlands specifically has its own set of issues despite having one of the largest growing workforces in Europe, political stability and access to capital, NL has not been progressing much for VC. A 2020 report from TechLeap.NL specifically lists some of the issues as lack of access to top technology talent, knowledge of termsheets and lack of investor momentum This Dutch report explicitly states the need for a “Public-private fund of funds structure to attract and boost VC funds that invest across funding stages” but that is exactly what my fund is and the Dutch ecosystem still is not moving, however Dealroom and various report make it appear that Europe VC is on the rise, how is this possible? Here is a detailed look at European VC by country:

Source: German Venture Capital Landscape Report 2020, Whitestar Capital
 
As can be seen on the country level, the YOY growth for EU venture capital is not particularly markable. Even Italy has been unofficially reporting €1.5BN and with the average global family office having $1BN assets under management, one or two family offices could easily sway these numbers. Any particular EU pension could also shift VC growth numbers, and yet it’s not happening, why? Because the capital coming into Europe is mainly American capital one way or the other. The acquirers of European startups? Also, American. It’s not explicitly listed out but even when looking at Germany’s exits 81% were done by “international acquirers” which is a mix of mainly American and some Chinese capital. 

Source: German Venture Capital Landscape Report 2020, Whitestar Capital Data powered by Pitchbook (link)
 
When looking at overall European exits we see the # of deals plateauing, with the average exit being €31MM, aside from outliers in 2018. In the U.S $31MM is the average size of a Series B funding round so Europe is still “emerging” with good pricing but it’s very far from being mature. 

Source: European Venture Report 2019 Annual, Pitchbook

If we take an even closer look at a different set of data we see again, outliers aside, $31MM is the acquisition sweetspot for European companies which makes sense in general because statistically companies $100MM or under have a greater chance of being acquired due to corporate affordability. We can infer from this the EU acquisition $ averages will go up but the total market cap is likely €75BN

If we know that funding is happening in Europe as well as exits, but we also know that EU pensions are not even 0.01% engaged with venture capital, and European family offices only make up about 3BN a year for venture in Europe, then who are all the LPs of Europe? Again we know 70% or more of EU venture is actually American capital. 11% of American Venture Capital comes from Europe too, so Europe is investing into America, to invest into Europe, in a cycle which mainly profits the U.S.

​According to several reports including UBS’ Investor Watch Report We know that 65% of founders prefer to start something where they are, that means European founders are founding wherever they are. We also know 7 out of 10 investors want to hedge on “mega-trends” that is why we see many European startups as EU versions or types of companies that do well in America, but this doesn’t always work out the same in Europe. If we look at the demographic of investors for venture, those under 35 tend to be almost twice as likely to embrace change and exert flexibility:

Source: UBS Investor Watch Report Year Ahead (LINK)
Ironically the average age a manager takes control of a FO is 40-45 years old so we can see here a new wave of managers coming into play and before the next generation takes control wealth is already up 70%

​Other data sources, Like FINTRX also confirm that the average family office is about $1BN in size. 

Source: FINTRX Family Office Industry Report, 2019

66% of family offices in the world are based in North America with about 25% being in Europe but if Europe family offices invested 3BN last year into venture capital, this 25% might as well be 0.05% in relevance for venture capital. 
 

Source:FINTRX Family Office Industry Report, 2019 
 
If we look towards the U.S to get more insights on how LP and investor categories breakdown we can see quite clearly the common types of investors, as explained by Preqin and First Republic Bank

Source:Prequin and First Republic Bank US Venture Capital in Q3 2019 (LINK)
 
The U.S market is pretty clear that the LP base of venture capital usually ends up in four main categories: Foundations, Pensions, Family Offices, and Other. If there’s currently a 50BN opportunity for Europe, and if it is to act similar to the U.S market, that would be 12.5BN per LP category. If we know 3BN of European venture capital is coming from European FOsthen the market is 1/4 maximized in that category alone. It would appear of all the types of LPs EU FOs and EU pensions are likely to have the hardest time getting a slice of the venture capital pie and yet they continue to wait and not sense any investment urgency. 

By reverse calculating the market opportunity of Europe which is currently at 30BN annually (for venture capital) it is very likely the market will cap out at around 75BN including assumptions for growth, price increases and currency fluctuations. This leaves 45BN unassigned in European venture to be gained upon, again 50BN. 
 
With the UK having left the European Union, that means EU venture potential has both cut in half and doubled at the same time and here’s why: on one hand London has always been a major hub for talent and capital, however with the UK out of the EU, talent opportunities have dropped to import skilled workers so mobility has dramatically decreased. On the other hand, taking out British investors as LPs into Europe creates more room for either American’s to take up marketshare or Europeans to finally jump in and get a piece. On a high level that means about 12BN annually has opened up for the EU community LPs to jump on, assuming the Americans do not beat them to it. 
 
Below is an infographic which shows how big the UK had been in the European wealth market as compared to several regions and prior to Brexit

Source: The Wealth Report, Knight Frank (LINK)
 
If we assume the current European VC market is 30BN, and American capital conservatively accounts for 50% or more of this (say 15BN), and Brexit has taken UK capital off the table for the future (13BN) and startup prices will continue to rise over the coming years (even at a rate of 30%) this would mean there’s about 50BN on the table over the coming years, and specifically all that’s left for European investors! 
 
With only 50BN for EU pensions, family offices, individuals and HNW, this is nothing. If the average EU family office invested only 2% of their AUM that would allow for $20MM per family office or room for about 500 family offices to get involved with venture capital. However, its known statistically that often FOs, when they DO invest into venture its closer to 15-30% of AUM. On the conservative side of things, and accounting for room in this 50BN opportunity for pensions and individuals, European venture capital in the future only has room for about 125 family offices to participate. In several simulations that I ran, this number could be as low as 50 slots for FOs. 

​If the US venture capital market is the closest in comparison to Europe, we can see both 
     (1) the EU market cap will not surpass 100BN and 
     (2) strategically every few years 10-15BN of American capital is diversified to Europe nearly 
automatically
 
For example, 2019 data might indicate a ‘decline’ but it also indicates capital was diverted from the US to EU to reduce risk and maximize better European price points. 

​On a positive note we see European VC funds decreasing in volume (# of funds) and increasing in the capital that is in them. EU VC funds becoming bigger in size is an indicator of market maturity but it’s not a reflection of European operated maturity or labor expertise. 

​This “growth” of European VC is happening on the accord of American capital infusing the market which is helping American investors profits but not necessarily helping the EU.

​So, what does this all mean? In my case it means that I launched my fund backwards: I should have raised the funds in the U.S and deployed them in Europe—versus raising in Europe and trying to deploy globally. It also means Europe is in great danger of not owning its own marketshare or controlling its destiny. It also means that European citizens are missing out on the possible gains that their pensions could be making them by investing into venture capital while also generating jobs. 
 
When I review again reports from Netherlands and Europe I see that despite evenmy own efforts to help the ecosystem, European investors have not budged in movement nor understand the gravity of the situation. I moved to Netherlands in April 2017 and nearly three years later do not see any signs on the ground that people are excited and learning about venture capital the way New York does and has in the past. This is presenting itself as quite the awkward situation for fund managers like myself, when we know that fund managers are paid 30% more working in North America vs. Europe:

​It is also known that funds raising in the U.S can often take 18 months to fill their fund and this is in ideal hyper-fast conditions with investors savvy in the asset product, so I can only imagine European funds need twice as much time (36 months to fundraise) and in this time can miss out on entire vintages and opportunities. It also seems clear to me without a more robust labor force and cultural appreciation for the kind of hard work running Unicorns take, if Europe wants to be a major player in venture capital it will have to come to a compromise with many of its cultural norms. 
 
And lastly, when I think about all that I have seen and experienced the last few years it seems obvious to me that if Europe does not quickly become familiar with venture capital and investing into itself it might miss the boat altogether. From a global perspective the EU VC market will continue to grow whether or not European investors figure it out in time, which means the people benefiting the most off European growth are not actually Europeans which explains why there is such slow movement with EU LPs and talent. It also means the European market is at risk of not reaching its potential if those on the ground do not care or understand what’s going on the way other regions do.

At the end of the day it seems that Europeans need to be honest with themselves about the 50BN elephant in the room, before the elephant is gone. 



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INDUSTRY REPORTS AND CITATIONS:
6 European Venture Report 2019, Pitchbook https://files.pitchbook.com/website/files/pdf/PitchBook_2019_Annual_European_Venture_Report.pdf
 
7 CBInsights Moneytree report with PWC 2020
https://www.cbinsights.com/research/report/venture-capital-q2-2019/
 
8 Managing Venture Capital Relationships 2019, Cachette Capital
https://www.slideshare.net/CachetteCapital/managing-venture-capital-relationships
 
12 German Venture Capital Landscape Report 2020, Whitestar Capital https://www.slideshare.net/JeandeLencquesaing/white-star-capital-2020-german-vc-report
 
13 European Venture Report 2019 Annual, Pitchbook https://pitchbook.com/news/reports/2019-annual-european-venture-report
 
14 State of European Tech 2019, Atomico and Dealroom, https://www.atomico.com/presenting-the-2019-state-of-european-tech-report/
 
15 UBS Investor Watch Report, Year Ahead, UBS
https://www.ubs.com/global/en/wealth-management/chief-investment-office/market-insights/2019/year-ahead.html
 
16 FINTRX Family Office Industry Report, 2019
https://www.fintrx.com/fintrx-charles-schwab-2020-family-office-report
 
17 Preqin and First Republic Bank Q3 2019 https://www.firstrepublic.com/~/media/frb/documents/pdfs/innovators/preqin-and-first-republic-update-us-venture-capital-in-q3-2019-v1.pdf
 
18 The Wealth Report, Knight Frank
https://www.knightfrank.com/wealthreport/2019/download
 
22 UBS family office https://www.ubs.com/global/en/wealth-management/uhnw/global-family-office-report/global-family-office-report-2019.html

​The last two years have been brutal: discovering a market need, building the product fit, testing it (omg does it work?!) and launching it. Unlike a mobile app prototype-- which for zero dollars a splash page can be set up with fake screenshots and nobody bats an eye -- setting up an investment fund, particularly a fund-of-funds, requires copious amounts of legal paperwork and it’s about 100x more paperwork than any standard venture capital fund is required to do. We’ve done this, and at the same cost of a VC fund that’s around $50MM in size. Add in immigrating to Europe, dealing with LPs (investors) from all over the world and a diligence process that would make any American VC pass out: if I knew how hard it would be from the beginning, would I have done it again? Probably not. But once a soldier is in the trenches it’s too late to ask why, instead, how do I win? Taking a Silicon Valley approach to European venture investing is one of the greatest blessings and advantages I think my firm has, and like anything new and disruptive it will not look or act the way everyone suspects. 

​Venture capital by definition is an asset class that attracts a certain personality type. The industry is built on hype and that is both what is fantastic and tragic about the space—you want fund managers who can hype and communicate quickly, to pump up and evangelize their investments, in this case their startups. At the same time, VC fund managers are the first to panic if not texted back within minutes, smaller funds are often disorganized, and depending on the fund size (usually the ones $100MM or under in size, particularly the ones around $30MM) are the first to send both love and hate. To not understand their own documents and to stress. With experience this gets better over time; its not something that be rushed, downloaded, or learned. As a fund-of funds specializing in early stage venture capital, the thng which is most valuable to investors who are large institutions is getting into smaller VC funds. At the same time dealing with smaller VC funds can be painful, and thus my value as a FOF manager is often to absorb the pain. And like most debut fund managers I’m learning at the same time as investing, yet instead of making mistakes on startups (usually $250,000 a pop) I have to learn how to make mistakes on entire VC Funds ($5MM a pop). If that isn’t enough to make your stomach curl, image what it’s like doing this, half-way across the world from all your family and friends, and sometimes in a different language. Gulp. 
 
Europe is a B*tch
The other day our Amsterdam office was too cold and I needed to turn the temperature down. To do so, as I was told, I would need to read a 57 page PDF manual on the building, find the reference to temperature control, find the mobile app mentioned, download said mobile app, get a login username / ID from the building, email with IT to get it activated, revisit the mobile app, and about five hours later I was finally able to turn the temperature down my office. While running a fund. If this is not symbolic of what it’s like doing business in Europe, I don’t know what is. 
 
Everything which should be simple here, isn’t. Getting talent is impossible or hard. Any time I have made an estimation of any timeline I have been off, and if you try to get upset or put pressure on anyone around you in Europe, the Silicon Valley "VC hype" attitude does not work at all. People take holidays. People do not like stress.  There is not a Postmates around the corner. You cannot use most on-demand apps in Europe to fill any gaps… you are completely on your own. When you are in a country dealing with different cultures and languages, with 1/1000 of the resources you are used to it’s not fun and if you even try to “American complain,” the first response you will get are blank faces. 

Europe is Opportunity
On the flip side to America, Europe is filled with massive opportunities. Most Startups here come out the gates with revenue. The idea of being venture-backed is novel and companies here are more sustainable in their growth. There are a couple of European startups I have been mentoring, who are high growth with sometimes 100,000 mobile app users or $100,000 a month in reoccurring revenue. You can tell them to meet with VC firms -- but they don’t, they build. It isn’t until the actual moment they need capital to speed up growth and have hit a wall that they call. Just this morning a startup called me “what should I do? I think we need venture capital?” It was tough to respond because I had introduced nearly a dozen venture capital funds to this founder over the last two years, which he could have cultivated a relationship with. Instead he took one meeting and hit a dead end. Now he asks “how do I raise money?” I felt choked up. He’s had all the right contacts and over a year to get closer to these relationships but that’s not how Europe works. Europe is skeptical. Europe is paranoid. Europe does not like newcomers. Except when it’s time (sometimes too late) to raise money, European founders panic… what should I do? And it’s hard to explain that they have had the solutions in their hands the whole time. This is Europe. This is where things currently stand. 

Europe has Capital, But it’s Different
Netherlands, for example is one of the world’s richest countries with massive amounts of capital in reserves.Its banks, pensions, and family offices are just now getting around to what the U.S figured out a decade ago. It doesn’t mean Europe is late, on the contrary I think Europe is getting ripe. Now instead of spending weeks of time and dozens of thousands of dollars circling investors in San Francisco, European founders can raise money locally which means no waste of time AND no ridiculous and over-hyped startup valuations. Europe is cash-on-cash, the only points here which matter is money not users. You could have two startups doing the same exact thing, one in Germany and one in the U.S and while the European one might have a lower company valuation they will make the money go further and have an even better chance of an exit because European investors are not expecting a 20X on an overhyped valuation but 10-15x on a REAL income related valuation. For this reason and others I actually think both Europe, and Netherlands specifically, is geared up to make a great amount of profits in venture capital; it just needs to get its momentum. It’s the reason why early movers in the European VC space are on top and why as of recently, Europe has more Unicorns (billion dollar company valuations or higher) than ever before and maybe even more than the U.S itself. 

​We have already seen how the path to IPO can be not ideal for venture capital—it takes a lot of money and longer periods of time with no guaranteed output—yet, as most know the sweetspot for being acquired is at the $100MM or so pricing which means startups which are getting funded at the Seed level here have a shot at being acquired or exited within their next 1-3 years post funding. Not a bad setup at all. Europe is filled with capital and opportunity; it’s just a matter of connecting the dots. That’s what our fund is doing, but it’s painful. Pain is not a virtue its a value, and as time passes I realize the value of my fund is to absorb the pain. Make it easy on our investors. Make it easier on our investments. 

Earlier this year, as a first time fund, we had to go through a very rigorous process to have our full fund underwritten and diligenced by a couple of the world’s largest banks. They asked for everything, every tiny paper, every notary, every line of finances. At one point there was a two letter typo on ONE page out of about 5,000 pages of stuff and we had to update that one page. That single update alone probably cost us about $5,000 between the various lawyers who had to do it. When I called around to other fund-of-funds and experienced venture funds to complain, everyone just shrugged “yup.” It wasn’t news at all and there was zero sympathy. When we had to send our entire fund’s strategy and commitments to some large LPs, including some who would replicate us if they wanted, I didn’t get any sympathy there either: “That’s how it goes.” When I further went to complain I later learned that the process my fund passed through with flying colors in six months normally takes eighteen months! A Dutch based FOF called me for lunch two weeks ago and I was super excited to ask them some specific questions about their diligence process, because we would have the same investors, and when they came into my office they asked for a job. Their fund didn’t pass the diligence that my fund had. It turns out slow and steady does win the race. 

Nuances….
We moved into a new office space in Amsterdam. I went looking for our office invoice via email and couldn’t find it until I contacted the office, and apparently they send invoices but do not mention the building name or have the building name in the email address. If you searched an inbox looking for it, it would have never been found. We ordered printer ink online and after a week it arrived (despite paying extra on Amazon Prime) and it was the wrong size for our printer and hence useless. When we posted for job openings asking for Dutch native speakers we got 98% non-Dutch speakers; most Dutch persons with the background we wanted are instead taking the safe path of multiple masters degrees and pursuing jobs lined up by their families. When I try to explain all the obstacles we deal with in Europe to my American colleagues it simply doesn’t make sense, its unfathomable, can’t be true… but it is. And despite all this we continue to move forward. One step at a time.  My fund started investing into venture capital funds last year and as the fund grows we learn more about how to adapt our strategy for a large fund of funds. I haven’t personally gotten a paycheck in the entire time of the fund; founding partners are usually the last to be paid. And so, as I get to work with my New York mentality expecting to accomplish 80 things in the day, I have learned to be content with getting 10 things right. 
 
Are we behind schedule to launch our first fund and meet our commitments?  Yes, we are. But this isn’t a mobile app prototype that I can simply trick people into downloading for vanity metrics, this is an investment fund. While Silicon Valley has the mentality of “f**k it, ship it” Europe has the mentality of “build it, and build it well.” All the roadblocks and inconveniences, in a way, seem like a system for keeping me more mindful and more thorough about how I build this fund. It is simply not worth doing anything in Europe unless you are going to do it right, do it well, and do if for the long haul. Europe is not in the mood for any short term sh*t, so leave your American sales mentality at the door, and drop the accent too if you can. 
 
Do I feel rushed by the expectations of everyone? Of course, especially the pressure from America where all the infrastructure is already there. The U.S will never understand the movement which Europe is currently going through, and despite all these hardships I still feel excited. 

Hope…
Last week we hosted one of the first ever “VC Nights”in our building and in two weeks notice over 100 people came to learn, in Netherlands. Reminds me of when I moved to New York circa 2011 everyone told me New York was a waste too, and now look at that startup community? I remember calling Women2.0to mention I wanted to start hosting female founders nights and I was told there likely wasn’t enough female founders, in New York. Within a couple months we built out a 200-300 person monthly event, selling out weeks in advance. 

In the meantime, we will be building what needs to happen. There’s no point in building something short-term when there is an entire continent about to break into an untapped asset class, which needs our product. I simply have to keep building.  Am I late? Yup. And I’m the first one to admit it. Just like a soldier on the front lines, I see the sky clearing and the magic happening here in Europe and I if I had put my finger on it, it’s hope. The breakthrough is just around the corner. 
 
As a professional project manager I’ve lived my life attempting to launch projects on time and on budget. In Europe however you simply cannot plan the same and make the same assumptions as New York or Silicon Valley. If we only have one shot, I’d rather be late and the best, than not in the race at all.

​Afterall isn’t it the turtle who won the race against the hare anyway?

Ellie Cachette is the Managing Director of Cachette Capital Management and experience entrepreneur now living in Netherlands. For more information or links see www.elliecachette.com or www.cachettecapital.com

#venturecapital
#cachettecapital
#DesireeCachette
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#cachette capital

Why Netherlands??? Out of all the countries I am often asked "Why Netherlands?" Why choose to have my life and career here, to that the obvious response is "Why not?" but it's much deeper than that and if you care some of the personal backstory is here. 

Flashback to 2007: When all my friends were taking cushy software jobs for Twitter and Facebook, and some of them self-made from doing such so early on (Mark, your Tesla is beautiful and you DESERVE IT), I was always a risk taker. Why not Romania? Why not work for a French fintech company in San Francisco? Why not share Silicon Valley hustle with Europe? Perhaps it was my curiosity or entrepreneurialism, or maybe something deeper but I was always up for the challenge. As I have talked about those early years and how and why I took certain projects I did, the power of Europe is not simply a cliche is a robust industry which has taken over a decade to collect itself which massive market data to prove its not only ripe for venture capital but startups as a whole. 

Now as we see the collective global innovation "war" being brought on and billions of dollars to support these efforts, as most Americans are learning the soil doesn't matter. It's where knowledge is generated. Where ideas and software is made. Technology is both the beauty and the pain of how Facebook can be easily spammed with misinformation affecting even the highest levels of democratic elections (I will reserve more comment or details on that here) and also why you can use Uber in nearly 72 countries across the world. The expansion of tech usability is not simply an accident its part of the plan of Globalisation, we are all living in it. We are all placing bets everyday with the products we use, things we support and things in which we pay attention. 

WHY Netherlands?
Netherlands has a population of 17 million people, by American estimates that's basically the total populations of LA, SF, and New York City and some change combined. Netherlands by land space is essentially .003% the size of American soil and yet doing so much. If you are curious you can go here and compare land space and populations. Yet despite this small European country, Netherlands has seen over 3MM new people in the last couple years and massive economic growth, ontop of having massive amounts of capital in its savings (read: no gazillion dollars of debt like the US) and everyone is walking around with health insurance. However this isn't a post about not America but instead, why not Netherlands? New York City was even once Dutch territory and for various reasons given to (however you decide) is now America today. Netherlands is surely a small country but a smart one. 

Whats Going On?
Firstly if you are keeping up with the news, Europe is having just as much economic growth as the US is used to as a norm. Let's first take a look at simple Dutch employment rates. How is Netherlands doing with all these new-coming workers?

​Netherlands represents itself in the top #7 European countries with workforce growth (ATM p.16). Besides current stability of a workforce, data indicating a growing workforce and an increase of nearly 1 million more jobs in the last year (ISHN) Netherlands has positioned itself as a contender in the next great race of innovation with access to talent (EDF p. 9), Amsterdam as top #7 developer hub in Europe (ATM p. 45) and aside from the U.K, Netherlands is a top 3 destination for American trained and employed software engineers looking to migrate (ATM p.50). Netherlands is currently #1 in Europe for job positions open for “Software Engineer” (ATM p.50) On a networking level, Netherlands is a European leader for attracting talent in general (EDF p.21) with strong coding programs for developers and technology enthusiasts (EDF p. 13)
 
Talent Within Netherlands and More Coming In
As a robust economic working force, friendly technology infrastructure and English fluency as a country, Netherlands is a top #3 destination for international movers (ATM p. 46) and non-Europeans feel very comfortable immigrating.
 
Netherlands has roughly a population of 17 million inhabitants and growing, with nearly 3 million in new constituents immigrating in just the last five years (WDM).
 
With about 33,720 km2 of land and 91% of Netherlands workforce being urban, there is both plenty of room and potential for the expansion of several working hubs in Netherlands. The average age in Netherlands is 42.3 (WDM) which also means, there’s room for growth of new generations and working forces. Lots of room and lots of opportunities. 

Netherlands is seen as a Top #3 Destination for non-European Talent

​Netherlands’ advantage to global economic viability but it is not just its workforce which positions Netherlands uniquely but also its location and infrastructure. Non-Europeans find Netherlands as a great place to immigrate into Europe as a physical and economic gateway. Non-Europeans place Netherlands as a top three European country to migrate into (ATM p.53) and some of Europe’s best schools are in Netherlands (ATM p.83). Coding programmes also support skills outside of academia (EDF p.13) and the government’s flexibility in supporting its own initiatives vital to growth and chance. Diversity is also seen as a priority with women being roughly half of the Dutch workforce (ISHN) and the government vocal of its support for women (EDF p. 19) even in industries where there can often be male-dominance, “I will never sit on a panel without women, ever again” (FNTS) HRH Prince Constantijn told Financial Times in 2019.

Netherlands ranks in the top #2 European countries with the highest concentration of tech-related meetup groups per inhabitants (ATM p.65) and this should come as no surprise as some of the most European produced Billion-dollar companies are Netherlands based (ATM p. 127). Of the top 10 largest European VC backed IPOs, 2 were Dutch. That is nearly 20% of billion dollar European IPOs coming from Netherlands (ATM p.130)

Top 10 Largest VC Backed IPOs by Market Cap Exit

​Netherlands is both a global leader in the amount of capital in which the country has access to, and talented workforce which can and will power venture capital, the work is being done on the ground to bridge the gap to speed up distribution of capital for the needs of growth and innovation. Some of Europe’s biggest financings have been Dutch-based and 1 out of the 10 largest Merger and Acquisition based exits was Dutch (Mendix) (ATM p. 130) there is still a lack of access to capital (EDF p.26). Netherlands based angel funds and early stage investing continues to grow (EDF p. 31) and government-led tax initiatives contribute to making Netherlands a friendly place to do business (EDF p. 35). For funds raised per capital, Netherlands ranks #1 (ATM p.127)

Top 10 European Countries Investing into Deep Tech

The point is, just like many people come to America with big dreams and eventually become American, so do Americans to other countries with different visions.

​The world of venture capital and technology is changing by the moment and becoming more global by the day. In the end we all work for someone and so perhaps, its the most American (or human?) thing to apply what you love to the place in which you feel you belong?

ISHN            Big Increase in Flexible Workers in Netherlands: Gig Economy Uptick Started During Financial Crisis 2007-2008 (2017)
                        https://www.ishn.com/articles/106239-big-increase-in-flexible-workers-in-netherlands
 
WDM          Worldometer Report Data: Netherlands consensus (2018)
                       http://www.worldometers.info/world-population/netherlands-population/

EDF              European Digital Forum- The 2016 Startup Nation Scoreboard: How European Countries are Improving Policy Frameworks
                        and Developing Powerful Ecosystems for Entrepreneurs (2016)
                        http://www.europeandigitalforum.eu/index.php/component/attachments/attachments?id=311&task=view

ATM            The 2018 State of European Tech Report, Atomico (2018) 
                       https://www.atomico.com/the-2018-state-of-european-tech-report-is-live/

​My understanding for a while was that venture capital was funded mostly by rich individuals, it wasn’t until later on in my own professional journey that I learned more about the origin of venture capital, namely, that large pension funds were much of the investors behind venture capital funds. In the U.S this is more commonplace and has been for some time, in Europe this is becoming more mainstream as well but only recently. What has started to strike me as odd, is that consumers are always paying the costs for things without having many business rights. What I mean is that consumers work hard for their money, are often forced to contribute portions of their pay into pension funds (which may or may not produce returns) then buying for goods which is also form of investing.

If you look at Tesla they are a perfect example where there have been government subsidies (funded by consumer's taxes, and later paid off wth consumer money from revenues), then consumers often pay in ADVANCE for a product which doesn’t exist yet (free business loans without any equity) and then, using post-taxed money they can have the ability to buy publicly traded stock into the same company, while also paying sales taxon the price of said cars. Huh? Let's not even go into lack of Tesla transparency and ranting tweets earning SEC fines which ultimately are passed along to shareholders aka consumers.

The world is shifting and consumers are now the ultimate investors and starting to realize such, this is why we see the rise of crowdsourcing platforms, Kickstarter campaigns and GoFundMe’s.

People are hungry to find a way to leverage collective power, when really, they’ve had it the whole time. 
 
WHEN SAFE INVESTING ISN’T ENOUGH
Now the problem and the beauty of pension funds investing into things is that it’s a great way to pool together (“the people’s”) resources and make bigger decisions for the collective good. In theory, this is a great way to accomplish a lot. One of the challenges these pensions are steered towards “safe” investment allocations only to find that people are living longer, more dividend returns are needed and thus the “safe” model is starting to hurt the banks and people who rely on their dividends later in life as the bar for performance continues to rise. Sometimes it goes bad too, I’ve had relatives lose much of their pension monies from mismanagement so pensions as it turns out, from a consumer perspective can often be a greater risk to cash flow. 
 
Looking at the fundamental structure of pensions, the life expectancy of a human back in the 1960’s was something around 52 years old, followed by a spike and by 1970’s the average life expectancy was 67.1/74.7 (male/female). Given technological advances and trends in science this number is already believed to be past 80. If pensions were designed as a safe way to save money, how can the same fund investment structures that were supporting those with the average lifespan of 52 somehow also perform for those living to 80? It’s impossible. That’s doing the same exact thing expecting an outcome needed to increase profits by 0.65x. How? Pensions will be forced to change their asset allocations and investing strategies or risk becoming extinct. 
 
Let’s take a look at overall American pension performance:

This lack of performance is not only from too conservative of investing approaches its also from the increased life expectancy and needs / dependents on the funds. Besides the obvious lack of performance this is also an opportunity cost for the people, as these funds could have been applied elsewhere for better returns. Produced more jobs or more profits, lots of opportunities missed.

​There is also similar data with GoLocalProv in a fascinating report Riley: Effect of Insider Politics on RI’s Pension Fund Under-Performance
​
Now let’s look at where a lot of this global pension capital is and who the major global players are in the game of pensions:

(Data courtesy of Cachette Capital Management. Full presentation can be found here on Slideshare)

If we dissect and look at the typical breakdown of pension asset management capital is usually spread across asset types like bond, equity, property, cash and alternatives:
​

This full report with the above can be found here by the FCHub, Financial Community Hub, there are many resources online citing the same breakdowns. The interesting thing here is that venture capital is still not considered equity. Venture capital usually falls within "alternatives" and is competing against many other forms of "alternative" assets. If we look at the top countries with capital in this chart namely Netherlands, thats about 8% total for alternatives and venture is less than 1% of that 8%. ​

​Yet if we look at the typical returns of these asset classes we see a totally different order:

​So, what is going on, if we know that venture capital could be a great tool or asset class why isn’t there more pension involvement in venture capital? Well it turns out logistics. 

​TIME FOR INNOVATION
While U.S pension funds slowly address venture capital opportunities, some countries are ramping up to quickly overhaul their current investing practices. Understanding that the current investing strategy doesn’t work to maximize capital, it’s starting to make sense to actually put the people’s money to work. In France there’s the expectation that over 1BN in capital over the coming years can be applied across startups and venture. In Netherlands there’s a whole initiative being rolled out across the Pension federation around not only venture capital, but innovation and social responsibility and if there’s any country to move the global needle in pension-venture capital investing its Netherlands. 

With Trillions in capital that could be put to work (Netherlands alone), even if asset allocation was increased to be say 3% of the current models to be venture focused, that’s billions to fund upcoming startups, ideas which consumers like, or fund things that might change the world altogether.

 Since pension money is the people’s money after all then it would make sense to shift towards market demand and yet we see even more interesting things happening in Europe around pension investing. 

 Penseon Federation (November 2018) in its additional referendum for investing. Full memo can be found here:
​
                           Dutch (original text): ​
                           "...verwijzing opgenomen naar informatie over de omgang met maatschappelijk verantwoord beleggen" 

                           English translation: 
                           reference to information about the management of socially responsible investing

This is quite interesting, for a nation loaded with capital (Netherlands) which can be put to use, its already outlining framework for socially responsible investing, yet wouldn't venture capital be considered a socially responsible way to apply funds on behalf of the people?

​Not exactly but also exactly. 

​THE CHALLENGE: EXPERTISE
The other challenge with investing into venture capital is inherently not a pension and vice versa. The skills for venture capital are completely different than that of a huge public fund. There is also the issue of potential fraud or bad investments, which is why many pensions across the world have “minimum” commitments of $25MM or $50MM or $150MM for underwriting purposes. There needs to be verification, investigation, and diligence. For the pensions aka “the people” to pay for this time it has to be worth it, as in worth the investment size. Mathematically when a pension fund is somewhere between 100BN and 300BN, the investment size (into any asset class) should also be notable enough to matter, to even move the needle. What’s the solution here? Well as it turns out there is a mechanism already in place that fits this, it’s a Fund-of-Fund. An investment fund which invests into many funds, which traditionally would have been hedge funds or bonds it’s become more acceptable (and it makes more sense as the asset class stabilizes) to see fund of funds specifically set for venture capital. Streamlining investment money into venture capital but spread across dozens of VC funds makes a lot of sense but there are not many FOF’s like that… until recently. 

There are more venture capital funds than ever before in history. In the US alone there were over 400 sub-200MM venture capital funds launched in the last two years and while the number of European VC funds is not exactly known, new and more funds that are even smaller  launching is possibly a good thing, it also means there more venture capital talent working specifically in venture capital and not at pensions or fund of funds. A FOF for venture capital would not be for the lighthearted: the responsibility astronomical, expertise across every area needed: legal, asset management, knowledge of underlying assets (startups) and how to properly manage each piece of the supply-chain.

CONSUMERS AS STAKEHOLDERS
If consumers are the investors and stakeholders behind pensions, shouldn’t consumers have more say in where this pension money is applied? Unfortunately they aren't even in the conversation. How pensions make their investment decisions comes largely from institutions or managers already getting well paid by management fees with zero incentive to increase risk or invest into other areas. Yet if we look at the stability of venture capital; since the 1980’s venture capital has started producing returns anywhere between 2x and 15x and it’s not without the consumers either: they have been using and investing into new products, new companies, trusting startups to do things like pick them up in cars (Uber) who go on to become publicly traded companies. Venture capital is becoming successful because of consumers, and it’s this use and investing with post-tax dollars that make it a shame for them to not have more equity. Its rumored that Europe has more billion dollar companies in the lined up under venture capital than ever before and the trend is showing no signs of slowing down. Its rumored that Europe alone is hiding dozens of billion dollar companies ("unicorns") who are producing revenue and scaling globally. 

A copy of the full report can be found here. 

For the big question: why aren’t pensions following more of what its constituents need, want, use and have-to-have? Why are pensions still investing less than 1% of their allocation to venture capital when 1 in 3 consumers are using products which were at some point backed by venture capital? Why don’t consumers have more of a voice? Well, they do its just used in the wrong directions. It’s only a matter of time that consumers not only vote with their currency (buying things) but that they demand too their pensions work for them.  

WHAT THIS MEANS FOR THE PEOPLE
The good news in all this shifting is that people are going to start getting a bit more of what they deserve. Products and startups already do and will continue to see cheaper setup costs, pension funds more likely to produce better returns and supply the dividends promised or more and the enlightened consumer will have more input into the things they use and the things which become successful. So while kickstarter campaigns and crowdsourcing is surely not to go down anytime soon, we should see the people’s money being put to work and doing good, for the people. The whole world and how it invests is already changing: entrepreneurs are going to become VC Fund managers, VC fund managers are going to become FOF managers, FOF managers are going to start working for the banks directly and in all this movement it’s a good thing because it means more knowledge will be spread across the lifecycle of venture capital and with VC as an asset class stabilizing. We can also be sure over the coming decades that venture capital is soon to be the new Private Equity. 
 
More than all that, how powerful is it that the future is not only going to be funded by the people but decided by them too?
 
Venture capital is the new private equity and consumers are the new investors.

ABOUT ME
Founder at heart I’ve spearheaded startups, consulted for VC funds and now the fearless leader of a global fund-of-funds investing into early stage venture capital funds. If you have an interesting VC fund or would like to know more send an email to ELLIE (at) CACHETTECAPITAL (dot) com.

​

​This post is one of many upcoming stories around raising a fund, managing venture capital and trends within asset management 

Often I am asked what is hard about raising a fund, or congratulated for putting on such a big effort (my fund is $1BN) or given jest about always being on an airplane but what’s hard about raising a fund isn’t what I thought would be hard at all. 
 
My situation is also a little bit different than the average “fund” in which I’m mostly referring to venture capital funds, as I am Fund-of-Funds. I am more upstream working with larger checks and larger investors. I also see it all: I see the dirty tricks, the lies managers tell themselves, the crafting of spreadsheets which mean nothing, and the back-channeling between fund managers to try and get an outcome they want. I see the sh*t talking to make one’s fund seem better and the flood of TV interviews while your startups are rotting and creating hype to get investors to put money in before the truth comes out. I also see (and know what it’s like) to be piled in bills, all credit cards maxed and yet still staying up until 2am to mentor your investments. See also Managing Venture Capital Relationships. 

From the good, the bad, the ugly I have seen every corner of both venture capital and finance as a whole and from what I’ve experienced here are some of the (surprisingly) hardest parts of raising a fund:
 
Everyone Thinks They Can Bring Value to a Fund---Until They Can’t  
Most ambitious persons attracted to working at a fund love having a VC vest, corporate credit card and being schmoozed by royal families and global banks. Who wouldn’t? No matter the role you are hiring for its incredibly hard to find the right people who can be trusted and the higher the person’s compensation package the longer the honeymoon period can drag on. I have not mastered this yet, however, I have noticed a trend:

• Person promises the world and exaggerates skillset to join fund
• Everything is dandy and jovial
• Mistakes start to surface, its blamed on “learning curve”
• Mistakes repeat themselves
• A Pledge of loyalty is proclaimed
• Some action happens that provides clarity on both sides: person has to either quit or be terminated
• If person has to quit its immediate and their ego is so profoundly bruised (reality is not fun) that a backlashes onto the team
• If the person is terminated, most coworkers are shocked and the employee will almost certainly shake the fund down for as much $$$ as possible before they’re out the door

 
My advice: since this is my first fund I don’t have repeatable data nonetheless I would say no matter how much you like a person (as a human) the fund’s performance and duty should always come first. If this person is not improving or helping the fund (even if they are not yet harming it) you have to let them go as fast as possible. 
 
The Food—Either Always Hungry or At an Airport
As a professional executive I am not new to knowing that a business dinner is not actually “eating dinner” but when you start raising a fund it takes thing onto a whole other level because you are (a) always talking in person or on the phone (b) on an airplane (c) in a taxi (d) on a stage or in a meeting of some situation where its rude to eat even though you finally can eat (see “a”… not talking). My advice for this is simple—start pretending you’re an astronaut. I have mastered the art of packing my own snacks, taking snacks from airport lounges (thanks KLM!) and meticulously planning how to eat. I am the master of dried soups, nuts, and any form of protein allowed on an airplane. It’s important because much of the time you are simply doing un-natural things and your body and brain need calories! It’s impossible to be in back-to-back meetings only to realize the 37 minutes in the taxi to the airport is the only time you can actually touch your food. I could write a book on this topic alone but after going to sleep hungry in many hotel rooms over the last two years (especially in Europe where things tend to close or not deliver) here’s what I’ve learned:

• Always bring an empty bottle to fill with water at the airport and fill it there. It’s easier and you stay hydrated
• Never assume you can just “grab” dinner at whatever hotel you are going to. Your flight might be late, the hotel kitchen closed, it’s a city that doesn’t serve food that day whatever. Bring enough calories for hotel dinner or even order food a few hours in advance and have it waiting at the front desk or in your room. If there’s fresh food available when you get there? Great! It never hurts having extra food
• Keep airplane snacks even if you don’t like them. If you are starving you will appreciate them and it helps to have something on you

 
All Potential Investments Lie 
No matter where you are on the foodchain all potential investments are lying right now about progress (startups, VC funds etc). This one bothers me the most. I’ve seen VC funds tell others they are further along with my fund and diligence than they are, I’ve seen VC funds ignore me then email my board saying we owe them a bank wire (when they haven’t signed documents or are “missing” something vital and are doing such tasks try to wiggle around it). See also, Prepping for Technical Diligence. I’ve also seen VC funds say they passed on me as an investor when we passed on them. On one hand I respect the whole faking it until you make it, I get it, but the lying that goes around venture capital can be way too much and I often feel like an island of reality check, reflecting truths to any fund which crosses my seas. Lying is also prevalent in finance as an industry. This makes my job (and your job) hard to raise money when 20% of energy is going to be cleaning up or clarifying little lies and big lies and you will always be offset by some sort of drama at the absolute worst timing ever. My advice here on that topic

• Keep detailed notes around who you meet and when. In my first WEEKS of building our fund a small $10MM VC who I didn’t like at all, spread a rumor about me--however I was able to produce a spreadsheet with data points and the other funds I met as backup. This report eventually evolved into one of our earmarked VC Dashboard Reports which we publish quarterly and have now met with over 300+ VC funds to date so it was an early blessing in disguise but annoying
• If you hear a rumor about someone, reach out to them directly instead of “spreading it.” I had a VC fund we’ve invested in once spread a rumor about another VC fund we invested in and when asked, they said they weren’t sure if it was true. If it weren’t true then why say something? I made both firms have a phone call and kiss and make up. I felt like a teacher making two kids in a sandbox play nice. It stopped the rumors in track (because they were also false) but again was annoying and a waste of time

 
Timezones Are a Bitch 
Perhaps it’s more challenging for my fund because we are fully global but when you are raising money you usually can’t choose where the investors are from and they usually have multiple homes or offices. Keeping traction is very important so often sleeping more than 6 hours or a flight or something else can throw you off an investors orbit. You don’t fully grasp the importance of timezones until you’ve lost a few deals or things keep going wrong and you can’t understand why—its timezones. Be mindful of the person you are trying to persuade or the critical members on the team and email them at a time friendly to them, not you

• Email the person preferably between 7:00-11:00am. If it’s too late in the day the quality of response will go down and maybe bumped another day, if its in the middle of your night, you could also struggle to response timely
• Start your day with those currently on your timezone or those more urgent and then work through (For example don’t email New York, Then London, then San Francisco if you are in Europe… start Europe, London, New York, San Francisco). Everyone’s work day starts on their morning. Batch timezone replies appropriately

 
People Who Can’t Apologize Can’t Be Trusted
This goes for employees, consultants, investors, startups or anyone. I have seen enough to know that a person who cannot say they are sorry does not mechanically know how to take responsibility and someone who cannot take responsibility should never be in your ecosystem. This is hard to pick up while raising a fund because no one likes making mistakes so I try to see if a person ever takes responsibility, even in telling stories about past mistakes. If nothing is ever a person’s fault, run. 
 
Lack of Confidants 
When you are a startup founder you have lots of other startup founders to talk to even if their products are different. When you are a VC fund manager you have many other VC fund managers to talk to (although they gossip so the risk is high there). Yet when you are a fund-of-funds, or in a fundraise or have certain filings with the SEC etc… its TOUGH. You CAN’T talk to many people about your problems or vent easily as it could quickly be hyped and destroy your fund or even cause problems with regulations. This makes Advisors and Partners even more important although that takes time and trust to build up. There are also the nuances of how numbers are financially ran or how a fund is calculating its decisions and a lot of the most interesting things you want to discuss, you won’t have anyone to discuss it with! This is also hard too when 95% of your time is verbally or in another way communicating with investors, so in the 5% you do have for venting, your heart and brain have so much to say one on hand and on the other you won’t have the energy or person to say it to. On the flip side, some of my closest confidants were around for Day 1 are now on my Board of Directors…confidants are built in layers. Invest in this early on. 
 
Being a Woman Makes It Harder 
​Being a woman and raising a fund is incredibly hard because its already hard and then you add all kinds of nuances like, investors pretending to be interested just to be around a pretty lady. Investors being concerned about pregnancies and when / if that might happen. Trying to actually plan one’s birth control around fundraising is impossible. Having routine sex during a fundraise is also impossible for either gender but harder as a women due to security reasons #Metoo. People won’t take you seriously. To this day, even with fund’s we HAVE invested in, many have to learn to not going running to my male advisors--that I am indeed calling the shots. The amount of discrimination and bullshit you encounter as a woman is off the charts and then you add periods, cramping, sitting on 12 hour flights wondering if you brought enough tampons? No thank you. The one thing I would have changed (if I could change it) would be raising money as a woman. I would be male just for fundraising in a heartbeat and I’ve even found sometimes bringing along a male to meetings helps. For how much harder it is as a woman I can’t say it’s fun still the one advantage is being constantly underestimated. This also means that while every amazing thing you do will be measured in half, it also means you can pull off pretty remarkable things while not a single man sees it coming. And perhaps I am a bit jaded on this topic as I’m a female General Partner who has survived raising money as a female founder, and serving as a female vice president and been through many of the stages of company growth, I can say a lot of my team that has been with us since the early times is female. I still have hope that eventually the world will be rebalanced gender wise and having the secret powers that come with femininity will prevail. 
 
My fund has a different story of origin because we did six months of research first, worked with large banks to solve product-market-fit, designed what the fund-of-fund needed to be THEN fundraised so I’m not exactly sure when our fundraising started, however, all funds eventually have to fill gaps or their whole fund and this requires grit, meetings and a lot of flying around the world. In the end, its been the smallest things which were the most challenging and simple roadshow survival. In general avoid the freaks, bring snacks and keep it moving. See also You Will Get Tired of Seeing My Handwriting (founders tale).
 
ABOUT ME
Founder at heart I’ve spearheaded startups, consulted for VC funds and now the fearless leader of a global fund-of-funds investing into early stage venture capital funds. If you have an interesting VC fund or would like to know more send an email to ELLIE (at) CACHETTECAPITAL (dot) com. 

New York Fashion Technology Lab:  While on the outsides a bit this year regarding the program at NYFT, I still keep an eye on the startups in the program as I have close relations with Nordstrom and Macys. Their Demo Day is coming up June 8th in NYC for anyone interested, shoot me a note :) 

SummitSync: Just recently became more involved with the kids at SummitSync, a startup focusing on changing how people meet each other at professional events. Their mobile app is live which I HIGHLY encourage you to download. If you have features or ideas please forward them to me, feedback always helps. (Find the iOS app here, Android app here)
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Back in 2008 at the Jewish High Tech Community meet up at the Fenwick and West offices in Mountain View I sat in the back of a room, it was probably fall or autumn time. I had never been an entrepreneur up to that point, just always a technical or software project manager but if there was one thing I was good at it was calculating budgets and timing. 

Romanian entrepreneur George Haber presented his startup to the group ( CrestaTech which has raised $20MM to date according to Crunchbase) and finished with the statement of, "We are raising XX in funding and launching DD-YY" and I thought to myself immediately-- wait a minute the math and launch date didn't line up. He wasn't actually able to launch by his launch date without raising money. In fact, he would barely be able to make it to launch. The project manager in me was so confused... "Why would anyone in their right mind be pushing a product they weren't prepared for or had the full budget allocated to execute?" It seemed insane, illogical. (Keep in mind around this time CrestaTech might have only raised, or publicly acknowledged raising $1MM...)

I raised my hand for the open Q and A session to ask George what-was-up with this.

"Mr. Haber, If your burn is x, and your launchdate is y, then you aren't launching on that date because the product will be ready, you are launching because that's exactly when you will run out of money."

George smiled, as if I had asked the most obvious question in the room that only I had been the last to figure out, "That's exactly right. We will launch then because we have to. That's life. That's why we do it."

He was smiling when he said it too, I couldn't believe it. Startup founders are insane I thought to myself. 

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On another note: a friend that was also there that night was David Ulevitch of OpenDNS. At the time OpenDNS had raised $2.5MM in a Series A.  Just last week OpenDNS was sold to Cisco for $635MM, so congrats to David and team, amazing how much can be done in 5-7 years!







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PS- What's up with this Founder Story?
Curious why I'm posting random stories? Its because I just finished a book and have time to download them. Have a question or something you want to talk about? Send me a note: e (dot) cachette (at) gmail (dot) com.