$300M in Deals: Launching a Fund Can Be A Disaster… and What To Do Instead

Hey, welcome to another episode of Making Billions, I'm your host, Ryan Miller, and today I have my dear friend Chris Van Dusen.

Chris is the senior partner at a firm known as Solyco Capital that has gone to do get this over $300 million in transaction. What's more, Chris is a three time exited founder that specializes in venture capital from C to Series B investments.

So what does this mean? Well, it means that Chris is an expert in venture capital, closing deals and building reputation, relationships and results.

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[THE GUEST]:  Chris is the senior partner at a firm known as Solyco Capital that has gone to do get this over $300 million in transaction.

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• 18:35 (Cont.) $300M in Deals: Launching a Fund Can Be A Disaster… and What To Do Instead

Transcript

Ryan Miller  

My name is Ryan Miller, and for the past 15 years, I've helped hundreds of people to raise millions of dollars for their funds and for their startups. If you're serious about raising money, launching your business or taking your life to the next level, this show will give you the answers so that you too can enjoy your pursuit of Making Billions. Let's get into it. 

Ryan Miller  

Don't even think about launching a fund until you've done what my next guest suggests. Join me on this episode of Making Billions, where we chop it up with a three time exited founder on real talk on what it takes to be a powerful asset manager in this alternative investment fund space, all this and more coming right now. Here we go. 

Ryan Miller  

Hey, welcome to another episode of Making Billions, I'm your host, Ryan Miller, and today I have my dear friend Chris Van Dusen. Chris is the senior partner at a firm known as Solyco Capital that has gone to do get this over $300 million in transaction. What's more, Chris is a three time exited founder that specializes in venture capital from C to Series B investments. So what does this mean? Well, it means that Chris is an expert in venture capital, closing deals and building reputation, relationships and results. So Chris, welcome to the show, man.

Chris Van Dusen  

Ryan, thank you so much for having me. Excited to be here, love the show. Big fan of yours for quite some time. So excited to be here and finally, get to do it in person, or, you know, in person here together.

Ryan Miller  

Yeah, man, it's good to have you, we've been very fortunate to be in the top 2% of all podcasts in the world. We're number three in private equity, if you can believe that, number three in the world, and it's all because of amazing guests just like you. So I'm excited to chop it up with you, talk about all of this transaction volume, your exits, building reputation, relationships and results. We know about that, so we've known each other for a little bit now and I'm just curious, from your perspective, there's a lot of people who listen to the show all over the world. Some of them are just starting out, but even if you're not, it's really good to brush up on the fundamentals. So from your standpoint, when someone's starting out in your industry, how do they win and get early points on the board and then we'll talk about how they not lose after that. So how does someone starting out, how do they win?

Chris Van Dusen  

So it's a great question, but I'm gonna sound like Warren Buffett, even though I am not, and that is, invest in what you know. And it seems very, very straightforward, but traditionally, before you get into to venture, you get into private equity, you get into even angel investing, right? You're doing something in your career, and in that, you're learning about a certain sector, certain industry, or, let's say, outside of it, there's just deep passion for something right, that you're not employed in. Both of those things are where you can have an unfair asymmetrical advantage to the knowledge gap, if you like, take me right? I did a lot in consumer package goods, I do a lot in sports. But when you get into biotech and pharma and these big, complex ideas, the education, education chasm that I have to go over just to be able to say I know enough that whether or not this deal is going to work, I know the competitive set. I know how hard it is to get contracts or do something in that space like I have so much more time compared to something I know, and that's the first thing is really to focus there. You're gonna understand your Total Addressable Market better, like I said, contract value, and also you probably have a deep passion for it, because you spend a good portion of your career or your passions really focused on it. That's number one. 

Ryan Miller  

Yeah, thank you for that. Investing what you know so you mentioned TAM, make sure that that is what do you need it to be and then do you factor in any of the the macro environment that that deal exists in? And how do you perceive that when doing your first deal and trying to get some points on the board? 

Chris Van Dusen  

Yeah, so I do very much, and we can look at the difference between investing in 20 & 21 versus 22 & 23 and even this past year in 24 when you look at interest rates and the cost of capital. So I look at it and say, what money or what capital is this business going to need on like a five year run, a seven year run, because venture deals specifically are going to be much longer and are they in a gross mindset, or are they in a yield mindset and those are very different, right? So when we look at Capital Markets, and you can see the cycles, when you look at low cost of capital from an interest rate perspective, you're going to be in a growth cycle that is high revenue, low yield, and that's to get market share to keep growing to get bigger, think of a land grab, we would say. And then on the other side, when cost of capital is higher, I'll allow what we're experiencing today, you're going to see more and more companies focused on yield, which is standing on their own two legs, not necessarily just living on investor capital. And that's true in venture as well as big established companies at the capital markets side. So we have to look at it. Because sure, we might be lead your seed, lead your a round, but if you still need a massive amount of money and your B, C and D, including debt that might not be available to you. So that's an execution risk from our point of view.

Ryan Miller  

Brilliant. Now, you said that, that's number one. So number one, invest in what you know, we got a few tips on that. What do you have another one for us?

Chris Van Dusen 

I do, and this is specifically, as you mentioned, starting out, everyone wants to launch a fund. My advice, don't. And maybe that's good, maybe that's bad from your point of view, but here's why. When you look at a fund, it's really an AUM game. We've got to raise a certain amount of money, we have a management fee. You've got carry, and we have to deploy that money into this, you know, sector this, this mandate that we've designed, but then into multiple companies. If you're starting out, I would contend you don't have all those great companies identified, or the relationships in that sector that are going to get you the very, very good A blue chip deals right away. Instead, you can take your time, find a great company that you believe in, go out and put together what they call an SPV, a special purpose vehicle or a different instrument to receive investor capital treated for just that deal and deploy it's going to save you a lot of time and effort, especially if you don't already have this high net worth, family office, or wherever you're raising capital for to come in. You know, I've seen many a fund, many a fund, burn out because they weren't able to raise capital quick enough. And you know, your show you talk about the three R's, right and reputation being a very big one. If you commit capital and don't follow through or follow through late, I will tell you what, that's ruining one of the R's. And so you have to go out and try and raise this and make sure you're going to do it. And it's much easier to do in an SPV model, deal by deal, than it is to go try and raise a fund and not be able to deploy.

Ryan Miller  

Awesome. Yeah. So, you know, I've helped to probably over 2000 people to launch their own funds and some, some do better than others, like any industry at all, ever. And one thing I can tell you is, folks, I absolutely agree with Chris, what he's talking about here is saying it's not that funds are bad or don't launch a fund because remember, the context is we're talking about when you're first starting out. And so funds are, think of it like a tool, and it is a specific tool for a specific job. And I'm generally speaking here, but typically, when you're launching a fund, if you do a traditional 220 structure and you're launching a fund, those are meant for large volume or AUM small margin. And if you're trying to do small volume and small AUM on a small profit margin, you're going to go out of business and this is the problem that people have. It's not because they didn't understand real estate or hedge funds or whatever it is they're doing. It's because they were in the wrong vehicle. And so you can crash and burn on your dreams, potentially by launching a fund too soon. Would you agree?

Chris Van Dusen  

100% and what ends up happening is you can't negotiate the rate, the right depth in your own deals. Or just take the economics on a standard 2 & 20 model, you go raise ten million right? You're sure you're gonna have a couple $100,000 coming in. Maybe that takes care of your salary. You're gonna have no support. You're gonna be having to file. You're gonna have to keep operating capital to keep your all your registrations filed for the fund, I mean, it will eat it up quickly. Oh, and by the way, the cost of raising capital, Where's that coming from? Because I don't know about you, but jumping on a plane to close a nice chunk of capital going to lunches, right? It sounds fancy, but the other day, that's an expense line item outside of what you're doing to support your own self and family. And so being able to do it in a smaller little deal, instead of having to put this whole thing together, I think it's very different.

Ryan Miller  

Yeah, yeah. So syndications, SPVs, those are the good and you may disagree and feel free to do it, but what I've seen some people say this number is too small, but I was like, don't even think about launching the fund until you're at least at 50 million. AUM, preferably 100 because then at 100, 2% management fee, if you're even able to get it right now, reports are coming in that actually it's about 1% right now. So let's just say, let's go with the market you raise $100 million at 1% management fee. So management fees are gonna cover your OP costs at 1% you only got a million bucks to manage $100 million of volume, okay? So only a million dollars, that's a couple of salaries you might be able to hire a mid level investment banker and the adequate lawyer and some graphic design, and you're tapped. And so you can see if you did that on a ten million fund. So you could, you can launch a fund with nothing you can, doesn't mean you should, but you can do it, and that, unfortunately, can stand in the way, not because you don't know what you're doing, but because you do know what you're doing, but you're doing it in the wrong vehicle, which also can damage reputation, relationships and results. I absolutely love it so it comes full circle. 

Chris Van Dusen  

One thing I would add too is, if you look at what you're going to need to do from a fund basis versus specific company that you want to invest in an SPV, I can evaluate that company, I can go deep, and I can add value, right? And adding value, I think, is extremely important, especially on an early stage investment. When I go and let's say, I raise that 10 million and I send it out equally, 1 million in 10 companies now, 10 companies that I need to focus on and help but remember, I don't have staff now to help me. I have analysts, I have me, and maybe that's fine because we're in a minority position, and they don't need all the help that they would traditionally need from the lead. But I contend that getting invested in early stage companies is because you have a passion for the entrepreneurial journey and you want to be able to provide value. And so starting smaller is a much more prudent way of doing it, then going right to a fund structure, in my opinion.

Ryan Miller  

100% because it gives you the space, because you don't have that pressure of compliance costs and all that worth audit and unless you really want it. But you know that's the your that would be bizarre, but with, in all seriousness, when it comes to doing an SPV, just getting that experience or syndication, getting that under your belt. It's not only a good idea, it's absolutely vital, if you actually want to be, if you're an aspiring or emerging fund manager, or you have those dreams. Just put in the reps show that you can close deals, you can run a team, you can raise capital, you can operate a business, you have processes. Like there's so many things that you have to go in place because of funds. If you don't forget, you're starting a financial institution. That's a big deal, and that's a bit and which is amazing, but you got to be ready for it and it's maybe you're ready, you're you're ready, but not able, or you're able and you're not ready. But then remember, at the end of the day, it's going to be you standing in front of an investor, convincing him that you can take down $100 million, you can take down $500 million or a billion dollars. And you're like, hey, man, it's my first deal, it's like, dude, go do a couple deals. Because I've been this guy. When I started out, I was a kid, they were like, just do a couple deals. Show that you can make money, I believe you know what you're talking about, but unfortunately, you haven't been battle tested. And so I need to see you in the industry and so I went out and I did it, and now we're here. And so for if any of you are listening to, to Chris and I, that is a great way to start and sometimes, and I remember my my son, would be a little personal. So my son, he's eight years old, he was in running club, and he ran too hard, and he was finishing really bad. So when we practiced, his time was really good, but during the race, and there was a few of them, he was so slow, and the reason why is because he was so amped up. It was the first race ever of his life. He was so amped up that he just went like crazy, and then he would hit him. You'd hit a wall, and then you'd have to walk, and then you'd sprint like crazy and you'd have to walk. And so my advice to him is the same to the rest of you, go slow to go fast. Slow it down, and you'll find that your finish lines, you will cross them faster if you actually scale back a bit in the beginning. It's the same exact principle, I love that.  

Ryan Miller  

Now we talked about how to win, but also avoiding some of the downside risk is another component when you're entering in this industry. So from your perspective, what are some principles that you found to help beginners to avoid losing in the beginning? 

Chris Van Dusen  

The biggest one that people focus on is, you know, similar to what I said, understand what you're investing in, make sure it's, you know, something that has some hedge against what might happen on the macro side, right? I can give you all this, the thing that no one really focuses on are the founders. Right? We go into due diligence and we evaluate the company, the TAM, the potential, the exit, uh, potential fool, and who the suitors might be. Make sure you look at the founders and personally, I love investing in founders that have already gone through it once, and the reason being, and sorry, it's selfish, but we're investing capital here is, if you've done it, you have done that journey already. And for those that haven't done the journey, it is tough period, hard stop. And so as we look at the founders, I want to evaluate two things do I believe they have the ability, capacity and know, know how to actually go do the things they say, right? 

Chris Van Dusen  

But then, in the case of co-founders, what is their real relationship like? And I don't have a specific percentage, I'm sure that you could track it down somewhere, you know, awesome, man, it's within a couple points of percentage points. But I bet you more than double digits of startups that received funding failed because the two founders didn't get along, nothing to do with the idea, nothing to do with the potential, but they had a hair difference in what they believed or where they believed the company should go, what it should be and where it should go. And that's hard to root out in diligence, because for anyone who sat through a manager presentation, everyone puts on their Sundays best and act like kumbaya best friends, and so you never really can tell in the straight and you know, focus, we're gonna go through these management presentations. We're gonna go through these questions, or go in your data room, or do all this. What I like doing is take them out for lunch, take them out for coffee. I don't advocate this, but take them out for happy hour, right? If they golf, take them golfing. See who they are as people together, separate. Wait for that, you know, loose lip to sink in and talk about a little strife in relation, like the little things. And that might sound nefarious but it's not meant to but at the end of the day, we're investing our capital, and we're investing investor's capital, and there's a responsibility to truly understand who you're now going to partner with, right? And that doesn't, other than doing standard background checks. The other thing you can do is really understand who they are as people, and then as you do that, how good is that relationship? Does everyone know where they fit? Got a clear vision aligned. I mean, I've heard this from another individual who I feel awful I can't give him credit for, but the CEO's responsibility is three things, vision, culture and fundraising. Now you should be doing those all day long, you have co CEOs that worries me. If you have co-founders where one likes doing the other's job all the time, that worries me, right? You see a great, enigmatic CEO, right? The P.T. Barnum that every startup needs, and a great CTO that's sitting there focused on where they're going and owns it. I start getting a lot more comfortable than I would to have two people saying, We're two brava bulls ready to go take on the world, because that starts to, over time, potentially separate. Because they are two very different people, when you get out of the vision and get truly into what they want to achieve, and there's a lot of things that can go wrong if you haven't done that diligence. 

Ryan Miller  

So it goes right back to the relationship side and and I love that you brought this up, Chris, because this is important, is to say too often, as asset managers that we are, or investors, or whatever it is you're trying to do, you don't even have to be a fund manager to follow these principles. Maybe you're an angel investor, you got a few bucks, and you just throw  out a couple startups. But I think the thing that gets lost, and this is why I say I got a lot of love for accountants and lawyers, but they have their place, and I always say, from my own experiences, they make a better Caboose than an engine. So you don't ever let them lead the deal and the reason why is not that their skills aren't good. Of course they're good. I'd never do a deal without my accountant or my lawyer, however, and nor should you, right. I'm not giving financial advice. I'm just saying here's how I do it is to say they're the final one at the end, I'm leading the deal. But when there's a culture of that, of accountants and lawyers, you rely heavily on contracts and financial statements, right? You're smiling because, you know, so you see this over reliance, and we call that due diligence. We're saying, what are the contracts? What are the legal things in place? Are they getting sued by someone I don't know? Okay, good, I mean yes, figure that out. Obviously, figure that out, I'm not saying don't figure that out, but what I'm saying is that's not enough. And I think that's what Chris is saying, is he's saying, like, hey, you gotta understand the stuff that's not in the financial statement, the stuff that's not in the legal contract, if you can unwind those. And what he's saying is he actually offered some suggestions on how to do that part of the due diligence is saying, how's the relationship? Because you have the best pro forma projections this world's ever seen, and it still falls apart because the founders can't even get along, and so it's not enough to deal with that. That's number one. 

Ryan Miller  

Number two, I love what you said about founders who are experienced. Can I Chris, can I tell you, if that's all right, can I share with you my dead giveaway of an experienced versus a new founder. So the thing that I found that really impresses me now, now I'm teaching people how to sell me, I'm not doing that, don't pitch me on this. I'm just saying for if anybody's an asset manager, you know, you have a really good, experienced founder. Because a new founder will always talk about product, and that's good, you gotta have a good product. You gotta have something that drives value in the company, but an experienced founder, and Chris, you're a three time exited founder, you would know this. An experienced founder not only focuses on, yes, we gotta have a superior product, we wanna win, but they also talk about distribution. That's when I know I've got a winner and I've got an experienced founder in my hand as they're saying, we're gonna have an excellent product, and here's how we're gonna get that to market. Okay, you've been through the gauntlet. You know, it does you no good to have the best product in a cave. So when you consider when you have a founder or an investor or a fund manager or anybody, please hear my voice. Make sure that distribution is figured out, even if you don't have it set up. Investors want to know you have a plan. Show me not only that, you have a great product, but you have a clear path to get this great product to market. How are you going to do that? Anything you can add to distribution of your product?

Chris Van Dusen 

Yeah, it's it's a funny story so career wise, and I'll save the long part of that, but I did a lot working with startups in the 2012 through about 2000, end of 2016 range, and there was this narrative going around, especially out of the valley, that there's no need for marketing if your product is great. And while I can see theoretically what they mean, the idea of, you know, the heroin drip of Facebook ads and Instagram ads and all this, where spend all this money I need to overspend to get customers, I get that, but I think that was misinterpreted as product is is number one. And by the way, I'm not going to disagree with you have to have a great product. 

Ryan Miller  

You have to. 

Chris Van Dusen  

There's actually a GP at benchmark who said this on a separate podcast. You know, if you're selling a sailboat, everyone's gonna try and say the rigging and the mast and the leather they used, and you know how far it can go. But an experienced founder, what you really should be selling is the wind. Because if the wind is good enough, all those will sail no matter. 

Ryan Miller  

Yeah.

Chris Van Dusen  

Right? So you have to have a great product. No, no doubt but if there's no wind, then that thing's just sitting in port the whole time, and it doesn't matter. And so understanding to say, I have a great product, here's why it's better, here's who's gonna want it. Here's how I've identified how it'll be distributed and, oh, by the way, we're not going to overspend on marketing, but if we did marketing this way, against this distribution, we loan this much of the market in this amount of time. And if we do that, then this is what our value is going to be in a very small amount of time. And that kind of just walk through is exactly what, to your point and experience, the founder will do. Because if not, it's look at my beautiful widget, and I'm like, who's gonna buy it? They're like, everyone. And that's another piece of due diligence, which is, if everyone is your customer, no one is your customer. So another mistake, and I'll throw this into how not to lose, is, while you're doing your own diligence, truly look and say, do they understand the market they're going after? Because what I find a lot of times is, and I made that joke a second ago, everyone's my customer. This is going to revolutionize every industry and while that might be true, that is trying to eat an elephant, and if you're raising venture capital, you don't have a 10 year runway and billions of dollars, right? You have I'm going to start in this vertical, this sector are, I'm going to have these two because they're, they correlate. And I'm going to go an inch wide and a mile deep in those and I'm going to use that piece right that as a case study to show you what we can do in another vertical, in another sector. 

Chris Van Dusen  

And really, the reason why that's important is every new one you go in, we like to think, oh, it just translates easily. What doesn't, however, and that's not product changes. I'm talking like a software company, it's not product changes, right? It's gonna be biotech and a brand new, you know, part of how your viewer, your product could work in a saving a different, different thing. But what ends up happening is you don't know how long it takes to make sales. You don't know how much staff you're gonna need. And what ends up happening is you burn all this and all this money identifying what you should be doing behind the scenes without standing up an entire division to do. And what's easy is, when you've come and dominated a market, and then go and say, I'd like to dominate a new one. By the way, you have traction, which means you have a higher valuation you can command, and less dilution for the next vertical you go after, and that becomes a better way to leg into your growth, right to your point, go slow to go fast. That can also work when you're doing diligence and understanding their plan of distribution and success.

Ryan Miller  

Brilliant. So as the saying goes, the riches are in the niches, man. So make sure that you really understand your client and stick with it, right? Even, even this show and by the way, this applies for fund managers as well. So I've, like, I said, I've helped 1000s of people, and in order to do that, I've heard a lot and the craziest thesis, and it actually made sense. But the craziest thing is, Ryan, I got the best idea, we're going to start an investment fund, it's going to do crypto, cattle and real estate. And I was like, huh, those are very different investors and you know, I could see why you backed into it. I won't go into too much, but it was wild. And so you're like, hey, man, um just pick crypto or real estate or commodities, cattle, whatever it is. Just start there, right? Go slow to go fast and so in order to do that, and to really get that down, is to say, hey, if you want to be successful, don't be everything to everyone. Whether you're a fund manager, still a startup, whether you're a startup, a founder, still a startup, you still need the distribution. You need to understand who are you pitching to, because if there's alignment, there's typically capital that flows in the right direction. When there's not alignment, you're like, I gotta find someone who's looking for crypto, cattle and real estate as a potential solution for  his money problems. Okay, that's a little too niche. So keep it simple, keep it niche, and pitch the crap out of it. I love it. Is there anything else that you could advise either fund managers or entrepreneurs on how not to lose? 

Chris Van Dusen  

Yeah, I would say the last thing is, if you're to do early stage venture, and especially the way we talked about it, the non fund model, right? And let me set the stage, you have to raise a fund. Traditionally, you've already raised the capital, therefore when you find a deal, you go deploy the capital right on the other side of the coin, if you're gonna do an SPV. And let's say you love the deal, you wanna put your money in it and get some of your friends, families, you know, colleagues, in whatever it is, some other high net worth people. And you may say, I believe I can get a half a million dollars, and you go through all the diligence, do everything, commit it, and then sign a time to to fund, and don't deliver, as you talk about in the show, you have 3 R's right, reputation, relationships and results, whether or not you're on the fund manager side or the entrepreneur side, right? Because it all, it's basically life advice. There are the 3 R's, but if you're not going to follow through. You put that company that's relying on capital into a spot during a formidable time, and that has ripple effects to reputation, to when the results that company is forecast that comes in for every other investor and themselves, right? And all of that can hurt back to your reputation and damage relationships. So if you're going to commit, commit small and over, deliver, ask for more. You heard the term all the time, this deal is oversubscribed, it's oversubscribed because they took more money than they had planned. That's not a bad thing every once in a while, right? And so if you say, look, I know I can get 100 grand, but I'd like to reserve the right to maybe go up to 250, 300 you committed the 100, and you're reserving the right to go up if you find the extra capital. But make sure you're realistic in what you commit, because it can damage companies. 

Ryan Miller  

You're right. And even to echo that, maybe we'll take that even a level two, if I could, because that is phenomenal advice. A second even another reason to do that is I have something where, where I'm raising, and if I teach people is I say no king makers. And so the reason why I say that is in raising or over raising. Sometimes it's tempting to say, I'm $100 million fund, and for some reason, I don't know what it was, maybe you they liked your suit, but for some reason, your emerging fund manager got no money, and they give you 100 million like one investor fully subscribes. Well, the thing is, is that person's now become your king maker. And even though you're the fund manager, they're your manager, and so just make sure over subscribed is good. But if you try to over concentrate investor capital, either in fund or in your startup, you run the risk of having king makers, and by the way, they can take your crown and make someone else King. So making sure, and so rule of thumb that I up and feel free to agree or disagree if you're in the fund management space, I technically, I will say, no more than 10-15% of the total AUM for any single investor. So what does that mean? It means if you got 100 million, you ask them to throttle it down. And I'll always say a joke. I'll be like, Look, there's plenty of time for me to take all your money, this is not one of those times. So let's just start out, it's $100 million fund. Let's start you out with 15 million, and then we can talk about scaling up from there. Anything to add to that?

Chris Van Dusen   

No, because if you do your job right, there's a fund two, and there's a fund three, and there's fund four and if he has a this individual has a hankering to give you that 100 million, just need to space it out. But also, and I, you know, we've talked a little bit, but most firms don't just have one deal, meaning one fund. They may have, especially at size, a fund that does, to your point crypto and a fund that does cattle and a fund that does right real estate. And so you could say, you know, if you want exposure to each of these, here's your placement allotment, right? I'll allocate this much now, that just went from 15 to 45 right? You're closing the gap, but they're not in side of specifically, one deal, one fund. So over concentrated, we're now. And I don't want to say the tail is wagging the dog, because capital is the most important thing we have, right? But it becomes you managing partly their family office, instead of you managing your fund that you are actually controlling. 

Ryan Miller  

Yeah, yeah, absolutely. I love that. So solid advice, brother. Now we wouldn't be much of a show called Making Billions if we didn't talk about the market so early on, we talked about finding businesses and assessing macro shocks, and the macro has been rolling the last few years. That's for sure, with COVID and interest rates, and it's all we're hearing about these large, sweeping things that are affecting global economies or even national ones. And so I'm just really curious about the market. I know it's not the market, but the markets that you're looking at the sectors, you're looking at the fundamentals, you're looking at what are you seeing out there? 

Chris Van Dusen  

Yeah, I mean, I'll start capital markets and just, you know, for everyone listening, this is my day job is not being a capital markets analyst. But, you know, the last couple years, we watched interest rates kind of go crazy, and they've started to pull back a little. But I believe all that's baked in, there's a little over valuation on a lot of companies and certain sectors. But overall, what has happened is, when you have this, this inflation, which is causing interest rates to go up, it impacts many different sectors, right, and venture is not immune to it. What you ended up having is a lot of companies that had a marked market, some of their investments, and those were marked down. Those are, those are down valuations from when they invested. You have a lot of dry powder sitting on the sidelines right, for most big funds and I'm making gross generalizations here they go raise capital right? They do capital calls when they find deals, but eventually they do raise the entirety of their round, or they have these kind of dangling out their capital calls that they need to make to deploy their capital into companies. And I know on good accord from from many people I've talked to who have funds that finished raising in 21 even 22 that still aren't fully deployed, and we're in 24 and traditionally, you're going to have a window of time that you've built into your model as a fund to deploy that capital so that it has the 3, 5, 7, 10, whatever your hypothesis is for the total funds life cycle to be deployed, to bake in the oven, if you will, right and be ready to enjoy and if you're now a year and a half, which is more standard, from starting your fund to deploying the capital to three, three and a half, four years. What do you think that does in the model? A it pushes everything out. So now your early investors are in potentially much longer. Maybe that's good, maybe that's bad. That all depends, but there's a lot of dry powder. 

Chris Van Dusen  

Now, why are they investing? Valuations have definitely come down. We can argue that it's hit the bottom, depending on the industry I'd agree. But you also have the thing like AI that is an absolute bubble. When you're looking at at companies that have pre revenue seed rounds at 100 million pre or post, that tells me there's something a little wonky. It tells me there's a lot of capital going there and it kind of is reminiscent of the old early 2000s tech bubble. There were a ton of winners, there are a ton of losers, so you bet on everything and hope that you made enough good bets to make up for the bad ones. And you know, we can, we can debate the portfolio theory all day, but that's actually built smartly, and I'm not sure that investing in X amount of 100 million dollar post money companies is going to give you the type of return you want, unless you had picked one brilliant company within that, you know, venture capitalists, I think they're doing great if they pick 25% right, batting 250 in the major leagues. So you better hope that of the 10, 12, 15, companies you picked in your fund, you have one that's going to be an absolute gangbuster. And if not, well, then that hurts that third R there in results, and that's ends up being a big problem, right? And so I think there's, there's interesting things happening. 

Chris Van Dusen  

Now, I see that in one side of my mouth, but I also said, there's great value out there. There are a ton of companies over the last couple years that had everything going for them and just couldn't secure capital because everyone was scared to deploy. There are companies now that you can find that have, I believe, fair valuations, if not undervalued compared to what their potential is, and need a capital bridge, or need to do an extension round at the same value they raised before, and you can get in at prices you never would at an execution risk trade off, meaning a lower execution risk than you would at that valuation in the year prior. And so it ends up being something that you can go out in market and find deals that are at a valuation that's fair, where you wouldn't be able to do that. I believe in the 20-21 range, when money was cheap and free, and everyone was throwing it in everything. 

Ryan Miller  

Brilliant. Yeah. So it reminds me of that model where you just invest in everything. My friends in crypto call that the shit coin spread. So you just, you lose, throw money at everything, and some are gonna pop, most will tank, and, you know, they're garbage, but you're like, Look, I'll just pepper it across literally everything. I don't know if that's possible anymore. I have no idea how many of those that are out there, but as a typical strategy, they stole from old school VC, by the way, not recommending that, it's not a great idea. Do your due diligence, make sure you understand what you're getting into don't just throw money around. So, you know, looking forward, I'm just curious, you hear AI over all this stuff, what are you seeing out there? I mean, you do a lot of deals. You focus on founders, you've been one multiple times. What are you seeing? What's your opinion on this, this AI wave.?

Chris Van Dusen  

So a couple things, if you started, like the generative AI, which I'll get over my skis very quickly on and I'm not going to pretend that I can sit here and talk for a podcast about all deep tech AI, there are going to be amazing models that win. I've always made the joke I'm not smart enough to know what's a product versus a feature on these large language models roadmap. So a lot of the middleware for me is out right away, right? Meaning the products that sit on top and we have this fundamental model of of, you know, an operating system all, you know IOS that you build apps on top of that people enjoy, right? So you look at ChatGBT or open AI came out with their marketplace, and everyone's gonna rush to do this and get capital towards it. Absolutely gonna be winners, not smart enough to know which ones they're gonna be, right? Then, on the total other side, you have everyone saying they have AI, and it's not AI, it's a very small use of something that's clever and maybe learns a little, but it's not truly what we would consider AI, but they'd put it in there, and it's no different than what you've seen in any other you know, basic algorithm that's used in these SaaS, these SaaS products, right, to learn and to give you recommendations, right? You know, I have a beauty care site that uses AI to tell you what's the right thing, and it's like, no, they just aggregated off your interests and gave you something. I wouldn't call that a use of AI. In the middle, there's companies that are doing a practical use, and I will give a little plug for one of our investments, ai.io, practical use of AI in scouting and player development, really fundamentally amazing piece of technology that will change a lot on how people are scouted globally for sports. Great, not a big language model, but a practical use of AI in today, that's where I see a lot of interest is figuring out how to use it more practically. Is that going to be the big game world changer that powers Android robots one day? Probably not, right. 

Chris Van Dusen  

The other thing, and I think it's most applicable to this discussion on AI, is we have 34 portfolio companies, we would be naive not to look internally and understand how AI can offset burn, right? Can change the financials within a company, how can be used to make companies better. And this is things that are off the shelf now, wouldn't call them an AI company, but utilizing the tools to make your company better, I think everyone at every company should be looking at that. And that doesn't mean building some big data lake walled garden, that means looking and saying, hey, I run 10 call centers and have 500 employees. Could I use certain bits of AI technology to get everyone coming through 80% of the way there, right, without having to talk to a human and now I can change the entire economics of every call center, right? I'm not advocating the loss of jobs for humans. What I'm saying is there's efficiencies that you can utilize tools today to fundamentally change the economics of your business. And if you're an early stage startup, in a situation like we're in today, going from potentially revenue and growth over yield, and need to bring down your cogs to get more yield base and have a smaller burn. What a great way to do it than to look at tools that are available. And that's, I think, where AI is finding a great place today, outside of the big media hype and you know what I would consider a bubble?

Ryan Miller  

Man, brilliant. Yeah. So it is interesting to see where this will go, and if this is a bubble or just the start of a hard bull run in a certain sector to I guess we'll, we'll, see the dots connect when you look back, so.

Chris Van Dusen  

Well, it's, it is the great thing about having an opinion, right, someone inspired me said this as well. You're gonna piss people off just by having an opinion that you've said out loud, because it's your idea and other people won't agree. So maybe some of your listeners are gonna say he's absolutely wrong, and that's okay, and then there's listeners say he's absolutely right, and that's okay too, but it's basically my job, if I'm going to be a professional investor, if you will be a fiduciary investor, dollars to have an idea and a thought around what's there and believe in that, and they come behind or not as well, right? And that's kind of my job, if you will as one of the senior partners in the firm, is to have a thesis on what I believe and then make the appropriate recommendations for investments because of that.

Ryan Miller  

Brilliant. Well said, brother. So as we round third base, one of my favorite parts of the show, and it's why we save it to the end, is I really love giving people an unfair advantage. And so you've done a lot, from startups investing and sports and everything. So from your experience, what are one or maybe one, two or three, maybe competitive advantages that you can provide our listeners today?

Chris Van Dusen 

So this one never goes out of style and goes out of vogue and it's actually pretty apropos, coming from an AI conversation, right? Because the thing an AI, I will contend today can't have is great human to human relationships. And whether or not you're an entrepreneur raising capital, or you're an emerging fund manager or an established fund manager, your relationships are the cornerstone of everything you have, from deal sourcing to raising capital to finding strategic partnerships for your portfolio. It is your network. The question I get I do some mentoring myself, right, for people who want to do things in venture is, how do I do that? Well, unless you were born to a certain type of family that went to a certain type of school that went on to get your MBA, you might not have a big network, or you might have the network you have, and it's looking across the bow and saying, how do I build it bigger. What's important to me, and that's not a transactional relationship. It's saying I want to meet great humans, and I'm going to see where those great humans take more relationships for me. So I get asked a lot, what type of people do you want to meet? I say, if you think they're awesome, that's who I want to meet. That's it. Not, do they have money? Do they not have money? Do they have deal flow? They don't have deal flow. I mean, ultimately, I need both of those things to do what I do for a profession. But meeting awesome people usually means you meet more awesome people, and then you meet more awesome people, and then more awesome opportunities come within the network and the relationships. And you know, to start practically that means having to go to networking events. Ultimately, you'd like to go and be a speaker. But unless you have something to speak about, that's a really hard sell. So go meet, talk to the speakers, get to know them, right, like, go put yourself out there. And it's the hardest thing for people to do, traditionally, at least, I've found, is walk up to someone they've never met, extend their hand and say, hi, I'm Chris, that's it, and expect nothing other than a conversation, right? Because people usually go right on the defense, at that defense, at that point, unless you're in a situation where that's totally expected and normal and those are the type of places you go. I don't ask for referrals. I think that is silly, just personally. And the reason being is, if you like what I'm doing, I make the joke. If you like my haircut, you're going to introduce me to other people who might like my haircut. That's going to happen, right? I think ultimately, finding and nurturing great relationships and protecting them is the most important thing you can do. And again, really, this is advice outside of just private equity, venture, being a fund manager, being an entrepreneur. It's true in everything you're going to do, but specifically in venture and private equity, the best ones that I have spent time with have amazing networks. They have built, nurtured, protected over time, and that really is, in my opinion, the biggest secret sauce. I mean, as we've joked about in conversations in the past, maybe sprinkle a little finance on top, that's usually pretty important to me in this world, but ultimately, relationships are going to be the biggest.

Ryan Miller  

Yeah, you know. And I absolutely love that and those who follow the show, you already know reputation, relationships, results. We said that many times, not only on this show, but also on many other episodes as well. You know, building those, we call it, I call those the R3 those are your most valuable assets in your position. So I love that you talked about going to mastermind speaking on stages. Now, one framework, if I could, if I could share this with you and with the audience around the world. If this is helpful to you, maybe I can add to this, this amazing conversation we're having, but I break it out into three categories to really understand who's got the right energy, who's in your life, who doesn't need to be or who's not in your life that should be, whatever it is that you're doing. So when you're really clear, you can try this framework, and please comment below or send me a note, whatever it is, I'd love to hear from you. 

Ryan Miller  

But one thought exercise that you can do is break out your life into three sectors, umpires, vampires and empires. So I created this, this framework for you to do that. And so when you have those relationships in your life or habits, it's also relationships with yourself and so those umpires are great accountants, great lawyers. And so I had to recently, I had a shift my accountant, he did his job, but he only did his job. I found a new account who did his job, and then went over and beyond and said, hey, man, we need to make some adjustments here, because long term, I know where you're going, and if you do it like this, it might cause you a problem. It's nothing illegal, but we're just saying how you've structured your chart of accounts and all this stuff could be an issue. Great. Those are the kind of umpires. These are people, habits, friends, that just keep you on the path, whatever that is. They all know what path you're on, and they will be outraged if you step out of line and they will do everything to get you back in line. There's, they just want to see you win, right? They're, they're just doing their thing, nothing fancy. There's no they're not billionaires, but they're just great influences and those sometimes are your own choices. Second one is vampires. Those are habits. Those are people. Where are you leaking energy? Where are you leaking money? Get rid of it. Solve it, deal with it, and move on. And then finally, number three is talking about relationships. Is empires. Are you, if you're this kind of person, and if you're listening to this show, I'll assume you are, you're you're the private equity carnivore, or whoever you are, I see you out there. But all of those, you want to really be around people who are headed in the same direction. 

Ryan Miller  

And so if you're trying to build some empire, you're Making Billions, or you aspire to be Making Billions, typically, you want to be around people who understand it, they understand that. And so as you, as you plug the leaks, and you have good umpires around you. They keep you in line, make sure you're doing things legally, ethically, above board. You're doing things that they know is good for you, and they will stop you from doing things that are bad for you. And you're also around people who are also about their business the same way you are, and they're building their empire and you are too, right? They like your haircut, and everyone else around you likes your haircut, and they all have the same haircut, whatever that might be. But in all seriousness, these are the people who will say, hey, I'm so glad I met you. And now resource sharing happens, and now you start building this little community of empire builders, and that goes and that lands this plane on exactly what Chris said, which is like at the end of the day, this is a relationship game, and some of the best VCs, best investors out there, they have this massive network that they're sitting on top of. That's the thing, it's not about launching a fund. You take a massive network and then you run it through a fund. Big difference. So don't launch a fund if you don't have the network, but if you do have the network, you might be able to pass that through those empire builders that you know, pass them through a fund, and you might have yourself a business. Anything you can add to that?

Chris Van Dusen 

I, well said at the end of the day, and I was just, I was thinking back, so I paused for a minute running your network through the fund. What a great way of putting it, as you made that arc, because it's so true. If you stood up a fund, have the greatest companies in the world. You want to put it, and you need no one to go raise capital from that does nothing on top of it. You go, raise $100 million and most people go, well, you have $100 million everyone's gonna want it. You know, like, gonna want it, you know, like, yeah, but there's that third R called results, so you just start throwing it out there, right? But hopefully you have a thesis or an idea on where you're going to invest. And that also requires being able to go in and have an ability to get on their cap table. And some of the best deals I've found are deals where it's almost closed. They're not running a traditional process where they're, you know, running around trying to get everyone in. They have a lead. They're in. These are early seed stage, right? We've missed the lead because I didn't do my job good enough to get the opportunity to compete for it, right? And you can get into that deal where it isn't readily available. And I'm not going to sound, I'm going to sound a little weird when I say this. It's not that I don't want the deals that are being pitched to me, but I'd like some destiny and figuring out the ones that I want to be in, and then fighting hard to do that. And even if I miss it on their seed round, I want to be in on the A and it's nurturing that relationship with the founder and the rest of the VCs I like to call frenemies, because ultimately, most VCs can't take down an entire round. They're going to take down a portion, and then they're also going to want to want to help this company succeed, so they're going to call their frienemies and go, I got one you want to run side title on this and jump in right? And I'm like, great. Let me go do my diligence. That's a more valuable call than a cold pitch. Doesn't mean there's not great ones, but that relationship gives me a new way of looking at it, because I know their track record, I know their results, I know their relationships, I know how they got him, and so it really comes down to that big, big R of relationships. 

Ryan Miller  

Yeah, that's right. So do you have a second competitive edge that you can provide our people from all your experience? 

Chris Van Dusen  

Yeah, I mentioned earlier on the show, invest in what you know, but more importantly, invest in where you can add value. So how do I get invited by that frienemy of me in right? It's because they're looking going well now, like I bring in Chris and his firm, right, and their capital, but I know if Chris is involved, he knows this, this, this, this, and this, or these people, or knows how to do this or he can be an asset as a growth lever. Or he can work with my CMO, because I was a chief revenue officer through the three exits, right, and one of the co-founders, he was our CMO, or chief revenue officer on different strategies. Or, you know, we need to get into this market that I know Chris has extensive relationships in, right, where you can add value and build that track record, especially through the SPV model instead of a fund. Then you start getting inbound going, I want Chris because of that, or I want so like, go because of that, or I want Ryan because of that, right, and that is where you're going to get more. 

Chris Van Dusen  

And it's tough, because nowhere in the economics of that SPV, potentially, is you having to do any labor other than identifying and close you're doing it because that third R of results is the most important thing you can merchandise to make everything else better. And so there's, I won't call it full altruism, right, you're going to make money on the back end, but you need to go in and provide that extra value and be of service to the founder, be a service to the team, and be a service to that portfolio company, or that that investment. And I think that's what's lost, is a lot of people like to be passive founders, or they like to be so active that they want a job in the company. And it's that sweet spot of saying, no, I'm going to add value regardless if, if it, you know, regardless of if I have a job or if I'm getting confidence, I'm gonna do it because it's the right thing for the business. And I think that's a big thing, and it's one you can establish your entire reputation on while you're doing your early deals, because then they want that hustler in there helping them drive. 

Chris Van Dusen  

And the last thing I'll add, and I think it's important, and it's, it's not, not the sexiest thing, and it's, it's, but we're pulling the curtain back on everything, right? 

Ryan Miller  

We are.

Chris Van Dusen  

The question as you're sitting there as an emerging manager contemplating how you want to move forward. I think the thing that's not discussed enough is, do you have the grit, determination, resilience, to do this type of work? Now, I'm not going to say early stage is harder or easier than later stage. I'm not going to get into private equity versus venture, but if you think about the fact that you are the center of a few different constituencies, you're the center of money coming in through LPs. You are identifying companies. You are a mentor to the C suite or founders. You are also looking and helping them solve the hardest problems in the business, only because, if it was easy, they're going to do it or their staff to solve those problems. Right? You're going to, not prescriptively, work 80 hours a week, but probably work 80 hours a week, or be thinking about what you're going to be doing that long so long weekends, not sacred, because their business is not stopping. This is a full court press every day, all day it, I like to say you're always working and never working. There's a movie Boondock Saints and like 711 I might not be always doing business, but I'm always open. It is. You're always at work, but sometimes never at work, because you're out of conferences and doing other things, right, but you're always of service to these companies, these founders, and specifically your LPs, right? Who gave you capital that is a tough position, and do you have that desire? And I mean, ultimately, both your investors and you, if you do it right and get that third R, are going to make a lot of money, and that's usually why people want to do it, and that's okay, right? I totally get it. However, are you willing to put in the work, and do you understand what it's really going to take to see these things through? Because I'm sure you've had the same thing happen. It's, you know, 11 o'clock at night on a Friday, and you get a call from a founder saying, X Y Z just fell through, we got to figure shit out and guess what you're doing for the rest of the weekend. You're helping figure it out. And so you're kind of always on call for things, but that doesn't sound fun, that doesn't sound exciting, that doesn't sound challenging. I certainly get very excited about because I love it, but at the end of the day, doesn't sound like something, I'd really question whether or not you should. And again, this isn't hard advice. Don't listen to me if you want, but be prepared for be prepared for some late nights and early mornings and everything in between. 

Ryan Miller  

Yeah, I love that, absolutely brilliant man. So before we wrap things up, is there any final remarks? Anything at all you'd like our fans around the world to know?

Chris Van Dusen  

Well, I do want to say, first of all, thank you for having me. This was awesome. If anyone wants to communicate with me, contact with me, get in contact with me. I'm on LinkedIn, Chris M, Michael being the middle name, Chris M Van Dusen, you know, happy to provide my email as well. What I love is meeting awesome people, and what I've met, you know as long as I've known you, Ryan, and I'm sure your listeners are the same awesome people. So anyone who wants to reach out, please feel free. Uh, my emails on the website, but it's also C, meaning Chrisvandusen, and then @solycocapital.com, reach out. We'd love to hear what you're working on. Would love to understand maybe we can work together. Yeah, that's really the biggest thing and thank you so much for having me. 

Ryan Miller  

Yeah, man, it's good to have you. So just to wrap everything up, never forget that this entire business runs on reputation. That's number one. Number two, not only should you invest in things you know, but also invest in things that you can really add value to that deal. Whether it's like I said, you want to, you have to have that R3 and you pass that through a fund. You don't start a fund and expect that to happen. You get that happening, and you pass it through that's how you add value. And then number three, just ask yourself, Do I have the grit to see this through? You do these things, and you too will be well on your way in your pursuit of Making Billions.

Ryan Miller  

Wow, what a show. I hope you enjoyed this episode as much as I did. Now, if you haven't done so already, be sure to leave a comment and review on new ideas and guests you want me to bring on for future episodes. Plus, why don't you head over to YouTube and see extra takes while you get to know our guests even better, and make sure to come back for our next episode, where we dive even deeper into the people, the process and the perspectives of both investors and founders. Until then, my friends, stay hungry, focus on your goals and keep grinding towards your dream of Making Billions.