Siddhartha Ahluwalia

Boris, welcome to The Neon Show. So excited to have you today. A lot of things to discuss, you know, with your experience on investing in so many companies, so many emerging managers.

And you have an amazing journey. You built a books company, then sold it to Amazon back in the day. And you have seen it all, I believe, in the last 25 years as an entrepreneur, as a VC.

And now, you know, you’re investing in other entrepreneurs and emerging managers. So what’s been your motivation to become, and also your journey to become an LP in emerging managers?

Boris Wertz

So first of all, thanks for having me on the show. I’m a big fan of what you’re doing here and all the success you’ve been seeing. It feels like crazy to think it has been 25 years now that I’ve been able to take industry first as an entrepreneur, as well as an investor, and now partly as an investor in other investors, right, in terms of backing emerging managers.

You know, we’ve seen some success over the years with what we built at Virgin1, which was originally an emerging manager, now on Fund4 with a $70 million early-stage fund. And I felt a few things. First of all, some people put me into the business back in the days as an emerging manager and kind of bet on somebody that didn’t have a huge investment track record.

And I felt I wanted to pay that forward to other emerging fund managers that didn’t yet have a track record, but showed hustle, had a really smart investment thesis, and felt like a good person, good firm to bet on.

Secondly, being in the early-stage venture market myself all the time, I thought I had a really good deal flow, could really evaluate which emerging managers were out there, had the right strategy that I’d gotten to know over the years. So it was both a combination of giving back slash paying forward and thinking that this was also a good investment strategy.

Siddhartha Ahluwalia

And can you tell us over the last 10 years or 12 years, which were the first emerging managers that you backed, and how many emerging managers you would have backed till now?

Boris Wertz

Yeah, so one of the first ones I backed was Haystack, which is an early-stage fund out of the US, Samuel Shaw, that was about seven or eight years ago. And then over the years, I’ve increased kind of this to about 30 emerging managers that have backed. And yeah, originally there were a lot of, what I would say, generalist VCs that are backed, generalist funds that are backed. And then over time, as I got more interested in other areas, I kind of fine-tuned that.

So I started to invest in a bunch of managers in Crypto in 2016, 17. More recently, I spent a lot of time backing emerging managers in climate, in deep tech, and in India.

So the last two, three years, we’re really focused on these two, two, three themes, besides the others that I’ve kind of pursued for a little bit longer.

Siddhartha Ahluwalia

Got it. And which are the emerging managers in India that you have backed till now?

Boris Wertz

Yeah, so there’s a total of five. There is Beta Capital, there is Boldap, there’s Grayscale, there’s Shiva in 1947, and then Utsav with Iseed. So that’s the five emerging managers I backed.

There’s everything from the more kind of smaller angel funds to funds that have like a specific thesis like Boldcap focused on SaaS or Grayscale focused on infrastructure and developers. So kind of a whole range of different emerging managers that are backed.

Siddhartha Ahluwalia

Got it. And what’s been your check size across these and the previous ones?

Boris Wertz

So usually I do, I think about it in roughly kind of 1% of the fund size. So that usually is anything from 100,000 at the low end to 250,000, 300,000 at the higher end. So it depends a little bit.

I’m in a few more mature funds in North America where there’s a larger check size, but these are also larger funds and a bit more mature funds.

Siddhartha Ahluwalia

Got it. And have you started like repeating across the funds in Haystack? Like you came in Haystack one. So are you still across in Haystack four, Haystack five?

Boris Wertz

Yeah, unfortunately, Haystack moved on to be an institutional fund after that. So they didn’t even have room for small investors like myself. But there’s many other funds where I’m now on fund four, where I’ve started investing in fund one and through all of the funds.

Generally, if you get an even better feeling for the fund manager, I obviously double down and kind of continue to invest in subsequent funds unless the strategy completely changes. And so I think one of the principles I had was to stay focused on very small funds. I really think fund size matters in terms of the potential for returns.

And so ideally, I want to stay in funds that are below 20, max $30 million. Anyhow, some fund managers have been very successful and have been able to raise lots of money. So if the fund goes from 10 to 30 to 100 to 200, then the $100 and $200 funds are probably not in my sweet spot anymore.

But most of the time, these emerging managers have stayed pretty disciplined and kind of smaller fund sizes.

Siddhartha Ahluwalia

And what would be the lowest fund size that you have backed and what is the highest fund size till now?

Boris Wertz

Yeah, it’s a good question. I think I’m right now in a few emerging managers that have sub $10 million funds. I think they originally wanted to raise larger funds.

But you know, fundraising environment has been pretty tough for everyone in the last two years or so. So sub $10 million. And then, you know, on the larger funds, on the emerging managers, it’s max $50 million with some exceptions. But most of the funds, I would say fall into the 10 to $25 million range.

Siddhartha Ahluwalia

Understood. Understood. And have you started receiving cash returns because VC is generally thought to be, at least in emerging markets like India, an illiquid asset class for a long period of time?

Boris Wertz

It is an illiquid asset class, not only in India, but also in North America. I mean, I give you an example for version one, where obviously, you’ve got a long track record now of 12 years. But in our fund one, which was raised in 2012, we invested in 20 companies.

We still have four of those companies in the portfolio. So close to 20% in the portfolio. We’ve paid back the fund more than once.

But that happened mostly in the last couple of years. But lots of the upside is still left on paper. And these companies that are on the portfolio probably will need another two or three years to really mature, potentially go public or get acquired.

So we’re 12 years in, there’s another at least two or three years left. So that means there’s 15 years until the portfolio is fully developed. And I think especially in everything that was invested in 21 and 22 will take even longer, because most of the startups that got invested in that period of time were a little earlier, a little less mature, given the hotness of the market. So yeah, early stage venture is nothing that happens overnight. Most of the returns will come after 10 and even later, kind of 15 years.

Siddhartha Ahluwalia

So why should people invest in funds? This is a basic question that I get asked, right? When let’s say public markets can deliver you any day between 15 to 20%.

Boris Wertz

Yeah, I mean, listen, this is a very, very good question. And obviously, public markets have done incredibly well, both in North America and India over the last few years. I think there’s a few reasons for it.

I mean, first one, history is not always kind of the kind of measure for future success, right? So I still believe that there’s an incredible opportunity for early stage private tech to deliver value. I think that the thing though, that one has to keep in mind is just venture is an outlier business, right?

And you just have to kind of think through how, which investment managers you invest in, what your portfolio of venture funds is, so you can actually get outsized returns. Obviously, the best venture funds can return much more than that 20 to 25%. And you just have to make sure that you’re in these really great venture funds, and you think through your portfolio of opportunities.

And so it’s obviously, venture investment is not easy, but if you do it right, if you get it right, then it can pay back enormously well.

Siddhartha Ahluwalia

And have the 30 funds that you have back till now, any one of them has returned 5x, 6x, that we talk about outliers in the business?

Boris Wertz

Yes, I mean, definitely the Crypto funds are more in the 10 to 20x excess, right? And they have done well, but there’s a bunch of funds in the portfolio that are, at least on paper, 6 to 8x funds, right? And obviously, funds that were more raised in the kind of 2016 to 2019 area.

So they had a little bit more time to mature, they obviously had a good run-up in the last few years. So yeah, okay, I think there’s some really outlier funds in there. Partly driven, if you got the theme right, crypto, right? But even in a more general species, funds that have done incredibly well.

Siddhartha Ahluwalia

Got it. And in these funds, right, which deliver, let’s say, keep aside crypto, if you have to summarize your learnings from the funds that delivered cash returns, right? What were your learnings? Like, how did you learn from them and pick new managers out of them?

Boris Wertz

Yeah, I mean, listen, I think magic at early stage happens usually in two ways. Most of the time, it’s really a manager that has incredible taste for openers, right? So like excellent openers that work on interesting areas, right?

I think whenever you have not-so-great openers working on boring stuff, that usually never really gets to any great result, right? So I think that’s where really it starts. And that’s where most of the alpha is being done.

I think on top of that, then is kind of more mechanical, like how does your portfolio construction look like? Especially emerging managers sometimes are not as disciplined around portfolio construction, they suddenly end up with tons of really small investments, where they put in a small check. But even if that company does super well, it doesn’t really drive any fund returns because your ownership is too small, right?

While they double down on other companies in a way that you suddenly have a very large ownership position. And it doesn’t do well, it really screws up your fund returns, right? So that certainly can always be fixed over time and kind of managers can learn proper portfolio construction.

What can’t be fixed is your taste for openers and for unique opportunities that can become these outlier opportunities.

Siddhartha Ahluwalia

Yeah, yeah. And as a fund that you are investing in, would you be focused more on how less valuation or how early they come, let’s say a price discipline of around 5 million valuation? Or would you prefer a fund which goes for more expensive valuation, but let’s say second-time proven entrepreneurs?

Boris Wertz

Yeah, so a few things. I mean, first of all, you can always make the case of valuations don’t matter if the outcome is a billion dollar outcome and it’s a real outlier, right? But the question is obviously, how do you pick the really good deals?

And obviously, earlier is always better. Lower valuations are always better, right? So the way I would think about it is you have to get a really good understanding of kind of what unique openers and unique opportunities are, right?

And for those, if you need to pay a much higher valuation, you obviously kind of should do the deal, but you have to do conviction that this is an A-plus opener and an A-plus opportunity, right? And then you should really go in.

You should never pass on a company where you have incredible conviction because of valuation in the same way that you should never do a deal just because the valuation feels really cheap, right?

But you don’t have really any, any conviction. So it really starts with a conviction first. I think an interesting piece of discussion is this whole question of second-time openers, right? And obviously, second-time openers can command higher valuations. They have a better network. They have a proven track record.

They’re probably going to make way less mistakes. On this one, I think you always have to kind of figure out how that’s going to play out in company building. I’ve seen lots of second-time openers that were able to raise lots of money very quickly, came down with a top-down thesis on a market, right?

And never really got to product market fit because the team that they were able to build because the capital they could raise was way too large to get to product market fit. Pivots were really too tough to undertake with such a big team. And ultimately, the brand that they had as a second-time opener didn’t really help them, right?

To get to product market fit only helped them to raise lots of capital, right? And so I think generally, if you can back somebody that has had experience, it’s a huge plus, but you have to be careful that it comes with a bunch of downsides as well.

Siddhartha Ahluwalia

And what if not naming the companies or the funds, right? What have been your learnings from some of the failures?

Boris Wertz

From second-time entrepreneurs?

Siddhartha Ahluwalia

Across investing, yeah, maybe second-time entrepreneurs, and maybe the funds that you backed, but never worked out.

Boris Wertz

Yeah, I mean, listen, I think there’s a few things. It falls into a few categories. I mean, the first one is, obviously, you underestimated, overestimated a market. It’s just, you thought the market was there, and it just took way longer, or it wasn’t as attractive as one sees. And that’s a common mistake. I wouldn’t even call it a mistake.

It’s just a fact of early-stage investment. We continuously make assumptions about the attractiveness in markets and the timing of markets, as do entrepreneurs. And often you get it right, but sometimes you just don’t get it right and just get the timing wrong, right?

I think the second area of where things fail is just teams don’t execute, or are not aligned, or are not focused. So it’s really internal. And obviously, you’re trying to get a good sense for teams, founders that have worked together for a long time, and trying to see how they work together.

But sometimes that just doesn’t work out, and teams break apart and are not that aligned. And then I think the third one is, it’s also team-related, but you just need very complementary skills to succeed as a team. And it often is that perhaps the team is too much focused on the technical infrastructure and the product versus sales and marketing, or vice versa, right?

And so you might be amazing in sales and marketing, but you never build a great product. And so getting that balance right is super important.

Siddhartha Ahluwalia

And if you can share it, what have been your outlier successes? Which companies, which funds?

Boris Wertz

Yeah. So in our version one funds, there’s a handful of really outlier successes. So the earliest were very much SaaS companies.

We have a company called Outreach in the sales engagement space, which was the last allegation was $4.5 billion, and we invested at the pre-seed. We have a company called Java, which is a vertical SaaS for home services business that is valued at about a billion dollars. We were the first investor in the pre-seed round.

The following, the next generation were lots of crypto companies. So we’re investing in Coinbase, which obviously is a public centralized exchange and crypto platform. We were investors in Uniswap, which is the decentralized version of an exchange in the crypto space and kind of multi-billion dollar outcome.

And kind of too early to tell where the most recent outliers come from, but there’s a bunch of areas and companies very excited about that, from crypto to climate, to Deep tech that are starting to scale. So pretty large range. And as I said before, I think often determined by the themes that were the most important ones at the time of investment, SaaS a decade ago, crypto five, six years ago, and perhaps today, different themes that really matter.

Siddhartha Ahluwalia

And what are the themes today, according to you that matter?

Boris Wertz

Yeah. So I think it’s kind of interesting to think about where the state of the market is right now. Obviously, everybody’s talking about AI, but it’s also clear that AI gives a huge advantage to incumbents that have the existing data, that have the customer and distribution, and that they’re certainly not sleeping on AI.

And so while AI is probably the most interesting technology and a huge platform shift, it’s also not quite clear yet how much value will it prove to startups versus incumbents. So it’s obviously something we observe a lot and spend a lot of time in, but it’s something that what we’ll figure out over the next five to ten years, how much startups can capture value versus the incumbents. I think there’s a lot, a big argument for interesting areas in kind of deep tech and climate where really tough problems are getting solved.

Obviously, startups that are much harder to scale, much more capital intense, we’re talking about hardware, we’re talking about lots of complicated processes that need to get figured out. And then we’re still very bullish on crypto, right? I mean, crypto has gone through lots of ups and downs and lots of cycles, but the ultimate idea of rebuilding the financial system on a global scale in an open-source environment is still a very attractive one.

It feels like we’re still very, very early in that phase. And compared to the other areas, like AI, you don’t really have to fight against incumbents. There’s no incumbent in crypto that can compete with you.

They’re all on a different technology, on a different business model, talking about banks. And you might have a real advantage as a startup in that space.

Siddhartha Ahluwalia

And you have been recently visiting India, right? If you can share about how many companies and how many fund managers you met during your this trip and previous trips.

Boris Wertz

Yeah, so I’ve been in India twice now in the last 12 months. And just super fascinated what is going on there. High-level thesis for me is really India feels like China two decades ago.

Increasing population, increasing middle class, geopolitical, and then super interesting spot where people try to move out of China and move into India. Incredibly large developing ecosystem, incredible hustle culture. So it just feels like such a fascinating country with so much potential.

And on each of these trips, I mean, I’m still in the phase of where I’m trying to learn as much as possible and meet as many companies and fund managers as possible. And so each of these trips is literally dozens of fund managers and dozens of companies I’m meeting. And obviously, over time, as I built my network and kind of getting to know people, perhaps that will reduce a little bit.

But right now, I’m really just in the phase of meeting as many people as possible, trying to learn as much as possible and just getting the lay of the land.

Siddhartha Ahluwalia

Got it. And what are the special things apart from like, it looks like China 20 years ago, middle class, any deep learnings? What’s in favor of India today?

Boris Wertz

So I don’t know if it’s like deep learnings, but I think there is. I mean, obviously, India, with English being spoken, has always been much more part of the global economy than China has. So from that point of view, I always feel like India has always been part of the global economy.

I think more than that right now, what you’re seeing is just the reverse brain drain of Indian people that have studied in the U.S., have worked in the U.S. or Canada for that matter. And I know going back to India to build startups again and kind of bring lots of learnings and lessons learned from those countries and those startup ecosystems into the India ecosystem. And so the way really I think about it, there’s these two opportunities, India for India.

So rebuilding India products and services in Fintech, in healthcare, in education, in commerce, you name it. And then India for the world. So building products with a worldwide reach from India and not only having the cost advantage, obviously, of operating out of India, but also having the design and product skills to build products that can compete on a global basis.

And we have one example in our portfolio company called Headout, which is a marketplace for travel experiences, kind of built out of India, competing on a global level, incredibly successful and has done very, very well with that strategy.

Siddhartha Ahluwalia

And what do you think the advantages Indian entrepreneurs have and disadvantages Indian entrepreneurs have as compared to their Western counterparts?

Boris Wertz

Yeah, the advantage is definitely that you have this really, really broad developing ecosystem, tons of talent and developer and obviously a cost base that is still very competitive to North America. So you can build really great product at a fraction of the cost than in North America. I think the challenge is always if you sell to North America in the market, the reality is you’re never going to be as close to those customers being based in India than you are if you’re based in the Valley.

And so obviously the world has gotten closer together, grown closer together. And it’s easy these days to kind of understand these customers, connect with these customers, travel to US, et cetera. But it’s still, there’s a time difference, there’s a geographical distance.

And so I think that’s the biggest challenge that I think every single Indian entrepreneur or for that matter, European entrepreneur and even sometimes Canadian entrepreneur have. I mean, it’s like if you’re not based in the core ecosystem, you’re always going to have, it’s always going to be a little tougher to learn the same lessons, connect with the same customers in the same deep way. And so that’s the challenge that needs to be overcome.

Siddhartha Ahluwalia

And you talked about both advantages and disadvantages, but do you see Indian entrepreneurs are more hungry than their Western counterparts or more determined or more trying to prove themselves?

Boris Wertz

Yeah. I mean, no question about it. I think the average entrepreneur in India is hungry than the average entrepreneur in North America.

There’s an incredible hustle culture there. And I love the ambition that you see. It’s obviously lots of upside that you can get by building successful startup. And that ambition is definitely, you can feel it all the time.

Siddhartha Ahluwalia

Got it. And coming back to how institutional funds are evaluating emerging managers, because there are now thousands of, I think globally, the number of emerging managers that are there because starting a fund has become much easier. The other thing is that earlier, if you remember, you have been an entrepreneur turned fund manager, building a fund was thought to be of a big boys club, like only people from Harvard, Stanford or Ivy League colleges would get into funds or even start funds.

Now the table is flipped, right? It’s a very democratic process. And what I think happened 10 years ago was that the best entrepreneurs still had to struggle to raise venture capital. Today, VCs are running after venture capital. Oh sorry, VCs are running after the best entrepreneurs, right?

Boris Wertz

Yeah. I mean, so a few things. I mean, first of all, I think LPs kind of try to kind of figure out investments along a few criteria. I mean, the first one is always how much money can I put to work in a certain fund? And no VC ever wants to be more than 20%, ideally not more than 10% of the fund.

And so lots of emerging managers, given that they raise really small funds of 10 to $20 million, are just tough for a large LP to invest in because they don’t want to raise, invest small checks into dozens of LPs, GPs. I think the second thing is obviously kind of LPs are pretty conservative. They want to see a track record.

They want to see some history in the fund. They want to see how the partners work together, et cetera. So I think they don’t tend to go for the riskier categories.

And so I think over the last five to ten years, there’s a few fund of funds that have really started to focus on emerging managers because they see the huge upside you have in kind of backing smaller, earlier funds.

And, you know, history has shown fund one and twos of lots of emerging managers have done exceptionally well and kind of created some of the best return. And so I really hope that over time, institutional LPs will go much more aggressively after that opportunity and wrap their head around a different style of investing, which is smaller checks, but way higher upside potential.

Until then, every single emerging manager has to kind of figure out how to raise their fund. And I agree with you. I mean, it has gotten much more democratic.

I mean, you look at when I started version one, I didn’t really have much venture experience. I had never worked for another venture fund. But I was able to raise a fund based on my angel investing track record, based on my entrepreneurial track record.

But you need to raise from one of three sources. It’s either other entrepreneurs that want to pay it forward. It’s other DPs, other investors that want to support or kind of perhaps want to build a relationship with an emerging manager.

And then lastly, from family offices and high net worth and people that want to get some exposure to venture. Obviously, all of these three categories perhaps have a higher volatility in when they have capital and when they don’t have capital. If markets are great, then entrepreneurs feel richer, DPs feel richer, high net worth and families feel richer.

And so right now it just feels like there’s not as many of those investors in the market anymore. And that’s why it’s so hard right now for emerging managers to raise.

Siddhartha Ahluwalia

And what would be a piece of advice for emerging managers right now on fundraising?

Boris Wertz

So for me, there’s a few things. I mean, the first one is obviously everyone has kind of an ideal number in mind, like how big the fund should be and what you want to raise. But in a tough market like this, I always recommend think about what I call the minimum viable fund.

So what is the minimum amount of capital you need to raise to prove out your strategy? And if your strategy is, hey, listen, I want to show that I’m going to get in the best deals with $100,000 checks. And I want to do that and show that across a bunch of sectors and over certain years and perhaps I need to kind of get into 30 to 40 deals.

Then, you know, a $5 million fund will be enough to prove that strategy out. If your strategy is I want to lead rounds at the seed stage with at least a million-dollar check size, and it should be a highly concentrated portfolio of high ownership, then obviously, you need more like a $30 million fund to do all that. And so I think everyone should kind of think about what is the investment strategy and then what is the minimum viable fund to prove out that investment strategy.

So you can go back to the market after you’ve done all that and said, hey, listen, this is what I set out to do. This is what I’ve done. This is my success.

I think the second thing is, to be honest, it’s just a matter of hustle and creating pipeline. Unfortunately, neither entrepreneurs nor family offices nor other GPs are kind of super easy to identify. It’s not like I know these 500 funds and I know what their budget is.

This is in this area, it’s a little bit less defined. And you just have to do the work to reach out to as many people and to connect with as many people as possible. And then I think the last thing is, I think everybody needs to kind of think through how they can differentiate.

And what I’ve seen and when I looked at emerging matters, there’s still too many undifferentiated funds out there. And I think you need to differentiate either kind of focusing on a certain sector. That’s a little bit more valid for North America than India.

Or by having a media platform and kind of getting great leads through a podcast or a newsletter or some other social media activity. But I think it’s too tough right now to race for a relatively undifferentiated fund.

Siddhartha Ahluwalia

Understood. So you have seen many cycles, right? Both as an entrepreneur and as a VC. So where would you categorize the current cycle is and when do you expect it to get better for the players in private markets?

Boris Wertz

So I feel like we’ve definitely hit bottom and kind of there’s optimism coming back into the market. I mean, obviously, it’s still far away from kind of what we saw in 21. And we might never get back to 21.

Perhaps that was an outlier and that was not just the normal thing. But I think the thing that everybody should keep in mind is, especially when you are in early stage, either building as an entrepreneur or investing as a fund manager. You know, as we talked about before, these are 10 to 15 million, 15 year cycles. Right. And so whatever happens today, tomorrow might not matter. It’s literally a long way.

And sometimes you have to do compromise in between. You know, I remember some of our companies that are doing the best now. They had many, many years of having tough times raising capital, not because the market was bad, but sometimes the geography didn’t work for investors.

The sector wasn’t hot. And so I think in technology, you always go through a bunch of cycles, either macrocycles or sectors being hot, being cold. And often you just have to be heads down and just working through it.

There’s nothing you can do about it. But ultimately, I think if you focus on creating value, either for entrepreneurs as an investor or kind of for customers as an entrepreneur, then you’re going to be fine.

Siddhartha Ahluwalia

Got it. And during these cycles, right, you’re saying today we are at the lowest of the cycle. What were the other lowest points and how did it get better for the people listening, for entrepreneurs listening, for fund managers listening?

Boris Wertz

Listen, I’ve been through a bunch of cycles. I think this is like probably my third one overall. So starting at the beginning, when I started my company back in 99, Internet 1.0, the boom just started. But then, unfortunately, in March 2000, we had the first cracks in the boom. And then in later 2000, 2001, it was what we call the nuclear winter. The Internet boom had completely deflated.

It was impossible to raise any money. Every single venture capitalist was just focused on supporting their own portfolio companies and couldn’t even do all of that. It was a pretty brutal time from the high-flying Internet boom times to what we called nuclear winter in 2001.

And, you know, during that time, we got lucky that we were able to sell our company to a Canadian company, which ultimately then we sold to Amazon. But as we were selling to Amazon, that was the second one, the great financial crisis in 2008. So there was, as you might remember, people were feeling like the economy was in shatters.

There would not be any economy. It was all breaking down. And that was a really tough time at that time.

But also that after that great financial crisis, lots of really amazing startups got built and got created during that time. And now I think 2022, the post-pandemic recession or kind of interest rate shake-up, was my third one. So the reasons are all kind of different.

The first one is like an inflation and kind of Internet company values. The second one was a great financial crisis. This was kind of interest rates that went up after the pandemic ended. So, you know, the reasons are different. How it plays out is usually different. But you know that at some stage, it’s just going to go back to normal times. And you just have to work through these cycles.

Siddhartha Ahluwalia

But definitely we all can learn better from history rather than from our own mistakes.

Boris Wertz

Yeah, agreed. Agreed.

Siddhartha Ahluwalia

And you are a board partner at A16Z. Tell us more about that.

Boris Wertz

Yeah. So back in the days when Mark and Ben tried to scale up A16C, they created this board partner program where they invited mostly operators and executives. In very few cases, an early-stage investor like myself to sit on boards on behalf of Andreessen Horowitz and represent the firm there in geographies where they didn’t have coverage or in sectors where they didn’t have enough expertise.

And I think that was a really smart way of at the beginning when there’s really only a handful of GPs at the firm to scale the firm. Obviously, in the meantime, the firm has grown tremendously and they have enough GP capacity to take that on. And that’s obviously always a better way of if somebody in the firm is the board partner on an investment versus somebody external that is kind of at the edges.

But to be honest, it gave me an incredible front-row seat to how Ben and Mark built that firm, how quickly they scaled it, how many experiments they did, how many trial and errors they did. And I think if there’s one thing I learned from that experience, it’s like they really thought about building A16C like a startup and not like a traditional venture firm. And that curiosity of how do you find product market fit?

How do we experiment a lot? How do we scale aggressively? That was just pretty fascinating to see because it’s very different than what every other venture firm had done at the time.

Siddhartha Ahluwalia

Got it. And what are the lessons that emerging managers besides the one that you mentioned can take away from how A16C was built? Because it was a firm that everyone said could never become Sequoia or Accel.

And I think now in terms of performance or team or even the fund sizes, it has outperformed all of them.

Boris Wertz

Yeah. I mean, listen, I think if one take would be Ben and Mark are very special people. Exceptional entrepreneurs, exceptional investors.

So I’m not sure how much lessons to be taken away from two exceptional people built something really special. It’s a little bit kind of what is the lesson from Steve Jobs having built Apple? Steve Jobs was just a very unique person and et cetera.

But I think the general lesson for me would be two things. I mean, first of all, Ben and Mark didn’t follow any rules or patterns or how things should be done. And so I think questioning all the time how you position yourself in the market and how you kind of think you can succeed is just a very, very important way.

And when you think about how venture was built beforehand, it was kind of a small group of people that did it. There was not much innovation. It was done in the same way.

Every venture firm was built in the same way. The brands were pretty undifferentiated. Everything looked a little bit the same.

Right. And so I think that’s the first one is like, and it comes back to this whole point, like, how can you differentiate in the market? And the way originally how Andreessen Horowitz kind of differentiated was we focused on entrepreneurs first, right?

We built a company, we built a fund for entrepreneurs. I think the second thing is then obviously that isn’t that initial choice of how you position yourself, not static. You need to do trial and error.

You need to test things. You need to experiment in the same way that a startup does that. And I think they’ve done just so many different things that they’ve tried out and kind of optimized, including what I just mentioned, like the board partner program, which was they tried for a few years and tried to make that work. Right. And so I think it has finally arrived at the VC stage as well.

Siddhartha Ahluwalia

Got it. Got it. And, you know, for you, you have been consistently building version one over a period of years. So today, you know, how much of your own wealth is in private versus other asset class?

Boris Wertz

So most of it is in private. But I’m completely fine with that for you. A, I think I have exceptional deal flow and opportunities in private, right?

So I feel like I’m obviously, or I think I’m a much better private investor that I would be a public market investor. So from that point of view, it kind of makes sense. And then the second one is like, I have, I wouldn’t say like an infinite timeline, but I have a very, very long timeline in terms of staying invested and believing that technology will develop, kind of create tons of value over time.

Right. And so if you feel like you have a competitive advantage in a certain asset class, for me, it’s like private tech investing, and you have no immediate liquidity needs, right, and you can let it compound over a long period of time, then it feels like it’s the right choice.

And you can be okay having, you know, kind of the vast majority of your wealth locked up in private illiquid investing. Right. But obviously, everyone is in a different situation or might be in a different situation that might not be the same two assumptions that I have for myself.

Siddhartha Ahluwalia

And let’s say, how many new companies would you pick every year? How many new funds that you would pick every year now?

Boris Wertz

So on the company side, when we invest in version one, we invest at the pace of roughly six to eight companies a year. So in every fund, we have about 25 companies. So that comes to give or take like a three-year investment cycle, sometimes longer, sometimes shorter, but kind of roughly three years.

And then on the fund side, so this year, I was pretty aggressive, I added about five or six emerging managers and new funds to my portfolio. Didn’t do as much last year. But you know, probably three to four a year is probably a reasonable size and pace for that.

But it always depends a little bit on kind of where the market is evolving. Obviously, I got super interested in India. That’s why I added, you know, five emerging managers to my list.

Don’t think there’s another geography that’s gonna be the same interest for myself for the next little while, right. So that was obviously a little bit of a special, special situation. But, you know, continue to invest both in version two, version one and interesting startups at the early stages, and then personally and interesting emerging managers.

Siddhartha Ahluwalia

And all these five managers got added this year, in your portfolio from India?

Boris Wertz

Yeah, no, in the last, so no, in the last roughly 12 months, so 12-15 months. So I think my, I did my first investment last year in January last year. And the last one, kind of in spring, spring this year. So yeah.

Siddhartha Ahluwalia

Got it. Thank you so much, Boris. It’s been such a special conversation. I learned a lot. And I believe my listeners learned a lot, right, on how, you know, a person born in Germany, sitting in Vancouver, investing primarily in US and now globally, thinks about various things, investing in India, investing in different geographies.

And also, you know, how do you have a different sense of a macro? And, and it, you know, and you have 25 years of experience, and still, you’re taking such incredible risks that majority of your wealth is still vested in private. So thanks for this conversation.

Boris Wertz

I appreciate it. Thanks for having me. Yeah, I love technology. I love startups. I love entrepreneurs. So I love being an active player in that and supporting the ecosystem, and hopefully building some great companies and wealth along the way.

Siddhartha Ahluwalia

Thank you so much. It’s been a pleasure.

Boris Wertz

Thanks a lot.