Brian O’Malley

Yeah, the biggest challenge right now with startup incentives is just that these companies are becoming more capital efficient.

And a lot of the dollars showing up in later stages, a lot of that money is going out the door in secondaries.

And so you have this weird dynamic there where certain people are getting access to much faster liquidity than the rank and file people who are actually building the product.

And that can create some complexity internally along the way.

So I would say as the market has gotten more sophisticated, as it's gotten more competitive, you need to be more nuanced with the incentives as well as thinking about the downfield ramifications.

Going back to what we were just talking about, venture firms, you really need to first understand what is the North Star of that LP that is driving their behaviors.

So some organizations might really care about access to some of these large storied firms because they're ultimately a fund to fund.

And so they're selling access

to that firm, at least most of the fund of funds that I understand, the more capital they're managing, the more revenue that they're ultimately getting from that.

So some of them might really like the idea of getting access to these bigger and bigger funds.

Now, another group might have, for example, a really deliberate direct investing strategy.

This is something that I'm seeing from more and more LPs, whether it be that they feel like they have some unique knowledge, whether it be that they're trying to blend the fees and carry down along the way.

But direct investing has become much more

prominent topic when I'm catching up with folks.

So they might actually like having more of an emerging manager program because they know that those funds aren't going to have the necessary follow-on dollars to participate in all the prorata in their best companies, whereas the larger firms already have that capital in the house.

And so part of my job when I'm having LP conversations is really to try to put myself in their shoes, understand what it is that they're trying to build.

A lot of LPs are challenged on their front because of the lack of liquidity that the venture ecosystem has created.

And so a lot of LPs have challenges as well right now.

And so part of my job is instead of sitting on the other side of the table,

Really trying to understand what is motivating them, what their challenges are, what are the things that they need to accomplish this year before getting into the next year.