VC Renata Quintini Reveals Her Firm’s New Fund And Why She Doesn’t Aspire To $1 Billion In AUM

Forbes

In 2023, female-owned venture capital firms received just 3% of the total $107 billion raised across venture firms worldwide, up from 2% in 2022. It is within this environment that Renata Quintini, cofounder and managing director of Renegade Partners, is announcing the close of a fresh $128 million in dry powder. The close of Fund II brings her firm’s total assets under management to $228 million, a size Quintini believes is a “Goldilocks” fit for the work she and cofounder Roseanne Wincek want to do.   “If you’re managing a billion dollars, the math works against you,” she said during a sitdown interview at the Forbes studio. “At our fund size, we can write checks for $10 million, or  in some cases have single digit percentage ownership that makes sense for our fund math… I’d much rather own a bite of a watermelon than the whole grape. Let’s optimize for opportunities to say yes to great founders.” Quintini also dished on what aspiring founders—of companies and venture firms alike—need to know about operating in 2024.  Subscribe to FORBES: https://www.youtube.com/user/Forbes?sub_confirmation=1  Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:  https://account.forbes.com/membership/?utm_source=youtube&utm_medium=display&utm_campaign=growth_non-sub_paid_subscribe_ytdescript  Stay Connected Forbes newsletters: https://newsletters.editorial.forbes.com Forbes on Facebook: http://fb.com/forbes Forbes Video on Twitter: http://www.twitter.com/forbes Forbes Video on Instagram: http://instagram.com/forbes More From Forbes:  http://forbes.com  Forbes covers the intersection of entrepreneurship, wealth, technology, business and lifestyle with a focus on people and success.

Transcript

00:00 (upbeat music)

00:02 - Hi everyone, I'm Maggie McGrath,

00:04 the editor of Forbes Women,

00:05 and today we are joined by Renata Quintini.

00:09 She is the co-founder and managing director

00:11 of Renegade Partners.

00:13 It's a venture capital firm,

00:14 and they have some news that they're sharing with us today.

00:17 Renata, thank you so much for coming to our studio.

00:18 - Thanks for having me, Maggie.

00:19 - Let's dive right in.

00:20 We'll get to your entrepreneurial journey,

00:22 but you have news that you are announcing through Renegade.

00:25 What is this news?

00:26 - I'm very thrilled to share that we just closed

00:28 our second fund at $128 million

00:30 to back technology companies, mostly at Series A.

00:36 - And this brings your total AUM to $228 million.

00:39 You have a co-founder,

00:41 so you are a women-founded, women-owned firm.

00:44 - That's correct.

00:46 - Talk to me about the environment you found

00:49 while raising this fund.

00:50 There are a lot of reports about how difficult 2023 was

00:54 for founders of startups

00:56 and founders of venture capital firms alike.

00:59 - Yeah.

01:01 Yeah, so I mean, we were raising our second fund,

01:04 actually fund one, we were very lucky

01:06 that we have a lot of institutional LPs,

01:09 endowments, foundations, Ivy Leagues, things like that.

01:11 So we thought, okay, these are long-term investors,

01:14 and that's gonna make our fundraising for fund two easier.

01:18 But then with the market environment

01:21 where we really had the economy slow down,

01:25 public market, multiple readjustments,

01:28 a lot of LPs actually were not that hot on venture.

01:32 And either they already were in the asset class

01:36 and they already all of a sudden had already too much of it,

01:38 or the folks that were thinking about getting in,

01:41 they're a lot more skeptical

01:42 because nobody knew what the bottom was,

01:44 what prices were gonna be.

01:45 So people were more in the watch and see mode.

01:48 So it took a little bit longer

01:51 than we thought it was going to when we first started,

01:55 but we brought in six new LPs to the fund,

01:58 foundation, pension funds, really high quality folks

02:01 that we're very happy to have as part of LP base.

02:04 - How did you navigate that market environment?

02:07 You mentioned the hesitancy that certain LPs had.

02:10 What was your talking point

02:12 or what was the point of persuasion

02:13 that you found most effective?

02:15 - I think that one, LPs learned that,

02:18 so the last financial crisis in 2008,

02:20 a lot of LPs decided to pull back out of venture completely

02:24 and they learned that you shouldn't do that

02:28 because it turns out that 2009, 2010, 2011,

02:32 those were fantastic vintages

02:34 and they ended up missing out.

02:35 So I think some LPs decided to readjust and said,

02:38 okay, maybe I'm gonna write smaller checks

02:40 or I'm gonna go a little slower.

02:41 So I think they learned to not step out.

02:44 And then the second was really the power

02:46 of emerging managers as the next crop of venture

02:50 'cause if you actually look at how the ecosystem has evolved,

02:53 a lot of the firms that have been in business

02:54 for a very long time, they have grown AUM

02:57 and they become a little bit more multi-stage in nature.

03:00 So emerging managers are really coming into the fold

03:03 with new products, focus more on founders

03:05 or more boutique approaches

03:06 and those can be great generators of returns in the future.

03:09 So those were like the two talking points

03:11 that were very powerful.

03:12 - That's really interesting about the vintages.

03:14 So is your prediction for 2024 and 2025?

03:18 - Oh, we're very excited.

03:19 We're very excited to have dry powder.

03:22 And we see the quality of founders,

03:25 the quality of companies.

03:26 I think companies are building better, right?

03:28 2021, it was a lot of money in the system

03:31 and with a lot of capital,

03:33 sometimes you build a little bit more inefficiently.

03:36 So founders learn how to do more with less

03:39 and they're building just better quality businesses

03:41 on top of just great products.

03:43 - So let's talk about fund two.

03:44 You're series A, you're looking for newer startups,

03:48 if you will, earlier stage startups.

03:49 What exactly are you looking for in this fund?

03:53 - Yeah, so for us, I think there are two key words.

03:56 I think one is markets that matter.

03:58 We're really looking for industries

04:02 that are ready to be disrupted,

04:03 industries that are important to the economy.

04:05 So for example, on fund one,

04:08 we led the series A of a company

04:09 called Airspace Intelligence that is using AI

04:13 to better optimize and simulate everything that flies

04:16 starting to sell to commercial airlines

04:19 and then move later to defense.

04:22 Those are very critical markets.

04:24 If you actually look at the amount of the value of assets

04:27 that are flying and being deployed in the sky all the time,

04:30 and it's a very valuable piece of the economy.

04:32 And actually when we led that series A,

04:33 it was during COVID, not all the planes were flying,

04:36 but we knew that that was an essential industry

04:39 to the world's economy.

04:40 And when it came back,

04:41 it was gonna come back with more efficiency

04:43 and more intelligence.

04:43 So we felt really comfortable making that investment.

04:46 So one is that idea of markets that matter

04:48 and transportation, global transportation is one of those.

04:52 And then the other one is durable business models.

04:55 So we're really looking for companies

04:57 that can go the distance as businesses.

04:59 They're really building most important products

05:02 for their customers,

05:04 that are really part of the most important workflows

05:06 because they have better revenues,

05:08 they have better expansion possibilities,

05:10 and they're just more resilient

05:12 when things don't go as planned,

05:15 especially in the macro environment.

05:18 - Interesting.

05:18 Now I've seen you described as a futurist

05:20 and you kind of have alluded to technology of the future

05:24 in what you've just said.

05:26 What are some themes you're seeing

05:27 from the companies that you are talking to?

05:30 Maybe not investing in,

05:31 I'm sure you talked to a number of founders.

05:33 What are you noticing is the technical trends

05:36 that are happening either within aerospace

05:38 or within the tech sector as a whole?

05:40 - Yeah, so I think one story

05:41 that we very much continue to see is this idea

05:43 of how can we get legacy, very important industries,

05:47 but they're sitting on decades old technology

05:50 and how can we bring in best in class software,

05:53 analytics and intelligence to just better use assets

05:56 and optimize decisions, right?

05:58 So aerospace intelligence is one of those examples.

06:01 We just led the investment in a company called Onslaught

06:05 that is doing a closed loop wallet technology

06:09 that is basically reinventing payments infrastructure

06:11 and allowing merchants to create loyalty for their users,

06:15 but without having to pay large processing fees.

06:18 And it's actually like a big undertaking

06:20 on the rails and payment APIs, right?

06:22 So that is sort of reinventing legacy infrastructure

06:27 there as well.

06:28 And then now with AI everywhere and everything,

06:32 we're actually kind of seeing

06:33 before it was software as a service

06:35 and now we're seeing a trend of service as software,

06:38 which is really interesting to watch.

06:41 >> What is service as software mean?

06:43 >> 'Cause we're seeing a lot of these vertical applications

06:46 that are giving humans superhuman ability,

06:50 selling to lawyers, selling to accountants,

06:52 selling to whatever it is your daily workflow in your job,

06:57 the technology is making you do a better job at it.

07:00 So before it was, let me sell you software

07:03 so you can do your work,

07:05 but now the software is actually bringing in intelligence.

07:08 It's bringing in insights to say,

07:10 okay, I can help you figure out what a customer is wanting

07:13 if you're doing customer service, for example.

07:15 And these are the trends.

07:16 So this is how you actually serve this customer better.

07:19 So like this idea of how AI is flipping service

07:24 in its head is very interesting.

07:26 >> So does that mean you are bullish on AI as an investor?

07:29 >> Long-term, yes.

07:30 Short-term, very cautious.

07:33 So I think, you know, as a consumer,

07:36 the amount of evolution that AI has had

07:41 in less than two years from a technology perspective

07:44 is astounding.

07:45 And also the amount of really great founders

07:49 that are building interesting things is unparalleled,

07:53 and the amount of capital actually providing.

07:56 So like it's a great environment to create things,

07:59 but when we think about as investors,

08:01 what is going to create durable long-term value,

08:04 we think one is probably going to lie more

08:06 in the application layer.

08:08 Like we're seeing a lot of great stuff being done in models,

08:11 but the incumbents like Facebook, Google, et cetera,

08:14 they're spending a lot of capital,

08:16 and they have a really great position to own that.

08:18 So as a net new investor, that's not a space

08:20 that we're looking to invest in

08:21 because it's very well capitalized,

08:24 and the incumbents are doing a great job

08:27 promoting innovation.

08:28 So then we kind of move to the application layer.

08:30 What will users be doing with it,

08:32 applications and interfaces?

08:34 And in that one, one is very competitive.

08:39 A lot of people kind of having similar ideas

08:41 at the same time, so it's not that rare

08:43 to see one company be a first mover,

08:45 but very quickly you have three or four

08:47 kind of fast following.

08:49 And then the second is what will be the durable advantage

08:52 that that company will have, right?

08:54 'Cause in the end of the day, if you have better data,

08:58 you're going to win, and it's very unclear to us

09:00 at this point with these companies that are starting,

09:03 how are they better advantaged compared

09:05 to incumbents in this space

09:07 in terms of having new data, et cetera.

09:09 So we're watching to see really

09:12 where durable advantage remains,

09:15 but we're seeing our portfolio companies use AI.

09:18 All of them are using AI either as ways

09:21 to improve their own efficiency and their own margins,

09:23 or as part of their roadmap on new products

09:26 that they're creating or they're already offering

09:29 so that their customers can use their tools better.

09:31 - What do you think is the most common misconception

09:34 about AI right now?

09:35 And I ask because as you're talking about AI being used

09:38 to build durable businesses and find true efficiency,

09:41 there's a real value proposition there.

09:43 But I was in a conversation the other day

09:45 where it was a group conversation

09:47 and someone was just, one person mentioned AI

09:50 and someone's like, "God, it's everywhere."

09:52 And just kind of a little sick of the subject.

09:54 And these weren't investors, mind you,

09:57 but I'm wondering, is there something

09:59 that is getting lost in translation

10:01 between Silicon Valley and the general public

10:03 when it comes to how AI is developing?

10:06 - Possibly, but I think the exciting thing

10:10 is AI is everywhere.

10:12 And that is what the most valuable thing

10:14 is gonna be about it, right?

10:16 'Cause if you think about the last time it happened,

10:18 it was SaaS.

10:19 And when it started, it was all on-prem

10:21 and you have Mark Benioff coming

10:23 and the no software behind him

10:25 and look where we are, right?

10:27 Everything is SaaS.

10:28 Like today, if you see a company pitching,

10:30 I am a SaaS company, you're,

10:32 of course you are, every company sort of is.

10:35 And we really believe the same thing will happen

10:37 with AI at some point

10:38 and it's actually happening pretty fast.

10:40 I think where things may be getting lost in translation,

10:44 I think one is the excitement for the technology

10:48 and true use cases being equaled

10:50 to immediate value creation for investors

10:54 or even for users, right?

10:56 We see models getting better all the time,

10:59 but they still hallucinate.

11:02 They still sometimes will give you results

11:04 that are not that great,

11:05 that you may feel like, okay,

11:05 I'm wasting my time trying to do this year.

11:07 Wasn't this supposed to be amazing

11:09 and fix everything now?

11:12 So I think the disconnect may be the excitement

11:14 that technologists and investors may feel now,

11:17 like, oh my God, isn't this incredible?

11:20 Because look at how fast and how far it's come

11:22 in such a short period of time

11:24 and all the dollars and, you know,

11:26 venture investors are very excited about AI.

11:29 Some may say too excited at this point in time.

11:33 But then when you kind of think about the underlying user,

11:36 what is the true value to me

11:37 and what is it doing for me?

11:38 It may not be right where the promise is, you know?

11:44 Does that make sense?

11:45 - No, that makes sense.

11:46 As someone who has had to correct a number of AI transcripts,

11:49 - Right. - Right?

11:50 I do a lot of interviews

11:51 and then you upload them and AI transcribes it.

11:54 And some of those words are not what we said.

11:56 - Right. - So I have to go in

11:57 and fix it by hand. - Right.

11:59 - But it's certainly better,

12:01 to your point about how much it's grown,

12:03 it's certainly better than the days

12:05 when I had to sit there and transcribe by hand.

12:08 - Right. - Which...

12:09 - Well, and if you also look at, you know,

12:11 every six months there's a new model out there

12:13 or somebody else is trying to come up with something new

12:17 and it's, you know, able to be done.

12:19 I mean, just look at what Sora is doing

12:21 on the video creation.

12:23 If you look at the output of generative AI on video,

12:28 17, 18 months ago versus to where it is now,

12:31 the realism and the details and just the ease of use,

12:36 'cause you can prompt it like you prompt a Google search

12:39 and it just comes out.

12:41 So give it another 24 months, right?

12:43 And that will be really, really impressive.

12:46 - 24, so a lot can happen in 24.

12:47 - A lot can happen, I mean, yes,

12:49 a lot happened in AI in 24 months

12:52 and give it another 24 months,

12:53 it will be a whole new world.

12:55 - And you launched Renegade more than 24 months ago,

12:59 but not that much more.

13:00 When you launched in the height of COVID?

13:03 - Yeah, so our first close was Friday, March 13th,

13:06 the eve of COVID. - Oh God.

13:07 - Yeah, the Princess Cruz was literally coming into the bay.

13:10 People were buying provisions for shelter in place

13:13 and we're on the phone,

13:14 "Hey, are you gonna send the paperwork

13:16 "so we can have the first closing or not?"

13:18 So it was a Indiana Jones kind of hat down the thing.

13:23 - What a time to launch a fund.

13:26 And you had been a general partner at other funds before,

13:29 what made you want to take the jump

13:30 from working for a fund to running your own?

13:34 - Yeah, so it was really,

13:37 like it was the right time in my career, right?

13:40 So I've been in venture now for 16 years.

13:43 So this is my second financial crisis

13:45 as a venture investor.

13:46 So I have the experience, I had a track record,

13:49 I had something to bring, a perspective to bring,

13:54 but I also had runway in the tank in terms of,

13:57 okay, I have 20 more years to give to start a new firm.

14:01 The other one, and I think probably the most important one

14:04 was my co-founder.

14:06 I would never have done this by myself.

14:09 My co-founder and I were friends and collaborators

14:12 for 13 years now,

14:13 but then it was her kind of going through the same journey

14:17 herself of experience, et cetera.

14:20 And by accident, actually we were at a dinner

14:22 and somebody asked at the end of it,

14:24 what would you do if you had your own venture firm?

14:26 And we were completing each other's sentences

14:29 in perspectives that not a lot of people shared.

14:32 And then we looked at each other's like,

14:33 oh, we should have this conversation type of thing.

14:36 Yeah, it was very like left field, but not.

14:40 - Interesting.

14:41 - Yeah, and so it was the right time.

14:43 And then the both of us actually spent months.

14:47 So I was at Lux Capital and she was at IVP.

14:51 Like we loved our jobs, we loved our firms.

14:53 We did not have to leave.

14:55 So then the bar was really high

14:56 and we really wanted to answer two questions.

14:59 One is how are we as co-founders?

15:01 'Cause we know in early stage startups,

15:03 co-founder risk is like the biggest one.

15:06 To know are you a great investor, that's pretty easy.

15:08 Just share track record, you can get that done

15:10 in 10 minutes.

15:12 But this idea of are you a great co-founder to me,

15:14 'cause it is a professional marriage.

15:15 So we actually worked with a coach for a few months.

15:19 We call it marriage counseling before quitting our jobs.

15:24 - That is so smart.

15:25 We've talked about that at various Forbes summits

15:27 about how important that relationship is.

15:30 And there are some co-founders who don't start

15:32 with a coach, but then they reach an inflection point

15:34 and then they realize we need some relationship counseling.

15:37 And it's the underlying relationship

15:39 that can really affect the business.

15:40 - Everything, and I mean, the amount of things

15:43 that didn't go as planned, right?

15:45 We did not anticipate COVID.

15:47 Who did?

15:48 We did not anticipate COVID.

15:49 We did not anticipate the market pullback in 2022.

15:53 Like so, two banking crisis, right?

15:56 We didn't anticipate any of it.

15:58 And because we had done the work with the coach,

16:01 Rosanna and I never had a disagreement.

16:05 Like we get on the same page in a matter of seconds

16:08 and then it's all about moving forward

16:10 because we have so much alignment

16:12 on what's important for the firm,

16:13 how we handle things, what are the priorities.

16:16 So it makes us so much more efficient and on the same page.

16:19 So that was number one,

16:22 are we good co-founders to each other?

16:24 And then the other question was,

16:27 does the world need another venture capital firm?

16:29 Because we're in this to win.

16:31 Like we really wanna build the next top,

16:35 the style venture firm.

16:37 And we wouldn't have started this

16:39 if we didn't think we could.

16:40 And the whole premise was, why should the world care?

16:45 So I actually started my career as a LP investor

16:51 in venture funds for the Stanford Endowment

16:53 when venture was transforming.

16:56 So that's when Andreessen was getting started,

16:58 Felice's first round, all those guys.

17:00 And I raised my hand and I said,

17:01 hey, we don't have any exposure here.

17:02 Can I go spend time?

17:04 So I ended up building the emerging manager portfolio

17:07 for Stanford in venture back in the day.

17:09 And I had to answer the same question to my colleagues,

17:12 like why does the world need another venture capital firm?

17:15 And the insight that I had back then was,

17:17 if founders are going through a new journey,

17:20 they have something that's top of mind for them

17:23 that is beyond just money and brand.

17:26 'Cause everything equal in venture in particular,

17:29 brand always wins.

17:32 And back 15 years ago,

17:35 this was the whole idea of the 10X cheaper to start.

17:38 Right, you had global distribution channels,

17:40 mobile, cloud computing platforms.

17:44 So you could actually start a company with $500,000.

17:47 So then all of a sudden product market fit,

17:49 meaning what do I build, what do I sell,

17:52 as a discipline change.

17:54 So that's when YC got started.

17:56 Like so many things got changed.

17:58 It was easier to start, but it was more competitive.

18:01 So if you actually go to the early days

18:04 of all these firms, they had something

18:06 that would help founders that are accelerate their product

18:08 or their revenue.

18:09 So they brought something new that founders care about

18:12 in the time they care about.

18:13 So then Rosanna and I were thinking about it and said,

18:15 okay, what has changed for technology companies

18:17 in the past 15 years or so?

18:21 And what we saw was the need to build

18:26 bigger and better teams started a lot earlier.

18:30 'Cause now Fortune 100 buys from startups.

18:32 Your markets are truly global.

18:33 If you have something that people want,

18:36 you gotta go build it, you gotta go sell it,

18:38 and you gotta service it.

18:39 And people will not give you a pass

18:41 if you're a series A startup.

18:42 So it's not uncommon that we were seeing

18:44 series A startups with 40 people.

18:46 - Wow.

18:47 - You know, on a few million dollars raised,

18:49 or sometimes 20, 25, 30.

18:52 It's not uncommon anymore to see, you know,

18:56 companies that look more like more grown up businesses.

19:00 So we, and we know, 'cause we've been on the boards

19:03 of many, many category defining companies,

19:05 and we saw that the difference between those that made

19:07 and those that didn't were the ones that could figure out

19:10 how to really scale their people,

19:13 how to really scale their operations to continue to seize

19:17 on the momentum that they were creating.

19:19 - That sounds so simple, but given all the layoffs

19:21 we've seen in the last year,

19:23 proves that simple is not always easy.

19:26 - Well, we talk about it's execution

19:28 and who executes, is people, right?

19:30 And it's, let's even put aside the 2021 oversupply of capital

19:35 and what that created, right?

19:39 Like it's not uncommon to have a startup that has,

19:42 let's say 15 people, they find product market fit,

19:45 they raise, I don't know, 10 million bucks.

19:47 And, you know, they start servicing their customers

19:50 and it's not uncommon for them to maybe hire 20 people

19:53 in a year, that's normal.

19:55 That means that they are hiring and onboarding somebody

19:57 every other week in a year.

19:59 Right?

20:01 When you think about that, that sounds like,

20:02 so imagine creating the talent pipeline,

20:04 what's the process?

20:05 How do I onboard them?

20:06 How do I make them successful?

20:08 How do I train?

20:09 Or people that have never been managers before,

20:11 like there's actually a lot that goes in the processes.

20:14 'Cause now you have to coordinate 30 people

20:15 instead of coordinating 15 people, right?

20:18 There's a lot that goes in execution and, you know,

20:23 more people, more problems, that type of thing.

20:25 (both laughing)

20:27 Sounds familiar, right?

20:28 And founders care about that.

20:30 So then we really wanted to focus on helping founders

20:33 through that moment.

20:34 You know, how can you reduce unforced errors?

20:38 How can you learn from others

20:40 so you can continue to run faster?

20:43 And a lot of founders either haven't done it before,

20:45 so they know their markets really well,

20:47 they know their customers really well,

20:48 but hey, I've never built a company before.

20:51 Or they have and they know, oh my God,

20:53 that's when the rubber meets the road.

20:54 And I, you know, I wish I had met you

20:56 in my prior company type of thing.

20:58 - So essentially in starting Renegade,

21:03 you asked two questions,

21:04 one of which was how do I work with my co-founder?

21:07 And number two is what value do I provide

21:10 to the founders of the current ecosystem?

21:12 So for folks watching who think

21:14 they might wanna start their own firm,

21:15 are those the two questions they should start with?

21:18 - And then, yeah, and then the third is fund size.

21:22 And what is your portfolio construction

21:26 or how does your math work?

21:28 - And I've heard you refer to Renegade

21:31 as kind of a Goldilocks fund size,

21:34 or at least the second fund is a Goldilocks fund size.

21:36 What does that mean?

21:37 - Yeah, yeah, so fund size

21:39 is actually a really important concept.

21:42 So I actually started my career early at Felicis Ventures,

21:47 and it was like the beginning of a bad joke,

21:49 a Brazilian, a Turkish, an Indian enter a bar.

21:51 That was the three of us in the early days of Felicis.

21:55 Starting a new brand.

21:57 And we had to ask ourselves this question,

22:01 okay, in the world where brand matters,

22:04 why will the best founders pick us?

22:06 And we would talk to other people

22:08 that were investing for a long time,

22:11 and they would come and say,

22:12 "Oh, you gotta own at least 10%,"

22:15 or "You gotta write," there were all sorts of rules.

22:18 And then we kind of took the step back and said,

22:20 "The one rule you don't break in venture

22:22 "is the power law," meaning,

22:23 "Can this investment return my fund?"

22:25 Other than that, I wanna partner with the best founders

22:28 and the best companies, right?

22:29 I'd much rather own a bite of a watermelon

22:32 than the whole grape, right?

22:34 So let's sort of optimize for opportunities

22:37 to say yes to great founders and great companies.

22:40 So when we were thinking about Renegade,

22:43 we actually said, okay,

22:44 what are the things that we wanna be able to do?

22:46 So one is we wanna be able to be catalysts,

22:50 meaning we have conviction in the company,

22:52 we have conviction in the founder,

22:53 we don't need to hear anybody else.

22:54 We can write a term sheet, we can make a round happen.

22:57 So the ability to lead was important,

23:01 but then we didn't wanna be constrained by,

23:03 oh, I need to own 20% of everything I do,

23:06 because then you're actually working,

23:08 or you're saying more no than yes.

23:10 So we actually thought a lot about,

23:12 okay, what is the fund size

23:14 that allows us to lead and catalyze,

23:16 but it gives us flexibility and check size

23:18 that we say, "Founder, what is more important to you?

23:21 "What is your company optimizing for?"

23:23 So we can also participate,

23:25 or we can take a smaller ownership

23:27 to bring others around the syndicate

23:29 to make the company better.

23:31 If you're managing a billion dollars, you can't.

23:34 The math works against you,

23:36 and ownership absolutely matters.

23:38 There are a lot of rules that you have to follow

23:41 just because of fund math.

23:43 But at our fund size, at 128 million,

23:46 we can write first checks up to $10 million.

23:49 We can lead rounds, we don't have to.

23:51 And in some cases, we can participate,

23:54 have a single-digit percentage ownership

23:58 that makes sense for our fund map,

23:59 because what we're thinking is,

24:01 if this company does what it's supposed to do,

24:03 does that return my fund on a cash-on-cash basis?

24:06 If the answer is yes, great.

24:08 Then it's like, okay, how can I get as much as I can?

24:11 But it's just more opportunities

24:13 to partner with great founders.

24:15 - Interesting.

24:16 I never heard that,

24:17 owning a bite of the watermelon versus the whole grape,

24:20 but that's a really good analogy

24:21 for, I think, a lot of aspects of business,

24:24 not just venture.

24:25 You earlier alluded to financial crises,

24:30 banking failures.

24:31 It's been a turbulent few years.

24:33 For folks who are watching this

24:34 and who feel economic or financial uncertainty

24:37 in this moment, maybe they're a founder,

24:39 maybe they're an investor at a VC firm,

24:41 maybe they're neither,

24:42 and they're just a concerned consumer,

24:44 what is your message to them,

24:45 and what is your outlook

24:46 for the next 12 months economically?

24:48 - I think first is focus on the things you can control,

24:52 and the value of optionality is huge.

24:55 For founders, optionality means time and runway.

24:58 So, probably your investors came and said,

25:03 trim as much as you can

25:05 and continue to control your destiny as much as you can.

25:08 That's coming from a place of,

25:10 give you time and give you more optionality.

25:13 And then the other one is focus on true customer need,

25:17 because true customer need equals revenue.

25:19 So, you also need, it's not just surviving,

25:23 you need to also thrive.

25:25 So, continue to hone in on customer need

25:28 and things that get you revenue.

25:31 And then on an investor perspective,

25:34 on one side, the stock market is doing well.

25:40 I actually find it a little bit hard to reconcile,

25:42 honestly, because yes,

25:47 consumer spending is still happening,

25:49 but federal debt is very high.

25:52 There's a lot of instability geopolitically.

25:55 So, I'm very cautious about prospects.

26:00 Who knows what's gonna happen with the election,

26:02 and interest rates continue to be high.

26:05 I think one, so two things that I watch all the time,

26:08 one is what are interest rates doing?

26:11 Lower interest rates are much better for our industry.

26:14 There's just more capital flowing, buyers buy more,

26:18 venture LPs flock into venture a little bit more as well.

26:22 And then the other one is when the liquidity window

26:26 is gonna open again,

26:27 'cause that was another factor that really hindered

26:31 investments in venture funds,

26:33 because usually there's a natural flow of,

26:35 hey, I give funds money,

26:36 but I'm getting funds back from distributions

26:39 and liquidity events.

26:41 And the window has been closed.

26:42 So once capital starts flowing back.

26:46 - Yeah, those liquidity events.

26:50 - Yes.

26:51 - I have too many statistics in my mind right now,

26:53 but I think broadly speaking,

26:55 2023 was not great for that.

26:58 Will it be better this year, do you think?

27:00 - I hope so.

27:01 I hope so.

27:02 - Any other predictions?

27:03 You're sitting with dry powder,

27:05 you're looking at aerospace and AI

27:09 and the technology sector as a whole,

27:11 any final predictions?

27:12 - Yeah.

27:13 I think really kind of go,

27:16 like we say markets that matter,

27:19 like these are the things that are always valuable

27:23 and are always resilient.

27:25 So we started investing in fund one in 2020,

27:30 2021 happened, the velocity in the industry picked up,

27:34 right, like funds that used to be deployed in 24 months,

27:36 they were deployed in 16.

27:39 People were coming back to market really, really quickly.

27:42 And we said, you know what, let's actually take time.

27:47 There's this concept called time diversification,

27:49 meaning they are exposed to different years

27:51 and different market conditions

27:54 that if you're kind of picking a moment that's off,

27:57 you have time to, right, to average down.

28:00 So we actually invested fund one over three years,

28:03 which was very uncommon and we felt very unhip in 2021

28:08 when people are like, what are you doing?

28:09 That you're so slow.

28:11 Why, how come you're not raising fund two already?

28:14 And we saw a lot of our peers actually doing it

28:16 'cause we didn't know if what was happening in 2021

28:21 was truly a systemic change or just a point in time.

28:25 And so we said, okay,

28:28 then let's also back businesses that are durable, right?

28:33 Things that need to exist in markets

28:35 that need to exist basically.

28:36 And then as a result,

28:39 70% of our fund one companies have over three years

28:42 of runway and 80% of our companies in fund one

28:47 that were eligible to raise a follow on round did so.

28:50 Very early in our lives, I'm not claiming victory,

28:55 but that just shows that these are assets

28:59 that need to exist.

29:01 Businesses that are providing something for their customers

29:04 that are seeing revenues expand

29:05 because customers are buying new things that they sell,

29:08 right, that they're not seeing a lot of churn.

29:10 And that's a great leading indicator.

29:16 So don't follow hype, focus on customer need.

29:19 - Don't follow hype.

29:20 I think those are excellent words to end on.

29:22 Renata Quintini, thank you so much for joining us.

29:24 - My pleasure, thank you for having me.

29:26 (upbeat music)

29:29 (upbeat music)

29:31 [BLANK_AUDIO]

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