J. Skyler Fernandes | Disrupting Venture Capital and How to Break into VC and Private Equity

J. Skyler Fernandes is the Co-founder and General Partner at VU Venture Partners, a firm known as the most scalable venture capital fund in the world who’s focused on a wide variety of different fields. He is ranked as a Powerlist 100 venture capitalist.

Skyler is also the Co-founder and CEO of Venture University, the world’s leading investor accelerator for venture capital, private equity, and angel investing.



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Here’s a Glimpse of What You’ll Learn:

  • Skyler talks about managing the VC Fund and Venture University
  • How the venture capital firm protects itself from inexperienced people
  • How the firm increases its deal flow as new venture capital classes come in
  • Skyler shares how he maintains his perspective and being grounded
  • Skyler talks about creating ‘The Next Big Thing: The Game of Entrepreneurship’ board game
  • How taking the innovative path has impacted Skyler’s life
  • Things other venture capital funds are doing that Skyler admires
  • Skyler’s take on the SoftBank and WeWork valuations
  • Skyler explains why he thinks it’s difficult for venture capitalists to have a SaaS platform
  • The people Skyler thanks for his success
  • Where to learn more about VU Venture Partners, Venture University, and The Next Big Thing: The Game of Entrepreneurship board game

Resources Mentioned:

Sponsor: Rise25

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Episode Transcript

John Corcoran  00:40

All right. Welcome everyone. JOHN Corcoran here. I’m the host of the smart business revolution podcast where I talk with CEOs founders, investors and entrepreneurs and all kinds of different companies and organizations like YPO eo activation, Blizzard, lending tree, Open Table, you name it. I’m also the co-founder of rise25, where we help to connect b2b business owners to their ideal prospects and I’m very excited today because my guest is Jay Schuyler Skye Fernandez. He’s ranked as a powerless 100 Vc venture capitalists and is the co-founder and general partner of the new venture partners, which is known as the most scalable venture capital fund in the world focused on a variety of different fields, which we’ll get into. He’s also the co-founder and CEO of venture University, which is really interesting. It’s an investor accelerator for VC private equity in angel investing. So it’s really interesting how they have both sides to the business. And we’re really going to dive into that in a moment.

But first, before we get into this interview, this podcast is brought to you by rise25 media which I co-founded with my business partner, Dr. Jeremy Weiss, and our mission is to connect you with your best referral partners and customers. We do that through our done for you podcast solution, and I frankly believe if you have a business, you should have a podcast. It’s one of the best things I personally have been doing it since 2011 that I’ve done and it’s like a Swiss Army knife. It’s a tool that accomplishes so much can and will lead to great things. in your life, including clients referrals and strategic partnerships. So if you want to learn more about it, you can go to rise 25 dot com. Alright, so Skye, it’s a pleasure to talk to you, you have a really fascinating background deep into venture capital. But you got this interesting model right now, where you’re managing multiple offices. So it’s not like the VC fund is not doing well. It’s keeping you plenty busy. And you get this wacky, crazy idea of also having this university side to train in some sense, you can even say train competitors. But so explain to me why you decided to pursue that model and how it’s been working out for you.

 

Sky Fernandes  02:38

Yeah, no, thanks, John, for having me. Yeah, the real thesis for creating Vu which is both venture University which is part of venture fund, and part University, or we call it an investor accelerator. The thesis was, I’ve been doing venture capital for little over 10 years at that point, and venture itself has not found a way Way to really be innovative and the business model of venture capital. The business model itself doesn’t scale very well, you take a typical hundred million dollar fund with a 2% management fee and so you have $2 million to operate a fund, they usually support somewhere between three to seven people and those three to seven people. There’s hard to make any more capital efficiency for that business model other than paying people less. And so you’re limited in the amount of deals that you can source. So most hundred million dollar funds only source around called 1000 to 2000 deals a year. If you’re a large multi billion dollar fund like Sequoia, any or Kleiner, you source somewhere around 3000 to 5000 deals a year. And so we’re entering a world now where the companies are becoming more and more capital efficient. If you look at the revenue of seed companies and the revenue of series a revenue keeps on growing at what the revenues are for those rounds. So we’re entering a world where companies are more capital efficient. They need less capital to get to where they’re going. But at the same time, we have funds that are becoming bigger and bigger. And their teams aren’t changing in size, right, even a multi billion dollar fund like Sequoia, or Andreessen, they’re all around 25 to 40 people, but they’re no bigger than that. So venture just doesn’t scale. So the question was, how do you scale a venture in a in break the model where we could have a much larger investment team than what 100 million dollar fund could afford, and not have to raise a billion dollars. On the flip side, getting into venture capital and private equity is probably one of the hardest jobs in finance to get. And there historically has not been great path to kind of get into it. Everyone has their, their own story about the window they went through versus the door they went through to get into VC or private equity. Sometimes you’ll hear about, you know, will you go to do an MBA, work at an investment bank consulting firm? Or maybe you start a company? How does a

 

04:55

company see seen failure? common one? Yeah,

 

Sky Fernandes  04:57

it’s, it’s probably one of my favorite ones is, you know, go Go start a company have a huge exit and then launch a fund. And so there there really there wasn’t even think about doing investment banking or an MBA or consulting, you still don’t have any actual transaction experience or VC experience. So the venture, you know, by its nature has always been more of a an apprenticeship industry. So it’s like, well, can we kind of go back to basics about creating an apprenticeship program. And that’s really what venture University is. It’s an apprenticeship program. We operate as an investor accelerator, where people join our investment team of the Venture Partners, they join the investment team for three months to 12 months, full time on the investment team Monday through Friday, either in our New York office or our San Francisco office. So by combining a fund with this investor accelerator, we’re able to have an investment team of 35 people. So we’re multiples the size of a traditional venture fund of three to five people. And the amount of deal flow that we’re sourcing right now is also multiples of a normal fund. We’re right now we’re sourcing a little over 10,000 deals a year. versus one to 2000 deals a year. So, our breadth and what we’re able to see vertical wise is much broader. And we have five deals, sourcing teams, we kind of have consumer enterprise, FinTech, healthcare and frontier to pretty much look at everything. And then we’re more selective than a traditional fund. Most VCs are investing in 1% of the deal flow that they look at. We’re investing in about point 1%, so about 10 times more selective in the deals we look at. So it’s an interesting model that really does it breaks the traditional venture model. But it has the kind of the secret sauce where people are joining other venture funds after being with us for three months to 12 months. We’ve had about a two thirds success rate in people joining other funds, VCP funds at all levels from annalistic partner. We also have about 20% of them are first time fund managers, angel investors, family offices. So the secret sauce is that you know, people are graduating from view and entering the industry at all levels, and we’re having our talent really infiltrated into all of these companies and they’re Sharing deal flow with us giving us access to proprietary deal flow and people started calling us come to the VC mafia, in that we’re identifying the best deal flow and keeping it internal with the Wii U family, and how we’re going about growing in within the industry.

 

John Corcoran  07:15

Okay, so let me be a devil’s advocate for a second here. So is that how do you protect against when you are building out this model? How do you protect against putting a bunch of inexperienced people in a room? How do you ensure that sure, you’ve got more people in the room who can look at more deals, but they’re all inexperienced? So So how, how do you protect against that?

 

Sky Fernandes  07:38

Yeah, great question. So it will most people that go and do venture capital the first time have never done venture capital before. So I put that out there. If anyone’s joining as an analyst to a partner, oftentimes, they have operating experience, but they themselves even if they’re joining Sequoia or NDA. They also don’t have any VC experience. We’re just doing at a scale that’s much larger than one or two people. So if you think Is that we do to really increase the quality of the investors on a team. One is that the people that we’re selecting are really extraordinary. So we’re getting right now around 5000 applications a quarter, and selecting only about 30 people. So it’s about a point 5% acceptance rate. So if you compare that to Harvard or Princeton, they’re about a five to 6% acceptance rate. We’re about 10 times harder to get into than Harvard or Princeton. And on application volume, like Wharton Business School gets around 7000 applications, we’re at 5000. So the, the quality of the people that we actually have joining are just really impressive people, they’re, they’re people that have started companies and exited them. They’ve, you know, killed it in maybe being an expert in their field for the last, you know, 1020 years. And we have people that are coming in at all age ranges. So we have roughly 25% in equal increments and people in their 20s 30s 40s and 50s. So it’s a pretty diverse age spectrum with experience, but how we go about launching people into the program. is also critical to the quality. So we start off the program with a VCP masterclass where we get everyone up to speed. It’s a full five day program. Everyone’s up to speed on exactly what VCP is. In the second week, we start a thing called the startup madness, where we have a large number of companies already pre scheduled. And you start seeing how the partners and the investment professionals on our investment team are asking questions, and engaging with founders before we actually let everyone off on their own. And those are

 

John Corcoran  09:30

like a stream of like, founders are coming in doing presentations this

 

Sky Fernandes  09:35

week to week two of every cohort, we have around 60 to 90 companies that we always have pre scheduled for them. Wow. week two, and then week.

 

John Corcoran  09:44

Two is in a big room then that they’re presenting to us like,

 

Sky Fernandes  09:47

yeah, mainly phone calls, phone calls, office. We were we have all the top accelerators pitching us in that week. So companies from yc 500. startups, plug and play You name it. We have a lot of them pitching in that second week.

 

John Corcoran  10:04

Is that week exhausting? Is it fun? Is it both?

 

Sky Fernandes  10:08

I enjoy it, it’s the time that I actually get to do the majority of my meetings because the investment team is really leading all of those calls before. Starting in week three, when the investor the cohort is then starting to do their own meetings on their own. So I enjoy it because it kind of goes back to you know, what we’ve been doing. My partners and I have been doing VC now for 35 years. I think that’s that’s the other part of what of how we protect the quality of this is my partners, you know, over the last 35 years, we’ve invested about 1.8 billion and we’ve returned a little over four times that on a net cash basis and so you’re you’re surrounded by getting wisdom constantly being ingrained in you. So you’re learning by doing that the whole value of v was really learning by doing and learning with people that have killed it in the industry. And we do advanced modules also on Tuesdays and Thursday nights. Besides you During the week, where you’re playing the role of a VC deal sourcing doing due diligence, Tuesdays and Thursdays, we have these things called Advanced VCP modules, where we spend about two to three hours going in depth on certain topics like understanding market sizing, how to operate a board of directors, financial modeling from scratch cap tables. So you really get the fact that there’s so much focus on you of learning by doing in this academic plus apprenticeship. Way. Every quarter people have said that kind of equates to like a year’s worth of doing VC or p.

 

John Corcoran  11:31

Now, I know deal flow is so important for a venture fund. So you bring in you know, you haven’t been doing this for too long.

 

Sky Fernandes  11:41

Yeah, we’re coming up on three years. Yep.

 

John Corcoran  11:43

Okay, so how does deal flow increase at the same time as you’re bringing in these new classes of, you know, how did that correspondingly the number of deals coming in the door? How did that also increase?

 

Sky Fernandes  11:58

Yeah. So the in one of the beauties in the secret sauce is that we now have roughly 170 people that have gone through vu. They’re now working with other funds and have launched other funds. You know, everything from accelerators, seed funds, you know, venture funds or private equity funds. So we have a feedback loop that we created. So at the beginning of every quarter, we could do a call a call pass the baton. So we invite all the prior alumni that are not working at these funds to get on a call and share all their top deal flow across all the VC funds, the funds they’re working at. So whether it be portfolio companies that are raising or new deals that they’re doing. So we do that the very beginning of the cohort, they get to meet the incoming cohort for the first time. And then at the end of the quarter, we narrowed down from our 5000 or so four to 5000 companies. And we bring it down to where we narrow into like two to five investments we’re going to make, and we share that with our alumni. So it’s this nice feedback loop where the alumni sharing their top deal flow. And then at the end of the quarter, we’re sharing our top deal flow with our alumni And so that allows us to kind of have this proprietary set of deal flow above and beyond the organic deal flow that we’re looking at. And so that’s beyond that. It’s really within more human capital about how we’re hitting easily over 10,000 deals, a year that we’re looking at.

 

John Corcoran  13:16

Now, we were talking beforehand about how you really believe in karma and you try to be nice to people and correct. You know, I started my career working in the White House. And when you’re in the White House, you have no stopping of people who are interested in talking to you. And venture capital, I imagine is similar, right? There’s

 

Sky Fernandes  13:35

a lot of room when you walk in,

 

John Corcoran  13:38

everyone wants your attention, everyone summon something for you. And that can really go to your head very quickly. And you can be a not nice guy because you’re like, I don’t care, you know. So talk a little bit about your philosophy around that. Why you know, how you’ve managed to maintain perspective and be grounded.

 

Sky Fernandes  13:57

Yeah, I am. I’m relatively humbled by Do you think I’m I’m a nicer person than many other people. I know. There’s a phrase I like to say that the only people that don’t like me are assholes. In general, pretty good person is probably going to 5% of the people I know probably are less favorable than those people are also probably a little crazy. Yeah, I think the InVenture you’re in a world where it’s such a club industry where every deal that you’re doing, you’re co investing in most cases. It’s unlike private equity where you’re going to take out the whole round or you can do a buyout of the company. In you know, private equity and hedge funds. You can kind of Have you no sharp elbows. You don’t need to be sharing deal flow with anyone else other than internal like a hedge fund. You’re not telling anyone else about what your strategy is. Adventure, you have to collaborate with other venture funds to source deals, invest in companies, do due diligence, work with them on boards. And so you’re if you don’t come at the industry with a collective of nature, and you’re not a nice person, I don’t think you last very long. And if you do last, it’s going to be, you know, your, that’s going to make your life a lot harder. So, you know, there’s a lot of karma aspects, I think within venture, in that, you know, even with portfolio companies, you know, I’ve done about 80 investments, and together my partner’s almost 300 investments, even the portfolio companies I’ve invested in where I’ve not returned, I’ve not received back 100% of the principal, I’ve worked really closely with those founders to try to find safe homes, even if they’re going to be my losers, I still have a reason of wanting to work with that founder to find a safe home for them, knowing that it could be their second or third company that they create that I invest in, that ultimately is that success. So even if that

 

John Corcoran  15:44

happened, where like you have, you know, like a company that didn’t succeed, and you find a way to sell it off or something like that, and then you later invest in that, that founder again later I have a success.

 

Sky Fernandes  15:58

Yeah, and then and also Not only, you know, reinvesting in company and founders that you believe in, you know, sometimes companies fail for a variety of reasons, they might have still actually been a good executed, but money out of their control. You know, I’m definitely willing to invest in founders I believe in. And I’ve been working in the trenches with them. On the other side founders, no other founders. And so when, when other founders are talking to me saying, Hey, I’m looking to raise a round of capital, who should I talk to, you know, you become one of the first people that that founder introduces another founder too. So founders can be a great source of deal flow. For VCs, if they work and really add value to those founders, those founders want to kind of give back and want to bring you into some of their friends. Investments.

 

John Corcoran  16:42

That’s a great attitude. I also want to ask you about your, I guess we’d say entrepreneurial in your approach, you and your you started a game. The next thing the game of

 

Sky Fernandes  16:55

villages, yeah,

 

John Corcoran  16:56

the game of entrepreneurship. You also created Something called the best startup pitch deck, which has reviewed and downloaded over half a million times. And, of course, do you university? Of course. So these are not your normal activities, dare I say?

 

Sky Fernandes  17:13

Definitely. Yeah, definitely more entrepreneurial than an average VC

 

17:17

and kind of thinking outside the box.

 

17:19

Correct? Yeah, you’d see the

 

Sky Fernandes  17:23

actually thinking outside the box is actually the logo for Venture Partners. It’s the the drawing of a box that’s not complete, because we’re, we’re trying to think outside the box as a venture fund and also demystify the world of venture capitals often looking like a black box in the wild, wild west, and we’re really democratizing venture capital for the world. Yeah, I think we’ve taken always a very entrepreneurial path, really being led largely by myself and my wife. We, we’ve been working together for about 12 years ever, ever since we started dating. We’ve been working together and a lot of venture capital also, as a No, she was a consultant at Deloitte. I was working in investment banking at the time, and ended up we started our first tech company was online booking and payment platform. And we raised some venture financing. And then I ended up joining a venture fund as an analyst in that process, and I was the chairman of the startup but then joined us analyst at the VC fund. We’ve constantly worked together and the, the rise of like creating of the board game, you know, is my wife and I playing the game of life and being like, why isn’t there a board game? That’s the journey of an entrepreneur from from beginning to end, all the way from creating going through accelerator and giving up 5% for 100 K, raising multiple rounds of capital and getting diluted along the way, trying to avoid, you know, significant events and having to pivots limit Chutes

 

John Corcoran  18:53

and Ladders up.

 

Sky Fernandes  18:56

In the game, you ultimately get to decide if you want to take the IPO path or m&a path. And the winner of the game is whoever exits for the most amount of money but has this most founders capital value, founders equity value, so you could potentially exit at a smaller amount but not have been diluted as significantly and still win. So it really goes to the understanding of what it takes to scale a company capital efficiently and you’re rewarded by having less dilution when you get your final exit.

 

John Corcoran  19:24

Right, right. That does not sound like it was something you created in a couple hours. It’s not like

 

Sky Fernandes  19:29

it took us about a year we had 300 beta testers to create that game. And then we did a Kickstarter raised a little bit more than two times we were shooting for, right. And the other fun thing about the board game I have on the box thread about this we have the top of the box we have the top 25 accelerators and VCs that all approved to be part of the game. So we got Y Combinator 500 startups. Any a great crowd, Croft Kleiner, they’re all Part of the game and I was amazing i a lot of these relationships with these funds I’ve built up over the last decade. And literally in about two weeks, I got the top 25 accelerators and VCs to agree to be part of the board game, which was pretty awesome.

 

John Corcoran  20:12

Yeah. And I’m sure if you run into those guys, they’re like, Hey, I’m in his board game.

 

Sky Fernandes  20:16

They’ll they’ll have copies. Yeah, yeah, actually, something that I don’t think I’ve ever said this publicly but something we did. That was a lot of fun. We, we got asked by the founders, it was called the founders forum. They, they do an event every year with the the top founders of startups. So it’s like Mark Zuckerberg, Elon Musk, Jessica Alba. A lot of VC. Folks are there as well. But they they bring the founders together. They did their last event, about two years, two or three years ago in London. And they asked us we create a custom version of the board game where everyone that was attending the event was in the board game, and we actually did a custom print of 1000 board games. Were read Hoffman’s. In it Mark Zuckerberg and Bill Gates, Richard And so they all have copies of this game from attending. We sent the thousand games there

 

John Corcoran  21:05

and meet you there. Did you meet it? No,

 

Sky Fernandes  21:07

unfortunately weren’t able to go but we, we, we made the game by it was a custom version of that game where all of these founders are actually in that board game. So it was a limited prints that we did at Oregon was pretty cool that knowing that, you know, the top few hundred founders have a copy of this board game with with them in it.

 

John Corcoran  21:25

Well, you know, I guess anytime you run into any of them, you got something you can talk to

 

21:28

them. play that game.

 

21:31

Exactly.

 

John Corcoran  21:33

It’s funny. So, so what does that done for you, though, taking this innovative path? I mean, especially, you know, in the world of investments, it can be stodgy, it can be kind of conservative, you know, did you ever worry that you’d be known as that guy who created that board game and would somehow diminish your authority? Or Same thing with the university like, you know, what do people think when you said, you know, I’m starting a venture fund, and I want to Started university because I also want to help people with their career paths. And I want to look at their resumes. They think like, why is he moonlighting doing like some, you know, career coaching? You know, what was that? Like?

 

Sky Fernandes  22:09

Yeah, I think Well, a lot of people have been asking me to raise my own fund over the last few years. And I’ve been hesitant to do until I knew that I want to really disrupt the industry by doing it. So I didn’t want just raise a pool of capital and do what I’ve done for the last 10 years. You know, that Simon venture group, you know, founded one of the largest corporate VCs, for an s&p 500 company, that was, you know, nice, and it was innovative and launched another fun with the former CEO of McDonald’s, that was more of a traditional VCP fund. As I get, I don’t just want to raise a pool of capital and invest it. I want to disrupt the industry if I’m going to do it, and have really a sustainable competitive advantage for why the fund will become successful. So it really was from a financial perspective, plus a way of creating purpose for my own life. I think my wife and I are at the point where, you know, we’ve we’ve made the And we’re kind of looking at, if we’re going to do this, what’s going to make the biggest impact in our lives, and we’re going to drive the largest financial returns. And so, you know, creating a fun model that now we think mathematically we’re sourcing more deal flow than any other fund in the country, potentially the world. And we certainly have one of the largest VC teams that exists because even in drink, we’re Our team is larger than Andreessen Horowitz, his investment team and on par with you know, the size of any team or sequoias team. So it is it’s, it’s really broken the model and so it? Well, it came out of the interest of disrupting the industry. And it can initially seem like we’re just doing good while we have that’s all true. I’ve never felt more purpose than actually venture University, we, the Wii U family that’s being built now that we’re 170 plus people, it’s a real thing. And at the end of every quarter when we have our graduation, we’ve always had between like one and four people crying, and some it’s just it is a beautiful thing of how real The view family has become, and it’s meaningful relationships that lasts the rest of your life. And, and it’s people that are not working with you in the industry on a day to day basis at their own funds afterwards. So it gives you this really competitive advantage as a VC fund that other funds just couldn’t have some advantage like that.

 

John Corcoran  24:18

You see any of your, you know, other VC funds out there. Do you see any of them doing anything that’s disruptive that you admire, or that’s interesting?

 

Sky Fernandes  24:30

Yeah. So the Yeah, I spent a lot of time thinking about where the industry of venture was going. If you look back, you know, 10 or so years ago, you know, first round capital was really, you know, the beginnings of creating a platform you’ll find as a platform called Software as a Service, but fun, fun, you know, fun as a platform. And they were three bringing together community in a way that had never been done by a venture fund before. Chris frolic, who’s known as the super LP, he’s one of our advisors, but he was the anchor LP for first rounds first fund. He’s been he’s well for being the anchor LP for about 40 other first time fund managers. You know, he, I think he he’s an advisor, he speaks at V once a quarter, I think talking to him is kind of giving me a big appreciation for where funds are innovating and where they’re not, you know, Andreessen Horowitz is the same way. You know, Andreessen started out where they did about 45 individual investments before they raised their first fund. And of those 45 deals. One of them was Facebook, another was Skype. And then they raised their first fund of 300 million. So even Andreessen did kind of a crawl, walk run approach to going out to raise the first fund. But similarly they did. They said, Hey, we’re gonna raise a monster fund. We’re going to charge larger than a 2% management fee. And we’re going to use that capital to have a support team, you know, of roughly 100 people 75 on the Support Team and 25 on the investment team to be able to provide more value add for our portfolio companies. So, you know, while Andreessen I respect and reasons model, the challenge with it, it’s good for Andreessen is it’s hard to copy, right? It’s hard to go out and say, Hey, I’m gonna go raise a billion dollars and have a huge support team. You know, first rounds have a good job of doing that through community. I think all all funds or whatever funds are pitching LPs, the main way that they’re differentiating themselves from the others is that they How are you differentiating? How your deal sourcing? Is there something else about how your deal sourcing and getting into better deals and other funds? And so you have to have a good answer to that. There’s not that many ways to skin the cat for how you deal source once you’re in the industry, kind of everyone knows everyone for the most part. It’s a relatively small world. So yeah, I think if I think of like real funds that I I believe like Founders Fund is actually one that I respect a lot where the whole the quote from Peter today You’ll have, you know, what we wanted was flying cars. And what we got was, you know, 140 characters, you know, venture I think should be the world of, you know, you should invest in things that inspire you. And then things that are really disrupting the industry. By looking at a lot of the first time fund managers that are not performing well, versus the VCs that perform really well, it’s usually that they’re going after much larger market opportunities, and going after much bigger disruptions. And so those are usually the things that are more inspiring. I’m kind of done doing, you know, the shiny object investments, you know, and even, you know, you should not be taking venture risk to make, you know, two to four times your money. And it’s unfortunate sometimes you see VC investors who are still learning the trade. They’ll come in, you know, at crazy valuations. And, you know, they’ll be known as the the the initial investor and in jet, but then that that investment doesn’t even return 100 of their fund. You know, it’s great that you invested early investor in jet, but you didn’t return your entire fund with that investment. And that would have been, you know, something you would have wanted to shoot for. myself, my partners, we’ve been fortunate that every fund we’ve had, we’ve invested in one or more companies that have returned the whole funder multiples of the fund, kind of like, beyond meat was my recent exit. I was the largest investor and beyond meat before an IPO. And that returned about three times my entire Fund. The those are the investments I think venture should be going after not hoping that you’re going to get lucky on lots of you know, two x’s and three x’s.

 

John Corcoran  28:36

And with beyond meat, was it was there an ethical reason that you invested in it?

 

Sky Fernandes  28:41

Yeah, no, it was purely financial return focus, but it’s certainly tied into the reason it was going to become successful was the timing of, you know, people willing to think about what they’re doing to animals in order to consume them, and we’re beyond me, really differentiate That cell phone, sorry, the lights we had the, you know, beyond me about 70 ish percent of the consumers are not vegetarians and not vegans. And it’s the first veggie burger that really convinced the market that it wasn’t a veggie burger. So it was this brand nuance that ultimately made the difference for beyond meat. And that’s why from a market sizing, they weren’t just going after seven to 12% of the vegetarians or vegans. They’re going after everybody. And that’s why the market cap kind of is what it is. So yeah, I think from you know, the future, we’re gonna have to figure out how to feed everyone, not by killing animals. And this certainly becomes a great way of doing that.

 

John Corcoran  29:41

Now, you mentioned over valuations. I know we’re running short on time, so we’ll be wrapping up shortly. But you mentioned over valuations and, you know, company that’s gotten a lot of attention around that topic as SoftBank and we work the whole controversy around that. Absolutely. What do you think happened in that city?

 

Sky Fernandes  30:00

Yeah, I think it’s a good example of where the the risk that they’re taking for the amount of capital they’re investing is a little out of line between. They’re not investing in venture capital sized dollars, right? If you’re, if your minimum investment is on average 100 million, arguably not the size of capital that’s usually used for for venture deals. So you’re taking, you’re taking venture risk with really large amounts of dollars. And that can become dangerous, really, that’s the world of more private equity sized dollars. That usually goes to the safer investments. So the challenge that SoftBank is facing is you can’t scale venture right. So, you if SoftBank were to deploy 100 billion into you know, deals of you know, one to $10 million, they just don’t have a team large enough dedicated to, to do that it would be arguably a spray and pray approach. So they have to deploy larger dollar amounts. In companies that are probably at a higher risk level, then that is rational. So it’s a different game. It’s not really the venture game, it’s not really the private equity game. So it kind of caught in this weird middle ground. But it, it goes to the heart of why venture has had the challenge of kind of the spray and pray approach, you’ll have three, you know, three to seven people making 50 to 80 investments. And that’s it’s hard to say you had enough time and energy put into making quality investments with that approach. We like to think that we’re breaking that model, we’re calling it spray and sniper versus spray and pray. Because we have so many people that can actually spend time quality time on deal sourcing and due diligence where every investment we’re doing, it’s just an enormous amount of time that mostly wouldn’t be able to do. So I think we’re, you know, we’re SoftBank is challenged is they’re realizing how ventures not scalable and you literally could raise 100 billion, but how do you deploy 100 billion effectively in the venture asset class. It’s really tough when you’re taking, you start having to make bets on things that are highly risky for that amount of capital like zoom pizza, you know, not not a lot of money when zoom didn’t happen, but again ventures a an asymmetrical game. So I think SoftBank vision fund was hoping for the asymmetric need to work even at the larger sizes. And we’ll see how it finally pans out but it certainly they’re gonna have to be willing to absorb large losses and if you’re not willing to do that, don’t be in the game like Sequoia is not like Sequoia has actually done what vision fund I think wanted to do. Sequoia is designed with their $12 billion fund like a 10th of vision fund sequoias fund they can drop 100 million dollars on an investment lose it. And they can do that a few times, but they might eventually invest in the next WhatsApp. I think the way that Sequoia has been playing the game by investing early, you know, really early even like pre revenue deals all the way up. They’re doing 100 bucks. million dollar 100 100 million dollar checks is more of the right strategy. But if you’re if your first check is just gonna be 100 million, I think you’re, you’re off on strategy.

 

John Corcoran  33:09

So, you know, you mentioned a couple of times that you think ventures when you say venture is not scalable. I’m wondering is it so high touch that you think it’d be impossible for? venture at some point to have like a sass platform, where, you know, it’s like, a black

 

33:27

box, or

 

John Corcoran  33:28

AI automation where, you know, it’s very simple, like maybe even on your smartphone, you’re a founder, you need a million and a half bucks. You put in the details on your smartphone, you connect your bank account, whatever, a couple of different things and boom, it spits out a check.

 

Sky Fernandes  33:44

Yeah, so a lot of there’s been a handful of VCs that have tried the heavy data approach. Again, in some cases, they weren’t but the The fun thing about that is like you can have 10 or 20 of them. So for example, correlation ventures has done a good job of branding themselves. As you send them the information, they’ll get back to you within two weeks of if they’re investing or not. And they’re basically seen as, you know, filler capital, the round is, you know, 80 90% filled, pass it over to them, they’ll run their algorithm and it will tell you in two weeks if they’re coming in, I don’t know the question of value add to a fun like that, other than filler capital, and, you know, we’ll maybe have good better choices of which ones it’s coming in on sure. But that’s not really a good solution for like, 100 Vc should probably not exist that do that. And then you have other ones that are, you know, using machine learning to kind of curate the best deal flow for themselves and bring that to the top for them to look at. Yeah, the challenge of venture is that it’s very human intensive and, and it’s relationship driven. Startups currently do not, you know, update either information all in one place, but how they’re doing. So it is a manual collection of data process. The other thing I would say is if If you did have a blackbox kind of AI machine, a, if you assume that, you know, all of these seeds would eventually have this wonderful machine, the only thing differentiates is the data in, right. So if you have different data going in, you’ll get different results. So it’s all just based on what’s going into that black box. And that thing comes from human capital, again, of getting access to a data set that other people don’t have. So even with the rise of AI black box, I think having more human capital to collect unique data will ultimately be the big differentiator. Otherwise, it goes back to no advantage if everyone has the same black box.

 

John Corcoran  35:40

Yeah, this is fascinating. I want to wrap things up with a question that I always ask thank you so much Skye for being here. Let’s pretend we’re at an awards banquet, much like the Oscars or the Emmys and you’re receiving an award for lifetime achievement for everything you’ve done up to this point. And we all want to know is Who do you think you know, in addition to family or friends Who are the mentors appears business partners, founders, other investors who who would you acknowledge in your remarks?

 

Sky Fernandes  36:06

Yeah, I think from you know, from the early days, one person that was a mentor of mine that helped really early on in the end of college and beginning work phase was a guy named Eva naito. He just actually started working full time at Harvard Business School. He’s, he’s actually The Godfather for my son. I’m the Godfather for his children. But he he helped me tremendously in kind of thinking about venture capital at a very young age, and started working with him today. I spoke on tons of panels because of his recommendations. We ultimately launched the South Africa Chamber of Commerce together, but he’s been a long term mentor and brainstorm or even venture University. The other person is probably the number one person I think because my wife literally couldn’t do. I couldn’t I wouldn’t be in venture capital if it wasn’t for her. And I wouldn’t have created any of the companies without her either. The beauty of having my wife Is that we we came together actually with the sole purpose of being lifetime business partners above and beyond love. And above beyond family, we were looking for someone that we could build things with. Actually, both of our sons share a middle name called Mason. And we did that because we wanted for from the meaning of builder, we wanted both of our sons to have something in common. So hopefully our sons can build things together as they get older, just like their mom and dad had built companies together. So I think having a true partner to life partner, you know, I talk to my wife 20 times a day, we have a 7am call every morning to go over what we’re going to be doing that day. We all have our HR roles of what we’re doing, and we just know that both people are executing at 100%. So knowing someone you know who’s on your team, and there’s a real partner, you know, for the rest of your life helps solve a lot of things when you’re when you’re trying to create a new company. So I have to put her into Number one person that I have to thank, for word an award like that.

 

John Corcoran  38:05

Excellent. All right, Vu Venture Partners comm venture dot University and also of course, next big thing board game comm any other websites or places that you want to direct people to learn? No,

 

Sky Fernandes  38:17

no, that’s Yeah, that’s the three core things. The board game now kind of sells on its own. So we don’t do much marketing for it. But it’s a great bargain to really be Venture Partners for our fun adventure University. For those that are looking to break into venture capital, you know, in private equity in angel investing, those would be the two ones I would go to go to checkout.

 

38:37

That’s excellent. All right, Scott. Thanks so much. Thanks.

 

38:40

Thank you for listening to the smart business revolution podcast with john Corcoran. Find out more at smart business revolution COMM And while you’re there, sign up for our email list and join the Revolution Revolution Revolution. And be listening for the next episode of the smart business revolution. Cast