Transcript: Luba Lesiva: Founder of palumni.vc investing in Palantir Alumni

Host: This episode of Start A Project is brought to you by Bear.tax. Bear.tax compiles all of your crypto transactions and makes it easy for you to file your taxes. Check out bear.tax, that is b-e-a-r.t-a-x, Bear.tax. Hey Luba, welcome to the show.

Guest: Thanks so much for having me.

Host: Yeah, so I thought a good way to start this conversation is by explaining to the audience what you do with Alumni VC. And how how did you get doing what you're doing right now?

Guest: Sure. So Alumni VC is an investment syndicate that invests exclusively in Palantir alumni founders. We aim to be the first call for any startup founded or led by Palantirian.

In terms of how I got here, I used to run Investor Relations for Palantir where I raised the Series J and the Series K rounds, and yes, the alphabet runs that far. Uh, those two rounds totaled about $1.2 billion between the two of them.

During my time, I also helped run a bunch of employee liquidity programs, um, and some common stock issuance. And what that meant is that for a lot of Palantirians, I was the person that they knew on the equity side.

So after I left, as as folks left or as folks were thinking about leaving, quite often I would get inbound calls. Hey, I have a job offer, can we take can you take a look at the equity portion? I want to make sure I'm being treated fairly.

Or, hey, I'm looking to sell some Palantir stock. Um, I'm not sure if I'm getting a fair price, do you mind taking a look?

And you sort of, you end up having lots of conversations with folks, and you end up very quickly as it as happens when you're dealing with money, veering into pretty private conversations.

Like, oh, well, you know, you're looking to sell some equity, why?

Um, and the question would come back with, well, I'm doing something in my personal life, maybe folks were getting married, folks were having kids and wanted to have some liquidity for that. Um, or, um, a lot of people were starting a new company.

And so you're getting into conversation of like, what are you building? How much would you need from this liquidity event in order to fund that before having to go to external sources of capital?

And so, um, I quickly found myself in the midst of folks who were looking to invest in early stage tech and knew a lot of Palantirians, or folks who were starting early stage companies.

And during that time, sort of in the past three to five years, I've been doing a lot of investing on AngelList. Um, and I have an investing background prior to that, which we can go into.

But as I was doing, um, quite a few deals actually on AngelList, I think my portfolio is now over 30 deals. I got to thinking like, why am I being a manual intermediary in this Palantir market in real life?

I could put this up on AngelList as a syndicate. So, uh, Thanksgiving last year, I did that and I just put up a landing page, we had no logo, no deals.

Um, we ended that day with three LPs, and then doubled LP count all through the holidays last year on the syndicate. And so the demand was just so crazy, folks were super keen to invest in startups that were founded or led by Palantir Allums.

Um, and so something that had initially been sort of a, well, I'm having lots of coffees with friends, I should probably productize it a little bit. Um, turned from a side gig into like a very serious endeavor.

It's been a year and a couple of weeks now, we're at 406 LPs in the syndicate. We did our first deal in June, we've closed six deals, invested about a million dollars.

Um, and every single deal that we've done has fulfilled initial allocation in under 24 hours. So it's been a very crazy year. Uh, lots of demand, lots of lessons learned as well.

Host: That's great to hear that you scaled up to 460 LPs um in in about an year, because one of the hardest thing today is to start a syndicate from, you know, ground and growing it is pretty tough because AngelList itself is now a huge platform and there's so many players and syndicates and leads and rolling funds that are competing simultaneously for both deals and capital.

Um, so what what did, you know, looking back at this one year journey, what growth tactics really helped for you to grow your LP base?

Because growing an LP base is sort of like, you know, growing uh you're sort of like a marketplace for LPs and deals. You don't have enough deals until you get enough LPs and you don't have enough LPs until you get enough uh deals, right?

So, how did you solve that for your first deal per se? Because the first deal is always the toughest one in my experience. Um, so looking at that from starting from Thanksgiving to that, because I think it now took six months for your first year.

So how was that process itself? Because the cracking the first deal in my view is where like most of the syndicates fail.

Guest: Yeah, so let me answer that twofold. Let's touch on the LP question first. And sort of with every marketplace, you kind of have to decide which side you're going to tackle tackle first.

Um, and my initial thinking was I wanted to tackle the LP side first so that when I went to founders, I could actually point to the LPs and be like, look, when you take an investment from Alumni VC, these are the awesome LPs that you get on board.

These are like the people that you respect, the people that are still operators that have very tactical advice and help that they could give.

And the people that are going to be very responsive, very different to an LP base that's endowments or foundations that are a lot more distant.

And so on the LP side, the initial thing that I targeted, probably for the first 10 LPs was I want people I want high social proof. So, who can I get on board that carries a lot of clout in my ecosystem, which for me is Palantir alumni.

Um, so I talked to people that I respect and that I knew were very widely respected in the ecosystem. And actually, initially, I talked to them with a very open, um, question of like, do you think this will work?

Or, hey, do you mind reading this and just like checking for typos? Uh, actually the person that I asked to to look at over and check for typos just signed up within like half an hour of me sending them the landing page.

And I was like, all right, I just asked you to check for typos. He's like, oh, I didn't read it, it's an amazing idea. You should have done this years ago. This is great. And like at that point, I knew I had a product market fit in in in the market.

And so I got a few folks on board just by reaching out one on one, um, and chatting to folks whether they wanted it.

I quickly found that there was lots of LPs that didn't need a conversation, that didn't need an introduction, that would literally get the landing page URL and just sign up.

And later on I'd be like, oh, thank you and so on and they just genuinely didn't care, they just wanted to be on board, they didn't need to be sold in the idea.

After the first 10 to 20 LPs, um, I pivoted more to thinking about it as targeting different sub portions of the market. So, I wanted LPs that had access to different ecosystems of their own.

So I thought about how do I have access to more female founders? Well, I need more female LPs, because that's a differentiated social network graph. How do I get access to more deals in Asia?

I should chat to some Palantirians who worked in that Singapore office. Let me go reach out to that community. I should have some Australian LPs on board. I grew up in Australia, but I haven't really worked there for the last decade.

So I'm a little bit more removed. And so I went out and actively talked to people who are based in Australia, who worked in Australia, um, who had still like very deep social graphs there.

And I think that was quite helpful, because what I found at about 80 LPs is that the flywheel took over of on its own. So the people that I brought on board before about 60 LPs were able to start a a growth flywheel of their own.

And so it was important to me that those core people at the beginning were very valuable, were very helpful to our founders, but also represented very different networks to make sure that I wasn't just seeing the same kind of deal and the same kind of LP over and over.

Um, on the deal side, I think you're really you're really asking about the toughest part of of raising a syndicate.

It's very hard to stand in front of founders and be like, take my money even though you have very little idea of who I am, uh, and uh, I super, super promise that I totally have legit capital behind me. No one actually believes that.

So how can you cross that chasm? So one is by actually being known to the founders that you work with, like having pre-existing personal relationships there. And that helped us with a few of our first deals.

Um, the other thing that really helped was actually being able to point to the caliber of the LP base. And be like, these are the people backing our syndicate.

They are putting their own money behind the idea that they believe that Palantir alumni founders are exceptional founders. And they want to be invested in that ecosystem. So I think that kind of call to personal connections was very, very helpful.

And then the third thing we did, which is is sort of the the founder's playbook but reversed.

If a founder wants to get in front of a top tier VC, the best bet is not to email that VC, the best bet is to find a warm introduction in between someone who can vouch for you.

So I basically reversed that playbook and I found founders that I wanted to target because I was excited about what they were building, um, and had heard great references on their metrics. And so I got warm interest to the founders.

Hey, you may not know me, but I'm Luba. I used to run Investor Relations at Palantir and now I run Alumni VC. We are a, you know, I think the time we did our first deal, we were about 150 strong LP syndicate.

Um, here are some of our top LPs, you can see them with the link. Um, I'd love to chat to you about investing. I'm not going to kick out your lead VC, I'm interested in just in participating and this is the value add that I can bring.

Host: Yeah, I think alumni's as a network have been successful.

If you look at like last one to two years and like what types of syndicates really were successful, I think alumni's with, you know, pre-existing good networks that have spread across geographies both on investor side and founder side, uh, have been very successful.

Like take, Plaid, Stripe, Uber, Air Angels famously raised, um, you know, they're actual in the process of raising an actual venture fund as well.

Um, and uh, I'm assuming at some point you want to graduate to raising an actual fund and graduate from doing the syndicate as well.

Guest: We've had some inbound interest from LPs. Obviously, as I mentioned earlier, we have a champagne problem. It's great that our deals close in 24 hours.

It's also bad that our deals close in 24 hours because some of the LPs that I most want on board for any individual deal are just very busy individuals. You know, they're C Suite executives at publicly listed companies.

They work for the Federal Reserve, um, and need government approval levels. They are co-founders of other startups. And so it's not always feasible for them to turn over their inbox in 24 hours.

Host: Another interesting aspect of starting an alumni based, you know, syndicate is that you know that the network is out there and your, you know, your community is out there.

And you can also think as your distribution is out there, but you want to get them at one place and say that, hey, we are doing this, right?

Uh, and even though it sounds very simple, uh, it takes a lot of, you know, effort uh from whoever is leading to actually make that happen.

So what are the tactics you use to uh, you know, sort of build that hype around Alumni VC and saying that, hey, we are alumni and you know, we're doing this and these might be existing, you know, investors and founders.

How did you get to them uh other than, you know, backtracking as you mentioned the VC playbook and reversing it, um, and going into your own personal network, but where did the flywheel really kick off and what tactics did you use to get that going?

Guest: So, at first it was very, very manual. Like once again, taking the startup playbook. Uh, at first you do the things that don't scale.

So I reached out to LPs one by one, explained who I was, explained what what I was building, explained why it was valuable, um, and asked if they wanted to be involved. And I was always very open-ended. Do you want to be involved?

It wasn't, do you want to commit? Uh, do you want to invest in the next deal? And there were folks who couldn't join the syndicate for personal reasons.

They had personal financial commitments that that didn't align with joining a early stage tech investing syndicate. But a lot of them were super helpful in other ways. So folks uh helped us design our logo.

Folks helped us pick which swag we would include in our swag box.

And so I've always been very open about that of like, I would rather have someone who's valuable to my community, but is not part of the LP base for for whatever reason, um, than not have them at all.

I'm just most interested in building a wide ecosystem that is very supportive to our founders and is very supportive to Alumni VC. And sometimes that takes forms other than money.

Um, so that's something that I would recommend that folks building a syndicate do is just not focus on the LP count, but focus on the greater value add for the ecosystem.

The other thing that helped is about, I would say February this year, we started running online events. Everyone was kind of locked down, there was no, um, in person events, and there were still gaps in folks's calendars.

So what I decided to do was run a AMA style Ask a VC webinar. We invited one of the VCs that we like to partner with that likes to lead the deals that we participate in, um, and just kind of put them up in a fireside chat, I was asking the questions.

Um, made it very easy, very casual for the VC. We do a brunch time Saturday session. So that brunch time San Francisco time, so that maps well to New York time and London and Paris time as well. Lots of folks can join in.

And actually we found that because it's over Zoom, a lot of the time the audience will ask questions that are quite sensitive that they wouldn't want to ask in person. So I'll get questions DM to me and I'll ask them on behalf of the audience.

Um, so that gets like quite interesting conversation flowing, and lots of folks started joining the webinars. And the webinars are designed to be quite educational. So we'll cover things like, you know, how does your firm decide on deals?

Like what's your voting structure at your investment committee? Or, um, what stage do you focus on as an investor? What are some areas you think we as angel investors should focus on?

Like focused on things that were very, very relevant to my LP base and to my founders. And that helped accelerate the flywheel as well.

Host: I think the great side effect of having a alumni based syndicate or fund is in an area where we have so much capital flowing in um at every stage of the investment cycle.

Um, obviously now any founder would first try to reach out to you guys, um, you know, to raise capital.

That's a big advantage when the whole system is so crowded with capital and you know, when well-known VCs are doing pre-seed and seed seed staged, it's almost impossible and very tough to get allocations, right?

So it gives you a edge in terms of, okay, these are alumni founders and LPs who are investing in my company and you know, it would be a great partnership as well. So there's almost a pre-built trust factor that comes along with it.

And there's also like this ancillary brand effect because it's Palantir and it's Palantir Alumni, okay, you can trust these guys and you know, uh this capital is capital that I will want to be on my cap table.

Um, so it's a interesting side effect that comes with uh, you know, doing something on the basis of uh a certain well-known company or a school brand, alumni.

Uh, but moving along, you know, any capital whether you run syndicate or a fund, what you're doing is basically voting with your dollars, right?

Uh, you're putting a point of view and saying that this point of view is, you know, how the world will move towards. So, how did you start picking deals?

Like what are the things that, you know, um, you've learned in identifying companies uh and that you thought are better than something else, right?

Because at the core of any capital allocator is that decision making whether we should invest in this company versus, you know, the 10 others, right? Uh, and now that you have a significant bunch primarily from uh, you know, founder.

Now you have a tougher problem of picking which one's the right one. Um, right? Because if it was just 100 companies and, okay, now let me pick founder, because this looks impressive versus, you know, the other deck.

Uh that it's an easier thing, right? But if you all your decks are coming from Alumni, they're all at a certain, you know, level. Uh, doesn't it get harder to pick uh which company you have to decide to invest?

Guest: Yeah, so I should probably preface my answer by saying I do have an investing background.

So prior to Palantir, I worked for sovereign wealth fund in the Middle East, where I invested about $200 million in directly into tech startups, but also into VC funds. So I've seen how many other funds operate.

And prior to that, I worked for Goldman Sachs and Merrill Lynch as an investment banker and private equity investor.

So I kind of have seen all sides of the table when it comes to private market investing, and also a diversity of check sizes and stages. So I have a good idea on um, what sort of deals work in a longer time frame.

Obviously, the market's always changing, so you don't want to overweigh your past experience too much. But it did teach me some great foundational skills in terms of what you should look for, um, in deals.

So I do analyze the team, I analyze the product, um, and I analyze the the company and make sure that you're not sort of dealing with that classical tech startup issue of, well, is this founder building a company or just a product?

And are they building a product or are they building just a feature? And can this be cloned elsewhere?

Some of the things that I think are unique to syndicates that, um, I have found quite helpful in the last year, is having a strict template for reviewing deals.

It's very easy to meet a founder and get very excited about how great the deal is and then write this syndicate memo that's all glowing.

And you get to the end and because you don't have an investment committee necessarily, and lots of syndicates are run by either a solo GP or very small uh, very small team of GPs, there's no one to tap you on the shoulder and be like, did you talk about the total addressable market at all?

So internally, I have a template and I make sure that we we ask all the right questions of the founders.

I think the other thing that I pride myself in is that I try to write a memo that I could present to an investment committee of very seasoned investment executives. I'm not writing a sales document for the syndicate.

So my memos will quite honestly say like, look, I consider these to be key risks for this investment.

And if you want to invest, you have to be on board with these risks and either think that they are not significant enough to, um, stop you from investing, or think that they are far outweighed by the advantages of this opportunity.

But we've been very open about challenges, um, within like different opportunities.

Um, and that's some of the feedback that I actually get from my LPs is some of them will write back and be like, this was a great memo, I like actually understood the product better after reading it, but also I found it insightful.

Host: How much of uh, your preference are you just giving, um, for valuations, because right now pretty much every, um, stage of, you know, private investing has, you know, at least two exes in terms of valuation.

Um, and you know, every any new entrant who's trying to invest into startups will feel that, okay, this is ridiculously pricey.

Uh, how are you grappling with this whole, you know, increased round sizes as well as uh, increased in increased valuations?

Guest: So rounds have gotten more expensive. They're more expensive than they were a decade ago, they're more expensive than they were five years ago, they're more expensive than they were two years ago.

But one of the things that I think works in our favor is we tend to play at the earlier stages. So our rounds have ranged from pre-seed to Series C. And when I look at a company, I really look at it more in terms of like, how big could this get?

And I'm looking for valuations that are going to be worth in the billions and the tens of billions of dollars.

And so then it becomes an issue of like, well, is a valuation in the millions or the tens of millions or the hundreds of millions expensive, or am I going to decide to invest in this company in the next round?

But even if the valuation is more in line with the round, it's still more expensive. I'm going to be paying more in the future to get in on the same company and I'm going to get less of the company for the same dollar amount.

So I really just come back to, is this a very valuable opportunity in the long run? And do I want to be on board in this? So many startups fail, um, that you're really looking for the ones that have a shot of super outsized return.

Host: As you're, you know, doing more and more investments, uh, what are the techniques or uh, sort of best practices that you've learned for any anyone who's trying to now start a syndicate.

Like what would you advise someone who's a solo capitalist who's, you know, starting a new syndicate, it's not based on alumni, then where do you see really the opportunity there in the whole solo capitalist uh, genre of investing, whether it's, you know, a syndicate or a micro fund, um, you know, or a rolling fund.

Uh, where do you see the opportunity? Like if let's say you're not part of and you're doing you're trying to do something like this, where would you see that opportunity be?

Guest: Yeah, so I think the first point of advice is to realize the ways in which raising a fund or a syndicate is different from raising for a company. Because a lot of solo capitalists tend to be former founders.

Now, the advantage you have when you're a founder raising for a company is you have a product, and even if you're super early stage, you have a clear idea of the market you want to target and what your go-to market is.

If you are raising as a fund manager, there is no product. There is no portfolio. Uh, it is an open-ended investment thesis. And so people are really betting on you as an individual, or if you have a team, the founding team.

Um, and obviously if we're talking solo capitalist, once again, they're betting just on the one individual. So really look for as many social proof points as you can.

Get people on board as early as possible, um, and don't condition too much for the size of their commitment or how many deals they will do.

But what you want is social proof points from from individuals who are very respected in the ecosystem that you're trying to target. So that would be the first one.

Um, the second thing that I learned is to actually almost the inverse of the first point, to not uh focus too much on building a giant multi-stage firm from the beginning. You should really run quite lean and scrappy, just like a startup does.

So only build things that the market demands. Go to market, start talking to potential LPs, start talking to founders, and see what is and isn't actually in demand.

And don't put the cart before the horse and and focus on things that aren't that crucial to your success.

Host: I think there's a nuance to this, right?

Because if you're doing a syndicate, the problem most syndicate leads face is your thesis of, you know, what you find valuable and convincing the LP base that this is valuable, turns a little bit almost like a sales structure that you're selling a product.

And because you don't have committed capital, you can't really truly stick to your thesis.

Uh, this is something I've seen uh and when I talked to a lot of syndicate leads even on this podcast is there is a difference between how the incentives are aligned because syndicates tend to do more deals than they want to do because of this factor, because this is the nature of um let's say take a SAS deal, right?

Um, SAS is obviously we all know it's very popular and uh it's easier to convince LPs to invest in a company which has, you know, 100k RR uh SAS but it's very highly priced. Let's say it's 100 mil uh at seed, right?

Um, but it's harder to convince an LP base who hasn't heard about a new category. Um, but in venture most returns are where, you know, where the crowd is not yet there, right? How do you navigate this?

Because if you truly want to be an angel investor or you know, a syndicate investor, if in a true sense, you have this uh problem of convincing the LP base for every deal.

So I think that's why even AngelList realized that you need more committed capital for leads to be free of this factor and then invest truly where the feel there is value. Uh, what do you think about that?

Guest: For me it's not a problem I've seen. And that's because I'm thinking about this as a 5, 10, 20 year look forward. So I don't do deals that I don't think are going to have outsized returns. Don't have a reasonable chance of that.

One, because my own money is a play. So like this does hit my own bottom line. But also, I have focused on building a career and a professional reputation that's very much centered around trust.

I would rather be a trusted resource to a founder and tell them the truth, even if that means we don't get access to that deal.

I would rather a founder come to me and ask me to choose between two term sheets, um, and have that founder trust me to give an unbiased opinion, even if for whatever reason that means we don't get to participate in the deal.

Um, I think in the long run, the tech ecosystem really, really runs on personal reputation. I just don't do deals that I don't think have exceptional chance at exceptional returns.

Host: Yeah, uh, I think remembering that this is a long-term game and doing deals, you know, to sort of compound that effect is very important.

Um, and obviously I don't know if how much you've been observing the whole syndicate environment, but this is a widely seen phenomenon for growing syndicate that you involve and do more and more deals because it's hard to pitch the right deal, the right one, when you pick it, you don't know that the LP base will actually close it.

Um, and that's what I've been hearing especially from the early stage syndicates who don't have uh, you know, thousand plus LPs and can't fill every deal.

Um, but having said that, what are the other resources that you which helped you in this process of investing, um, that you want to suggest as we are, you know, almost at the end of our conversation.

Guest: I think if you're looking to launch a syndicate, have a look at some of the other syndicates out there. Um, and have a look at which ones are successful and have a think about why. Um, have a look at how tightly their thesis is defined.

Um, have a look at who their LPs are, have a look at their investment memos. There's many ways to be successful.

Um, the one that I have chosen is to have very honest investment memos, to have very high selection criteria for our deals, to be very thoughtful about what we're building as a framework for the future.

There are other ways to be successful that might be high volume plays, um, or that might be a wider thesis. I think you're going to be well placed for success as an emerging fund manager if you're aware of what else is out there and where you fit in.

Um, some of the other things that I found helpful is, um, listening to long form and reading long form from successful syndicate leads and from successful VCs.

And when you're doing this, make sure that you're not overweighing folks who have very short track records and will say, you know, I have a 90% IRR. I'm like, well, that's great. But your entire portfolio is nine months old.

So that doesn't tell me anything about your success through different market cycles. Um, or What are those some of the syndicate leads that you look up to and found useful, maybe their long form podcast or writings that you found very useful?

Guest: Um, I find Zach Coelius to be very thoughtful about what he's building.

Um, I find some of the AngelList events, especially when they first launched the rolling fund uh concept, the different types of rolling fund leads that they profiled were quite interesting because it was very different approaches to the market and very different approaches to how to be a solo capitalist.

Um, The Information has done a lot of writing recently on the emerging solo capitalist and what that means for the industry and I found those to be quite well researched, uh, and quite thought-provoking.

Host: And uh, for those who are listening, um, the interesting thing about Zach is Zach's deal in Cruise was the largest exit at that point on AngelList, um, when it was acquired by GM. Um, and yeah, he's a very great resource and I do occasionally follow his content as well. Uh, thanks, thanks for taking for time and uh, I wish you good luck with uh VC.

Guest: Thanks again for having me.

---