David Zhou: Silicon Valley Thought Leadership, On Deck Community Building & Emerging LPs Investing in VC Funds - E388

· VC and Angels,Creators,Thought Leaders,Podcast Episodes English



“At the day, it's not about virtual or in-person meetings. it's more about people craving connection. Humans are, by nature, social animals. On top of that, we live in a world where we have never been more connected than we are today. The town square is a millisecond click away. We pull up a browser, depending on your Wi-Fi speed, you can see everything on Twitter, LinkedIn, and other platforms.” - David Zhou

“In terms of things to be aware of, it depends on the type of limited partner you're talking to. For larger limited partners like institutions, pension funds, endowments, they see venture as more of an asset class. It is a smaller bucket in the private equity portfolio. The private equity to them is a combination of venture, growth, and buyout. For the smaller LPs like individuals, the smaller family offices, the next gen family offices, there's the largest wealth transfer we've ever seen, but it's not always associated with the knowledge transfer. To them, venture is less of an asset class but more of an access class. In that world of understanding venture as an access class, the incentives are still financial return, but it's also deal flow, co-investments, and a bunch of other things. When you're thinking about the LP landscape, or being an LP yourself, what is your primary motivation to be an LP?” - David Zhou

“I remember one of my swim coaches told me that the reason you're interested in swimming isn’t because of friends. While they do help, you're interested in swimming continuously after many years because you've accomplished something. The more you accomplish, the more you naturally you get interested in it over time. And venture is a long cycle, long time horizon. These short wins of ‘I did something that impacted a founder's trajectory’ really helped me want to stay in here longer.” - David Zhou

David Zhou, Writer of Cup of Zhou & Head of Investor Relations at Alchemist Accelerator, and Jeremy Au talked about three main themes:

1. Silicon Valley Thought Leadership: David shared his journey from being a shy introvert to becoming a thought leader in the LP & VC space. He talked about his early exposure to entrepreneurship through his father's ventures that laid the groundwork for his ambitious career. Berkeley SkyDeck and On Deck catalyzed his transition to guide investments, advise, and help both startups and emerging fund managers. He underscores the power of personal growth and how his varied experiences enriched his understanding of venture capital, culminating in his current focus on LP decision-making.

2. On Deck Community Building: David discussed how his On Deck tenure offered valuable lessons on nurturing talent communities, intentional design and fostering a culture of innovation, speed & aggression. He also talked about his reflections on how communities shifted before, during and after the pandemic due to communication platforms. He also reflected on what it takes to make the transition from passive content consumption to active knowledge creation.

3. Emerging LP Investing in VCs: David delved into the multifaceted realm of fund investing, from the perspectives of both LPs and VC managers. He also shared about how the term “Emerging LP” was coined by Andrew Gluck from IrrvrntVC. He shared insights into the motivations and considerations for Limited Partners (LPs) within the ecosystem, alongside the strategic thought processes fund managers should employ. He also talked about his journey from being a content creator to an LP, the evolving nature of investment strategies, and the importance of continuous learning and knowledge sharing.

Jeremy and David also touched on his strategic cadence to cold emailing, maintaining consistent writing and publishing discipline, and the symbiotic relationship between technology and human engagement.

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(01:25) Jeremy Au:

Hey David, really excited to have you in the show. I've been reading your blog for quite a while and that was a pleasant surprise to hear that you've been listening to the podcast as well. So, happy to have you on the show and chat a little bit about your life.

(01:36) David Zhou:

I love it. Thanks for having me on. I've been, I will say, like, after starting my podcast, I've been voraciously listening to other people's podcasts. And well, yours is one that I've had a lot of inspiration from just because the conversation just seems so much more organic. And we talked about this right before as well. So thank you. for the inspiration and the lessons learned in being a content creator.

(01:56) Jeremy Au:

Awesome. On that note could you share a little bit about yourself or you like growing up? I know you went to UC Berkeley, so go bears. What were you like growing up as a kid?

(02:03) David Zhou:

What was I like growing up? I was a shy introvert growing up, believe it or not. I still am an introvert, but I think I'm less shy. So, made my way into the world of like Silicon Valley. I was born and raised in Silicon Valley. My parents were great. My dad happens to be a serial entrepreneur, so learned a lot from him. And as I was growing up, at least I swore to myself that I'd never be an entrepreneur myself because I saw how hard he had to work and I was like, Oh my God, this sounds like horrible. But then his winds are really high and his lows are really low, so to speak, right? Anyways ended up landing myself in Berkeley, go bears, which is the wonderful world of innovation, entrepreneurship, research, one of the top research universities in the world as well. And that became quickly a function of, holy cow, everyone is starting something, even if it's not a business, they're starting an organization, they're starting a nonprofit and everyone's so damn ambitious in Berkeley.

And in that whole world, I ended up finding myself starting a couple things and had a lot of great learning experience, made my first foray into venture at SkyDeck, which is a Berkeley startup accelerator. While I was started there we were a nonprofit. And then while I was there, we ended up raising our first fund to back Berkeley and UC entrepreneurs and eventually immigrant founders and all that as well. So, a great learning experience. And then I meandered my way around, but I think we'll get to that later in the podcast episode, so to speak.

(03:24) Jeremy Au: Awesome. And what's interesting is that you went on to work at multiple roles, I would say during your undergrad years on the startup ecosystem. Could you share a little bit more about what you were exploring or trying to find out by yourself?

(03:36) David Zhou:

I will be completely honest. I was just exploring, like, I didn't have a plan, right? I didn't go like, I want to be in venture capital one day. I didn't know I wanted to be in the LP world one day. In fact, I'm in it now. And if you told me back in college, David, you're going to be an LP. You're going to be in the world of Capital Allocator, like that's not the world I want to get into. So I was literally just exploring what I mean by I was literally exploring. I fell into venture. I fell into SkyDeck as a function of me taking free swag at hackathons. I kid you not, like I, and I still, I still have this motto. If it's for free, it's for me kind of thing. So I go around, I love swag. I love the different ways people think about promotion, brand marketing and all that. And so I, I remember I was like stuffing like three to five, like Adobe neck pillows down my backpack, getting permission from the Adobe folks, and then got caught red handed by my friends at SkyDeck and they're like, what are you doing?

That quickly translated into a conversation slash interview and join their team quickly after because I like, I'm, I know nothing about venture capital, but it seemed fascinating to me. So. That's what I'm in but I was exploring when I joined SkyDeck. I didn't even think I was going to be in venture capital for long. I wanted to be back on the operating founding side of things but ended up falling in love with everything about venture capital. And a large part of that is just the. Feedback I was getting from a lot of founders we were working with, and I wasn't the most educated person on the team in terms of just like venture things, operations, starting businesses, exits, all that kind of stuff, but I was willing to hustle for founders. If founders had a question, I didn't have an answer. I would go help them look for the answer. And sometimes it came in the way of various different things.

I remember having a, we had a hydroponics company at SkyDeck. And there was a time when power went out, water went out and they're like, Oh my God, how do we revive some of these, these, these crops in which we have, I was like, you know what, I got this one advice from a florist because I was trying to buy my Valentine's day flowers three days before Valentine's day. And they're like, you know what, add two packets of sugar, the the sugar you get at restaurants and all that, and add in a teaspoon of vinegar into a solution of water into a vase, and the roses are going to be even more vibrant than before. Ended up giving that advice to the founders and it worked really well for them but that's not really venture advice necessarily. Anyways, they ended up raising 1.5 mil mil which was really exciting and ensuing weeks to months and they came back and thanked me.

(05:47) Jeremy Au:

Oh, that's so sweet.

(05:48) David Zhou:

So, because of those things, right? It's like, you know, when a kid gets a lot of good jobs and gold stars and all that, the kid goes like, Oh, you know what? I think I'm doing something right. And you get more interested in it. And I remember one of my swim coaches back in the day ended up saying like, Hey, you know what? The reason you're interested in swimming is not because of friends and all that. And while they do help, you're interested in swimming continuously after many, many years is because you've accomplished something. And the more you accomplish, the more you naturally get interested in it over time. And venture's a long, long cycle, long time horizon. And these short wins of just I did something that impacted a founder's trajectory really helped me want to stay in here for longer. I don't know if that was the most concise version of the story, but nevertheless, I decided to share it.

(06:26) Jeremy Au:

So what was that journey of interest and minor successes that you felt became more apparent, I guess, in the Silicon Valley ecosystem, but that you were personally experiencing?

(06:37) David Zhou:

Well, it's this, it's like this waterfall of dopamine hits. And the reason I ended up staying there a little longer is, started angel investing, and the process of angel investing. I ended up picking some great companies that went on to, and too early to tell, like, dude, I don't have enough whiskers on my beard yet, right? But in that world they went and were going on to raise many, many more rounds after and they ended up growing in terms of traction from a couple hundred thousand ARR to a couple million, now tens of millions and all that. No exits yet, but nevertheless, felt like I had some element of a picking ability, even if it was semi random semi, you know, just right time right place.

(07:12) Jeremy Au:

Amazing. And so I think the big chunk that happened was, I think, your experience at OnDeck, which I had angel invested in, in one of the rounds. And I'm still kind of curious what was your experience, you know, joining them and your experience with them.

(07:23) David Zhou:

So a big part was I'd seen like On Deck in quite a few places, and a lot of my friends ended up who are founders ended up choosing to join On Deck's fellowship over some of these other opportunities. For example, I had one friend who was a consultant for a bunch of YC companies. He was a mentor at 500. He was a mentor at Techstars. And when he started his company, he didn't go to any of them to incubate or accelerate his company. He chose On Deck out of all places. And it was like, he was an on the first On Deck fellowship.

And I was like, this is too weird. This is like by far, one of my smartest friends. He knows the venture landscape like no other, but when he started a business, he decided to go to On Deck versus anywhere else. So that's when I started looking into it back in 2019. And just the community that they were building were second to none. And it was a combination of also Eric Thornburg, David Booth, Julian Weiser, and a bunch of them. They were sharing really insightful tips online. And the straw that broke the camel's back, what happened to be there were two people that I came to deeply respect. One was Andrew Ray, who is now starting his new company which I think is still stealth. I don't know exact. So I can't share too much. I was an angel investor in that, but like, you know, can't share too much on that. And the other person is Sam Hewlett and because of those individuals and how deeply they thought about angel investing I knew I wanted to work with them or learn from them in some sort of capacity. So it was two ways.

One, I could have joined the On Deck Angels Fellowship and I realize like, if I really want to get better at angel investing, if I really want to get better at picking great companies, I need to spend more than just like two to five hours a week on this topic. I need to spend 40, 50, 60 hours on it. And I thought no better way to learn than to join the dark side and ended up joining the team at On Deck angels and, and really growing the community and eventually building out an emerging manager track for that community as well.

(09:04) Jeremy Au:

What did you learn from your On Deck experience?

(09:06) David Zhou:

So many things to learn. One is that one of my favorite things about On Deck is that onboarding really matters, and onboarding needs to be very intentional. It's not really an angel investing advice, so to speak. But one of my favorite things about On Deck is that you had to ship something on day one. When you join the company and this put everyone into a bias to action, you had to ship something no matter how small, not how big it is. And it puts you in action-oriented mindset and not a passive mindset. If I'm going to wait for someone else to tell me what to do kind of thing. That's one.

(09:33) David Zhou:

Two, I loved the theme of building everything from scratch. And also there's no code, low code culture at On Deck. So every team member was empowered to build something. So we used a combination of Airtable, Zapier, Typeform, Notion, and a bunch of these other things. And if we wanted to test an ID into market, we didn't have to wait for the product or engineering team. We would build it ourselves first. If we found product market fit in whatever way we were measuring it, then we'd bring it back to the product engineering team. And they would go on to refine it and make it better. That's one.

The second part of this is I ended up falling in love with how the team thought about different things. So, like it's, it's a non answer, but one of the lessons, another lesson I learned is on events, and at some point at On Deck, we were in the process of hosting two events per week, which was like crazy workshops, fireside chats, also in person, IRL events. And this is why I love Sam, by the way.

And Sam put me down this exercise of like, hey, you know what? We're doing two events per week and then eight events per month. What if let's play this? What if exercise, what if instead of eight events per month, we only did one event per month? What would that look like? What would change in that? And then on the flip side, like, okay, if we only did one event per quarter, what would that look like? If we ever did, if we only did one event per year, what would that look like? And how much more time and effort do you need to put into something to show that that really mattered? It's not necessarily an angel investing tip, but it put you in the framework of how do you teeter between the lines of quantity and quality? And how do you really build a community? So how do you be very intentional about building a community? And that was something that's I realized quickly that community is not really like some afterthought or like something you have on slack or discord or something, you have to be very intentional with it. And it's not only that we're preaching something to them, but we have to empower our community members to start things themselves.

And so flip side of culture, how do you empower community members to be your greatest champions effectively. And we've had many community members who went on to like, they would fly together to Santorini, Greece and spend once a year together, they would host their own mastermind group outside and hosted their own book clubs outside of this as well. But that's where community really rises because a lot of the friendships they started ended with, well, not ended with, but like started and built was a function of us empowering them with resources, the platform, and the energy it took for them to get to the activation energy.

(11:43) Jeremy Au:

And what's interesting, obviously, is that at that time, there was a big wave of paid membership communities and also on that group massively as well. I'm just kind of curious, and obviously we've seen that a lot of those trends have also reversed, I think as a function of the pandemic, the return back to in person, IRL. I'm just kind of curious what your thoughts are.

(12:00) David Zhou:

So, OnDeck started in 2019. This was before the pandemic. Pandemic came in early 2020. OnDeck was built upon the idea of in person connections and in person relationships. Obviously, as a function of the pandemic, everyone had to go virtual, and what was really prescient of what OnDeck did is they were early to the curve of turning everything virtual and not waiting for the pandemic to end in two months and so they can go back to in person. And because they went all in two feet into the boat when it came to virtual it, we learned a lot about how to build things intentionally for an online community. People were craving for connection. They were locked in the four walls of their home and they literally had no one else to go to.

In fact, at some point, probably midway through 2020, it was so much easier to get to know someone like a thousand miles away from you than your own neighbor, because you weren't even interacting with your own neighbor. And in that world, it's not enough just to have one interaction per week because that doesn't really build relationship, friendship and all that. It's about multiple interactions, the same way as the marketers out there, they say, they see an advertisement seven times before you remember it, in a way, you have to have multiple opportunities for our community members to meet each other, not just synchronously, but also asynchronously. So a lot of points.

So we had mastermind groups, and that was really important, right? Instead of us leading every single session, we had to empower our community members to lead their own sessions. We also get empowered community members like, Hey, if you have any ideas, how do we provide you the resources, the time and the personnel in order to make your idea, help your idea come to be something. And there are some community members who are like, Hey, I actually have this idea. I want to start a fellowship. And so we would empower them to start their own fellowships within the On Deck brand. And so we had ,various like On Deck fellowships that sprung up as a function of community and team member interests, including On Deck podcasting, On Deck writing, On Deck angels.

And at one point we were talking about On Deck investing and all that. And I think they only had one cohort of On Deck investing, but yet On Deck engineering On Deck legal. Anyways, a bunch of these things and it was all In the sense that we built a place for people to build relationships. We had a slack channel that was active daily among repeat members. It wasn't that, and the last thing is also that we grew with our community. We built OnDeck Angels to help operators become first time angel investors. Over time, as 2021, 2022, and 2023 hit, we realized that a lot of these first time angel investors had now built this portfolio and were looking to institutionalize as investors.

And most communities stay pretty static. And they don't grow with their community members, but for our community, while we still had offerings for first time angel investors, we also grew to be like, Hey, they want to become syndicate leads. They want to become emerging managers. How do we help them with that? So that's what we built out a syndicate lead track, emerging manager track and provided resources for that as well. So we had many folks who ended up starting their, their funds out of like the On Deck community from Vijen Patel at 81 collection to a couple of the familiar names, like Packy McCormick at Not Boring and a bunch of others who ended up starting their first funds and to this day, they still keep in touch with a lot of the other people they met to via On Deck angels, even though the community admittedly is less active than it used to be.

(15:06) Jeremy Au:

And what's interesting is that everything has inverted since then, right? Which is that, you know, now On Deck has reverted back to IRL. There are a lot less communities. And then they have also been hyped off into different verticals, but I think the founder one being, I think the core one that's still standing, on a standalone basis. So what do you think are the lessons from your perspective here?

(15:24) David Zhou:

Yeah. So, I mean, at the day, it's not about virtual or in person, it's more about people craving connection. Humans are, by nature, social animals even on top of that, we live in a world where we have never been more connected than we are today. Like, the town square is, like, milliseconds clicks away. We pull up a browser, depending on your Wi-Fi speed, you can see everything on Twitter, LinkedIn, and all of the above, TikTok and all that. So the town square has really gone virtual. At the same time, despite having all the tools available to us, we are in a world where the average person feels lonelier than they've ever been.

I mean, Facebook did their own study where they realized people who use Facebook or Instagram often came out more depressed, or I don't know if depressed is the right word for it, but had associated themselves with more negative feelings than before they used the platform. And all that to say that, there's a lot of consumption and there's a lot of like information obesity, so to speak, and in this transition back to in person, while online, and I don't know if you've had this as well during the pandemic, on average, just because I don't have to travel one, one hour, one and a half hours to work each way, and so I've saved like two to three hours a day on just travel, so to speak, right?

And now it's like, okay, well, it's so much easier to have meetings. So I'll just book myself with a bunch of meetings. And then what happened is that on average, in a given day before the pandemic, I'd have maybe five, six meetings at most, and that'd be like a crazy day. All of a sudden, I kid you not, there was at one point in time, I had like 15 to 20 meetings a day, because it was just so easy to have conversations. And everyone was like, it was so easy to like, Jeremy, you're across the world, you're in Singapore right now, I'm in the Bay Area. It's easy. We don't have to fly to each other in order to talk to each other. And so right now, I'm recording this at 7:30 my time and and so because of that, we don't really have boundaries anymore. We've absolved ourselves of boundaries, and there was a lot of burnout associated with that.

And so this transition back to in person is still that people are craving connection, but when there's a wealth of information, there's a poverty of attention and in person, at least given that there's travel and all that in between, it helps you focus a lot more on the people in front of you and not the different screens and different monitors and different browsers you have. And at the same time, there is more quality of communication, quality of a relationship than there is purely online. So I know a lot of investors have also gone back to we will now take a lot more in person meetings and even though the first meeting might be introductory and virtual only in the process of doing diligence, in the process of eventually investing in you, we still want to have these in person conversations.

(17:43) Jeremy Au:

And so what's interesting is that in parallel, you've been writing during this timeframe as well at A CupofZhou as well which, love the pun there as well. So.

(17:52) David Zhou:

You are, I think, one of maybe four people who have accurately pronounce, pronounced my last name, pronounce the name of the blog, and totally gotten the, the, the pun. There are other people who's like, that's cup of Zhou. And I don't really correct them because it's always fun when there's an Easter egg and you're like, Oh, it's actually cup of Joe. And then it clicks with them. But anyways, sorry, I interrupted you.

(18:10) Jeremy Au:

You know what? I did not realize that. Yeah, it makes sense that some people would not get the pun because the enunciation of that surname is yeah, not common knowledge. Right? Yeah. So, so there you are. You've been writing during this timeframe as well. And I think it'd be interesting to watch you evolve as a writer, right? Because, you know, your early writing was more general and then started to evolve. So obviously pick up on some topics that you really kind of like in focus on. Could you share a little bit more about the evolution on your writing side?

(18:34) David Zhou:

Holy cow. I am embarrassed. So I started my blog in 2019. I am embarrassed with the blog posts I came out with back then. It was more general, to be fair. Like, I started my blog because I had a lot of founders reaching out to me, asking the exact same questions. And I was responding to them manually every single time. And at some point I was like, you know what, I just want to write one response for everyone. And then it just becomes a public resource. And that was the initial impetus for the blog. I wouldn't really call it a blog. It was more of this public FAQ page. That's what I struggled with the name for a very long time.

And then one day it was like a dinner between a friend and I, and he was like, You know, we're fatties. We've already eaten three courses. But we're still hungry. Let's go for dessert. What about a cup of Joe? And I was like, that just clicked with me. And that's how the blog name came to be. Anyways, so when I started the blog I was chatting with one of my friends who's a prolific blogger himself. And one of the recommendations he gave me was that decide a cadence for how often you want to write a blog. It could be once a month, it could be once a week, but whatever it is, stick to it, right? Don't fall off the bandwagon, stick to it. And to this day, I've only missed one week ever in my blog in terms of weekly and the only week that I've missed not even holidays, right? The only week that I've missed was because that week and it was like a month after and one of my blog posts went momentarily viral, which is the emerging LP playbook and the traffic crashed my website. And so that was the one week I was figuring out, like, holy cow, how does WordPress, like, how do we read up WordPress and all that?

Anyways, that's the only week I missed. But when I started, my my mentor and friend ended up saying like, Hey, you know what why don't you write 20 blog posts on the backend? And so in case you miss a blog post In a given week, or you like you're too busy that week, you always have something in the back pocket, something in the toolkit to bring up. And that's how it all started. And it gave myself the ability to fall back on a plan B, I will be honest to this day, and I'm like, what, five years into my blog now, out of the 20 initial blog posts I wrote, I've only used one of them. So I still have 19. And I look back at those 19.

(20:30) Jeremy Au:

So you still got 19 in a hopperr right now? They're from the OG?

(20:34) David Zhou:

OG, like 19 in the hopper, I look back and I was like, man, I have so much, my thoughts have really refined over that time. And so, I think last I checked in my current draft folder for the number of blog posts that I've just like queued up and had, have had random thoughts around, I think last I checked, this was two weeks, three weeks ago, it was like 52 drafts. So I now have 52, I can pull up whenever and just like miscellaneous thoughts that come up. So, your question was, how has writing evolved for me over time? And this is my long preamble to it. It started off as a public FAQ.

Over time, it became my public outlet to scratch my own itch. It became much easier to have conversations with people I deeply respected and admired. If I said I was gonna share their thoughts online. And that's how I built a lot more scar tissue in terms of the venture landscape. And that is also how I made my foray to becoming an emerging LP myself.

(21:26) Jeremy Au:

Amazing. And how did this concept of the emerging LP become a vertical or specialization or topic? Because previously you mentioned that you were investing, you're helping founders, you know, you're part of an accelerator. So the emerging LP is actually, you know, you could say even one meta layer above all of those strands.

(21:42) David Zhou:

Yeah. So how it actually started, completely unintentional, which is where all of the best things start accidentally. This is while I was at OnDeck and it was a combination of two things. One while I was at OnDeck, we were co hosting a lot of events with people we deeply respected. And one of the folks who ended up wanting to host an event in New York actually was Andrew from IrreverentVC. And he was the person who came up with the nomenclature EmergingLP. Because that's what he, like, he's like, this is an event for EmergingLP. So I'm like, oh. Yeah, that actually sounds pretty good. Like, you know, these are first time or early LPs. And it's not just like the high net worth individuals, but this is also like a family office that is allocated very little to venture as an asset class.

This is the pension fund that, that because they write 50 to a hundred million dollar checks, they never really get to really access emerging managers or venture capital really, really well. So he came up with the term. He struggled for a little bit and he eventually, like, filled up the event. But in the beginning, he was like, Hey, do you have any folks who could help fill up this event? Let's co-host and all that. And then the event became a really huge success. But that's when the emerging LP nomenclature, like, got tagged in my mind. The second of which is, as I mentioned earlier, that a lot of our On Deck angel fellows ended up starting their own funds. And there was a specific fund manager who I'd been seeing grow start off as a, as an angel investor, actually it was a professional athlete before he became an angel investor and was just. I had deep admiration for the individual in which he was. Full of grit, full of hustle. And I saw how hard it was for him to like pull together his fund.

And eventually, you know, I helped him a little bit, made some introductions for him to other fund managers, didn't even know that many LPs.

(23:14) David Zhou:

I just made some introductions to other fund managers who might be helpful for him as he's constructing his first fund. And his fund ended up becoming oversubscribed and he came back to me after his fund is oversubscribed. He had done his, well, he was like a week away from his final close and he's like, David, you've been so helpful with how I've thought about like, you know, being a fund manager. You've made so many introductions. Thank you so much. I'd love for you to be an LP. And I'm like. I know most minimum check sizes for LP checks are like 100K, 250K at this point in time. I'm like largely allocating towards angel investment. So I'm probably not going to do like a hundred, 250K check. And he's like, no, I just, I just really want you. And I don't really need you for your cash, but I just want you because you've been a huge champion. And I want to say thank you. So I wrote my first LP check, which ended up being a thousand dollars, but it was only because it was oversubscribed and all that.

I knew I was going to invest them anyways. I've seen him grow. I knew like if I had the capital, I would invest anyways, but I want to think like a more sophisticated and established LP, even though I knew I was going to write my check into it. I only knew like three, four LPs at the time.

And what ended up happening is I ended up hitting, hitting up a bunch of my favorite fund managers. I'm like, Hey, who's been your most helpful LP? I just need one name. I don't need like a million names. You don't even have to introduce me to this person. But just tell me that name and I'll go reach out to this person myself. I kind of trust my cold email strategy. And a lot of them were like, dude, I'll just introduce you to them. And I love that you're, you're, you're, you're LPing into your first fund. So I got 80 introductions in two months. And I met with 80 LPs in two months. And it was such a great, like learning experience altogether.

I was like, Holy cow. The advice in which they shared with me, I really, really wanted to share with the public world. So I, I went back to the 80 and I was like, Hey, you know what? You've been so helpful. Thank you for all the advice, the, the checking my blindsight and all that. Do you mind if I put all your insights into a blog post? Half of them were like, no, no, this is, it's proprietary. I shared it with you because I trust you and all that. And I was like, I get you. I want to respect those boundaries there. The other half was like, Yes, we believe in the transparency and the honesty necessary for the LP landscape. 25 percent of them were like, hey, you know what? Like, don't share my name, keep it anonymous, just because I don't want to have to go through compliance and SEC regulations and all that. And the other 75%, give or take, were like, hey, you know what? Put my name down, share my insight, let's do it.

So wrote a blog post. In 2022 ended up becoming my, still is actually my longest blog post, which from what my, like, writing friends say, is about a quarter, a fifth to a quarter of a nonfiction book. It's 12,500 words, long blog post, but I put it out there, just like, hey, I want to share this with, with others, and People loved it. People picked it up. And so, my own learning became ammunition for, for other LPs, maybe some GPs out there as well.

(25:41) Jeremy Au:

Amazing. And so what's been interesting is what has changed since that initial post that you wrote, which is, you know, obviously probably "embarrassing" versus what you know today, versus what you think you are going to find out in the next few years.

(25:56) David Zhou:

That's a great question. So, I will say those insights still stand because I asked people who had a lot more miles on their odometer compared to me. I was mainly the steward of information. I didn't add in my own thoughts per se. I mainly just like literally took other people's thoughts and put it into a format that was relatively digestible. So after that blog post, a bunch of LPs and GPs reached out to me. It's like, dude, you've got to write a book on this. We should totally write a book on this. And so I was like, maybe I should. The blog post itself is 12, 500 words. I on the back end had about 23,000 words worth of information that I like just like had, but didn't share.

And I was like, well, I do have enough to write a book. I have some early relationships that would help me write it. So I started writing a book. I kid you not, I started writing a book. And then I started talking to a bunch of folks like, Hey, you know what, like, what is it like? I know nothing about the publishing world. And people are like, Hey, you know, if you're going to publish, like, just know that if you Get picked up by a major publisher, they'll take like 80, 90% of the profits. And I'll be like, that's insane. What does that, that's that for real, that's the publishing industry? And the flip side of this was also like a major publisher won't even pick you up unless they, they think they can sell like 50,000 copies of it.

And I'm like, even if I had that audience, like, I don't even think that 50,000 people would be interested immediately, at least in terms of the LP landscape, right? Like how to be an emerging LP. So the lower the lowest hanging fruit ended up becoming let me just as I'm writing my this book, so to speak, let me just continue taking bits and chunks and pieces of the questions I've had for myself, questions I have from others conversations I've had, and just continue writing blog posts on that. And so since 2022, I've written a lot more content on being an LP.

And one of my readers ended up reaching out to me somewhere around this period in time and she asked me if I could do a podcast. And I was like, well, I mean, I don't think I have the personality to be doing podcasts. But that's a huge vote of confidence. Thank you. And like, out of curiosity, why did you, why did you like say that? Why'd you recommend that? And she was like, you know what? I'm actually legally blind and I can't even read your, like, I can't really read your blog posts. So I always have my husband like every week when it comes out, read those blog posts to me.And I was like, that's like immense dedication. They're like, I, I want to, I want to build something just for you because that means so much. And she, she'd been reading my blog posts since like 2020 or something like that. And so I started writing the content, but also just reading the content and just recording these 5 to 10 minute audio clips of just me reading the the blog post. And I realized, holy frick, this is so much work. And I have so much more respect for content creators because of this. So I was like, I'm not going to do this anymore. This is too much work. But maybe I start a podcast because that gives me the excuse to ask really smart people about how do they think about LPing and all that. And also, as they also want to share their thoughts to give them a platform for that. So that's how it all came together in terms of that.

And so there's that element in terms of how I think about being an LP going forward. And I'm still learning, still a work in progress. There is an episode that will come out in season two which I don't know when this podcast episode will come out, but I can say it now because one of my guests called me out on it effectively. He's like, why are you doing this podcast? What is the goal behind this? and I started asking questions. He's like, I know why you're doing this. You're going to start a fund to funds at some point, like you're going to institutionalize your LP practice. These are his words and you'll see it in the pod the episode as well.

But I've been thinking a lot about that as well, to be completely honest. I don't know when, where, how, and all that, but in the process of at least setting that as my relative North Star. I will, I am learning a lot more on portfolio construction and allocation, why different models work, diversified versus concentrated and not to get too jargony and all that, but Learning the finer nuances of being an LP and how do you construct a portfolio and what is a good portfolio of different venture funds look like, and also how do you de risk that as well. So, that is likely to be content as I'm learning as well. That is likely to be content either in the form of a blog post or via the podcast in the near future.

(29:39) Jeremy Au:

Well, I can't wait to see the emerging fund of funds playbook that you're going to be writing.

(29:43) David Zhou:

I don't know if I'm qualified enough to do that, but luckily, I've had quite a few fun to fund folks on my podcast so far. But stay tuned. Don't want to promise anything, but if enough critical mass comes together, I will likely also do a blog post about that.

(29:55) Jeremy Au:

I think what's interesting, of course, is that, you know, we're thinking about several layers of ecosystem, right? So there's a founder, then there's the VCs, then there's the LPs who are looking at that stack. And now you're talking about a fund of funds, which is somewhere, it's a instrument for LPs to be able to help understand and align with the ecosystem. What are some misconceptions that you think exist regarding the whole venture ecosystem that, you know, perhaps a fund of funds or someone is looking at that macro perspective should be conscious about?

(30:23) David Zhou:

You are good at these. This is why I love your podcast, by the way, like you're good at these questions. In terms of like things that to be aware of, it really depends on the limited, the type of limited partner you're talking to. For larger limited partners, these are institutions, pension funds, endowments. That these kinds of things they see venture as more of an asset class. It is a smaller bucket in the private equity portfolio, and the private equity in itself is a bucket, right? The private equity to them is a combination of venture, growth, and buyout. So, LBOs, or I think LBOs was a relic of like, at least what they called it, like in like 2000, 2010 but so it's that, and so for them, venture is very much of an asset class. For the smaller LPs out there, these are the individuals, either the smaller family offices these are the next gen family offices, so they're now right now, there's the largest wealth transfer we've ever seen, but it's not always associated with like the knowledge transfer, right? And so people are trying to learn and all that. So to them, venture is less of an asset class. It's more of an access class. And in that world of understanding venture as an access class, the incentives obviously are still financial return, right? But it's also deal flow, co investments, and a bunch of these other things. So I think the main thing when you're thinking about the LP landscape, or in terms of being an LP yourself, is what is your primary motivation to be an LP?

When I started to be an LP, or I guess still I am an LP large part of this is I am, and I'll give credit where this is due, but this is inspiration. At least the term comes from Gautam Shewakramani, who I got to work with at OnDeck and now runs Inuka Capital, but Inuka betting on like great Indian kind of like, founders. But he told me this, he's like, if when you're, when you're an LP, when you're investing as an individual LP you are paying for the most expensive newsletter subscription you're going to sign for, but hopefully it's damn worth it. And it really is, right? Like, a lot of it I think about is there's one world, and for those who have yet to get their MBA or thinking about their PhD or whatever it is, MBA is about 200k, give or take. And being an emerging LP is effectively getting to pick your own professors. And a lot of that was like what we learned at On Deck as well.

A lot of really, really smart people who are very successful in their own career by their own right, instead of like jumping to another, like higher educational career or higher education, they want to be able to pick their professors, pick their mentors and On Deck across all of our fellowships, angels, founders execs, all that kind of stuff. You paid a tuition to learn from some of the smartest people build great mentor mentee relationships and build mastermind groups like peer mentorship and all that. And it's a lot of that. So when I invest in a fund manager, at least for me, I invest in fund managers who do not invest in the same fields as I do. As an angel investor. I'm a consumer angel investor, but like in terms of fund managers, I look for, I look for deep tech, health tech, FinTech, like, you know, these kinds of things that I don't have exposure to or like geographic advantages that I don't have exposure to. And I am learning the market, what they're seeing from their eyes. And for me, it's a lot of learning.

Also to set your expectations straight, right? Where if you invest in a founder and it does really well, you can get that hundred X thousand X return and all that. Even some of the best returns for venture funds really sit in the dozens, like the double digits. It really doesn't get too far into the three digit territory, except for a verified, like rarefied few, right? Like small, small number. Like you have like, Chris Sakas fund, Lowercase Capital Fund I, I think it was an 8 million fund. I think it was a 200, 250 X kind of thing. That's rare, right?

So most funds are you're, you're putting like, you know, you're getting like a good 10, 10, 20 X is awesome already. Most of the time when I'm investing as an LP, I'm underwriting for a five X return for a seed stage three X for, for series A and all that. And so, because of that, you're not going to make, can I cuss on here? It's like, are there, do you have children watching?

(33:55) Jeremy Au:

Go ahead.

(33:55) David Zhou:

Okay. You don't,

(33:56) Jeremy Au:

I don't think there's any children watching this one.

(33:59) David Zhou:

Sorry. I've alienated all the

(34:00) Jeremy Au:

I want to hear about daddy doing LP investing in fund of funds. That's way better than toy trains, you know?

(34:07) David Zhou:

Way better than toy trains and Legos and, and all that. Well, so you're not going to get shit loads of return. Like you're not going to shit load. You're not going to shit like freaking rich from, from, from investing in, in, in a fund manager per se. So you usually have like, it's capital plus something else, like financial return plus something else. If you are writing million dollar, like seven figure plus checks. And okay, there is a magnitudinal change that will change in your net worth when you do these, but if you're writing anything South of that, like it's really just hard to really appreciate capital in that sense. Also it's locked up for well, used to be 10 years. Nowadays we're seeing the average fund to be like 13 years and it's airing on the side of 15 years now. If you really want financial return, go invest in the S&P and you know, you're going to get like decent return, probably like two X, three X over like 10, 15 years and all that.

And so if you want your money locked up illiquid asset class, although Samir Khajiit allocate says like illiquidity is a feature, not a bug. So it is fun in that side of way side of things. But you should have something else. The motivation should be deal flow. So, that in the form of co investments, a lot of these emerging fund managers do not have the capital to double down on their investments. And so they'll often like, it's SPV out or just share it with their LPs. And if the co investment strategy is interesting to you, you get one to fund, like see all the diligence, the emerging manager did. And that's where the returns come in. Like if you can invest in a pre seed seed manager and you get a double down on the series A, that's when that's where your returns come in.

So is it. Is it co investment? Is it deal flow? Is it access? Is it learning? Or is it something else? And to be very transparent and honest with yourself with why you're choosing to invest in a fund manager. Sometimes, even for myself, it is learning their decision making framework because I think there's something to be gained from their decision making framework that I personally don't have as an investor.

(35:46) Jeremy Au:

What is it that you don't have as an investor?

(35:48) David Zhou:

So to be an investor or to be like an institutional investor Once again, not original. I'll give kudos to Ben Choi at Next Legacy and Samir at Allocate, but you're really evaluating on an investor on like three different wavelengths, at least in terms of investing: sourcing, picking and winning. Sourcing, do you have a sizable amount of deal flow where you are capturing a lot of great founders? Just like your top of funnel looks great. That's sourcing, right? Picking if that founder's deck or pitch or cold email falls on your lap, can you recognize that this is a great founder? And then the last of which is winning. So of the best founders out there. So for example, if like, Max Levchin were to start another company or Elon Musk or like Mercer Mayer or whatever, whatever it is. If they were to start another company, would they choose you to be on their cap table? Do you have a reason for them when they, when capital is a commodity for them?

Do they have a reason to pick you, right? In terms of various different kind of wavelengths for myself, I'm okay on the sourcing front, at least as a function of my fund size, my aperture, my top of funnel is more than good enough. Right? Like I get about like 50 to 100 pitches in a given week from various different channels, a lot of an organic, a lot of some, some of the blogs, sometimes other things, right? Like my top of funnel is fine. In my opinion, it's not amazing, but it's like, it's fine for me as an angel investor.

Picking, I think I have a reasonable eye when it comes to consumer companies, but I don't know if I have a good eye when it comes to enterprise, deep tech, biotech, fintech, all these other things that I just don't have expertise in. So learning that picking framework from fund managers that have really good picking ability is something I'm learning from as well.

Last thing, winning. Why do the best founders pick you? And this is also the reason I joined. On Deck angels, the team there, right? Is for a long time in terms of how I help founders and to, to this day, still very much so it's a lot of a storytelling, fundraising, investor introductions, but that's not really unique. That's like. If you spent long enough and you're intentional enough and you care enough about the people around you, you're eventually going to build that network in complete honesty. I'm not going to kid myself, right? But there are other ways you can win. And one of the things that I learned from one of my good friends who happened to be an On Deck angels fellow before I joined the team.

One of the ways he won deals every time. He took a meeting with the founder, he would look at like, look, go through the product, really play around the product. And after that, within a week, he would write a three to five page bug report just for the founder, and it'd be like a perfect QA QC kind of person. And. Like most founders really do appreciate that because they go out of your way. And like, you know, another example is like Leo, like Sousa ventures and all that. Right. Like before he started Sousa ventures and all that from what I hear, I don't know him personally, but from my friends who are LPs in Sousa ventures, what he used to do is he used to go to the founders, founders offices in which he'd invested in, and he'd spend a day just coding alongside other software engineers and he would do debug things with them. He would build code with them, and that's all he did. Right. And so founders loved him because he got really deep in the weeds.

He got his hands dirty and all that. And so there are different ways to win deals, why the best founders would continue to pick you. And my reason for joining On Deck angels and my also my reason for investing in a lot of great GPS is, are there ways fund managers win deals I don't know about yet, right? I don't know what I don't know. And so there's also that element as well.

(38:50) Jeremy Au:

On that note, could you share about a time that you personally have been brave?

(38:54) David Zhou:

I mentioned at the beginning of this podcast, I used to be a shy introvert and I still am an introvert. I think I'm a little less shy. I still, I still get stage fright and all that, to be completely honest. So, this may seem like low hanging fruit for the extroverts and the outgoing individuals of your listeners, but to me back when I was in college, I was deathly scared of sending a cold email. I was so scared of the repercussions of how people I deeply respected would see me. And so I don't know if this is the bravest and there are other probably brave examples. And if this example doesn't fly, Jeremy, you let me know. I'm happy to give another example. But one like One of my mentors eventually convinced me to send one cold email to someone I deeply respected every single week and it is not just people in VC or founders and all that, but it's also people who are Hollywood directors, people who worked in the president's cabinet.

It's people who worked in the three letter agencies in America. So like CIA, FBI. All that kind of stuff. People are just like authors, everything like content creators, everything. And I was scared to do so, but he, he got me into the habit of writing one cold, and this practice I still do today, right? I write one cold email per week to someone I deeply, deeply respect. And over time it, it helped me become a lot more intentional. And one of the cold emails I sent over the years ended up being to someone that I now, like, immensely respect. I'll abstract her name because I don't think she's given me permission for this yet.

And she's now a mentor figure and a friend and all that. But I remember when I first reached out to her. There was an there's a HBS case study on her. And I was like, she seems like the perfect protagonist to whatever she's doing. And she replied back with be interesting and interested. And I was showing so much interest in her and just like how she thought, how she felt like worked about things, but I wasn't interesting enough. So that was like a lesson from one of cold emails. Other thing I did as I learned is in the process of getting myself out there and not just on a virtual standpoint. This is like 2018, give or take. I started writing handwritten letters, and I would send that to like VCs offices or other people's offices.

And I like my theory there was this is 2018, right? So people get a lot of mail. People who usually check the mail are either the assistant or the office manager and all that. But at the very minimum, if I wanted to get in front of a VCs per se, right? That gets like 500 deals per week or like, you know, whatever. insane number per week. I will not make it through their inbox. Plus a lot of VCs, as you know, are like strictly, I don't check cold. I don't like cold emails, get a warm intro and all that. Right. And so I thought maybe if I wrote a handwritten letter, put it in their inbox, their office manager is more likely to hand it to that VC. And at least I have some screen time. With this individual screen time, like metaphorically speaking and so I started sending these handwritten notes and that ended up helping me get, like, I literally got reply. Like, I became, I became pen pals with some VCs and Hollywood producers out there, right? We just literally write letters like every few months back and forth to each other about what we're seeing in the market.

But that scared the shit out of me because. There's a very real case of where I in the process of writing handwritten notes, showing up at their offices and all that I could have been called out for the police on like trespassing and all that, but it helped me really understand the cold email and how to do cold emails and how to write notes very, very well. And that's something I one wrote a blog post about to have shared with a lot of the fund managers founders in which I've invested in. I don't know if that counts as brave, but if it doesn't Jeremy, let me know. But hopefully this counts.

(42:08) Jeremy Au:

Definitely brave. On that note, thank you so much. I'd love to summarize the three big takeaways to go from this conversation. First of all, thank you so much for sharing about what you would like in terms of your early decisions in terms of investing, advising, helping. I thought it was very fascinating to hear each career decision. I thought it was very much a function of, you said, the fact that you started out as a shy introvert. And yet you also took steps to be brave and to kind of like step out of the comfort zone all the way to the point where you're now writing regularly, you are cold emailing and writing handwritten notes regularly. So it's really interesting to see that personal evolution and also how your experiences at On Deck and, oh, Berkeley SkyDeck both have decks in it.

(42:47) David Zhou:

There are a lot of decks. We often had that joke.

(42:49) Jeremy Au:

Yeah. How they've all helped you kind of like mature as a person, but also sharpen your skillset to now where you're writing about LP decisions, VC fund decisions, and fund of fund decisions.

Secondly, thank you so much for sharing about On Deck. I thought it was fascinating to hear about your experience about why you chose and why you were attracted to the talent community that was being attracted to that, and also fascinating to hear about some of the lessons you learned about the culture, the no code. Being fast and aggressive and yet also some of your learnings as well since then about what makes a great community and how that has played out in both before the pandemic, during the pandemic and after the pandemic.

Lastly, thank you so much for sharing about your own mastermind slash thought leadership on fund investing. I thought there were multiple domains that you've tackled this from. I think first of all, you shared about it from your own personal experience as a writer and eventual podcaster about how you tackled learning and also sharing your knowledge that you've gained along the way. In parallel, you also shared about the insights you had, you know, about what LPs should be aware of in terms of the ecosystem, but also what fund managers should be thoughtful about in terms of visiting the funds as well. On that note, thank you so much, David, for sharing your time here with us today.

(43:57) David Zhou:

Thank you for having me.