The New Fund Manager Survival Guide

How I Built a VC Firm and Track Record at the Same Time

If you would have told me in 2016 when I made the decision to build Precursor, that by 2022 I would have led 15 Deals and that Precursor would have $100M+ in AUM, I honestly wouldn’t have been surprised. I am like that – I take a goal, cloud everything else out, and run towards that goal until I’ve exceeded it.

There are though, many things that surprised me along the way. It was a long journey, one that cost me a lot of blood, sweat and tears and I’m proud of myself for persevering through it all. *queue Beyonce’s Be Alive*

So much of my work in the early days was about building, learning and operating under extreme uncertainty – constantly. When I made the decision to build Precursor, Charles Hudson (who ran point on LP relationships and who was the only other FT person at Precursor) had raised about $5M, and each dollar raised was a struggle. I was also one of very few (but not the only!) Black women in venture.

If I’m honest, the lack of awareness of all of the things I needed to accomplish to reach my goal was a blessing. I don’t know if I would have taken the role if I knew the steep mountain climb ahead of me. I picked a really difficult path.

Essentially, my task was to:

build a Black-owned VC firm (at a time when there are very few)

that was both Pre-Seed + diversified (at a time when both Pre-Seed and diversification was not accepted as a strategy – highly concentrated Seed funds was and continues to be all the rage)

with very little capital (and no trust fund to back me up if I failed)

do it twice as well as anyone else (in an attempt to pre-empt/mitigate the bias that I knew the firm would receive)

all while also launching my own career in investing (something I knew very little about)

To accomplish all of this, I broke the steps down into measurable, daily goals which then compounded into quarterly goals and then eventually voila – there was a website, investments, mark-ups, mark-downs, fundraises, onboarding processes, LP letters, employees, investment memos… the list goes on.

When I was first thinking of this post, the song that came to mind was Seasons of Love (if you haven’t watched Tic Tic Boom yet, what are you doing?!!). How do you measure a year when building a company? I thought I would break it down into Fund cycles because each Fund has felt like its own distinct journey.

Fund I Learnings: 2016-2018

What Have I Gotten Myself Into?

This is the chapter during which I literally had no idea what I was getting myself into. You might remember this blog post of mine during that time: What Does An Associate Actually Do?

I finally got the “dream job” that my nobody – my MBA School classmates and career counselors included – really believed that I could get. I remember many an advice session with folks who made it clear that given my nonprofit background, this aspiration of mine made little sense and shared opinions like “why don’t I try instead to focus on selling toilet paper or razors and if I’m lucky maybe even get a consulting gig?” I did end up selling toilet paper at Kimberly-Clark in Neena, WI for a while, and it was horrible, but I digress.

But now what? What do I do with this new job? With this new really heavy responsibility? I had never seen a VC firm built before, and didn’t have anyone close to me who had much of an experience in VC. I had no idea where to begin. So I started step by step.

Before I get into the steps though, I’d like to paint more of the picture for you about what venture was like in 2016. There were only a handful of firms who had a chokehold on the market and it very much felt like a white boys club. I remember one of the first events I went to – one for LPs to meet emerging GPs. Throughout the entire day, I only remember seeing two women on panels – both of whom were white – and the overall tone of the event felt very didactic. If you built your firm this specific way, you had a chance to pitch to these specific 5-10 LPs, and only if one of them said yes could you be successful. Anyone outside of that norm was highly critiqued. I took it all in and tried really hard to show that I belonged, but to be honest, I felt like I was drinking from a very large water hose and felt like I was always behind – I didn’t know the latest VC Twitter convo or go to the most recent happy hour w/ Elon Musk or have a background in PE/Banking/Stanford to discuss.

I took a breath and started from the beginning. Which I outlined as follows:

  • How do I find awesome companies? I’ll start by finding them with a podcast. I was hypersensitive to the fact that I was a black woman and a newcomer in VC and I wanted to be sure that if I was asking a founder for their time, that I had something to provide in return. I also wanted to use this podcast to prove people wrong. I got so much negative feedback about my thesis in the early days. I knew awesome companies were building in the thesis I created so I used this podcast to demonstrate that. My cousin helped me produce the podcast and I buit it out on free software in the early days of podcasts. It was a challenge, but it’s been awesome to follow-along these companies’ journies because I now have a track record through the podcast as well.

  • How do I find investors I trust? I’ll start by building a network of Women of Color in VC. The idea was sparked by a random lunch discussion with another woman of color in VC. We wanted to create a space for women of color to feel connected to each other. These relationships could result in job offers, deal flow, advice sharing. We planned, scheduled and got sponsors for quarterly dinners for about 2 years.

  • How do I build OS for a VC firm? I’ll start by finding the right tools we need and then, once I’ve figured them out, I’ll publish my findings. It was really hard to find the right tooling in 2016. So much of VC was manual because in a lot of firms, each partner was doing 1-2 deals a year. So they didn’t need software to see a complete collection of holdings year over year. The only real software we were using was Sevanta – which was very old school. Precursor was different. We needed software to account for high volume dealflow and deals. It should also sustain our really large and growing network since we relied so much on coinvestor information as well. So much was trial and error (this continues to be the case honestly) but I was proud to build out our foundational stack which became – Affinity + Airtable.

  • How do I build a deck for LPs? This was pre-Canva and I have no consulting experience which is where all of my MBA friends got their powerpoint skills. I didn’t have the patience to learn powerpoint from scratch and luckily we consulted with Moxie Method who created a powerpoint deck structure with our specific branding, so some of the foundational work was done. Now what do we include? At the beginning, it was such a whiteboard session. Would LPs be interested in founder diversity? Maybe co-investor metrics? How about follow-on timing? In the early days, I workshopped the AGM and LPAC meetings for weeks. I don’t think I can say now for sure that there is a recipe for success here, but we found a template that worked for us and continued to iterate over time.

  • How do I fundraise from LPs? I’ll start by leveraging my previous fundraising experience in the nonprofit space. I realized once I started there, that so many of the same funders I approached at the Fund for Public Schools were also investing in VC as an asset class. As I zoom out, it makes sense – philanthropy was part of the hedge fund/family office/ foundation investment strategy. VC is also a part of their investment strategy. I don’t know for sure, but I wouldn’t be surprised if the same overall percentage of capital is given to philanthropy as well as VC. Because VC is such a high risk strategy, the investment dollars might return $0, which is the same return as philanthropy.

  • How do I value companies? I had only taken the online version of Venture Deals before – which talks about how to value companies in a theoretical manner, but this did not prepare me for how to value real life companies with real life founders building our real life future. I had so many questions – and continue to have these questions – because I don’t think that valuing companies is a science, it is more of an art and it is an art that holds a lot of bias. The below tweet is from very recently, but the underlying premise holds true throughout the ages.
  • How do I build cap tables? I’ll start with google. While I had taken one financial modeling class in business school, it really only gave me the basic tools to build out an excel spreadsheet. The free tools I found on google were worth their weight in gold as I learned how to read and design cap tables. Some of my favorites were Captable.io (now LTSE), Funders Club and Corporate Finance Institute.

  • How do I build a website? I had never built a website from scratch before. But I had built out some templatized pieces of a website before (thank you, Fund for Public Schools for that opportunity!) I learned via trial and error how to upload photos on our website which was particularly challenging – we were attempting to showcase the faces of our founders to demonstrate that we backed different people compared to others. To help out with the pieces of the website that I simply couldn’t figure out, we employed a contractor – Kenneth Lim – who was immensely helpful.

  • How do I build a scalable support network for founders? So much of the support we would need to provide founders would need to be scaled. The vision early on was not how do we support 1 founder or 2 founders, but how to support 15, 20, 100. We have now grown to over 500 founders. In 2016, believe it or not – Slack was not a big deal! It was not widely used and was still very much a startup. We created a founder Slack early on with the hopes and dreams that it would become a self service like product. What we found was that because the founders we were working with were Pre-Seed, they had a lot of operational, administrative questions that could easily be answered in a place like Slack – like what PEO are you using? or, how are you paying your intl employees? or, does anyone have extra office space in FiDi? All we needed to do, in many cases, was get founders together. So in the early days, it was a lot of dinners and lunches.

  • How do I write investment memos? In the early days, we did invesment memos for all of our rounds done via an SPV. I mirrored my investment memos based off of the public policy memos that I used to do at Duke University (who knew that Public Policy degree would be helpful in finance!). I am so grateful for that training. It allowed me to structure memos as a 1-pager, why did we invest initially? what has been their progress since the initial investment? why do we want to double down on this investment?

  • How do I read, review and issue term sheets? One of my first projects at Precursor was to analyze our terms sheets across the portfolio and put together a spreadsheet so we could catalogue with whom do we have side letters. I spent a lot of time reading and reviewing term sheets over and over – in those days priced rounds were the norm even at Pre-Seed/Seed – and understanding the nuances between what a Cooley term sheet looked like from a Fenwick term sheet and everything in between. There wasn’t much I could find on google that helped me here and instead, so instead, I took my skills from working with a lawyer in NYC and read each document closely and intently, over and over again.

  • What is crypto? One of the first things I got excited about when I joined Precursor was crypto. I spent months digging into it. I was obsessed with the idea that blockchain could really help the government operate more effectively. You wouldn’t need to sign 10 different piece of paperwork if all of your information was stored on the blockchain. I got really far down the rabbit hole learning about ideas that were getting implemented in Dubai! This was my first experiment on getting up to speed quickly on an area I previously knew nothing about and it was envigorating.

  • How do VC finances work? I was in charge of managing our first audit and also the fund’s budget. It was a lot to manage on top of all of the other things, but was great to get a very clear-eyed understanding to exactly what it costs to set up and manage a VC firm.

  • How do I take care of myself emotionally and financially? So much of the early days was really hard. I spent a lot of my time doing my own work and in addition to that supporting Charles as he was on the front lines of fundraising and had to shoulder a lot of the financial burden of starting Precursor. I shouldered my fair share as well – taking a lower salary, working extremely long hours and not having much of any of the traditional support system you receive in corporate life – whether that was the HR benefits or the peer colleagues. I found that so much of that early work was instrumental in giving me a clear eyed view into what it means to be a founder and I rely a lot on that experience to help me as I counsel founders today.

Fund II Learnings: 2018-2020

Focus on The Founders

As I began to find my footing, I started to think through where I really wanted to spend my time in venture. I had always had a clear vision about the types of founders I wanted to back and the types of companies I wanted to champion. Now how do I start working towards that more focused goal?

  • How do I deepen my relationship with investors? I decided to join the NextGen VC Board to help me develop a stronger network with investors. I applied with the help of Anarghya @ Maveron and interviewed with Sunil @ Ubiquity and Roseanne @ Renegade. I got the opportunity to explore how to cultivate events and experiences that would allow me to build a community who I could rely on throughout my venture career. Over the course of my Board tenure, I planned many a wine bus trip and happy hour and it was a lot of fun!

  • How do I communicate my values? In my previous career, I never had to worry about this as much. In the public sector, you know that everyone who is there has a principle value of service. Now I was in VC where a lot of people valued wealth over all things and I didn’t know how to relate to these people. I decided to create a user guide to help me navigate these new waters.

  • How do I get into the flow of information? I was given an opportunity early on to join calls that Charles was a part of. I would send him an e-mail at the end of each week, letting him know which calls I’d like the join in the following week and he would let me know which ones I could join. I was so swamped in the first two years that I didn’t take advantage of this much. In Fund II though, I was oftentimes in back to back meetings with Charles all day for days at a time. Listening to the questions he asked founders/LPs/other investors, listening to the concerns founders/LPs/other investors had and trying to soak up as much as I possibly could. I also created our IC meeting during this time to create some structure as well.

  • How do I get leverage? As I transitioned into a new role, I had to figure out how to make sure all of the previous things I was doing before got done. We were still barely $50M AUM which meant very limited management fees, so I was cost conscious when I thought through how to get leverage. I reviewed most of the tasks I was doing before to explore which I could automate (Zapier became my best friend!) and which I needed another human to do. There was more than enough work for another full-time person and because we didn’t have a hiring manager, that meant I had to learn how to become the hiring manager. I drafted the job description, posted the role across LinkedIn, Twitter and elsewhere and singlehandedly reviewed over 300 applicants – taking phone interviews with about 100. I tried as best as I could to limit bias in the process and we ended up hiring an amazing person for the role – Ayanna Kerrison – who is still with us today.

  • How do I create a more inclusive ecosystem? Something that I recognized early on was that the many of the types of companies I wanted to invest in were led by Black and LatinX founders. However, my experience was that there was a perceived increase risk of those founders – honestly for no good reason. But the perceived increase risk of those founders led investors to increase their diligence of these founders and worry significantly about the ability to syndicate those deals. So in order to generate more awareness of who was already doing these investments, I decided to create a list of investors doing this work. It was very challenging work for me. Because there was no public information on this, I had to poll investors I knew one-by-one on how many investments they had made into companies founded by Black or LatinX people. I polled 100s of investors and with that data created The Interrupters List to shine a light on those who were doing this work to inspire others to follow their lead.

  • How do I move from reactionary to strategic? As processes were nailed down and things felt like normal, I wanted the firm to move into a more strategic place. I built out our quarterly offsites to make space to talk about things impacting the firm more generally and how we could get ahead of the next thing. The first quarterly offsites were very open-ended where I tried to bucket our conversations into categories and discuss topics pertaining to those categories.

  • How do I continue to build a name for myself so the right founders can find me? I spent a lot of time trying to figure out how to make sure founders could find me. I continued working on my podcast, spoke at SXSW, spoke at Grace Hopper, participated in interviews and traveled to Australia! The hard work paid off. I sourced about 200 companies the first year, and over 600 the second year!

  • How do I do my job well and also be thoughtful about my own boundaries? I’ll be honest, I am still working through this in therapy. I don’t know if you saw Encanto, but my life growing up was a combo of both Mirabel and Luisa – so I am very used to over-giving. When you are in between two roles as I was – helping Ayanna get up to speed and helping Charles work with founders/LPs – it is hard to figure out where my role started and where my role ended. I was pulled in a lot of directions and was still figuring out my voice in this ecosystem and learning how to say no.

  • How do I manage my own anxiety as I manage the uncertainty of this new role and the uncertainty of Precursor? At this point, Precursor still felt very much like a startup. In addition to that, because I was so great at my previous role, I was promoted into a role I didn’t know if I was good at! I joined Pathwise to help provide me with a trusted community so that I could be more thoughtful about how I was showing up in spaces around me. It was such a great group of people to learn from and I got the opportunity to practice showing up as my authentic self in this industry which was really useful and helped me build my own confidence.

  • How do I start prioritizing myself again? I spent so many hours in the early days on all things Precursor. Days, nights and weekends were booked, and I rarely if ever took a vacation that lasted more then 2-3 days. I realized this was unsustainable and had a hard conversation with Charles. I also realized in this time, that in so many of my previous roles before Precursor, I burned out after two years and then found a new role at a different company, where I would rinse and repeat. I didn’t want that to happen here and wanted to address it in advance. I decided to take more time off, spend time exploring other projects that gave me joy and also got more deeply involved in my community.

Fund III Learnings: 2020-2022

Building my Track Record

I picked a really hard asset class to build a track record when so much of how this industry defines success for track records is: did the company raise lots of money from <enter cool multi-stage firm’s name here>. Deciding to invest in pre-seed companies, which predominately have the highest risk of all, means I’m asking for a lot of heartburn. Especially compared to folks who have instead decided to focus on Seed/Series A deals where there is more data and more infrastructure to a company that you can evaluate. In addition, lots of the pre-seed companies I invest in are pre-product, which means that it can take them the full 18-24 months to get to a strong Seed round and years after that to get to a strong Series A. So how do I do this, in an industry that is fueled by so much hype, growth at all costs stories, and generally keeps a short memory?

  • How do I define success for myself? First things first, I needed to build a strong internal compass. This feeling of groundedness would keep me from flying too far into the wind anytime a challenge arose, and could also help me stay laser focused on what really mattered. To me, success is building multi-billion dollar businesses alongside founders who care deeply about the people they are building their product for, and through their work are committed to making life better for the 99%. There are millions of ways to accomplish this and I can’t get distracted about other metrics of success, until the end goal is achieved.

  • How do I invest in a pandemic? Being able to begin my checkwriting career in a pandemic was both a blessing and a curse. A blessing because I got to see more companies than ever before because so much work was done on zoom. I saw about 2K companies over the course of this time! A curse because the founders I was backing were still largely first time founders, so guiding them on how to build a company in a global pandemic was challenging to say the least.

  • How do I transition from asking for sponsorship for my decisions to becoming a decision maker? This one was so hard! I have never had a leadership role in my work like this before. In my 10+ year history of working, I have never been the boss. So when I had to transition into this leadership role, I had to shed a lot of the “asking for permission” behavior that I had learned that had gotten me to this point. I had to learn to trust my own judgement and to stand strong in my own opinion even when faced with opposition.

  • How do I invest in our team? We grew a lot during the pandemic. I found us a great CFO and also supported a new analyst search. Charles hired a Chief of Staff as well. We were no longer a team of 2 or 3. There is something about becoming a team of almost 10 that really makes you think about company building. I launched a series of conversations around – how we wanted to work going forward, what additional benefits we’d like to see, and how we could start incorporating more effective communication strategies like getting trained on how to provide feedback and building out more effective meetings. I am grateful for The Grand (full disclosure: they are a Precursor portfolio company) for their wisdom here and I also listened to a lot of Brene Brown’s Dare To Lead Podcast at that time to inspire and inform new stragies.

  • How do I continue to uplevel? As I grew into this role, I felt more and more overwhelmed. I joined Kauffman fellows which helped me identify more insights about myself. I realized that in order for me to uplevel, I needed a crew. A group of people who I could be completely honest and vulnerable with who I knew would have my back. My forum in Kauffman has become that and I’m grateful for all of the other programming Kauffman has provided as well.

  • What do I need to do my best work? Now that I have more reponsibility on my plate, what do I need to be successful? This answer is still evolving, but I realized the big thing I needed was space. Space to think, space to give me time to respond vs react, space to write, space to continue honing my own voice and trusting my own decisions. I started working with a FT EA, made the decision to work from home for the forseeable future, made the decision to get a coach (thank you, Jen for helping me find her!) and doubled down on learning how to say no. I also now try very hard to make sure I have spaciousness built into my calendar like No Meeting Mondays and budgeting time for daily breaks.

  • How do I guide founders on my own? As I made the move to invest in companies myself, this meant that I was the deal lead for all things related to that portfolio company. I generally spend about 1hr a month with each founder and also make myself available for adhoc concerns. If the company needed guidance on fundraising, they called me. If the company needed leads for a new hire, they e-mailed me. If the company had product ideas they wanted to explore, they told me. I was now the main point of contact for each founder I worked with and I wanted to be able to show up for them in a way that was authentic to me. I built out a one-pager on all of the things I wanted to be able to offer, and focused a lot on how I wanted to be seen as their coach – I decided to invest in their companies to guide them on their growth, not to fix them.

  • How do I build a thesis more publicly? After a year of investing, I decided to launch a Precursor substack with my own writing about my thesis. I used a lot of the learnings I gained from working with founders to fuel a hopeful and honest view on why I was excited about backing companies building for the long-tail. It took me about two months to build out this thesis and I’m so grateful for many of the founders in the portfolio who helped me draft and edit it!

  • How do I build networks within this thesis? I decided to build the SMB Syndicate with a few friends after I was told many times that SMB tech was too small of a market. I knew this wasn’t true and so I decided to collaborate with like minded individuals to showcase the great work going on in SMB tech. SMB tech fits squarely into my thesis so I also wanted to build this group as an excuse to share deals and collaborate on deals with others investing in the same space.

  • How do I let go of the sef-limiting beliefs holding me back? I talk to my mentor, Miriam Rivera, about this all the time. As the saying goes: what got you here, isn’t going to get you to the next chapter. So much of what propelled me to this place was my own fear and anxiety that I wasn’t doing enough. I needed to do more and more and more to catch up! Now though, I’m setting the pace. The new work that I do now requires attention, strategic thinking and concetration. That means focus. Which means I can’t be trying to do everything anymore. Another belief that I’m working on shedding is this belief that in order for anything to be worth it, it must be a struggle to achieve. I’m allowing more ease into my life which is a daily practice.

  • How do I want to show up in the world? I am still figuring this out, but I know that so much of how I show up in my the world must be grounded in both my own sense of self, sense of community and sense of justice. I wrote some thoughts on how I am grappling with my newfound power, and I hope to use this power for good by also spreading it among organizations like Colorwave and Project Include.

Light work*

Through this essay, I hope that I have illuminated some of the many pieces of my story and through that illumination, I hope that it helps light the path for others as they find their way and build towards their own vision.

*conclusion inspo: Yrsa’s Substack Article titled Light work

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Sydney Paige Thomas