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  • Alex Keith

Annual Letter ~ 2022

Partners and friends,


Here we are, once again, at the end. The Fed funds rate is approaching 5%, fixed income is seeing action and venture capital is rightfully licking its wounds from fantastical growth projections and even more imaginative valuations. The year behind us is filled with the detritus of a party that went on too long.


Good.


In the face of increasing hysteria, we maintained high standards.


Our TVPI stands at 3.73x, which includes current marks and puts us firmly in the top quartile of venture managers. As more of our fellow managers re-mark their books to close out 2022, we expect our performance to look even stronger.

It does not take a genius to avoid obscene valuations, unfavorable terms, unproven markets or questionable technologies. It just takes basic due diligence, a distaste for being ripped-off and the genuine enjoyment of critical thinking over trend-chasing. We work hard for the companies we invest in. Even in the best of times, very few companies have linear fundraising paths up and to the right. It's in momentary challenges where our tenacity has built long term gains for our investors.


That said, we are in the fickle business of betting on the future—so how do we avoid the hysterias that consume so many who look for dollars in the distance?


The short answer is that we’re disciplined.


The long answer is that we have principles:


Be the network


We consciously design our network to create value for its participants–namely, our founders and our partner managers. Our investments reflect this network and their return is based on how well it works. The more value that participants create between each other, the more value we generate for ourselves.


Know what you don’t know


The world is a big place and its future is even bigger. There are so many things we don’t know and our curiosity leads us to the people who do. In our experience, it is far more valuable to ask the right questions than it is to know the right answers. If we keep asking questions, eventually we’ll be able to distinguish between the answers that educate us and the ones that don’t. When someone gives us an education–managers, founders, partners or friends–we keep them close. This is a cornerstone of how we build our network and it allows us to consume a deep variety of knowledge, which is essential to making good investments.


Have a bias to action


As much as I enjoy writing these memos, I’m paid to be an investor. If there’s one thing that is still overly inflated, it’s tech investor pontifications. As Nasem Talib likes to say:


“Don't tell me what you think, tell me what you have in your portfolio.”


Our portfolio reflects what we believe, how we work with founders, how we manage our network, and even who we are as people. The only thing we can say for sure about the future is that it will come from the actions we take today, rather than what we say about them.


Buy well


After hysterias implode, and capital is constrained, structure is usually the first tool deployed by investors when crafting new deals. Over the past decade, we’ve seen various financing structures used, to positive and negative effects. Good defense is often the best offense, but it’s important to reject the greed to take too much from the very people we’re investing into. Buying well does not always equate to a liquidity preference. Thoughtful dealmaking will be critical over the next few years.



If we have yet to speak to you about our new fund, Deep Acre, please reach out to set up some time with us.

Generational returns will be seeded over the next 18-24 months and we truly believe that Deep Acre's strategy is the best way to sow them.


We look forward to telling you more!

Alex, Charles & Doug







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