Raising Capital from Family Offices | LSI Europe '24

Alexei Mlodinow 00:04
Steve, well, thank you to the co-panelists here for being here today. We're going to talk about raising capital for family offices and try to touch on what that means from an investor perspective to be a family office, and what that means from an entrepreneur perspective to raise capital from that source, rather than some other options you have, institutional or otherwise. This is probably the biggest panel, maybe, of the conference in terms of the number of panelists, which is nice because it means everybody's airtime is reduced. So the pressure's off, you know? I mean, imagine being on a two-person panel with 45 minutes to fill. So we'll start with introductions. My name is Alex. I don't have a family office, but I started a company called SIA and was the co-founder and CEO of that company, which made absorbable mesh products for plastic and reconstructive surgery. Over the six years running it, we raised about 21 million in equity capital, the majority of which, the vast majority of which was derived from high-net-worth individuals and family offices. So Series A and B were both consecutively led by two different family office groups in the Chicago area, and that's kind of how I landed in this seat as moderator. But mostly you'll hear from these people. So let's just go down the line for introductions. As far as Marie-Louise and Pablo, who run family offices themselves, they'll talk about their professional backgrounds prior to joining the source of that family office as well, a little bit about assets under management and portfolio strategy. Tyler can do a little bit of the same, but mostly I'm going to ask you to wear your entrepreneur hat, and John Slump, same thing, a little more entrepreneur hat with a little bit of your investment thesis for your own family office.

Marie-Louise Little 02:08
Yeah, great. Nice to meet you. Marie-Louise, I represent TW Medical A/S, which is a Danish family office. The families behind TW Medical are involved in audiology, so it's one of the larger hearing aid companies. What we focus on in the family office is, of course, different types of investments. My key focus is on what we call seed and venture. So this is really sort of linking towards a VC-type investment, although we're not quite there. We'll get more into that. I could say my background to this is I'm a medical engineer. I've been an entrepreneur myself. I worked in large corporations. I was part of the leadership team that sold a company to Hill-Rom back in 2012 and have worked really with them, but on the operation side, from innovations to business development and, of course, also investments. So I worked in more traditional VC investments in med tech, and I've been involved with the family office for just over four years now.

Tyler Wanke 03:09
Hey everybody.

Tyler Wanke 03:11
I'm Tyler Wanke. I started off going down the clinical path. That's where I met Alex originally. So I did my MD/MBA out of Northwestern University. Along the way, I got really interested in med tech and started helping spin out companies out of Northwestern and other universities. Along the way, our family had some liquidity from a business, not in the medical space, but in an industrial space, paper manufacturing. So we started investing mostly in med tech companies. As mentioned, I sort of split time between helping run our family investments in the space, and the rest of my time is helping operate companies that we've invested in, most recently, Medicine Scientific.

John Slump 03:58
Yeah. Thank you. Hi everyone.

John Slump 04:00
My name is John Slump. I'm actually the CEO and co-founder of Atraverse Medical and also the CFO of Voltamedical. Previously, I was actually the CFO at SIA, where we worked together for a number of years, growing from three employees to 30 plus, and had a nice exit with Integrity Life Sciences. I actually started my first device company as a 20-year-old undergrad who knew nothing about med devices, and it was an oncology safety device and was a colossal failure, but I learned a lot. Probably my most notable exit was as the co-founder of Farrar Pulse, which was acquired by Boston Scientific with Dr. Michelson, who I see in the crowd. So I'm excited to share some of our thoughts and perspectives with you today. Very cool.

Pablo Prieto 04:44
I'm Pablo Prieto, Managing Director at CG Health Ventures, a family office-backed fund specialized in healthcare based in Barcelona. Our sweet spot is early-stage health tech, and that means from IBD to software and solutions. The family backing us has made a lot of money in healthcare. They own a private network of hospitals and a pharmaceutical company. In fact, the name of the fund speaks for itself. CT are the initials of the founder and a member of the family who is the sole operator. I have a corporate background in pharmaceuticals for 10 years and then 10 years as co-founder and operator in startups. This is my first adventure, actually, in investing as a manager of funds. So I bring to the table both the corporate and the founder and investor perspective. So it's a blend of things.

Alexei Mlodinow 05:41
Excellent. Well, why don't we dive into that? Maybe we can actually start with your perspective, having made that jump fairly recently. But what, in your mind, sort of distinguishes family offices from a traditional, let's say, venture capital LP model? Try to put your entrepreneur hat on and your investor hat on. And just for the benefit of people who don't know structurally what the differences are, talk a little bit about the difference.

Pablo Prieto 06:09
Sure, at least. I mean, I'm going to be talking about my case, obviously, but I think family offices tend to be inside a circle of trust. So I would say 90 to 100% of the deal flow that I get interested in and progresses in our evaluations comes from a trusted source, either past co-investors in funds or other family offices. I think that's a circle of trust that is somehow difficult to penetrate as an entrepreneur; that was certainly my experience. So you just need to overcome that hurdle of networking. But I would probably say the biggest difference between traditional funds is that traditional funds have investment cycles, and they need to hunt for deals, deploy capital, and then return to their LPs. Family offices, we prefer maybe to sacrifice some of that excellent and abundant deal flow for trust and co-investing with people in whom we trust, both in terms of governance or follow-on investments and longevity of the company. It's a slightly different mindset. That would be my summary.

Alexei Mlodinow 07:14
Excellent. I guess, speaking of, let's say, trust as a mechanism of deal flow sourcing, is there, and the entrepreneur hat, people can feel free to jump in on this.

Unknown Speaker 07:29
I guess, how do you access,

Unknown Speaker 07:32
as an entrepreneur, the family office kind of circles for in terms of pitching for investment? And from a family office perspective, obviously, conferences like this can be one example. But how do you make sure that you're not missing good deal flow just because you don't know a guy who knows a guy who knows a girl who's running something?

Marie-Louise Little 07:55
So I think I can speak, of course, from our perspective. You know, it's, and actually, I would see from a traditional VC, it's overall extremely difficult to know if you're missing someone who knows someone, who knows someone. So I think it's about really being well connected. I think we spend quite a lot of time, even though we are a family office, trying to connect with other investors, whether they are VCs, angels, or other family offices as well. So I think you can never truly make sure that you get the best deal because you may not meet them. I can just add to that, of course, what we try to do is to show our exposure. We try to go out also with the companies that we have in our portfolio and help them, and thereby also meet other entrepreneurs.

Alexei Mlodinow 08:40
Okay, Tyler, John, as far as breaking into those circles, meeting those people, any words of guidance for, I guess, the approximately 40% of entrepreneurs in the audience who are fundraising right now?

Tyler Wanke 08:56
The most prolific networker I know.

Tyler Wanke 09:00
I try. No, yeah. It's tough to, I think it's tough to get that first investment done within, like, a group of folks. I echo everything that's been said. We sort of build trust within these networks and groups of family offices that do deals together with VCs and angels and everything else. But like, you build trust by doing deals and getting to know people. I feel like maybe that's the first thing, is just getting to know family offices. A lot of times we're not going to invest in a company or an idea that we just meet for the first time, and we don't have a relationship. A lot of times it's meeting, you know, you over multiple conferences over an extended period of time, building that trust to even get the first investment. So I'd say, like on the front end, that's a big part of it is, you know, coming to conferences like this. There are also family office conferences, which are totally different, where it's all family offices, but the topics are all over the place. You know, from life science to private debt and all sorts of crazy stuff. So those conferences can be helpful too, although if you like life sciences, an early science company like this is a pretty good, you know, type of venue to go to. But all that to say, one, I think you just want to build relationships just like you would with a VC or anyone, and really start to earn that trust. You know, if you're pitching early on, you know, hit your milestones, do what you say you're going to do, just the standard stuff to get in. And then I think once you're in with, you know, one family office, as you mentioned, like we tend to do a lot of deals together and send deals back and forth and get our deal flow that way. So then I think it's easier to sort of break into the network after that. Let's see, I guess maybe SIA is a good example. If I didn't mention that was one of the deals that our family had done, and it was relatively early deal when we started doing this a few years back. That was one where, you know, we knew the entrepreneur for a few years, you know, excited about the tackle that, but knew the entrepreneur in Alex's case did what he said he was going to do, hit milestones, built that early trust, and we got to know the rest of the team, and eventually the extended team. It was a really good situation of getting to know them over time and making investments then over a couple of rounds. I think we were able to send the deal to a bunch of other families and high-net-worth individuals in our network that had done deals before, who then participated. It's sort of a cycle going forward. Now, you know, SIA was a great exit, you know, a little over 18 months ago. I think that builds trust too within the network when you, you know, because that's part of it too. You know, we have these long-standing relationships with other families and stuff, and it's like you want to send a good deal. So when you send good deals, do good deals together. That builds trust to do more deals as well. So that's all part of it.

Unknown Speaker 11:53
I think you made a couple. Oh, sorry, please, Steve.

Alexei Mlodinow 11:56
I was just going to add one comment from, you know, maybe from thinking back to my time as a first-time founder in my young 20s, having never raised capital, knowing basically nobody in this arena. I really think, you know, a recruited CEO who has a network and relationships can be worth their weight in gold. And, you know, sometimes it's hard for the founders to let go, but that was how we broke into our kind of first early family offices, really bringing in a recruited executive leader. Or, you know, if that's not right for you, think of really thinking about your board more strategically. Put a board together, like, you know, someone like Alexei or Tyler, you know, really inculcate them into the network and leverage their network when you especially are just getting started. Fundraising is hard, and it does get a little easier when you have a couple of wins because you can kind of go back to some of those same folks. But for first-time entrepreneurs, you really have to kind of, you know, put a great team together and try to leverage other people's networks.

Marie-Louise Little 12:55
I think there's some salient points in there. Just to look at this through the lens of SIA, which was my first venture, and I was similarly, maybe not quite as young a man as John in his first venture as I was in an MD/MBA program. I'm not Doogie Howser, but it was my first venture. I was pretty young. I was raising money in a tightly regulated, sort of high-risk domain of implantable, long-term medical devices. I think some key salient points I heard: one is do your networking ahead of your needs for that network. I personally hate networking. I don't characterize myself as being particularly good at it either, but some of these points that you're hearing about seeing people again and again, especially now in this Zoom-connected world, which is very easy to do, even if they're across the world and on another continent, I think that's super important. If they see you again and again, and then they hear that you're going to do something, and then the next time they see you, they hear, "Oh, yeah, we did that thing we said we were going to do." That's so important for them to then think of you as a reasonable target for investment. Or, we'll talk about this later on a different panel, but strategic engagement. They see you again and again, and they kind of get to know you personally and professionally. They're hearing things, you know, two years ago at this conference, this person was going to do this thing. Two years later, they're at the same conference, and they hear, "Oh yeah, they did that thing, and they did it well." Then in their mind, you know, you're sort of building implicit trust by doing nothing other than telling people what you're going to do and then doing what you say you're going to do. The sad thing is, an early entrepreneur who wants to move really fast and raise money fast and get things done fast, is that that inherently takes time. That strategy requires time because people need to see you over time and see some of these milestones met. I think that sort of a way of building trust. Come to a place like this, talk to people before you need anything from them, and then a year later, two years later, when you need something from them, you're there, they know you, you have results to show, and then that's a de-risking event for the person that you're talking to, whether it's a strategic or a customer or an investor, right? I want to turn a little bit, as this is LSI Europe, to the European market. In our prep call, there was some really interesting back and forth about the European market, particularly digital health versus hard med tech. So whoever wants to kind of take it first, tell me about how many of your investments are in Europe versus other markets, and why and how your portfolio strategy relates to that.

Marie-Louise Little 16:06
I guess that. So, of course, we're based in the Nordics. We're based in Copenhagen. So, of course, there's a physical element that it's easy to work with companies intensely where you are based from. So, of course, that is a natural thing for us. We have invested in European companies as well. We have also invested in American companies. I think, you know, the difficulty being where we are, because we are located outside of Copenhagen, you know, working with companies in LA is somewhat tricky. The time difference, you have to be there, you have to really intentionally spend time on them. I think, on the other hand, for us, what we see is that we're learning a lot also from these companies. How do they operate? We really get our fingers into gaining insights that we can use also for the companies that we have in Europe. So I think there's a learning element that we find deeply important to have. Having said that, from our thesis, actually, and this is our family, obviously, I can say we haven't really got that thesis investment-wise. We go and invest where we think we have, of course, we have to trust that that is a key thing. But of course, also where we have an interesting technology that has a platform potential. We have some key technologies that we do like from our perspective, but I think really companies, no matter where they are, who can fulfill that, we will work with them. I think from a European perspective, coming back to the LSI, we see that the med tech, in particular, when we talk about things like implants, is extremely tricky to find co-investors in, at least in another part of Europe. This is where we also try to really build our family office relations with other like-minded family offices. We see that the VCs in the Nordics generally don't have a great appetite for that type of technology. So this is where family offices become really important to us as well.

Pablo Prieto 18:12
Filling a regional void exactly within the EU for that kind of gap. Yeah, and I think really trying to tie the knot with like-minded investors across Europe is really important and critical to us.

Alexei Mlodinow 18:24
Got it. Thank you, Pablo. I know you have a contrasting view from a digital health standpoint.

Pablo Prieto 18:31
That was an excellent leeway for my answer from Marie-Louise, so I want to start first by acknowledging that we also don't have a thesis, and I think that's a fairly common theme between family offices. We're very opportunistic in that way. But I want to stay, I wonder the people to understand, mostly entrepreneurs, why that is the case. At least my thesis is that as a family office investment vehicle that operates in venture capital or as a venture capital fund, the objective is always financial return. You need to understand, in the family office, you're managing real estate, you're managing debt, you're managing public equities. So there are a whole lot of classes that the family office is managing, and Marie-Louise and I are managing just one bit of it, which is part of the diversification strategy, right? At the end of the day, we look at this with financial eyes, and we don't need to pitch a specific thesis to LPs, and that's what gives us the flexibility. So that's the origin, and we share that. Having said so, I think financial return is easier to be obtained in North America than in Europe these days, and I won't explain why because this is a very controversial topic. As I said, we invest mostly in health tech, and in health tech, I've spent 10 years in digital health. So translating, say, a software application that is facing either a physician or a patient from German to French, a lot of people will tell you, you just use a translator and boom, roll with it. That's not it. I'm sorry. I've made an operator in this field. That's not it. Scaling in 20-some countries in Europe is going to take time and a lot of money trying to gain traction in European healthcare systems for brand new business models or brand new products. Not very easy. In the US, in contrast, I mean, you have other financial incentives, lengthy to another debate, another panel. But in our view, we think when we deploy capital, both the uptaking valuation to the next round exit opportunities, experienced founders, and model supports better venture capital in North America as a result. Out of 20 companies active in my portfolio right now, 16 are in the US and four are in Europe. But as said, it has nothing to do with an investment thesis that is very well crafted because we don't have one. It's just merely a reflection of how capital markets in this specific staging of investment works.

Tyler Wanke 20:52
Yeah, I'll just say, maybe add a few things. Likewise, we don't have, like, a mandate. I think somebody asked me, and apologies if they're here, like, "What's your mandate? You know, what's your exact mandate?" And something like, we don't have one either. Like, we're pretty opportunistic. But a couple points, one general point I'll make is on geography. We tend to be slightly US-focused, at least to this point. I think it's helpful to understand, like, where the family office is coming from and what their priorities are and whatnot. But one particular thing is if you know kind of how they invest, that might inform how to do deals. We do all sorts of different deal structures and invest from different platforms within the family. But like, sometimes there's tax treatment that, like, it's very advantageous to do something a certain way, and in particular helpful if you have a US entity. I mean, that's kind of what I'm getting at. It's a really big one. So a lot of times we'll do things where there's a real tax advantage to doing it into a Delaware C Corp, or really just a C Corp of any nature in the US. So, like, that's a strategy that we find really important. For a lot of the European companies out there, we've talked about it like that's something to strongly consider for a couple reasons. One of them is because a lot of families at high net worth in the US really want you to be, say, a Delaware or a C Corp, rather, for some reasons, like 1202 tax treatment. That's one thing to consider in terms of, like, having an entity over there and just thinking about how family is the best. The other thing is, we don't have a mandate. But one thing I didn't mention earlier is there are some, a lot of family offices get passionate about certain areas, perhaps because, say, they have a family member that suffered with that disease, or a friend or themselves, etc. So that's something to think about with family offices, is try to learn what really matters to that family. If you're a fit, it might be a fit. Likewise, if you know, we're all opportunistic, but sometimes there might be something in a disease state that is just not interesting. No matter how much we hear the pitch, it's not going to be something that we'll invest in. So I think that's helpful to have conversations just about where people, you know, where families like to invest. I'd say we're big on women's health. We've done multiple breast cancer deals now with SIA, in a way, Dev and others. I feel like that's an area that we've invested in and want to continue to invest in. Also, we have some neurodegenerative disease in the family. So that's an area that we're looking into heavily for the future, to be able to invest in that space, a running mad side. Now, we're doing a smart shunt for hydrocephalus. We don't really have that in the family, but we have friends and people in the space with that disease and other dementias that you can see with normal pressure hydrocephalus. So that's an area that we're looking at, for example. So I think that's a big thing, is if you understand where the family is coming from and some areas that maybe are passionate, that might be helpful. Because that's a big reason why we're investing in this space. We could probably make more money putting it in other areas, but we, this is our way of investing in things that do good and help people, as well as getting a financial return.

John Slump 24:00
Just a final couple quick comments, I would say I'm not investing at the same scale as some of these others. For me, regardless of Europe or the US, just having operated these companies and knowing just how hard it is, I try to stick to a rule of only investing in entrepreneurs that I know are just relentlessly perseverant and will just work their ass off and run through walls. So I've invested in Tyler's company, Dr. Michelson, who's in the crowd. I mean, you know, I just, it's just knowing how hard it is. I mean, really trusting in the entrepreneur and having the faith that they're going to run through walls to get there is important.

Alexei Mlodinow 24:39
For the entrepreneurs in the audience, your first question to investors is often after, "What's your name?" or whatever is, "What's your mandate?" So for family offices, maybe you should ask, "What's your bias?" Because I think you're hearing everybody has their biases here, but none of them have mandates or guard rails in a formal capacity. But you know, everyone has biases, and family offices are people too. On a related note, though, to the sort of lack of mandate and the opportunistic ability that you guys have to invest, I wanted to talk a little bit about something that came up earlier, which is the temporal lack of temporal guard rails and how that sort of affects how you think about investments, some successes you've had, and maybe that would be considered a failure, or at minimum, be considered overly long in a traditional fund perspective. Just a little bit about that from whoever wants to talk.

Pablo Prieto 25:38
I can start again, yeah. So I think, you know, on the timing issues, what I assume you're referring to here. From our perspective, you know, we do, of course, also invest. We do also have these key perspectives, key areas that we like to invest into. I would say actually, you know, we do, of course, invest on the investment because there's a financial potential return, but there's also the hard and off of that. So this is also what we're kind of alluding to here. From our perspective, if you come into some of our portfolio companies with a sort of a standard VC, we just added VC glasses on, you would potentially think that some of those deals have gone a little bit too far or maybe they're building a little too much in another direction, but that's simply because we see that there's a much longer potential. I think the guard rails for us is that we can see a bigger perspective on some of our deals, and we also really need to follow those companies going in slightly different directions. That means, of course, you know, it is really down to who is the entrepreneur. Do we believe in that team? Do we believe that they are delivering on what they promise us that they will do? But we're also open to considering, you know, is there another strategy than the one we originally laid out that would actually suit this company somewhat better going forward, simply because we're learning as we're going along. So I think for me, at least, that has been so jumping from a VC to a family office. I mean, that is, personally, I really like that because that's actually following the life of the company a little bit closer than what a traditional VC would do.

John Slump 27:20
Makes sense. Totally resonates also with our experience. I think most family offices tend to have somehow an industrial background, and so they understand that success is not part of execution, but it's subject to macroeconomic cycles and a bunch of other things, and that mistakes are made and learnings are gathered from those mistakes. I think VC funds, you know, they run their own business, but they can be a little bit unforgiving in that regard, in that they really need to deploy and they need to collect within a given time frame. At least for the family office that is behind my fund, they work in pharmaceuticals. We've worked in hospitals. We understand those hiccups in healthcare. Sometimes to bring this to an inflection point where value can be extracted without creating mayhem in the business, that's going to maybe take eight, nine years. I mean, we invested in Butterfly Network, the handheld echographer in Series B. We saw it all the way through IPO. We invested in Berta Health in the US in 2016. This is 2024, and we're still holding that, and very happily, by the way. There are a lot of things where, you know, if you wait long enough, there are really good exits. The same can be true about this biomedic, which we lost, which we saw a couple of years ago to buyers store. There were moments where we were like, "Oh my god, this is not even going to break even." But then ultimately it happens, and I think this happens too with VC investments. This is not exclusive to what we do, but I think the tolerance to stay on the cap table, stay supporting the entrepreneurs, maybe it's a little bit higher. I'm going to say isn't stress maybe, because I think it would be unfair to a lot of VC funds and unfair to some family offices too. But yes, in general, you know, I would be happy if I have to hold an investment for eight, nine years, provided, obviously, as Alex mentioned, that you're meeting all the milestones and you're doing what you said you would do, which is just like basics of good business management, right?

Tyler Wanke 29:32
I'd add a comment here, actually. Tune Medical comes to mind, where I was a co-founder, CFO, and we had several family office investors in that deal. Dr. Colstad, the kind of founding inventor of that technology, you mean, bless his heart, that was a 15-year journey for him. To your point about really, you know, waiting and growing it to 22 million of trailing 12-month revenue, leading up to a $160 million acquisition by Humanetics and, you know, plus a three-year uncapped revenue. So I think much, it's just a great example of, you know, to your point, I'm not sure, but certain VCs may have forced to, you know, some pretty dramatic changes and or maybe, you know, have been much less patient. But in the end, you know, these things are a roller coaster ride, and sometimes it just takes a lot longer to get across the finish line. But that was a great example of entrepreneurial tenacity and family office investor patience.

Tyler Wanke 30:24
That's a good one. Yeah, there's one example, and then I'll speak in generalities, but Endotronics was another huge exit, also a Chicago company that a lot of people in our network were involved with. There was at least one family office that I think made it, I won't say names, but made a huge difference in keeping that company alive because that one was like a 16-year journey or something like that. Probably like a lot of arc, all of our companies could have died at any one of many points. But, you know, I think there were some strong family offices that believed in the company and sort of helped get through low points. There was a huge exit to Edwards. That was a good success story, I guess, in terms of like the time frame. I just like you guys, we can go longer a lot of times we're investing in like the spin-out. So we were pretty early in SIA, invested in Atraverse, literally right as that got spun out, and we're willing to go longer because we don't have the fund, just like what was mentioned. General family offices, and we tend to be patient capital in that regard. The flip side is also true, which is interesting, right? We don't have a fund. We can also take deals that are like quick flips. That may not be a huge cash-on-cash return, but maybe you'll get a flip in like one year and get a good deal. Some VCs might not like that because they'd prefer to hold for longer and get a larger return. But, you know, in our case, we can take those opportunistic deals and get a, you know, whatever, 3x in 18 months, or that's a pretty good deal, actually. But, yeah, you know, a good IR, that's a pretty good IR. So we're opportunistic in that regard as well. I think that's something to think about, you know, and just those other things too. Like, I think family offices can be good sometimes, anti-networks and whatnot, and just filling out rounds and just taking those interesting positions and opportunistic positions in companies that are just outside of the realm of what you can see with some venture money.

Alexei Mlodinow 32:20
Yeah, no, I think the patience point, you're right, cuts both directions. I was just thinking about SIA's Series B, which was raised just about a year before, I guess it depends on which closing you're referring to, but about a year before we exited. We had a lot of very supportive capital in the decision-making around that exit and whether it was the right time macroeconomically to publish one earlier, to take a deal that represented a high IRR, but not a high cash-on-cash multiple for that last money in. But in the context of understanding what was going on with global financial markets, what the fundraising outlook might look like a year later when we would have needed to raise capital, etc. We had 270 people on our cap table, so I can't say it was a walk in the park to have these discussions with everyone. But generally, people were very supportive, I would say, of what was a good deal. But for the Series B investors, certainly not immediately a great cash-on-cash return. So that definitely resonates with me. I guess any, we have, there's a timer here for those in the audience who can't see that's looming in the background, telling us tick, tick, tick, when we have to get off the stage. But how about lessons learned or portfolio strategy changes? You can answer either way.

Unknown Speaker 33:49
I would offer that we haven't really much talked about it, but from the entrepreneur's perspective, families tend to structure their deals much differently than VCs. You know, I personally find participating preferred deal structures to be pretty nasty and archaic and a little disingenuous, and I've not worked with any family offices that have shoved the participating preferred deal structure down our throat. Meanwhile, it's sort of par for the course for VCs. If you don't know what participating preferred is, you know, take a look and you should Google it before signing anything.

Unknown Speaker 34:24
Yeah, it is true. I think as far as portfolio strategy goes, yes, of course, this is a moving target all the time. It tends to be based on experience. So you're learning a lot from that circle of trust, mistakes that were made and successes that were made from past companies. You learn to discern who are the entrepreneurs that are going to stick with it and are going to grind through the harder parts. I cannot actually pinpoint specific learning points. I think it's just, you know, like any solidified company, you learn by doing. This is also learned by doing in their own investments. Sometimes you craft a strategy, and then you realize that's not the right strategy, and then you pivot halfway. I think family offices, we don't do this in a written way because we don't have an investment thesis, but we do it again by being on boards, by participating and engaging with the rest of the investors and the entrepreneurs personally. For us, a lesson learned is cost of capital, probably. So we don't like redeploying capital over and over again in the same space. A lot of people will come back to us, for instance, and say, "Oh, I saw that you, for instance, exited Butterfly Network, which I mentioned earlier. Here is a new technology in ultrasound and so on and so forth." The answer is, yes, we do exist, but we have our own playbook as to why that was the case. We learn a ton of things there. When I see your pitch, I can very easily say yay or nay based on my past learnings, but I think it's very hard to answer that question, you know, for us.

Marie-Louise Little 36:09
I think from our perspective, you know, I joined just over four years ago, coming from more traditional VC. I think our family office at that point, I think our investment strategy had actually, I should say, I joined really just to formulate also our sort of investment thesis on this. There wasn't really a thesis beforehand, and the way that our owners had invested previously was really, you know, he's a nice person. I trust the guy. I'm going to put some money here, and then there's going to be another one. So there wasn't really sort of a rationale behind our investments other than we had trust and we believed in the technology. I think really coming from, so of course, one of the learnings is that, you know, we do need to also take on the mindset that we do need to have KPIs. We do need to control these companies a little bit stronger than what we had done previously. So we have certainly implemented more sort of structures around our investments. I mean, really, that's common sense, but we hadn't done that before. I see, of course, with also some of the other family offices that we speak to who are just on the verge, they have done a few investments, but they would like to do more. They're also looking to, you know, other VC strategics to see what are they actually doing to structure their investments somewhat more.

Alexei Mlodinow 37:29
Excellent. Thank you.

Tyler Wanke 37:32
And I would just say, you know, in terms of portfolio structure, strategy, I mean, just one point I'll make that was somewhat touched on earlier is like a lot about how we invest is based on trust in entrepreneurs and teams. That is something that, like we've seen as we're opportunistic enough where we like certain areas for sure, but we'll see entrepreneurs, you know, spin out new companies, and we believe in that person, and they might take us to a new disease state that we didn't really think about before. But again, if you build the trust by, you know, working with that entrepreneur before having success, you know, you might find yourself in a new area because you believe in them. Ours is changing, you know, we're figuring out where we're going to go, and part of it will be, you know, looking at deals with people that we've had success with before.

Alexei Mlodinow 38:22
All right, good note to end on. Thank you for watching, and thank you for participating. Thank you.