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Joelle Kayden

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2022-02-14
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2022-02-14
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  1. “So, what? I'm not sure that I'm smart enough to really know the answer to that, but I think it's a different philosophy. I think it is very much of a portfolio approach that is born out of their experience in the public markets. And so I think they are probably underwriting to also a different return profile than what we aspire to get in venture capital when we back companies at the earliest stages. So I think you've got to keep that in mind. What I'm hearing is in that cohort of companies in that country.”

    2022-02-14 · Capital Allocators · Joelle Kayden – Canvassing the Landscape at Accolade Partners, Venture is Eating the Investment World 7 (Capital Allocators, EP.235) · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “cohort of companies addressing that sector There are the brand name funds obviously firms like Sequoia, Andreessen, Excel. They can win based on reputation. Then we believe sector specialists, particularly early on in the life of companies, have a reason to win whether that's in fintech firms like Ribbit, QED, firm like transformation capital and healthcare. These are each huge industry's fintech healthcare where deep domain expertise and also knowledge of the regulatory framework is critically important to the success of the underlying companies. And then maybe this is somewhat self-serving, but we are hearing this a lot, particularly from young founders, that diversity on the cap table really matters. And so I think firms that offer that lens, either by having available individuals who can serve as board members, or perhaps even more important the ability to recruit talent that's diverse.”

    2022-02-14 · Capital Allocators · Joelle Kayden – Canvassing the Landscape at Accolade Partners, Venture is Eating the Investment World 7 (Capital Allocators, EP.235) · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “So I think that's really changed over time. I mean, when I started in the business, you could name the number of firms that quote mattered on two hands. So that's not the case today. And it's a really noisy market. As you know, there's a massive amount of capital in all shapes, sizes. It comes from the US, it comes from all over the world. It is a global business, and so it is extremely competitive right now. We think there are basically four ways to win in venture capital today, and this was not the case a couple years ago. One, we've seen the emergence of firms that write checks really quickly and are extremely aggressive, whether it's Tiger Global, D one, Kotu, name your favorite firm. That's just a very different strategy. They don't take board seats, but they're extremely knowledgeable about the sectors in which they invest, and they pick what they think is the best.”

    2022-02-14 · Capital Allocators · Joelle Kayden – Canvassing the Landscape at Accolade Partners, Venture is Eating the Investment World 7 (Capital Allocators, EP.235) · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “Well, we like to spend a lot of time with our managers. We like to get to know them. We have deep knowledge of their portfolios. We sometimes visit portfolio companies. And so we really want to have a 360 degree view of what it is that we're investing in. You know, we invest in funds. They last 10 years, allegedly, but really they last 15 years. And they're not liquid. So we better make the right decision a priori.”

    2022-02-14 · Capital Allocators · Joelle Kayden – Canvassing the Landscape at Accolade Partners, Venture is Eating the Investment World 7 (Capital Allocators, EP.235) · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “Right, so as I mentioned, we have a terrific team and prior to COVID, I think we spent most of our life on an airplane. So it's really trying to make sure that we're aware of all the managers that we should be tracking in some way, shape or form. Recently, there's just been such a proliferation of managers that it would be disingenuous for me to say that we can continue to do that, particularly on the seed side, whether a thousand, two thousand managers these days. We were very fortunate that we've backed some terrific firms that we stayed with Excel since 2000 and Reason since Fund 2. So we do have our brand name Series A managers that are important to the portfolio. But do you have a distinctive lens on a universe of founders that you can access that other people can't? And so we want managers that are accretive to our portfolio, and so we think about that a lot as well.”

    2022-02-14 · Capital Allocators · Joelle Kayden – Canvassing the Landscape at Accolade Partners, Venture is Eating the Investment World 7 (Capital Allocators, EP.235) · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “Firm, but we continue to hustle. We don't always do the re up. We're open to new ideas, and I think that's brought us a lot of success.”

    2022-02-14 · Capital Allocators · Joelle Kayden – Canvassing the Landscape at Accolade Partners, Venture is Eating the Investment World 7 (Capital Allocators, EP.235) · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “So I think a couple of things that we've learned over the years that are very important, which is one pretty obvious. I mean, there's nothing earth-shattering here. Portfolio construction matters a lot. We have fairly small funds. We now are in the luxurious position of being able to raise more money than we want, but we've stayed very disciplined in terms of our fund size. We believe a lot in concentration. We make big bets. We're not afraid of anchoring first time managers. In fact, I think that's been the source of accolades outperformances not only identifying managers early on in their career, but also sectors of the market that are interesting earlier than others. So, for example, investing in seed funds or investing in fintech-focused fund, et cetera. And so those are some of the things we think about, which is we always say accolade is a very research-intensive”

    2022-02-14 · Capital Allocators · Joelle Kayden – Canvassing the Landscape at Accolade Partners, Venture is Eating the Investment World 7 (Capital Allocators, EP.235) · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “A lot of the firms that invest in our asset class. And also in parallel with that, spent a lot of time building the team, and the team is terrific. So fast forward to today, we now have multiple products. We have our traditional growth equity, venture fund of funds. We have a dedicated growth equity fund of funds. We have a significant effort in blockchain, which started in 2019, and then we have an effort in what we call the empowerment fund where we're investing in women and diverse managers. But it took twenty years to get to that point.”

    2022-02-14 · Capital Allocators · Joelle Kayden – Canvassing the Landscape at Accolade Partners, Venture is Eating the Investment World 7 (Capital Allocators, EP.235) · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “So we pretty much stayed the course there because the next time that we went to raise capital was two thousand eight. And we had raised half of that fund right before a global financial crisis and then spent the ensuing two and a half years raising the second half of that fund. So I would say the first 10 years were challenging. So from that time forward, the other thing, as you know, it takes a long time in our asset class to demonstrate performance. And while we had a high degree of confidence that we had invested in some great managers and had a pretty unique strategy, which was not well understood at the time because nobody was investing in growth equity and software, really, except for a handful of managers. All of a sudden our numbers started to manifest themselves, and so we started getting some traction, particularly with a consultant said intermediate.”

    2022-02-14 · Capital Allocators · Joelle Kayden – Canvassing the Landscape at Accolade Partners, Venture is Eating the Investment World 7 (Capital Allocators, EP.235) · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “So take me through from that founding, and we can fast forward to today, but what was the rest of the evolution of Accolade as a business and the products that you had from that, say, second fund that was half early stage, half growth equity to where you are today?”

    2022-02-14 · Capital Allocators · Joelle Kayden – Canvassing the Landscape at Accolade Partners, Venture is Eating the Investment World 7 (Capital Allocators, EP.235) · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “I did not raise fun one, fun two, and fun three in the end graphic succession. So we were able to, in 2005, we were able to raise our second fund, which was $150 million. And somehow or another, I had the good fortune to find a capital partner that gave me $50 million and we were able to raise $100 million. In that fund, we articulated that 50% of what we did was going to be early stage venture and 50% was going to be growth equity, which is not what we hear about in the growth stage today, but more firms which we backed, like Toma Bravo in their first software focused fund, Excel KKR in their second fund, which was really their first software-focused fund. Firms like that.”

    2022-02-14 · Capital Allocators · Joelle Kayden – Canvassing the Landscape at Accolade Partners, Venture is Eating the Investment World 7 (Capital Allocators, EP.235) · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “Well, it was a pretty dark time. Remember I started the firm in two thousand. two thousand one was nine hundred eleven. So we go from the collapse of the internet bubble in two thousand to nine eleven, which was a horrendous time for our nation and the ensuing years were pretty bleak. We were 114 million dollar fund of funds when it was presented to investors. It was presented as an early stage, focused venture fund of funds. We took, as I mentioned, these slots that we had with managers that we had funded previously and said we would be funding those managers but at a reasonable size given our pool of capital was one hundred fourteen million dollars. And then when the internet bubble burst and it became clear that continuing to fund early stage venture capital in the face of a nuclear winter was probably not a great idea, we slowly migrated to funding some firms.”

    2022-02-14 · Capital Allocators · Joelle Kayden – Canvassing the Landscape at Accolade Partners, Venture is Eating the Investment World 7 (Capital Allocators, EP.235) · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “WorldCom and MCI and all these next generation, what were called CLEX competitive local exchanges, and so they all needed lots of infrastructure and it cost $50 million just to start one. And I think it became clear that all those companies were going bankrupt, literally bankrupt, and they would not be buying any equipment and all the firms that had semi along the way of building that infrastructure that was necessary for those carriers had no business. And so they all went to zero.”

    2022-02-14 · Capital Allocators · Joelle Kayden – Canvassing the Landscape at Accolade Partners, Venture is Eating the Investment World 7 (Capital Allocators, EP.235) · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “So I think because I had a capital market lens, I've always been a public market person in terms of the discipline that I think the public market imposes. And I knew a lot of people who were in the private equity business and they had been telling me about what was going on in the bond market. And so I was watching how nothing could get financed. And so it was clear that we were nearing the end of this cycle. But, you know, you can't do anything about it because you've made commitments to venture funds. And so you're sitting there knowing you're about to watch a train wreck. And there's very little you can do. That was a moment of serious reflection to try and think with the capital that we still had available to commit what kind of course corrections could we make to try and earn our way into some sort of reasonable return over the next several years. Venture at the time funded everything that was going to fund”

    2022-02-14 · Capital Allocators · Joelle Kayden – Canvassing the Landscape at Accolade Partners, Venture is Eating the Investment World 7 (Capital Allocators, EP.235) · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “Well, I really didn't know anything about portfolio construction or manager selection or anything. It was a really interesting time and I always say people sort of caught the last train leading the internet station and that wasn't a good time to be investing either. So it was a really rugged time.”

    2022-02-14 · Capital Allocators · Joelle Kayden – Canvassing the Landscape at Accolade Partners, Venture is Eating the Investment World 7 (Capital Allocators, EP.235) · IDENTIFIED FROM THE TRANSCRIPT · source

  16. “There really wasn't a plan. The plan was I had always been interested in investing. And starting in 1995 had made a number of investments in funds along with several of my colleagues. We formed a small limited partnership. And actually our first investment was with Technology Crossover Ventures run by Jay Hog. And that was our first investment. And then once you have one investment, you have to have more than one investment. And so we made several. I just decided we would take some of those positions and roll them into a fund, started raising the fund in the end of 1999 and closed on $114 million in March of 2000 right when the Nastic hit the peak of five thousand. It was a lot of individuals. There was one large institution, but really no one should have been giving me any money.”

    2022-02-14 · Capital Allocators · Joelle Kayden – Canvassing the Landscape at Accolade Partners, Venture is Eating the Investment World 7 (Capital Allocators, EP.235) · IDENTIFIED FROM THE TRANSCRIPT · source

  17. “Well, I wish I could say it wasn't a logical progression. Basically what happened was the global financial crisis of nineteen ninety eight, the first one, which was long-term capital management. Alex Brown had the misfortune of deciding to sell itself to bankers' trust, and in the summer of nineteen ninety eight our stock went from one hundred forty five to forty five, and every call that I took was you're not going to be able to roll your short term commercial paper, which, as you know, is how banks finance themselves. I really thought our stock was going to zero. We were eventually bought for ninety three dollars a share in cash by Deutsche Bank in nineteen ninety nine. I left at the end of ninety nine just because after two mergers and two years was too many.”

    2022-02-14 · Capital Allocators · Joelle Kayden – Canvassing the Landscape at Accolade Partners, Venture is Eating the Investment World 7 (Capital Allocators, EP.235) · IDENTIFIED FROM THE TRANSCRIPT · source

  18. “So it was a pretty wild time at Alex Brown, I mean over the course of the ensuing eighteen years that I was there we became the leading underwriter for Venture Backed Initial Public Offerings. I mean, the firm had an amazing franchise in so many different sectors, whether it was consumer, taking Starbucks public, or whether it was taking Qualcomm public in the semiconductor world, America Online, and then every software company you can think of starting in 86 with Microsoft and Oracle, Autodesk, Cadence Design, you name it, we did it. It was an amazing ride. We had strong tailwinds in the equity market for basically fifteen years.”

    2022-02-14 · Capital Allocators · Joelle Kayden – Canvassing the Landscape at Accolade Partners, Venture is Eating the Investment World 7 (Capital Allocators, EP.235) · IDENTIFIED FROM THE TRANSCRIPT · source

  19. “So I quickly realized that I probably was not going to be a successful venture capitalist, even though I was given the opportunity to transition to doing investing. That was largely informed after I had worked on a bunch of private placements for the firm, and particularly with a bunch of disk drive companies, with an individual named Frank Atasi who immediately decided that he did not want a woman on the deal team, at which point I thought, this is probably not a good place for me to be, particularly since I didn't have a technical background. I had an MBA, and so I quickly transitioned to working in capital markets in the investment banking division.”

    2022-02-14 · Capital Allocators · Joelle Kayden – Canvassing the Landscape at Accolade Partners, Venture is Eating the Investment World 7 (Capital Allocators, EP.235) · IDENTIFIED FROM THE TRANSCRIPT · source

  20. “Of data communications and infrastructure, things that don't exist anymore. And there was this company called CXC Communications, and they made a product called the Rose, and it was valued at a hundred million dollars, and I was like, there are no financials for this company. How can this be possible? So we've gone through many cycles of booms and busts, and shortly thereafter there was a pretty significant bust. But it was really more of an entrepreneurial venture to set up the firm. The investment bankers actually were the ones who made the investments, so to speak. We were tagging along firms like Greylock and J Whitney in making small investments alongside them.”

    2022-02-14 · Capital Allocators · Joelle Kayden – Canvassing the Landscape at Accolade Partners, Venture is Eating the Investment World 7 (Capital Allocators, EP.235) · IDENTIFIED FROM THE TRANSCRIPT · source

  21. “Sure. So my career really began at a firm called Alex Brown and Sons, which sadly was sold ultimately to Deutsche Bank in nineteen ninety nine. I joined the firm in nineteen eighty two as the chief financial officer of what was then called ABS Ventures. We had a whopping twenty three million dollars under management. Actually, I say we were the first micro VC. We just didn't know it at the time. One of the partners in the investment banking division handed me a box, a cardboard box, and said here, these are our limited partners. Go figure out how to set up this firm. So I was the chief financial officer which sort of meant that I did everything but investing, so we had no systems we had to report to limited partners. We had to set up our financials. And I remember distinctly in 1983, which was again a time when technology was sort of going crazy. And this is a time.”

    2022-02-14 · Capital Allocators · Joelle Kayden – Canvassing the Landscape at Accolade Partners, Venture is Eating the Investment World 7 (Capital Allocators, EP.235) · IDENTIFIED FROM THE TRANSCRIPT · source

  22. “Story to share and something to prove. That said, this field moves quickly so as the disclaimer goes, past accessibility is not a guarantee of future capacity. My guest on the seventh episode of Ventures Eating the Investment World is Joelle Caden, the founder and managing partner of Accolade Partners, a $3.6 billion venture fund of funds that invests across early stage, growth, blockchain, and empowerment strategies, and is one of the most respected firms in the business. Our conversation covers Joelle's nearly two decades in technology investment banking, the launch of Accolade into the dot-com bubble, and its evolution over 20 years. We then discuss her perspectives on the four ways to win in venture capital, assessing culture, adding value as an LP, portfolio construction, re-upping decisions, and investing in the current environment.”

    2022-02-14 · Capital Allocators · Joelle Kayden – Canvassing the Landscape at Accolade Partners, Venture is Eating the Investment World 7 (Capital Allocators, EP.235) · IDENTIFIED FROM THE TRANSCRIPT · source