📶 Mack Healy (GP @ KdT Ventures) on the non-glamorous parts of venture

I actually think our approach is similar to other funds - we try to find and back the best founders operating in our space. But I do think how we’ve gone about it is unique.

Whereas most firms consolidate power/decision-making and run their firms like a band of free agents loosely tied together by matching patagonia sweaters, we’ve tried to do the opposite. We’ve found the most talented, young, hungry investors and builders we can, and we’ve pooled our collective efforts however needed to best serve the entrepreneur.

So when we partner with a founder, the founder benefits from the entire team’s mindshare and network. And as a team of 8, it’s been our experience that founding teams feel our energy and passion - creating stronger partnerships and, consequently companies.

If you are uniquely privileged to deliver value to a large population, you should attack it with all of your energy.

So, when we felt like we had an insight (learned from one of our portfolio companies, Rejuvenate Bio) and an opportunity to capitalize on that insight (by way of sourcing an out-of-favor therapeutic asset), we built a company through which we could do so.

Ultimately, we’ll need to hire a management team, but through our work across the portfolio, we knew we had the potential to bring-in the asset, run a handful of pre-clinical studies and raise a round to push the asset through the clinic. We’re very much in the throes of this process and while we can’t forecast exactly how it will play out, we’ve certainly learned a lot along the way and have become much more astute investors as a result.

Turning down money and keeping our funds sized for returns and not management fee accumulation.

Over the lifetime of a fund, extra capital can certainly prove helpful. That said, our conviction in:

(i) properly sizing funds to maximize returns over fees

(ii) our ability to help companies move from concept to development

(iii) capital scarcity forces our team to use every dollar judiciously

These ultimately informed our decision to forego raising larger vehicles. 

That it’s glamorous.

Obviously when a company is acquired or goes public, there’s time for celebration. But most of the time, we spend our time in the weeds with our portfolio, convincing young founders that they should work with us, or other co-investors to take our companies as seriously as we do.

If you want to feel small, running a venture firm provides plenty of opportunity.

We’ve certainly improved our process over the years but the substance has largely remained.

We look at those opportunities with a fresh set of eyes, trying to objectively assess the opportunity relative to all the other opportunities we’re analyzing.

I will say, while emotions can complicate the analysis, we do feel like we can remove the number of “unknowns” based on our relationship with the management team over the prior years.

Not sure if it’s unconventional, but it’s certainly hard to quantify: speed.

How fast does this team move?

“Moving” can take many different forms (hiring, pivoting, generating data, onboarding customers, etc.) but when we see a team moving a lightspeed, it’s certainly something that grabs our attention.

Focused, disciplined stage-wise financing of high-risk, high-reward science-driven ventures is increasingly overlooked in our current market obsessed with megarounds.

While $100M+ financings can have a place for technologies ready to scale or true moonshots, funneling so much capital into so few companies crowds out contrarian ideas and first-time founders, and heightens systemic risk if any one giant bet fails.

Backing scrappy founders building high-impact technologies is our speciality at KdT, but we’re seeing too much herd mentality around megarounds for me-too GLP1 drugs or yet another “ChatGPT-for-X” play. 

Remove any ego and be willing to raise a “small” fund.

Your Fund I portfolio will follow you forever and it’s far more important to show you can get into the best deals (easier with a smaller check) than to show that you can secure large allocations in second class (or worse) deals.

This may be dodging the question, but nothing has made us more efficient than only hiring those types of investors that want to run and work as a pack.

If we weren't all aligned around doing so, we’d likely run into many of the internal conflicts that plague so many firms.

Try to understand how investors (especially those that will take a board seat) approach difficult situations and struggling companies.

People’s true nature and personalities are revealed when shit hits the fan. Ask potential investors to share a story of a portfolio company and how they supported them, and try to understand the investor’s approach when things invariably (these are early-stage startups after all) go sideways.

In addition to asking the investor directly, be sure to do off-sheet references with founders the investor has worked with before, especially with startups that have gone through challenging times. 

We have deep respect for firms like Benchmark and Thrive, largely because of their disciplined, concentrated approach.

They’re selective about the founders they back, which allows them to devote significant time and resources to each portfolio company. Rather than spreading themselves, they actively partner with entrepreneurs on strategy, hiring, product, or whatever the company needs.

This model has consistently demonstrated how a high conviction, high touch model can drive outsized outcomes without chasing every hot deal.

This level of commitment is a core value of ours as KdT.