📶 Charley Ma (GP @ Pathlight) on how to think as a thematic GP

We categorize ourselves as a thematically-focused generalist fund, but there are a few categories where we spend the majority of our time.

Winners for us came through deep thematic work and it's also how we like to personally spend our time. 

Venture is a super long time horizon, and we want to spend as much time as possible talking to experts in different spaces so that we can develop our own unique view of that market.

We think that knowledge (and the network) compounds.

Absolutely - all we can do is develop opinions.

For us, it’s more about mapping out the markets we’re excited about, and then we let the founder guide us to a deeper insight.

Founders have spent 10x the time we have in a given area, and they can provide non-shallow answers to our questions. This is more helpful to rule some things out.

One of the more interesting questions we’ve been thinking through is this:

“If AI can become more agentic and take away more of the services work, does it actually begin to eat software?”

If this plays out, we think distribution matters even more than it does today.

Assuming this plays out, there are really two ways to win in the future:

1) Build a beautiful product that creates tons of customer loyalty

2) Build durable distribution quickly

If there are two takeaways from this, they are this:

1) Brand > everything, and you should do everything you can to build and protect your brand. Taking a longer time horizon is usually a good rule of thumb for that.

2) Your product has to give users an “ah-ha” moment faster. They need to see the value immediately, or else they will find something else that can give it to them.

What does ball control actually mean?

We like to lead, and we like to co-invest with other investors we have worked with before.

When you reach a certain size fund, how you source deals and how you work with other funds changes dramatically. This is why we decided to keep the fund size what it is so that we could be collaborative with other seed funds.

As we’ve scaled up, we’ve made some changes to sourcing and internal tooling, and most of that focus has gone towards answering “how can we get to conviction as quickly as possible?”.

Not qualifying LPs enough.

The faster you can disqualify bad fits, the more time you can spend with people who can actually work with you.

Being a solo capitalist or a solo GP wasn’t really possible ten years ago.

We’re noticing a huge shift where the more notable funds have now scaled up to larger AUMs + larger teams. If you want to compete with these funds, you have to have a different product offering.

Pathlight doesn’t have a massive platform team, but they also don’t have a rotating group of investors, their portfolio companies work directly with the GPs, and this better aligns incentives especially at the early stages.

For companies, they have to choose whether they want to have a closer working relationship with the GP or if they value the brand over that.

It's actually a very poor asset class if you're looking to make money.

I wouldn’t recommend investing into venture unless you truly understand what you’re getting from the asset class.

Returns are really hard to deliver on a consistent basis.

There is a ton of irrationality around pricing and distortion. Taking AI as an example, there will be a handful of notable companies created and billions of dollars wasted chasing those companies.

Lots of venture investing also comes down to picking the right vintage.

If you want venture-like returns, there are also plenty of ways to find them in the public markets.