E106: Chris Douvos, Managing Director at Venture Investment Associates – Interview

April 13, 2017


This interview is with Chris Douvos. Chris is the managing director at Venture Investment Associates which is a private equity fund of funds that invests in venture capital, growth equity and buyouts. Chris is focused mainly on the their VC fund investments.

Chris has a quite a background with innovating in the VC space. He not only looks for talented VC managers but also new investment models. You should listen and learn how Chris thinks about the VC business. It’s fascinating.

Chris is located in Palo Alto, CA.

-What’s one of Chris’ best investments?
-Hear how Chris was involved with First Round Capital‘s early days?
-What is Chris interested in now? Very interesting.
-How did Chris get his first investment job at Princeton‘s endowment?
-What’s it like working at an investment bank as an associate?
-Hear Chris’ philosophy around fund of fund investing. It’s much more adventurous than I imagined.

Dave Kruse: Hey everyone. Welcome to another episode of Flyover Labs and today we get to talk to Chris Douvos. Chris is the Managing Director at Venture Investment Associates, which is an Employee-Owned Manager of the Private Equity Funds of Funds and we’ll learn more about what that means and they focus on Venture Capital, Growth Equity and Buyouts and they have about a $1 billion in capital. So Chris also has a wonderful investment background before Venture Investment Associates, which we can learn about and he is located at Palo Alto California. So I wanted to bring on Chris just to ask more about fund to funds and how they work and what he is excited about now and learn more about his past. So Chris, thanks for coming on the show today.

Chris Douvos: Thanks for having me and I’m very excitable, so you’ll learn a lot about – a lot of different things that excite me. So I’m looking forward to it.

Dave Kruse: Excellent! Well feel free to take it in a different direction if you are especially excited about something, but – so can you tell us little bit about your background before we get into what you are doing now?

Chris Douvos: Sure. So I was actually a Strategy Consultant out of college. I worked at a firm that did a lot of high level stuff for a large companies and it was kind of the liberal arts of business at New York. So I got to work across a bunch of different functional areas and a bunch of different industries and that was a ton of fun, but I felt like I was developing this really kind of shallow skill set, because it was on all kinds of different projects that had a taste for a whole bunch of things. So I went to business school and then during business school actually spent my business school summer at one of these you know high Wall Street investment banks and just felt absolutely depressed by it. It was just a terrible experience and I got back to business school and sat down with a guy that I actually went to college with.

Dave Kruse: Did you say depressed, or you are…

Chris Douvos: Oh yeah!

Dave Kruse: Why is that? You got to give us at least one point…

Chris Douvos: Well, I mean it was – I’ll tell you a story that I don’t often tell and I probably shouldn’t tell it in a podcast, but you know it was one of these jobs where like you had to kind of sit around and wait on the win of somebody else. And you know there is kind of a lot of unproductive waiting and the penalties for not kind of complying with the up and ups were kind of severe. And so I remember I was sitting around and it was in maybe 11.30, 11.45 like on a Tuesday night and I was tired of like sitting at my disk waiting for some managing director to throw some work at me and nature calls. So I grabbed my – grabbed my Wall Street Journal and sorted over to the men’s room and was kind of doing some business and my pager went off. I’m like, like oh! I’ll finish my business and then go find out what this is on. So maybe we are talking like 15 minutes between you know by the time I got all squared away and then went back to my desk and did one quick email thing, then wandered into this guys office and he absolutely ripped my head off and he was like, I can’t believe you were missing for 15 or 20, this is now at midnight. I can’t believe you are missing for 15 minutes. We’ve got this client in Mexico that’s thinking about doing a merger and we need to get on this right away and because I couldn’t find you for 15 minutes I staffed somebody else and this is going to come up in your review. And I was like really? This is how we define victory?

Dave Kruse: At midnight, it’s amazing.

Chris Douvos: At midnight, right. So this is kind of life that you know as an investment banking associate right and so you kind of get abused in hopes that one day you can be fantastic and fabulous, but it just didn’t seem worth it to me. And the other thing about it was, I really felt like we were agents. We weren’t principals, we were agents, and you know so we were always running around and it was a very servicy business and I’m a servicy guy, so that part of it didn’t kill me, but I got back to business school and so I’m sitting with this guy who is in the Yale investment’s office, Seth Zander. He’s now a Chief Investment Officer at MIT and Seth had been a year behind me in college. And Seth and I stated talking and I said, tell me about what you do at Yale Investment Office, and he stated off by saying you know it’s amazing. It’s the closest I’m ever going to come to doing, to managing my own $1 billion fortune. I go, tell me more? He goes look, we got one client, the University. We manage a lot of money with very low liquidity needs, few tax headaches, you know a perpetual horizon, etcetera, all those kind of attributes that make endowment investors so lucky and give them you know kind of competitive advantage and I was like oh my gosh! This is outstanding. I said, you know can you plug me in? Could I get a job at Yale you know and he’s like, I’m like sorry, but Princeton is hiring, so you might want to go talk to them. And it’s actually funny in the way. I think you know the way I got the Princeton job was Seth and I spent a bunch of time talking about timber. He was like, you know the Princeton guys really dig timber and there are lots of acts that make timber a great investment right. If prices are low for wood, you just leave the trees in the ground and they actually become more valuable. So you got like some counter cyclicality, but also kind of you know growth.

Dave Kruse: Good option.

Chris Douvos: Right and it’s a funny little option. So literally I think the first interview at Princeton, I spent the whole trip taking about timber. You know I’ve never done a timber investment before or since, but it was like such a really interesting kind of discussion and we really got into it and I think that like helped me to get the job. So I ended up at Princeton’s Endowment which is naturally huge and you know that’s such a great platform and Princeton is such a great institution, it’s such a great team and I was working on hedge funds and private equity, including ventures. So that was actually a really interesting time, because I found this is now a 102. I found that the hedge funds guys and the domestic equity guys were spending all their time trying to find like a little angle or figure out how they could make their piece of a pretty static pie bigger, whereas the private equity guys and these guys are gender neutral right, these were men and women, they were all, they were all trying to be catalectic owners. How do we buy this asset and improve it? You know in the venture space how do we you know, how do we create them, how do we go from zero to one? You know private equity actually gets a bad rap for being you know kind of corporate raters and all this, but most of the people that we worked with were these catalectic owners that were trying to make these businesses better. So long story short, that was like really kind of you know trying to make our piece of our growing pie. That was so much more compelling to me than working in hedge funds, fighting over that static pie. So I really kind of dove into it, and then really started spending time in venture and spending a lot of time kind of visiting California. And you know Walt Whitman in kind of 1858 wrote you know kind of about California with the flashing of golden pageant of California; popular cities and their latest inventions with the newest machinery, and that helped us you know – I always love that phrase, popular cities and the latest inventions, right. It held us true in 2002, 2003 as it did in 1858 and just you know kind of I ended up moving out here in ’07 or ’08 sorry, but you know here in California we do you kind of live a few years in the future and you know the kind of things that go on out here, were just so mesmerizing and I don’t mean to be a California homer. You know there is great stuff going on all across the country and its really important kind of clusters in innovation and all that stuff, but nowhere is it as concentrated as it is here and I started saying ‘holy smokes, this is where I want to spend my time. I want to really be a part of the innovation economy’ and so that was the Princeton for three years to the day and then went and had a great opportunity to Co-Manage the private equity portfolio at the Investment Funds for Foundations. I’ll talk about that a little be later, because what kind of grabbed me about that opportunity was so amazing. I did that for seven years, move out of California during that time and then as we had a change of leadership and that kind of different kind of geographic mandate, they talked about closing down the office out here and I wanted to move back to Boston. I’ve been enchanted by the sunny and magical land and so hooked up with my current partners whom I’d know since like one’01, ‘02 to work on some stuff here. So it’s been a crazy venture.

Dave Kruse: Wow! That’s a good story and so when – well I guess, when did you start investing? Was it when you went essentially to Princeton and then – or a different question could be what was your first investment that you made and were you nervous?

Chris Douvos: Yeah, that’s a great question. So you know it’s funny, at the end of time in strategy consulting; so we were talking about ’99, we had like this little nascent initiative to run a hedge fund. And so I was actually an analyst on the hedge fund and was doing a bunch of stuff and actually partially went to business school because I didn’t understand what the heck was going on. When we valued – this is ’99 – ‘98, ‘99 mind you, like companies were getting valued on the eye balls right and I’m like wait a second, when something is valued on eye ball, is each person one eyeball or two, right, like what is that? My denominator might be off here. So I was doing a bunch of stuff and it was tough because I was doing kind of telecom and financial services, public market investing, but the challenge was that we had to be net neutral because it was a hedge fund. So for every idea, every long idea I put in the portfolio, I had put a short idea and it was so perilous to be short, because if something was really cheap, somebody would swoop in and buy it, and so you are just really kind of struggling that way. So I used to – you know my public market investment said that I would make out, just feel like oh my gosh! It would stress me out so much. But fast forward to Princeton, you know that’s how I started like moving you know institutional scale dollars and you know there is some stuff we did in those early days of ’01 and ’02, kind of venture funds and some buyout funds you know where people were investing into some – into a pretty grim environment. And you could kind of loose a lot of sleep over each of those, but in the fullness of time the folks that you alluded to earlier, the fund to funds level at an institution like Princeton, we are investing in fund managers, not in actually the assets. And so you know kind of understanding your people and that really you know started formulating my contrarian streak, because a lot of the people in whom we were investing you know liked to zig when the market was zaging and vice versa and finding people who were greedy when the world was fearful, you know during that time was no small fee you know and the flip side is sometimes today it feels like people are being, you know I got to be fearful when the world is greedy, you know that’s the opposite side of that bucket equilibrium, right, so it was an interesting time.

Dave Kruse: Do you remember one investment that was a kind of contrarian that worked out well. I mean I guess it’s easier investing in fund manager, so I don’t know. I don’t know if I’m talking about fund managers or the actual or the direct investment, but…

Chris Douvos: Yeah. So what’s interesting is that you – investing at the manager level you know you are making a bet on people who themselves are contrarian and hoping that their strategy plays out that way, right, in the contrarian way and they don’t just follow the crowd. And so it was really interesting because in those early days of Princeton and I’ll give you an example, we invested in a buyout fund that kind of grew capital for us that it was buying up a lot of software companies that were declining. So they were literally buying like co-ball companies right and these were companies that were – they would pay two times cash flow for these companies right, but the top line of these companies was declining by you now 10% a year. But you are like, oh these are expensive. If you can hold on just long enough to you know kind of cash flow us. Then what these guys did was pretty clever. They said, what if we smash a bunch of these together and create kind of a strategic asset, one that itself had kind of a base of business, the cash-cow business that then can invest in kind of growth areas and so that of thinking you know was really interesting to us and we gave these guys a lot of money, and in a one time there kind of software cluster, which kind of acted as you know almost as one company was like the sixth or seventh largest software company in the United States; you know in a cloud that’s kind of wild. But you know what enables that, this is kind of one of the things that’s great about private equity and ventures, you have to have and extreme long time horizon. Like it’s – you know we used to say in the public markets, you always dreaded the moment where your trade turned into an investment right. When you got like that like gob smack of bad news and you know now you are a long term holder. Well, in private equity right, like that’s actually something you can exploit, right. Its – you can definitely you know you can…

Dave Kruse: Buy that time.

Chris Douvos: I’m having a…

Dave Kruse: No, that’s fine.

Chris Douvos: But you can totally buy your time.

Dave Kruse: While everyone else is worrying about the quarterly, you can focus on creating value for the long term probably.

Chris Douvos: Exactly.

Dave Kruse: Yeah, interesting. That’s a great example and so I want to talking about Venture Investment Associates and this is very related.

Chris Douvos: Which by the way, just to double check, you know not everything works out, right. You know I’m only saying this because one of my kind of founding beliefs, like you have to be willing to take the risk of being wrong and alone, to be right and alone, right, and if you are being right and alone is where you know fortune and glory reside, but being wrong and alone is career risk right and so long story short, sometimes it works out, sometimes it doesn’t. We did something. I did stuff later in my career that was maybe like a little bit too creative where we had people kind of try to monetize innovation in different ways or having – you know that hasn’t worked out as we liked, but I feel like you know if I didn’t do those investments I also wouldn’t have the kind of courage and risk profiles to do the things that did work.

Dave Kruse: Yes, now I’m really curious what those are. So, yeah well yeah, can you – do you have an example of one just quick, you don’t have to go into much detail on it. I’m curious which ones didn’t work out.

Chris Douvos: The one that I’m thinking off, I’m under like all kinds of non-disclosures. So I probably should keep my mouth shut.

Dave Kruse: That’s wise, that’s wise. So let’s – all right, and I have a follow on question. But first can you just give us a little overview on Venture Investment Associates, you know like the – well I mentioned the fund size or how much money you have under management and the number of investments and anything else you can tell us.

Chris Douvos: Sure, and hold on a second, there is a little construction going on outside my window, so I’m going to have to de-camp for a moment. Okay, well let me try it, if it becomes an issue just speak up and we’ll…

Dave Kruse: Sounds good.

Chris Douvos: So Venture Investment Associates was founded in 1993. It was actually the successor to our founders work at American Express, where he was one of the early investors in private equity and yeah, I call him the hubble space telescope adventure, because he sees all the way back to the beginning of the universe in a sense. And so once we saw it, it was founded in 1993, actually bought the assets out of American Express, the unbalanced sheet assets and then turned that business into a fund to funds and again, kind of investing in managers. We’ve then gotten – it’s like the assets and built you know business or founder stock that did that from ‘93 to 2000 and then his son joined in 2000 and you know raised progressionally larger funds. Then I joined in 2011 and in the meanwhile we had started investing in energy funds, fund to fund format and then I joined in 2011 with the idea of kind of building up a practice in small and idiosyncratic fund investing. So you know we’ve raised now a series of these smaller funds and these smaller fund oriented fund and in the meanwhile while we did some direct investing in the companies, you know in the kind of spin out of some of these funds where it might need some more financing, so that’s been a ton of fun. So today we’ve actually got closer to $2 billion in assets under management and we’re just kind of chugging along having a blast and exploring some new areas where as Yogi Bear would say, ‘hit him where they ain’t.’

Dave Kruse: Nice. What – so with the funds you work with, what size are those and how many investments do you make in those funds?

Chris Douvos: Sure. So at the funds level we’ll invest in kind of – you know this is in the small funds. We’ve worked out a flagship fund with those you know more conventional investments. But in the small funds and that’s kind of a great option for you know kind of mid-sized institutions and large family offices, whereas in the small funds they tend to be more nippy and we dial up the risk and potential return and so we’re looking kind of smaller funds doing more quirky things and so our investors in those funds tend to be you know larger institutions that have perhaps existing portfolios and are looking to shine their flashlight into a new area. So you know that’s been a lot of fun. In the smaller funds we’ll probably do three to four in new investments a year and you know typically in funds that are sub $100 million and I like to be one of the biggest investors you know in those funds and I have a real kind of proclivity for finding new managers. So you know one of the things that maybe we’ll talk about later is you know some of the stuff that I had fun doing, kind of in the middle part of the last decade in seeding some of the kind of managers that have really emerged over the course of this decade as you know kind of leaders in the small fund space.

Dave Kruse: Well that was my – my next question was what are some of the funds you invested in? Can you share?

Chris Douvos: Sure, yeah, yeah, yeah. Well I tell the story all the time you know and it will probably kind of carved on my tombstone because I tell it too much. But back in kind of ’04 and ’05 and kind of double clicking for a moment on my jump from Princeton to TIFFs, the ‘you know, you had me at Hello moment’ at TIFF was when our Chief Investment Officer was this kind of great thinker David Salem. He looked over the table – he looked across the table and he goes ‘look, I want you to come onboard and I want you to invest courageously. I want you to be a hero’ and I was like ‘Wow! That’s a great mandate.’ So you know long story short I was like Hey, how do we…

Dave Kruse: What does TIFF stand for, sorry?

Chris Douvos: Oh! It’s all right, The Investment Fund for Foundation.

Dave Kruse: Okay, thanks. I know you said it earlier.

Chris Douvos: Yeah, yeah, yeah, no. And there are these other great folks and they still run funds and do fantastic stuff. Excuse me, but that moment where Salem’s like I want you to invest courageously, I want you to be a hero. Like I felt like he gave me a mandate to go do some interesting stuff. And so you know one thought I had and this is maybe the one only great insight I had in career was I was like look, the fundamental economies of entrepreneurial finance are changing. Right we went from the last 90s when it would take $7 million to $10 million plus to get to first revenue. You know all the stuff that we talk about when we talk about lean start up today, you know all that stuff was kind of coming in the vogue you know in ’04, ’05, Amazon’ last to compute cloud, open source, like all these modular things that you could – you and I could start a company for a fraction of the cost in ’05 what it cost previously and today some people joke that you know starting a company, the real cost is just the opportunity cost of your unemployment. Because you can rent everything and so many things are free; you know and obviously that’s in a consumer space and its stressing out that the barriers for entry are low and all that stuff. But I had this great insight. I was like wow! You know this is something that could really change the economies of investing and there are all these funds that have been raised, during the bubble where it was just too big. And I was like okay, you know could a small fund exists right. I mean they could be more nimble, you arithmetic could work in their favor and at the same time you know could they meaningful, right; could they punch above their weight enough. If they could, they wouldn’t be relevant to the companies and they could add value the way we left our other bigger funds who you know kind of promised to be catalytic investors might add value. And so I was kind of running around and talking about some of this stuff and somebody said to me, I spent a lot of time talking to portfolio companies understanding who they thought were valuable investors and all that stuff and long story short, a bunch of people pointed me to Josh Kopelman who was then just getting First Run Capital off the ground. And you know Josh and I started talking and after kind of several meetings, I said look, I want to give you money and he was then running like his own small friends and family funds. Josh was you know great and said, I’ll let you into my funds but the flip side I want you to help me continue to flush out this idea and then eventually if we can test these hypothesis around business scale, is this worthwhile, is this is a good use of time. If we decide to go institutional I want you to help me with that. And so Josh and I would sit in the West Conshohocken in Pennsylvania, you know once a month, once every couple months and have breakfast and talk for hours about his vision for First Run Capital, which really was a very disruptive and pioneering firm that you their motto is turning Venture Capital on peds and I felt really lucky to be kind of involved in those days, helping Josh think about how they might disrupt Venture Capital and so then when the time came to raise FRC2 you know I made introductions to several investors who I think totaled 85% of Josh’s capital base. I helped some with his slide deck and legal docs and all that stuff and so you know that fund turned out to be the Uber fund and you know…

Dave Kruse: Do you know what the returns were on that fund?

Chris Douvos: Yeah, well I do, but I probably shouldn’t say it.

Dave Kruse: All right, sounds good.

Chris Douvos: It’s good for this. That fund, there is a lot of great stuff in that fund. You know because there are several companies that are really broken out and you know that fund is probably going to be one of the better funds of scale of all times. And so I get calls from the Yale Alumni Fund and whatever I forget to send in my check for $10 or whatever and you know they ask me, hey would you considering increasing Gift-a-Choice. The best gift I’ll ever have given alma mater is that introduction to first round, because that commitment will have you know kind of returned a very meaningful sum. So that’s all in the fund but I did that with a bunch of managers and even today as I shin my flashlight into different corners, love helping managers getting different stuff to get off the ground and when – there is saying, you know in the fund business don’t be wired. But I’m kind of really attracted to these weird funds and so they sometimes they have trouble raising or whatever, thinking about how they might kind of grow their businesses you know and be effective investors and that’s where I really love to kind of bring my experiences to there and be a fund mentor.

Dave Kruse: So what would be an example of a – do you have any wired funds now that you – or where would I – I know like be on target and support the main exact fund, new ideas or weird domains or yeah.

Chris Douvos: Well, so long story short, one of my ideas and one of my themes right now actually is like I’m sick and tired of conventional funds, right. I’ve seen – you know last year I saw you know 150 funds and it got to a point where these fund managers would come through and they all look the same you know. As entrepreneurs at hot companies who you know kind of had one little kind of corky interesting thing about them, who all seem to be angel investor in the same 50 deals and after a while they just all sounded the same. I through at one point I was on an episode of that Ashton Kutcher show Punk’d. I was like oh my God! This is the same meeting I had last week, like I go look at my calendar to make sure it was actually a different person. So I started to look – what I’m really focusing on more now is people are doing what I call co-creation. So really getting involved in companies at a much earlier stage, even kind of in the form of discussions and helping to build out the teams and stuff like that, and one group is a group called Other Lab. So they got a website, O-T-H-E-R-L-A-B and they are really interesting guys because they are a bunch of inventors and they some interesting ideas about robotics for example and stuff like you know thermally adaptive fabrics and programmable mater and stuff like this. I was like Wow! This is some really interesting stuff. If we can put a fund around this, you know I would love to be involved. And so I spent a lot of time with those guys, really just helping them think about how they might deploy capital and what structures might work and what kind of things they want to invest in, what kind of things they might avoid and you are really just kind of advising them on a lot of the dynamics that a lot of early funds struggle with.

Dave Kruse: Wow! That is innovative, that’s awesome. That’s really interesting. Yeah, you are taking it to another level, which is I think can make a lot of sense. I mean almost they are kind of like incubators in little ways, but I think that’s where a lot of – I think that’s where a lot of things are going to make sense. Interesting!

Chris Douvos: Yeah, I think the incubator space is interesting. But at the end of the day getting that real invention right, like you know is what, I think it’s a really, really stand out. But again it runs the risk of you know potentially you know kind of having missteps. But you go to have – if you don’t blow the engine up every now and again, it doesn’t mean it means you are not running the car fast enough.

Dave Kruse: That’s right, that’s right.

Chris Douvos: Something like that.

Dave Kruse: Oh man! All right, I was going to ask, well I guess not those questions are all different, because I was going to ask how did you decided to invest in certain funds. But now like your strategy is almost, you are going down to like, you know the operators and investors almost, which is almost it’s a little different mentality. I guess at what stage would you invest and maybe you already did, we don’t know, invest in OtherLab or something like that. Like what does it take to be okay, I have talked to these guys for six months. These guys have some stuff. This is great. I’m going to invest. What does it take?

Chris Douvos: Yeah. So a lot of people in my seat start with performing and look at you know how people have performed. But you know I’m a believer that you know the old warning that past performance is not necessarily an indicator of future success, but is the persistence of performance in venture but there are a lot of things that impacted as well. So instead of starting with performance like many people, I actually start with the people. So understanding are these people somehow you know unique or distinctive, and you know kind of seconds to none in a specific area. Like what is it that is a durable edge. At the same time I’m also thinking about the strategy, not necessarily a question of you know do I agree with the strategy or not, because I have. There are certain things where I’m skeptic but I also acknowledge that I have no monopoly on wisdom, right. And so you know there is certain strategies that have worked out that I’ve never through would. So what I’m looking for is just like this strategy making sure that there is a resonance with the people and you know are they well suited for this strategy. There are a lot of people who aren’t, that lack of self awareness. Out of the people the strategy falls the portfolio. So usually I’ll invest in somebody – early if I had invested in somebody is when they have you know kind of a handful companies that kind of give me an incline for what there are capable of doing and how they add value. So that’s where I spend most of my evaluation time, is understanding the portfolio, spending time with the portfolio of companies, understanding what, you know what value these investors have added; how those investors access those deals and such and such. There is a lot to get your arms around there and that’s where I spend a lot of time and out of portfolio in the long term we’ll follow the performance, but that’s a lagging indicator not a leading indicator. So kind of growing through framework is how I kind of chase things down and find kind of valuing new opportunities.

Dave Kruse: Got you okay and well, I got one follow up on that, but before that I was curious, can you tell the folks on the podcast that you know kind of how the fee structure – You don’t have to tell your exact fees, but I mean if you want you can, but I’m sure you don’t. But if you tell kind of a fee structure from the fund to fund perspective; it’s a little different.

Chris Douvos: Sure. Yeah so I’ll give you know kind of a generic portrait. So typically a find to fund will charge anywhere from you know half a percent to 1.5% management fee and you know we’re somewhere in the middle of that; and then on top of that, carried interest. So if there is profit you get a percentage and the range of those is you know it like the middle two thirds of that is you know kind of 5% to 10%. You know in our case we actually have a hurdle which is uncommon, so we actually don’t take any carry until we’ve returned you know twice our investors money. But so that’s a pretty fast travel but that’s how we articulate our belief is that’s the very minimum level of compensation you should accept for the riskiness of the asset class. So you know mind you those fees, they were on top of the underlying fund to manager fees. So I should have to be really darn good at my job to kind of surmount that high hurdle of kind of fee and incentive comp drag and I’ve been kind of lucky that historically you know I have been able to find managers who can generate market beating returns net and that’s kind of what I spend my life trying to figure out.

Dave Kruse: Interesting. Yeah, I mean because what do you guys – like you often hear with the venture fund that they try to return generically 3X to their investors who like invested a million, times three. Do you guys have a multiple like that and I mean you must have to have some good size exits in order at least you know get double the money back for the investor.

Chris Douvos: Yeah and so look – I mean our – so I love the 3X has become kind of the hurdle, because I think it’s like really thinking. Because if I were to tell you, how to gaze into magic, into my crystal ball, which by the way is in the shop. But if I were to get it back from the shop and it was – you know it gave me perfect foresight and I told you that the market would have, the public market would have returned to zero within the next 15 years. I think the 3X private return which you know, IRR, the timing is based you know metric, but using some vast simplifications you know a 3X gets you the kind of high teens low 20s you know rate of return. So you would have beat the market you know by 20%. That would be so unbelievable as to you know make people write magazine articles. If I told you on the flip side that over the next five years, over the next 10 years the market returned 30% a year, you know that’s what’s relevant. So I’m always thinking about things in terms of context, you know the market context, because private equity is basically a hyper octane public equity exposure where we are just exploiting this risk premium of being private. And so you know, but the way it articulates kind of specially to us is you know we’ll say look, we have this hard hurdle of 2X before we take an incentive comp. So that means we think that, a turn venture return should be somewhere north of that and I think that’s achievable you know with some good work and thoughtful, you know kind of thoughtful investing, but it’s by no means a layout.

Dave Kruse: Got you, okay, all right. Good answer, yes. Context is important.

Chris Douvos: Context is important right, and look, and it will vary too. You know in our diversified fund, that’s a very broad based fund and there’s buyout and venture and there is some of these zig when others zag. It will provide some balance. I still think there is great public market beating, return is possible, but that might have a different return profile than our seed fund, that is investing in these small managers that is some of who I feel like will – it’s like the early days of the space program that will either blow up on the launch pad or get up into orbit.

Dave Kruse: Yeah, that’s right. Nice okay, two more questions. One is, you mentioned other like robotics, is there any other area that you are especially excited about or looking at that you can share?

Chris Douvos: Yeah, so I love, I love robotics and human augmentation. You know I think we are headed to overall where people are able to do things that are previously unable to do and this is you know people environment, but I just think of you know kind of older peoples mobility concerns or you know some people. So I think you know we are going to really see you know flourishing of that kind of stuff, and then you know I mean robotics is a big area, but we’ll also see just see machines helping us a lot in a lot of ways. And I think that we are seeing a seen a real flourishing of that right now. The other thing, its maybe at this point like overhyped, but I really do think that artificial intelligence or what I call ambient computing is really going to be interesting, especially when you add that to kind of voice activated stuff. I think Amazon’s Echo and Google Home or whatever you know. There is a whole bunch of these that I think are really going to start the change the game and you know they are still obviously some privacy concerns and the future is a scary palace, but it’s also a lot of easy for us. Like what if I walk over to the fridge and open it up and say ‘oh darn! I’m out of eggs’, and you know my Echo automatically orders me some eggs, right and knows how many I want. Now by the way it knows that I’m having a party next week and that I’d like to make you know pancakes for my super bowl party and so you know it will order extra eggs. So stuff like that right you know. You can almost imagine all the consumer adaptation and obviously the corporate setting you know just business being smarter and having stuff happen without you having to think about it I think could you know an interesting, an interesting way of kind of pushing frontiers.

Dave Kruse: Yeah, well that makes sense. All right, so last question. So you probably get stresses when you are doing public markets way back in the day, but I mean do you get stressed and if you do, how do you get stressed or how do you unwind or how do you get away from the ground.

Chris Douvos: I’ll tell you. So you know I’m constantly stressed, because the number of things that can go wrong in a company are amazing. So I mean it’s really wild. It’s like risk, compounded on risk on risk. It’s like building a nascent company or taking the company from zero to one is really, it’s like growing an orchid right. Like the soil has to be right, the sun, everything has to be just perfect and some of these companies break out and can create you know huge value as a result. So I – the way which I have changed over the 16 years I have been doing this is I try to be more even keel, because when you hear about these companies, they are like early breakout successes, like four square and you are like holy smokes, this company is going to be you know kind of life changing and then they kind of, you know they kind of plateau and other things are kind of nowhere. So just kind of managing that ebb and flow has been a challenge and you know it is what it is. You know markets go up, markets go down, areas go in and out of favor. You know I just hope that I can control what I can control and I’m hoping that my mangers are cantoned with the control and doing a good job at it and that’s fine. As for how I de-stress, you know I coach my son’s little league team and I pitch batting practice twice a week and there is nothing more therapeutic than throwing and these are like 12 and 13 years old now and I’ll tell you, they are starting to flatten me out a little. I pitched in high school and stuff, and so you know just yesterday I was throwing cutters and changeups and sliders and I’ll tell you my arm is felling it today. So that’s how I de-stress.

Dave Kruse: Nice. Are you a righty or a lefty?

Chris Douvos: I am a rightly.

Dave Kruse: Nice, nice all right. Well, that’s a pretty good way to end it on little league and so definitely I appreciate your time. Chris this was awesome. I mean I know you guys mentioned the stuff. I just didn’t know it was this interesting. So great to…

Chris Douvos: Thank you

Dave Kruse: Yes, it was better than expected right, that’s…

Chris Douvos: Good. Well, thanks for all your good questions and let’s do this again sometime.

Dave Kruse: All right, that sounds awesome. Well, thanks Chris and thanks everyone for listening to another episode of Flyover Labs. As always I greatly appreciate it. We’ll see you next time. Bye everyone, bye Chris.