​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
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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)
​

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. 

For the full posting go here

.....it all started with a seemingly innocent music video of Vitas. Then I found more, and then more. 

I love you Russian pop music. 

Terry L. Stogdell
(Born: June 18, 1964 -- passed: April, 14-2002)

While a youthful dad by any standards (just a bit over 20 years old when I was born), today my father would have been 51 years old. Which seems old, except it isn't. 

For those of you that remembered him and know the legacies he's left behind that is quite impressive in his 37 years living on the planet he maximized each and every relationship and piece of love he came across...

There are loved ones in this lifetime and others who passed that appreciated all that he contributed to the HIV / AIDS communities as well as Hemophilia communities in Northern and Southern California. 

Here's to keeping his honor, and mainly his spirit for healthy and vibrant communities. With any luck by fall 2015 semester there will be a "Terry L. Stogdell Scholarship" at Humboldt State University this fall and his legacy foundation, the Silverman-Stogdell Foundation is up and running providing resources to underprivileged kids looking to disrupt public health.

"May his Memory be for a Blessing" - Jewish Proverb

Feel free to leave a note or send me an email with your favorite memory. 

The Difference Between a Copyright and a Trademark

Copyrights and trademarks are two forms of intellectual property rights. People often confuse the two, however significant differences exist that distinguish one from the other. Let’s take a look at these differences to help you better understand which, if either, is right for your invention design:

What is a Copyright?

A copyright refers specifically to works of authorship, such as songs, books, dramatic or musical plays, software, and photographs, and provides the creator with exclusive rights to the material. Whatever the material, tangible expression is required to get the work copyrighted.

To obtain a copyright, you must register with the United States Copyright Office. This is something you can do on your own or with the help of an intellectual property lawyer. If you decide to hire an attorney, you will likely be asked to fill out a questionnaire regarding your new invention. This provides the lawyer with a thorough understanding of your work.

Once all necessary information is collected, either by you or your attorney, you will file a copyright application with the copyright office. It generally takes six to nine months to receive your Certificate of Registration in the mail, however the copyright is effective immediately following acceptance.

After you receive your copyright, it is within your legal rights to reproduce, distribute, display and perform the work however you see fit. You may also create derivative works, or works based on your original creation. If a person or business unlawfully copies your work, you have the right to take legal action against the person/company in federal court.

What is a Trademark?

A trademark is defined as an “identifying mark that distinguishes particular goods and services.” It is a brand name. Considered necessary assets when forming a business, examples of trademarks include words, logos, symbols, phrases, names or a combination of these. And while a trademark is different from a copyright, the application process is similar. If working with an attorney, who will help manage your idea and the application process. You will again need to fill out a questionnaire, and the lawyer will perform a trademark search before finalizing the application.

The next step is filing your application with the United States Patent and Trademark Office. How long it will take for your trademark to register depends on a number of factors, such as an application based on use in commerce or intent to use. The process can take up to several years.

Acquiring a trademark demonstrates public notice of ownership. It also establishes your legal rights and makes legal action possible should a person or company violate these rights.

(This is a guest post by Kevin Skaggs and Idea Design Studio)