00:01 - 00:31 LINCOLN Welcome to Funds That Won, where we dive into some of the world's most renowned investment funds. We'll interview investment managers across the alternative landscape and learn how they built their million and even billion dollar asset management empires. We'll explore teams, structures, strategies, and best practices in launching and running alternative investment funds. David, welcome in. Why don't you start off by giving me the elevator pitch on Fraser Group? Just high level, you know, who are you guys? What do you guys do?

00:31 - 05:02 DAVID Hey, thanks for having me. It's a real treat to be here. I'm with Frazier Group. We started as my father's family office. Scott Frazier was the first, he co-founded the first angel group in Utah. The Utah Angels in 1997. And it was really interesting. They invested for about 15, 20 years, and then they had a reunion at the end. And in the reunion, they said, hey, we've prepared a special treat for all you angels. We have kept good records of everyone who put money where, and we're showing them on the board of which angels did well, which angels did poorly. and track records, no holds barred, just, just. And of the 22 Utah Angels, only three had been successful as an angel investor. And so just terrifying odds. And a couple of them had gone on to do other things, not investing. Carlson founded Lucid and Ben Peterson founded Bamboo HR. Not saying all 22 or 19 of the 22 are unsuccessful, but only three angels succeeded. And as what we think went wrong with those funds is what we have tried to do as a family office and as a fund now. So kind of our fund mantra, if you're saying, hey, what are Frasier's about? The core mantra is shooting fish in a barrel, not throwing darts. So the problem with the Angels was they wrote a ton of $50,000, $100,000 checks into companies. And as soon as they could, every one of those companies tried to graduate from angel investors to bigger investors, to better investors, to seed funds, to growth funds. And as soon as they could, they stopped taking the angels checks. So our objective as Fraziers, that's what we call throwing darts at a board. You make 50 checks, 20 checks, and you never see them again. And you hope you made money, but most of them didn't. What we do as a family, we call shooting fish in a barrel, is we write these initial checks as small as we can, as broad as we can, and then we aggressively pile on in just the very few best. So 80% of our checks are in, of our logos, are not great. but 80% of our cash ends up in our best companies. And that's because we write $100,000, $500,000 initially, but in some of our winners, we've written $9 million into Filevine, a local law firm software, case management software company. We've written $5 million into Alianza, $5 million into Nav, $4 million into Kizzik. So… So the Fraser mantra is put money in early and then pile on as long as you can in the winters. So really focusing on follow-on investments.

05:02 - 05:22 LINCOLN extreme focus and that comes through secondaries saying hey you know it's been five years I wonder if some some other shareholders would like to sell their shares and another big element is forming a close relationship with the founders if you don't have a close relationship then as soon as they can they will stop taking your money they will say hey there's a series a lead investor they want the whole round and I'm gonna give it to them But if you are active, if they think of you as someone that has helped them a lot, you care about them, you've sourced them some hires, and you come in early saying, hey, I'm really excited, and I want to be your first million dollars, then there's always room for someone in that position. So that's the real heart of what Frasier Group aspires to be, is to have those kind of relationships where someone says, I don't need the Frasiers in, but I feel like I kind of owe them. And I feel like I can predict them and they want to be helpful. And I, and you know, That's the heart of what I think the Fraser Group strategy is.

05:23 - 07:20 DAVID That's great. And so, you know, to get technical here pretty quick, are these checks coming out of different funds? Because you said you want to come in at the ground floor. That'd be a traditional VC fund, right? Do you have a different product altogether that you write the secondaries check that you were talking about? Or is it all out of the same like fund vintage? Or how do you guys think about that?

07:20 - 07:23 LINCOLN so I'm not saying this will work for everyone but the way we do it is we do whatever we want in a given fund so everything we invest in in the year you know 2022 to 2024 let's say is all out of the same fund some of those are initial checks hopefully only 20% of the cash goes into these small initial dispersed pre-seed checks and then any of these later stage follow-ons the hey let's put one or two or three million dollars to work at a time kind of checks into companies where we've had a relationship for five years or ten years all those come out of the same fund. And then as soon as the fund expires, that cohort, let's say, of limited partners, they have no right to any of the follow-ons. They have no future expectation of putting a single dollar to work. that belongs wholly to the next cohort. And if you want to capture, you know, the follow-on in some company that you think is really particularly good, then the way you do that is you'd have to commit to the next fund. So we view it as fair and LPs have felt like it's fair because we've told them, hey, look, you know, you're benefiting from piling on money into seeds that we planted many years ago. Yeah. And so the fact that, hey, you're planting some seeds, you're making some of these early checks that are highly risky, that aren't frankly quite as sure of a bet. The fact that you're writing some of those checks and not getting those follow ons is just, you know, part of being in the fund.

07:25 - 07:52 DAVID Yeah. So remind me, what's your total assets under management right now?

07:52 - 08:02 LINCOLN We are raising fund five in the spring of this next year and we probably have we have about 50 companies and $200 million in capital invested into Utah private VC-backed companies. So yeah, like $200 million.

08:03 - 08:29 DAVID $200 million. Awesome. And what percent of that, just to get us a breakdown here, because you're kind of self-funded through your own family office, right? We were at the beginning.

08:29 - 08:38 LINCOLN Since 2015, we have been raising LP money in regular 2 and 20 venture funds. Look exactly like a venture fund. Maybe the only difference is Frazier's are a third of the fund or half of the fund. But in terms of structure and LPs and reporting and everything else, we're just a regular fund.

08:39 - 08:59 DAVID So let me ask you this. What made you want to start taking on outside capital and start going down that road of raising external funds rather than just managing internally?

09:00 - 09:03 LINCOLN We just looked at it and said, hey, if we had no constraint on the money we put into these deals, how much could we take down? And that number was much greater than the number that Frazier's had in the bank. So that's the simple calculus there.

09:03 - 10:10 DAVID That's good. Sometimes it is that simple, right? I love that.

10:10 - 10:17 LINCOLN That's great. And I would say it's surprising how much, if you're focused on piling money into a given company, it's very surprising how much you can actually get in. Like the amount of demand for secondaries can build up very, very big, or the amount you can get in primary is really high. If you've expressed that much to the company, if the CEO says, oh, Fraziers are always looking for ways to put in money, things happen all the time where they just say, hey, this situation is happening and the Fraziers have already expressed interest in it and it's just like plugging a hole. It's just like, oh, I already knew they wanted that. someone says, I need to sell some shares because I want to buy a house because I want to move to Utah to be at the company. Then the CEO is like, oh, I know exactly how to resolve that. And you see a lot of those situations. Whereas if you're quiet and you have an expressed interest and they don't know, then they just don't come up.

10:17 - 11:35 DAVID So are these typically GP-led secondaries then, where you're initiating the secondary or is it?

11:35 - 11:50 LINCOLN Yes. OK. Mostly, it's us initiating. Mostly, it's us looking at a company. They say, just to the board, they just say, hey, we're really turning a corner. We just landed this deal. Growth rate just dramatically improved. Feels like we hit product market fit. Every company has those points where they're like, it's really working. We're quite sure that it's happening. But to the outside world, it's not quite known yet. And they wouldn't capture full credit for it for whatever reason. Like, hey, you know, we need to keep this pace up for a year to raise the Series B or whatever. But if you're on the board and you're watching it, we wait for those turnaround moments and then we aggressively say, how do we get in more? How do we increase our exposure? And we go approach the CEO and say, we'd really love to put some money to work here. We pull up a list of all shareholders and anyone who's not currently employed at the company. We call every single one of them and we say, We like what's going on. We want to buy more. You've been in here for five years. The market sucks. Wouldn't it be nice to get some liquidity?

11:52 - 14:57 DAVID So how do you think about, you know, coming to a evaluation of those, you know, those interests, those membership units that they have in the fund? What's your process in evaluating those?

14:57 - 15:03 LINCOLN If you are our competitor, then don't listen to this part because I'm just going to lay it all out there. The way I think of pricing, the easier way is to peg it to a recent financing. If someone is raising money right now, like, hey, the Series A is happening right now and there's secondary interest, we generally don't buy because They are now anchored to, you know, the top price they could possibly get. The company itself has gone around to 50 to 10 different VCs and pitched them all and done a road show and selected the highest priced offer. And so we won't do a secondary during the round, during a financing, but If they did a financing nine months ago, we'll generally say, oh, you know, the company's done great since then. They've taken that money and really, you know, proven out what they hoped to accomplish with it. And we'll peg the price to that financing. We'll say, yeah, they raised money nine months ago. Can we can we peg it to that price? And everyone just says, oh, yeah, nine months. That's basically now. Even though to us, we're saying to ourselves, the company's twice as big as it was. Yeah. And so much so much could have gone wrong. and didn't. But anyway, so that is one secret I would say in terms of doing secondaries is if you can peg it to a financing that was six months ago, nine months ago, that's a great way to go. What if it's longer? If it's longer and that valuation is clearly stale and not right, then we value companies all the time because we're not a secondary fund. We're just a direct investor. Most of what we do is just put money into seed, pre-seed, series A kind of stuff. we're already comfortable just showing up and saying, hey, you know, we think your competitors seem to be getting a 7x revenue multiple, and, you know, we like this better about you, so it bumps up to eight, and we like this less about you, so it bumped back down to seven. So anyway, you figure out what you think the multiple should be and just peg a company valuation. Once you have, hey, the enterprise is worth a hundred million bucks, then a secondary, you shouldn't pay the same. There are a couple modifiers that we use all the time. One is we say, look, we're buying common and not preferred. So that's a 20% discount. That's because the preferred, they get extra protections. They get downside protections. They get a board seat. They know what's going on. They get all these rights. And the common, you just don't get it. And everyone says, oh yeah. And you Google it, 20%, everyone says that that makes total sense.

15:05 - 16:11 DAVID So right there, you're recognizing like a 20% step up in basis on your investment, right? Or do you perceive it that way?

16:11 - 16:12 LINCOLN Mostly, I think there really is some advantage to preferred shares. It's not as big as 20%, but people accept it. So in my heart of hearts, I would say maybe you're arbitraging 10% because it's actually 10% better to have preferred. But you're getting 20%, so that's nice. And then from there, you say the business is worth $100 million, common's worth $80 million, but the whole reason we're doing a secondary is because you're a liquid and you don't want to be a liquid. And it probably is worth $80 million, but no one's offering $80 million because this isn't a public company. And you're going to have to sit around here for five more years and things could go wrong. And we are willing to take that risk because we have money and it's our job. But you, you know, a departed employee don't really care for that kind of risk. So we charge another 20 percent.

16:12 - 16:38 DAVID Gotcha.

16:38 - 16:58 LINCOLN Or whatever you can get away with. A lot of times it's less. If it's a really hot company and you know it and they know it and everyone knows it, you might not get you might not be paying $60 million. Yeah. 100 minus 20 minus 20. Right. Or the opposite could be true. So, you know, you just negotiate.

16:58 - 18:16 DAVID Well, what's nice about that is because if it's an LP led secondaries transaction, then all of a sudden it's almost like a bidding word where you have to go bid against other people that want to buy out their position. But you guys don't even have to, you know, you never even have to deal with that. Right? Right. So you, it's because you initiated the conversation.

18:17 - 18:40 LINCOLN Yep. It's fantastic. Yeah. I would say it's very rare for secondaries to have multiple bidders. Yeah. It's very, very uncommon. So they're pretty sweet. Yeah. And then maybe one other thing while we're on the, hey, how do you actually price a secondary if there's no recent valuation? The other thing is you need to adjust the valuation for the waterfall, the liquidity, the preferred shares. So if you say the business is worth 100 million bucks, and then you add up the value of all of the preferred shares, they have a, participating preference for the first 20 million bucks, you just subtract that out of the top. So you'd say, look, the business is worth 100 million dollars, but they've already promised the first 20 to preferred shareholders, so it's 80 and then 20% of 80 and then 20% off of, you know, whatever 20% of 80 is. So that's the other thing that you ought to factor in is you do require to do a secondary, and they'll always give it to you, but you do require a waterfall of the preference stack.

18:42 - 19:38 DAVID And when you guys think about this in terms of liquidity to your LPs, is that ever a factor in the equation of, oh, this company's pegged to IPO in three years or sell in three years, or maybe it's still seven years out? Or does that ever come into the equation? Or if it's a good company, then you just want to increase your exposure to it?

19:38 - 19:44 LINCOLN That's a great question. Our funds in particular, as I mentioned before, we're not reserving money for follow-on late into the fund's lifetime. So all the money gets spent in the first, call it three years. So we aren't constrained by time, like maybe other funds are, where they're putting follow-on money in their year five or their year six. Like that's not us. It's all going in year one or two or three. So that alleviates some of that pressure. On the other hand, I would say we don't do secondaries until the company is pretty mature. Early stage secondaries, we don't really do. What do you define as mature? The business is three to five years from an exit, maybe.

19:44 - 20:05 DAVID Any certain revenue or employee counts?

20:06 - 20:09 LINCOLN Just 20 million plus revenue or so. We wouldn't do secondaries much younger than that. This may be going too much into the weeds, but some of you might recognize this, but we value qualified small business stock. Section 1202, do we even want to go into any of that?

20:09 - 21:14 DAVID I think it's useful. Yeah. Let's talk about it briefly.

21:15 - 21:16 LINCOLN OK. It's a racket. I don't know who lobbied for it, but it is incredible that if you meet the threshold and meet the criteria for QSBS for Section 1202, you can pay zero tax, zero federal, zero Affordable Care Act, zero alternative minimum tax, just no tax. And it's awesome. Particularly for us because half the money in our funds are our own money So we we especially care about being tax efficient. Yeah, so if it's a young company Generally you can get QSBS tax treatment and the company will will last will will you'll have to look up the criteria on your own because that's That's a big long topic. But yeah If you hold it for five years and it meets some criteria, then you'll get the tax treatment. And so that's a pretty sweet deal. I guess why that's relevant is if you buy a secondary, you can't get it.

21:16 - 21:49 DAVID So it eliminates that.

21:49 - 22:29 LINCOLN It eliminates that. So that is not great. So if it's in a late stage company, it doesn't really matter because you weren't going to hold it five years anyway. Or maybe their assets were over 50 million anyway, and you weren't going to get it anyway. Yeah. But our view is that's such a sweet deal, such a big deal for us. that when the company's young enough and you can get QSBS, you might as well just get it that way generally. Yeah.

22:31 - 27:40 DAVID No, that's great. I appreciate you diving in the weeds there. Hey guys, thanks for listening. As you know, we don't run ads on this channel, so if you could really help me out, if this podcast has added any value to you or your business, please subscribe, rate, and review. I would appreciate that greatly. Thank you. Let's, let's, uh, let's, let's take a step back. Let's go a little high level. Now we've been, we've been in the weeds here for a minute. Um, you know, this, this podcast is called funds that one, you know, we had an interesting conversation a few weeks ago when we were at lunch, uh, where you were talking about the performance of different funds. Uh, I want to ask you the question, you know, what makes a fund win? You know, why does a fund win?

27:40 - 27:48 LINCOLN That's a great question. It's probably only going to be relevant to venture capital, because that's what I do. And I don't understand these real estate funds and private equity funds. So everyone else, close your ears. But for venture, venture is kind of a different animal. It is winner take all, or at least for us. It's the beauty of software is if you make really exceptional software that's really useful, it can spread like wildfire and scale. You have no cost to doing it 10,000 times more than once. And so that's awesome and that results in some really quick big winners. The flip side of that is that you have to be much more careful of competitors because they can just as easily eat your lunch as you were hoping to, you know, spread like wildfire and wipe everyone else out. So it's much more of a winner-take-all. I view venture as a winner-take-all and what I think makes a fund win is finding companies that have a true competitive moat and it's very hard to do and it's very rare and And if you're able to identify those companies that are going to be a monopoly, that are going to charge a high margin because no one else can do what they do, those companies are the true winners. That's where you're going to get these outliers, these huge wins, and be a winner. And the number five and six and seven companies in a given space, they all don't do that well. Maybe they get a good exit, a good-ish exit. Maybe they don't, but not the ones that you're ever really jealous of. And then the question is, OK, fine, that makes sense. Why don't I just put all my money into these mega great companies that are all monopolies and no one else does what they do? That's much easier said than done. The way that a fund gets into those outlier companies is relationships with C-level execs, relationships with people that already know you and say, oh, they're a great person. I'd love to work with them. So we make a big part of our job at Fraser Group is just saying, hey, do I know the CEO of Filevine? yes he's taken nine million dollars from us and we took him down to Lake Powell and he likes us and we bought him shoes and whatever yeah and we go had dinner or whatever um that's okay but we try to also have a close relationship with their executives too so we know not just the ceo not just a ceo so we have a we we've We've done things with the head of sales, with head of customer service, with marketing, with the guy who does all the AI stuff. And I think that is highly important because as soon as Filevine sells, Each of these people was at a successful company, was a C-level exec with a really killer team. They all have a million dollars in their pocket and they're all hungry to do the same thing again. And they're either going to start a new company that's really great or they'll be drawn into a company that can hire the top talent. So for us, and I think for you, build relationships, not just with one CEO, but that entire top level, pretty much anyone that you know, that you think, hey, this person is really smart. And I just, I mean, I just admire what they say about marketing. And I think they're just great at it. That person is a goldmine for you and for a fund. and they're either going to source your next deal or their friends are going to be the ones that start companies and they're going to point them to you. Or, you know, you're going to have a portfolio company that needs a CMO and they'll, they'll drag her in to be their CMO or whatever. Like there's a dozen ways that you can let that, that it ends up helping. But the core of it is if you want to be a fund that wins, you have to build relationships with really smart people that are really good at their jobs, super good. And if you don't, and the only companies you're seeing are ones that kind of make the rounds, that pitch every venture fund, and don't have a preference for you, it's going to be hard. It's going to be very hard.

27:48 - 29:38 DAVID Thank you. I love that answer. Where does your primary source of deal flow come in from these days? Do you go out and headhunt it? Do you find it yourself?

29:38 - 29:43 LINCOLN Or you go to conferences? The best come not to harp on it, but from that group of people that I just talked about. C-level execs. Those people are the very, very, very, very, very best. As many of those relationships as you can form is great. And it's a long, long game. One of the relationships I'm really proud of is I met Diogo Mira, who's probably the very best venture capitalist in Utah, single best. If you are a different VC, don't listen to that part. But probably the very single best VC in Utah. And I met him when he was a student at BYU. We both, I served in Brazil, so I speak Portuguese and we had this friendship and then we both worked. I was working for my dad and he was working for a different angel. So we kind of had the same kind of like, angel, helper, assistant kind of role. And so we bonded over that and we had a relationship way back then. And it was always obvious to me that Diogo is just really, really friendly, really, really smart, really driven. And did I know that he was going to end up in venture capital? Not really, but I knew that he would be at a great company, or he would be at a great VC, which he is, or, you know, something. I would just encourage you gals and you guys to just take a very long term view and just say, you know, this kind of person here in my life is someone that is going to be important somehow and and make friends with them while they're looking for friends before they have it made. What was the question?

29:43 - 31:32 DAVID Yeah, no, I think you hit it right on the head. We're originally talking about where primary… Oh yeah, so that's the best.

31:32 - 31:34 LINCOLN I think that's… We all do other stuff too. I mean, we track, we have a tracker that looks at every company that we say is good, like 140 companies in Utah that we say, that's a good company. I don't know everything about them, but they're good. And then when any of their C-level execs changed positions on LinkedIn, then our tracker notifies us and says, hey, the head of chief of chief revenue officer left route and went to XYZ company. And then we start to see, oh, you know, two really great people left to XYZ company. Maybe Maybe they're so charismatic somehow or have such a good idea or something's going on that is attracting someone who has a bunch of options to people that have a bunch of options. So kind of keeping your ear to the ground, I guess, is a second, but it's a It's a distant second. Yeah. And then, you know, I don't want to be exclusive or something. So I would also say we look at lots of companies and a lot of people reach out to us and just say, Hey, you want to check out our company? And we love that. So I want to throw that in there too. Like if you're pitching, we'd love to, and you make software in Utah, we would love to talk to you. Um, Is it exclusively? And that works, but it's just like you see a lot, and there's a lot of noise mixed with signal, and that's your job. So if you're a fund manager, do it, but realize that there is a better way to the extent you can do it.

31:34 - 33:03 DAVID Are you guys exclusively Utah?

33:03 - 33:18 LINCOLN We are kind of Mountain West. Don't listen to this part because I hate to be exclusive again. But kind of our theory again is, hey, make a relationship with these people that's going to last after the point where they need your money. And if they're in Chicago and they take $200,000, they don't care about you because it's just so far away. You just don't have any shared experience. You can't do something or be local or visit them often enough. So anything in the Mountain West, we do because we feel like we can travel and get those kinds of relationships. Anything in California, we do look at, but our perspective is, hey, the reason someone from California is looking for Frazier money is because they've already pitched 80 VCs and they still need Frazier money. Kind of an indicator right there. We rarely do California deals unless we have a personal connection, unless Jeff Kerl did Skullcandy, which was one we did, and then he went to California to do Stance. And we're like, oh, OK, that makes sense. We did GitHub because there was a relationship with someone, and that's a California company. So like we, we do them, but they're pretty rare.

33:18 - 35:08 DAVID Do you ever seek out any like co-investments? Like if there's a firm, are there any, you know, firms either locally or nationally that like, if they put their money there, it's like an indicator for you to be like, okay, let's, let's, let's go here.

35:08 - 35:20 LINCOLN Let's check this out. It's mixed. I think they're a good source, but not, not excellent. My thoughts around co-investment opportunities are that there are situations where they're great. Like, I've had great experience with, like, University Growth Fund. Peter Harris, he sent us two of our very favorite deals, Project Solar and another called Parallel. He's like, these people are just really smart. They're too young for our fund. We're a growth fund, and they're both seed. So he made that introduction, and it was wonderful. Yeah. So it does happen, and it does work. And there are situations where you can get a co-invest, or maybe they don't understand the value of it, and so they share it. But using the 80-20 rule and saying, hey, there's 20% of companies that check every box, and where the confidence in the team is sky high, and it feels like a real win. Those deals, I personally feel, are not as commonly syndicated for co-invest. Where they say, this is the greatest deal I've ever seen, so we will lock it down. right or just as likely there are three people trying to lock it down and so you know three of them had a relationship with the founder and you know invested in her last startup or whatever and so there's just no room for xyz for for one vc to just say hey, this company needs some extra money, and do you want to give them some extra money? So I feel like there's some selection bias, I guess is all I'm saying.

35:20 - 36:01 DAVID Right. So do you, to piggyback on that, do you prefer to take down the whole round if a company is raising money? Or do you have a maximum amount that you'll take down?

36:01 - 36:06 LINCOLN Or is there a… We'll do 500. I mean, it depends on the stage, but pre-seed, we'll do as low as 100K. of like pre-product, pre-revenue. But kind of the seed or series A, kind of the seed round, we'll write like a 500k to 2 million-ish dollar check. So if that's all they need, then okay, then that's great. We wrote the only large check in Kizzik, Hands Free Labs, that's a shoe company around here.

36:06 - 36:52 DAVID So if they need additional capital, will you lead the round and then bring on others?

36:52 - 37:30 LINCOLN Yes, yes. But in the very hottest deals, I personally feel like a lot of times they kind of have it pretty locked down. Pretty locked down. Or maybe it's not even just the fund trying to lock it down, but just who the founder is. They did a great job at Qualtrics or whatever. They already have a network built because they were successful. Yeah. Anyway, I probably harpened too much on it, but there is some selection bias. So if XYZ company's sharing it, it's because they don't want it all or there aren't other people that are. fiercely fighting over it.

37:31 - 42:00 DAVID Hey guys, so we recently just launched this community called Wall Street Rebel Insider. It's an awesome group where you can network with other emerging fund managers, get up-to-date insights. It's a really cool group and community on Discord. I think you guys are going to love it. Definitely go check it out if you're interested in this industry and you want to keep a better pulse on things. Thanks. David, I want to shift gears here a little bit. There's a lot of talk about there's too much dry powder out there in the state of venture capital, that there's too many funds allocating to too few companies. What's your thoughts on the current state of the VC market overall?

42:00 - 42:00 LINCOLN I think that's right. There is a lot of dry powder. There are not that many great companies right now, which I'm not saying that to be offensive to you, an entrepreneur who's listening. My personal theory on it is that a lot of the best companies and company ideas are offshoots from other successful companies. When Omniture sold for the next five years, every single company in Utah had someone from Omniture or Adobe or when Qualtrics sold or went public, like every company you saw had a VP of something from Qualtrics. And I think that makes sense. I mean, these people already had a great run. They saw how things work when they worked really well. They proved themselves. Now they left the company. They've got a million dollars in their pocket to get the product to a state where it's impressive to VCs or something like that. So that's where I think a lot of the best companies come from and in the last two years very few companies have liquidated and therefore very few of these really great operators have left. They're still sitting around trapped in their company saying I do have this great idea, but frankly, you know, I've got stock options here still and it's kind of a scary time to go out and do something and maybe I'll just wait. So I think the number of companies is a little down. The dry powder is still high. I think there is a bit of a bubble in AI, and that's highly nuanced, so let me throw some nuance on that. I think the promise of AI is enormous, and companies like Microsoft and Amazon and Apple are 100% right to be only caring about AI and caring about nothing else. I've heard people that are like, hey, my contacts at Microsoft They get zero traction unless they say the words AI. For their division, for anything inside Microsoft, if it doesn't say AI, no budget. Period. Really? Yes. Wow. AI is going to be hugely transformational. And if you don't think it's transformational today, and you're like, yeah, chat GPT, bit overrated, picture AI in five years and what that could be. And these companies should be doing it now. So AI, great. I am super hyped on it. But I say there is a bubble in that there are tons of small, brand new startups that are essentially just wrappers for ChatGPT. They say, I'm going to attach ChatGPT to this use case. I'm going to use ChatGPT to do customer service calls, or to answer reviews, or to whatever. I think there's a million applications, and those are going to happen, but it's going to be gobbled, all the value is going to be gobbled up by the big AI producers. They're going to be the ones saying, Hey, we've now rolled out a new application, this new feature, and it'll just destroy these little startups. So I think there is a bubble among small AI VCs that a lot of them are looking at themselves saying, my product does a lot and is efficient and is great. And I think that's true, but they're going to be destroyed by the big players once it's worth their time to build out all these little use cases. So that's a big part of the state of EC. Feels like it's maybe getting harder to fundraise. I don't know. yet. I mean, we're raising in the spring, so we'll see. But it does seem like I'm hearing of funds that are like, hey, we couldn't raise our next fund. So I don't know what to say, but good luck.

42:01 - 42:43 LINCOLN Yeah.

42:47 - 43:41 DAVID Yeah, I saw that a lot with a lot of our clients and different funds coming out of our ecosystem. You know, the past, like, well, Q1 and Q2 of this year were terrible and Q4 last year. But I've seen an uptick, you know, starting in Q3 of this year where, you know, dollars are starting to get more active. So it's promising to see at least. So I'd love to shift. Talk to me about what the future of the Fraser Group looks like. What do you want the firm to look like five years from now, 10 years from now? Are you going to be introducing new product lines? Do you want to be a billion dollar firm? How are you looking at the state of the Fraser Group?

43:41 - 43:42 LINCOLN The future for Fraser Group probably doesn't align with most of your funds, so I'll probably just go quick. But we're hoping, fingers crossed, that Fraser money will match up with our ability to source deals, meaning we will no longer be raising LP money in five years. So don't take that to heart, but if you can drive a high return on your own money, That's probably, or we've concluded, it's a better return than driving a lower return and earning fee and carry on other people's money. So that's the direction we're probably going. I don't want to go off topic, but there is one thing that I have seen funds do that I thought was genius and I wanted to recommend as a direction for other people.

43:43 - 47:42 DAVID Yeah, that'd be great.

47:42 - 48:18 LINCOLN One thing I've seen work really well in two different occasions was having an investment committee for their fund. And I don't know how many times this has been brought up because I know Bridger Pennington, his dad was a founder of Bridge Investment Group. I think they're the fourth largest REIT, or they were at some point. $30 billion in assets, so great. Yeah, they're the fifth largest real estate fund right now. Fifth largest, fifth. I'm going to start saying that number. And I was an intern there. Oh, OK. What was really, really cool that they did was they had an investment committee, where they invited investors to come and observe the principals making investment decisions. Uh, one of the partners would throw up a deal and say, here's this property. It's in Santa Quinn, whatever. And, uh, it's this and this and this. And then the other partners would scrutinize it and say, well, what about this? Oh, I don't like that. Oh, I bet we could do this to the property. And the observers, these investors, added no value. So I don't think they add much value, but in terms of fundraising and confidence in the team and ability to just be like, get some diehard people. My dad would sit in those meetings and he'd come away like, wow, these people are geniuses. And then we were in their next fund. And a lot of investors saw it that way. a local fund, Kickstart Seed Fund, they did this same model, and I think it worked really, really well for them. In their first couple funds, they had an investment committee that consisted of their biggest investors. So you write a big check, you're in the meetings. They'd have companies come in and, or rather, companies would pitch Kickstart, Kickstart would vet them and say, we like you, we're like 90% sure we're gonna give you money, but we want you to present to our investment committee and then they would come and pitch again and kickstart would look like hey we're sourcing all winners because every company that comes in is actually doing something pretty cool and pretty interesting and kickstart looked really smart because they're already familiar with it and they're already asking smart questions and um it gave all of the investors like a flavor and a flair for aim for for investing where they They get to show up once a month or once every three months and sit in a cushy chair and have donuts brought in and have these cool companies pitch. And it just gave them this scent in their nose of like, whoa, seed investing is just so awesome. And I get a front row seat. They allowed them to vote, but it was pretty quickly apparent that the votes didn't really matter. kickstart every time kickstart said we think we should do it what is your vote they always voted in favor yeah but investment committees if if you're in a position to do them I highly recommend them and if you have like the stomach to because their work too so that sucks but do you guys have one But half of the money's ours. We've had some good returns early on. I think our first couple funds were in some really nice years for venture. So, you know, we didn't have to claw for the trust, maybe in the same way. But as I look back, like if I were to say, hey, you're a new investor, you're starting a new fund manager. If you can, if it makes sense, I think that's just a killer way in some form. And maybe you make an easier way to do it that's not quite so labor intensive. But I think that's huge, huge, huge.

48:20 - 49:30 DAVID I totally agree. I think it's phenomenal. It's a lot of work on the general partner's behalf in some ways. to structure it, to put it together, to make sure it's happening. But yeah, I wholeheartedly agree that you should have a structured IC. Um, well, that's great. Uh, we're, we're, we're wrapping up here. So I want to get to the last couple of questions. Um, do you have any business pet peeves, uh, that you just like that just drive you crazy, uh, or investing, you know, that people do that just drive you bonkers.

49:30 - 49:45 LINCOLN Well, if everyone felt this way, then it wouldn't be a pet peeve. It would just be something annoying. So I'm going to give you my personal one. I get annoyed when there's kind of excessive posturing, when it's clear that a company needs a down round. Things haven't gone well. And there's kind of these people doing backflips to avoid acknowledging what really happened. That annoys me. where they're like, oh, here's this round. We're pricing it at the same price as last time. But there is 50 percent warrant coverage and it makes the effective price half what the last round was. I'm like, just Let's all just like suck it up, take the reality and just go forward and reset expectations. And so that's mine. If there's just a lot of posturing, I start to roll my eyes and I'm like, how much of this is politics? How much of this is just let's make some money? Yeah. Get the companies the funding they need and move on, you know?

49:45 - 50:59 DAVID Yeah. Yeah. Great. On the flip, any habits that have attributed to your success? They can be personal, business, whatever, just habits, things that you do that you think attribute to your success.

50:59 - 51:05 LINCOLN I don't think I have very good habits, so. Probably not me personally, but I think some great habits again is, is find a way to add value to your companies and your founders and try and be in the weeds as much as you can. I think that's just, I think that's just gold and you'll learn so much more about business too. Um, you know, I, when I invest in a company, a lot of times I will ask, we'll say, here's, I love you, the founder, and then I will go get lunch with the co-founder who isn't the decision maker, who isn't the one that really is going to decide everything, but I can just tell they're really smart at something. And I just learn from them and I just say, wow, this person is really killer at enterprise sales. Maybe they want to know about venture, and I sure want to know a lot about what they do. So I think that's a tremendous habit is don't put blinders on of like, hey, this person is important and that person is not important. Just find people that are really good at stuff and learn from them.

51:06 - 52:13 DAVID Love it. What's something you wish you knew when you were just starting out that you know now?

52:15 - 52:20 LINCOLN I think it's important to have good partners. And I've had great partners, so this is not something I have learned from the wrong experience. But thinking of the partners I've been able to have, it is hugely important to have other people with other perspectives. you get hyped up about something you say this is amazing and I love it and then a partner says I've seen this situation and it's just like this other company and they're not that special after all and so I think it keeps you very grounded to have other smart people and the value of having a partner is quite large so I would say make sure make sure you don't you don't sell yourself short You don't, what's the saying? Drop a dollar to pick up a nickel or something? Something like that. Don't be short-sighted and say, I could keep all the economics and cut out all partners. I wouldn't do that. I would just say, let's get some more perspective, smart people, and build something great together.

52:20 - 52:53 DAVID Love it. David, thank you for being so generous with your time today. Really appreciate you coming on.

52:53 - 53:36 LINCOLN It was really fun for me to be here. And I just want to say, Lincoln, I really love Fund Launch Partners. I knew Bridger Pennington's dad from Bridge and a lot of people that work here. And I just think you guys are a super cool operation. A friend of mine just recently, he's like, I'm starting up a crypto fund. I've watched all of Bridger's YouTube videos and he's like, I think I'm going to take the punch. And I'm like, you totally should. So big, big props to you guys. I really admire what you guys do. Yeah. Thanks for letting me join.