More and more people have started to turn to venture capital investing as a full-time activity, only to find that it is not as easy as it seems. This realization explains the rise of Oper8r, a for-profit, venture-funded accelerator that was launched last year as a sort of Y-combiner for emerging fund managers. This explains the wide appeal of AngelList, which handles much of the hassle of administering funds in exchange for fees.
Now Plexo Capital, which is both a venture capital firm and a company that backs other venture capital funds, is ending its own program to help educate investors on the many facets involved in everything, from the creation of a fund to the raising of capital, to the proper management of these assets.
Called GPx, the program offers an impressive number of free educational modules that have been recorded by a long list of esteemed VCs and limited partners, including Charles Hudson of Precursor Ventures, Michael Seibel of Y Combinator, and Beezer Clarkson of Sapphire Ventures. But the program is also organized around cohorts in which a number of emerging fund managers are invited to work more closely with its trainers, service providers (such as law firms) and subject matter experts.
Notably, GPx is a nonprofit program but wholly sponsored by Alphabet (which is the principal investor in Plexo Capital), City National Bank, Practical VC, and global law firm Gunderson Dettmer. The alleged benefit for Plexo Capital is that it gives the company better insight into which managers it might want to fund, but to find out more, we quickly caught up with company founder Lo Toney yesterday. Our thread has been edited slightly for length.
TC: What is the primary objective here?
LT: I would say our goal is to add as much value as possible as an LP. When I started Plexo Capital, leaving GV [where Toney was an investor previously], I realized that there were so many resources that we had there. I didn’t have to think about a lot of back office as there were finance, legal and operations teams to handle all things related to reporting and drafting documents for transactions. Additionally, Alphabet is GV’s only LP, so there was no need to fundraise. When I went out to start Plexo Capital, [it was eye-opening].
TC: What is the advantage for you of setting up this platform? Do you get a stake in the managers accepted in the cohort?
LT: There are a few benefits that we take very seriously. Firstly, we like to be up to date with what’s going on in the market and it’s a way to have another point of contact with GPs to understand overall what they think about building a fund and what is the profile of the people [and] what types of opportunities are they targeting.
It’s also a great way for us to give back. For too long, the information needed to transition from being a great investor to hanging your own shingle and becoming a great fund manager has been a bit hidden. I was lucky to have people like Georgeanne Perkins [a longtime former director of private equity at the Stanford Management Company] to really help me understand all these nuances. But there are so many things that are not known. People really don’t know what they don’t know. There is no comprehensive book on Venture Capital Fund Management for Dummies.
TC: Are you an investor in these funds? Is that part of the deal?
LT: We got involved in some cases [of the funds] and in other cases we have not. But there is no cost, there is nothing we can do to have a preferred economy.
The objective is to be able to create a community among the [cohort] to be able to browse the website modules – the video content – at their own pace. Then, with the cohort, we bring these people to deepen certain topics such as, for example, portfolio construction, or how to identify a family office, or how to set up a go-to-market strategy. We also provide access to some of our professionals from the Plexo Capital team. Vishal [Tripathi], who is our portfolio manager, works with one-on-one GPs on portfolio construction. We have Kuji [Chahal] who manages investor relations for Plexo Capital, and he sits down with every GP and he helps put together a tailor-made list of potential LPs, then helps GPs with the right approach to access those LPs. . .
TC: Do they have to be people working on their first funds? Presumably, there are a lot of people who are launching secondary funds who might also need help.
LT: We just finished our first cohort where we had about 13 GPs from about 10 companies, and they are, for the most part, [working] on the first fund. We would like to isolate this to people who are emerging managers looking to create their first fund or fund two – this is where our sweet spot is.
But whether it’s someone’s first or fifth fund, anyone looking to access open source content can sign up. It’s a journey. It is not a static process. I am still learning myself.