Episode 152

Carey Lai ·  Starting Conductive Ventures

“I didn't have any friends or hookups people that could really like pull me up and say, you should go pursue this career. I had no idea. I was just fumbling around and really just fortunate and blessed that I had really good people around me.”

Carey Lai is a Founding Member and Managing Director at Conductive Ventures with $450M in AUM focused on investments in the areas of software, hardware, technology-enabled services, and blockchain. Carey has over 18 years of venture capital and technology experience.


Prior to Conductive Ventures, Carey spent over four years investing at Intel Capital focused on Internet and enterprise software companies. His portfolio included 500Friends (acquired by Dentsu), Box (BOX), BrightEdge, Gigya (acquired by SAP), Kabam (acquired by Netmarble), Nexmo (acquired by Vonage), Onefinestay (acquired by AccorHotels), Sprinklr (CXM), and SweetLabs.


Prior to Intel Capital, Carey worked at Institutional Venture Partners (IVP) where he focused on rapidly growing later-stage and growth-equity investments in Internet & enterprise software companies. He actively worked with the following IVP portfolio companies: ArcSight (ARST), At Road (ARDI), Business.com (DEXO), Concur (CNQR), Cortina Systems (acquired by Inphi), Danger (MSFT), Data Domain (EMC), Mobile365 (SAP), SuccessFactors (SFSF), Synchronoss (SNCR) and Yodlee (YDLE).


Carey also worked in the Technology Investment Banking Group at Bank of America Merrill Lynch as an Investment Banking Analyst focused on the software and financial technology sectors. His transaction experience included offerings for some of the leading technology companies in the world, including Blackbaud Software (BLKB), Computer Associates (CA), Hewlett Packard (HPQ), and Sungard Data Systems (SDS), and Tibco Software (TIBX).


Earlier in his career, Carey worked at eBay in Business Development.


Carey has an M.B.A. from the Wharton School of Business at the University of Pennsylvania. He also graduated with a B.A. in International Economics from the University of California Los Angeles.


Social media handles:

LinkedIn: @careylai

Website: conductive.v

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Podcast Transcript

Carey Lai

Intro: (00:00:00) Hey guys, welcome to Asian Hustle Network Podcast, My name is Bryan and my name is Maggie. We interview Asian entrepreneurs around the world to amplify their voices and empower Asians to pursue their dreams and goals. We believe that each person has a message and a unique story from their entrepreneurial journey that they can share with all of us.

Bryan: (00:00:23)Hey everyone, welcome back to another episode of the Asian Hustle Network podcast. We have Carey Lai this week carry so excited to have you on the show. We want to hear more about yourself and your story. Can you tell us more about that?

Carey: (00:00:48) I was born and raised in Los Angeles and my parents immigrated here from Taiwan.  We just love Southern California, I grew up there, and went to UCLA, so I didn’t go very far. And then my first job was really up here in Silicon Valley.  I’ve always been a kid that loved tech. My dad was an aerospace engineer by training my mom, a computer programmer. So a lot of technical, engineering in the family. But I think I was really blessed that they never pushed me into the traditional Asian professions of a doctor, a lawyer, or an engineer.

And so, in some sense, my parents were a little bit atypical and, and perhaps even maybe progressive that they really wanted us, my brother and I to really find on passion. I remember my dad really young telling me, hey, look you’re going to be working for a long time. You should probably find something that you really love to do, where it doesn’t even feel like you’re working.

It was really good advice. I think that I think very much informed by my parents’ experiences in Taiwan where you kind of have to test into a major, and then that ultimately becomes your career. So, I really appreciated that and for me, it was business I always tell people I love business.

Ever since I was seven and I really wanted to go into business. So, studying international econ first job was up here in the Bay area doing technology, and investment banking. So, for me, that was kind of the blending of both kinds of the technology aspects my parents influenced me with, and then the business part of learning, finance taking companies, public, helping them with mergers and acquisitions and then that experience really led me to venture capital.

So, the two years of banking appear in San Francisco and then went to IVP, which had me on the road since the 1970s and has funded some really great companies like Twitter and Netflix and Snapchat, and others. So just a really traditional legacy firm and then really have the opportunity to launch my own fund. Having stopped off at Intel capital and then really through that process landed on launching Conductive Ventures.

Bryan: (00:03:16) That’s quite a lot of information in such a short amount of time and I want to give props to your parents too because they give you the leeway to pursue any passions that you want right. I feel like a lot of us aren’t really given the opportunity to choose. I feel like your parents did it right. And I feel like you should let your kids choose their true passion. They’re going to do a good job, no matter what it is right and if we learn anything nowadays, it’s that you can make money with anything that you feel passionate about. It’s not just these hardcore skills. It’s creativity that makes money and being passionate about what you do.

Carey: (00:03:56)I mean, let’s be clear though I wasn’t choosing a career like as a male model or acting, so it wasn’t like really going that far off. So, I have no idea how my parents might’ve reacted if I said I want to become a male model one day. Yeah. I chose business just because I absolutely loved it ever since I was a little kid. And I think that, yeah, I agree. I mean, I would say looking back some of my cousins weren’t afforded that opportunity and so I have a lot of cousins who are doctors and engineers and yeah, it’s that kind of progressive thinking that I think really helped to lead me down this path and it’s been.

I mean, I tell folks, like it’s been one of the most fulfilling and rewarding times in my professional career right now to see everything kind of come to fruition. When you go off that ledge and you raised try to raise your first fund. I mean, you are an entrepreneur and I don’t think a lot of VCs often get the credit that they deserve, which is like, you are starting your own business and you have to go raise capital from people. And just as scary and exciting as doing this startup.

Bryan: (00:05:03)  Yeah, I couldn’t agree more with that statement right. I think when you go out there, you’re essentially building your own team and you’re building your own culture, raising money you’re responsible for the annual report is financing, all those things, right.

It’s basically running a company, out of curiosity. How did you develop your perseverance and grit at one point in your life where you’re developing new skills? Because venture capital isn’t an easy startup life. Isn’t easy, right? And it’s, it’s a lot more dow than there is up moments, right? There are a lot of times that you look yourself in the mirror, and you’re like, what am I doing in my life? Nothing’s working out and you’re like, oh man, how can I push through this? And I’m kind of curious how did you develop that grit and perseverance? How did you continue to foster that mentality as an adult as well?

Carey: (00:05:47) Yeah, it’s a really good question. I would say that the two things, one, I think seeing my parents coming to this country as immigrants where English was not their first language. I think you definitely absorb a lot of that. First-generation immigrant hustle, for sure everything from stretching, every single penny to finding the best deals, but a lot of that grit is born out of necessity right because we didn’t come as crazy rich Asians here, but I mean, my dad told me stories of how he didn’t even have a refrigerator when he left Taiwan didn’t own a car and didn’t have any gas in the home where you could just flick it on and start cooking. I mean, that’s why my dad doesn’t like camping because he was camping was, that was an everyday occurrence.

Like having to start a fire to start cooking. I think the second thing is I grew up as a really overweight child. And I think I just developed a really thick skin, I think having been made fun of having a lot of times being that odd kid who was just really, really fat, but I love sports.

So, it was kind of this conundrum where I was a pretty decent athlete, but I was fat. So, I was always picked last. But I could hit really well. I was pretty fast for how fat I was. And so, I loved proving people wrong. And I think that what developed over time was this ability to constantly want to prove people wrong.

And so, my wife always says, if you want to motivate Carey as if he wasn’t self-motivated enough just telling me he can’t do something or he can’t have something and you better watch out. And so, I think that to me is what it looks wrong in, in entrepreneurs and the people that we back, basically, you will come across those times where you’re backed into a corner.

And a lot of times you grow well, okay, I give up and for me, there’s just no giving up either you’re going to convince me why I shouldn’t do something or I’m going to die, trying to figure it out and I think that’s just always been my tactic. And I would say those are kind of the two vectors that I think have really played a significant role in why you have so much grit, perseverance, and determination. And it’s pretty ubiquitous. I think, though everything I do in my life.

Bryan: (00:08:16)  I love that story a lot too. It’s so relatable to me. It’s like, I don’t take no for an answer and you have to kill me for giving up. Yeah. It’s a, you have to develop that mentality right. And it’s also because oftentimes, you’re going to, you’re going to have a lot of naysayers around you hey here, you can’t do that or not. Nothing’s too hard or isn’t possible. You get stuff like that, all your life right and the people who were able to play set aside and push past it are the ones who do extraordinary things like yourself right, and again, you bring up a really good point too, because this not only a reflection of yourself but other founders that feel right. Don’t let any hold you back. There’s always a solution to everything. Ask yourself how do I get there instead of like, darn I can get there. Right? It’s just a matter of a couple of the capillaries in your mind in order to achieve the next level.

So, I really appreciate it, Carey. And I’m kind of curious too. So, most of our listeners as you know are from the age 25 to 40, right. And a lot of people have never been able to like escape their W2 and pursue their passions and dreams of whatever it is. What was your mentality like as an early graduate from college? What was going through your mind? Did you have this intention that one day, this is what I want to be like one day, I’m going to start my own fund one day. I’m gonna start my own company. Has that thought ever occurred to you? Like in the first couple of years of your career?

Carey: (00:09:44) Absolutely not. I always tell people that in many ways, I’m sort of the accidental entrepreneur. I don’t think I ever imagined that I’d be running my own fund. I think my ambitions were much, much smaller. You know, when I landed my first venture role at IVP, I felt as though I had made it and I thought I would want to stay there forever, to be honest and it just didn’t turn out that way ultimately.

In many respects, I think a lot of this happens just through your natural journey where one thing will just lead to another. I can’t say that this was sort of the master plan I didn’t even know what venture capital was when I was in college. So, I didn’t really have the exposure.

People always ask me did you have an uncle or cousin or older brother that brought you up? And the answer is simply no, I mean, my parents have probably not until recently really understood what I do, because this is just something that doesn’t really cross an engineer’s mind or a programmer’s mind ever.

I didn’t have any friends or hookups people that could really like pull me up and say, you should go pursue this career. I had no idea. I was just fumbling around and really just fortunate and blessed that I had really good people around me, particularly roommates who were of the same ambition, the same hustle, and the same mind, and watching them succeed in different areas gave me confidence.

To go and pursue what I thought was sort of the next step I’d say my venture career has been definitely an evolution. I describe it in three parts. The first part is about the seven years I spent at IVP where I was clearly in the back of the. And I was learning how to do the venture. The second part of my career was at Intel capital where I felt like I was definitely, in the passenger seat, I got to do my own deals, and sit on boards and do really well, but it was only one part of the business which was investing.

And now it’s come full circle with this third part of my career, which is failing really badly for a year and a half, trying to raise a fund, which didn’t come together, and then really succeeding now with conductive ventures over the last five years where I’ve fully felt like I’m in the driver’s seat and all the things that you talked about building a brand.

Choosing the name, raising the capital, hiring people, and while doing the investing, which is, a core piece of it and raising capital from limited partners, like all that are different components of the venture business, that’s really feeling to me like being in the driver’s seat.

And then, as you said before, being able to do it in my own way, that’s authentic. And not something that was inherited or something that was legacy simple things like this is the way we’ve done it for the last 20 years. So, we’re going to keep doing it this way instead of saying, well, why do we have to go by that way of thinking we can, we can, it’s just us. We just try something new, try something different. If it’s not.

Bryan: (00:12:55) I appreciate the rundown of your story and I can’t help, but draw parallels to how I am too. Right? Because I think that we are both UC kids and have no shades in the UC kids, but you don’t get that exposure like you to do to see how money operates at a higher level.

And to have that connection is almost impossible right. If you’re not born into it or you’re, you don’t, you’re not well equipped for it. And to make that connection, those connections, I can see, honestly, I’ve read a thesis while you’re fundraising, and I can see why you chose that thesis now and how everything links together.

And it’s crazy because I think that just fun that you create it, it’s a reflection of who you are and how you became this person right I think for myself too like I never imagined myself becoming an entrepreneur ever in my life right. Just a series of things that happen. You’re like, oh, well, why not me?

Why don’t you start asking yourself? Like, wait, wait, why not me? And it seems very similar to you, roommates who became entrepreneurs that I’m like, well, if that guy could do it, why can’t I can do it, right? Why should I do it? And you start pushing yourself to see what you can do and slowly things compound, right?

Little wins add up and you’re like, you get more and more confident. You dream bigger and bigger. Suddenly you find yourself immensely immersed in these conversations. The dollar, not that you thought where super big a couple of years ago is no longer vague and it just blows your mind blows and in-laws are my, and now you think about the world differently about how you can reshape it, right. How you can dictate the feature. And that’s the best part about starting a venture fund or starting a company, is that you do have the power to change the world.

Carey: (00:14:31)I echo a lot of what you just said. I think that when I think back to the last since 2004 since I’ve been doing ventures people always ask me, how did you get in? I literally just applied. I applied to a lot of firms and 98 to 99% of them said, no, thank you. And you’re right. I think that could start the problem of how I make that transition from investment banking to venture capital without knowing anyone or having mom and dad help me out.

I mean, it was literally just getting out there getting in front of people hoping to impress them and maybe they give me a shot, just a chance. I felt like that in many respects, every step of the way through starting conductive how do you find limited partners? Well, go to people who like you, that you’ve made money with, and maybe they’ll introduce you to a few.

And maybe if they like you though and introduce you to their friends and so on and on and on it goes, but I think. Yeah, will you kind of look at the entirety of the body of work. It always starts with that first step and it leads to something else. So, it’s kind of, like I said, in the very beginning, one thing kind of leads to another.

It’s not that you can really architect this in any defined way. There’s no blueprint necessarily. There’s only the one that becomes your, your own. But again, sometimes you don’t often see how these dots connect at the moment, but over time, whether that’s 1, 3, 5, 7, 10 years, then you’re like, oh, that’s how it all connected.

But again, it’s not. In the very beginning, there was this master plan and you just have to go, it’s not like building an Ikea bookshelf where there are steps one through 20. Right and that’s it.

Bryan: (00:16:20) It always makes a lot more sense looking backward and tracing how things connected that you realize that wow, like every single experience you have in life, no matter how good or bad it is, it’ll help you become the person that you are today.

You’re going to draw upon these skill sets at different times of your life. Whenever you hit a problem. That’s the crazy thing. So, I’m kind of curious, and I know I read your articles on your LinkedIn about the previous funds, not the successful ones. I mean, all successful. Well, your first fund ever, and it, how it took you such a long time to raise it.

Talk about the experience with us. How did you, I know you mentioned that you reached out to the LPs, have you been introduced to LPs? Well, walk us through like Carey at that time. What mistakes did you make? What did you think about the venture world at that time, as you’re becoming more of an operator of the full-scale type of situation, how’d you overcome your setbacks?

How did you make the fund happen? Right. I think most people will be like, I can’t raise money. This is too hard. And raising money is not easy, right. Just to put it out there. It’s huge. It takes a huge toll on your self-esteem your time commitment and you’re questioning yourself every step of the way. So, I’m kind of curious, what was the mindset that you had raised the first fund and when we were set back?

Carey: (00:17:36) When I was about to leave Intel capital and really step off that ledge and go raise the first fund, which ultimately became Luma capital partners. What I was thinking was, man, I have this really strong and amazing investment track record.

I have made Intel Capital a ton of money, not to mention IVP and the previous seven years and I think the next step and the next evolution is to take this on the road and hang my own shingle and start my own fund. Like that just kind of felt instinctively. Like that would be the next step.

And I think a lot of Asian Americans can relate to what I’m about to say. I completely thought that given my investment track record, which is basically good grades, a strong sat score. Would be enough to successfully raise a fund. That’s that was my mindset and to be honest, super naive, because limited partners don’t just invest in people with strong track records.

You have to be able to do the whole thing. You’ve got to be able to raise the capital in a day. So, in addition to having a strong track record, which I would say is just table stakes, you got to be able to attract capital. You’ve got to be able to schmooze other LPs to come in, you’ve got to operate your fund.

So, LP reporting, audit, right? Manage people. You got to show limited partners. You’re able to scale because it’s, you’re not a one-man-band. Like you have to be able to hire great people. Leverage their skills and their talents to help really build an organization, a platform, right? It’s not conducted ventures, Carey Lai, that’s it.

It’s conducted ventures with Carey Lai and Paul Yang and other folks, right. That really makes this machine really, really just come to life. And so, all those things I didn’t know about, but I knocked on the doors of at least 150 LPs traveled crisscrossing not only the United States but also the globe.

And at the end of the day, the goal was to raise a hundred million. We basically raised 11. So, we fell really short of our goal. And we didn’t, we basically, we had four partners initially and we basically all left and went our separate ways. And so, to me, it was basically the first time in my professional career that I felt like I had failed everything that I had set my mind to before getting into venture getting into investment banking.

Like I achieve those goals. And this was literally the first time that I had totally and completely fallen flat on my face. And it was not a great feeling. In fact, I was telling Paul my current partner, how bad it was. And so, he basically lived it through me. And you just never know how hard raising capital is until you have to go do it on your own.

when you raise capital under the flag of IVP or under the brand of Intel capital and built capital, you don’t raise capital, right? You just take it from the balance sheet from Intel. That’s just not fundraising. That is what I call order-taking right. When you’re at an established place, fundraising is having a mission.

And really selling someone on a vision on yourself and your ability to execute upon that vision. I mean, that’s selling that is fundraising. And to be able to do it with a smile on your face when it’s four hundred and 50th time you have no more money. You’re basically back against the wall. If you don’t land this capital, it’s over not to mention three kids, a wife, and a Palo Alto mortgage and by the way, you’re not making any money because you haven’t raised any and what’s worse is you have to put money into the fund, your own hard-earned dollars. So, it’s like the worst of the worst of the worst. And it’s hard. It’s really hard. And so, we just can’t do a decision that this wasn’t going to happen.

And we went our separate ways and literally I was crushed. I was just absolutely crushed. I, felt like I totally failed. I didn’t really know what I was going to do next. And so, what I did next was I took some time off. I took a month off and I started traveling with my family. And when I came back to the bay area, I was actually surprised by how refreshed I felt.

And I had a plan and my plan was to reach out to my entire network, to tell them that we were going to call it quits and that all, this is the funniest part of the story. All I wanted to do was go back to a regular fund and just have a regular VC job. That’s all I wanted. That’s basically what a year and a half and a ton of travel and fundraising led me to just want my old job back.

That’s all I’d given it my all. And I’m done and literally a good friend of mine, through all these coffees and lunches that I was having with people. This one lunch I had with a good friend of mine said, hey, there’s an LP that is not going to come into our fund. And I know you said you’re not going to go fundraise anymore, but just have coffee with them and see where it goes.

And that led to conductive ventures fund one, literally a random introduction by a friend. That I’ve known for at that point 10 years, that liked me, and that random introduction was the start of conducted ventures.

Bryan: (00:23:18) What a story! So many parts are so relatable right.

Carey: (00:23:25) You know what’s funny is the other thing I learned.  Okay. That tech crunch, since you’re an avid tech reader, it never covers okay. What actually pissed me off is that you would all I’d often see like other people raising brand new funds and I’d always wonder, I mean, just natural jealousy would hit like, dude, what does that guy have that I don’t have?

And literally what tech crunch doesn’t cover is like, oh, this is one of the partners is like the grandson of the LG family or this dude’s parents in Singapore are like part of the family that was in the crazy rich Asian movie. So, it’s like they never write about that, but there is some kind of family or connection.

And literally what I had was you know my parents were engineers. My grandparents are poor from Taiwan dude, I don’t have some rich uncle that was like the chairman of LG or whatever corporation. And so those are things that you only discovered later as to why some of these funds were able to get off the ground because the family states 50 million in the fund, but they never write about that in tech crunch. But that’s something that I learned much later in terms of. Oh, yeah, I don’t have that network. I didn’t come from that family. So yeah, this is going to be a lot harder.

Bryan: (00:24:47) I’m going to manifest myself to be you and a couple of years, all your stories and everything. It’s kind of where I’m at right now. So, for our listeners, you guys could be here, a sneak peek. I’ve been raising money for an Asian American venture fund through Asian Hustle Network. And it just makes sense, right? Because you have a network of 200,000 entrepreneurs around the world and wouldn’t have a fund to invest in ourselves, similar to you.

I’m going out, I’m fundraising. I’m getting my self-esteem crushed was just like, what am I doing wrong? right. And I didn’t really want to talk about it, but it does help when you have all these connections right. Because my parents had skipped the Vietnam war. They grew up in associating houses.

I grew up in a 600sf house with five siblings that I didn’t know, I was poor. I was just happy. And to me being this position, why did give back when everything you just said? It’s like, I felt that right and that is not to say this is a low point, but at one point I did apply to a 16 Z to be. I just like, I just wanted to be a normal analyst.

This is too hard right. This is the point where I’m just like, I’m just gonna continue grinding, and lo and behold, I get introduced to Abigail shout out to Abigail and now you’re on the podcast. I’m like this guy’s story has given me a lot of inspiration here because I see a lot of the younger you like me right now. So, I hope that that ordered me as you right now.

Carey: (00:26:11) You know what’s, what’s so funny and maybe. Odd about my story is had I not quit at the time that I wanted to call it quits I could’ve would have totally missed this opportunity to meet the LP. It was literally by happenstance that the moment I quit and said, we’re not doing Luba capital partners anymore.

And I came back from my trip and literally he was like the first guy I met within like a week or two and it just so happened just, just amazing the timing. So, yeah, I mean, I felt like I had quit, but I, in reality, it was like I did.

Bryan: (00:26:50) I always say those are times when the universe is trying to nudge you. Yeah. It was like, hey, don’t quit. You’re meant to do great things. And it’s just actually helping your breakthrough, right? Yeah. I’ve been hearing a lot of that type of situation for a lot of founders that come into our podcast were on the verge of quitting, it backs to the wall and a miracle happens that tends to happen a lot.

Whenever you put yourself out there and you do more and you try to like, make things happen, you just attract positive energy. So, I want to hop into the nitty grittiest of your fund, right? What is the mission of your fund? What was building out that team? Like how do you cultivate your team culture? And I just want to hear all about that.

Carey: (00:27:28) A little bit on Conductive Ventures. So, what we do is focus on capital efficient nontraditional entrepreneurs. So let me unpack that a little bit. We have a very explicit and quantifiable definition for how we determine what is or isn’t capital and let me give you an example.

If you’re a software business and you are building a traditional SAS company generally these are just general things. If a company has, is approaching, let’s say a $5 million run rate in ARR, hopefully, if they’re relatively capital-efficient, then. They’ve raised or at least not burned through more than 5 million in ARR.

Now there are obviously tons of exceptions to this rule. So, for example, if you’re a cybersecurity company, it takes a lot of capital even to ship your first product because it just has to work right? And so, there are other businesses that lend themselves to some of these more capital-efficient models. That was our original thesis going in.

Now, my partner, Paul, who came from Kleiner Perkins, obviously. Very famous and storied from on Sandhill Road and myself from IVP and then towed capital. We really had this thesis going in that there is a subset of entrepreneurs who actually want to raise sensible rounds and are not trying to raise these massive financing rounds.

That tends to be pretty diluted, but they’re still building scalable businesses with revenue that we could invest in. Now, let me touch upon the nontraditional part, the nontraditional part. In effect kind of like what we saw from a lot of these firms have been on the inside of what stuff, what companies, what, which entrepreneurs get chosen.

Ultimately, we really saw, and again, you have to take this back to 2004 things have obviously changed in 2022, but I would argue not that much most of these funds are run like, so there is, this is a statistic 86% of general partners. These are people who make decisions within the firms are white males.

That is not an indisputable fact. That is just where the venture is today and back in 2004, that was 91 or 92%. So, you can imagine the entrepreneurs that they typically funded. Probably were, you know, similar to them, typically white male, like likes light is what’s often said. And so, when Paul and I kind of grew up, so to speak in that environment we started witnessing that, first of all, we’re not white males and second there’s a hustle and a way that I think.

You know, a lot of Asian-Americans build companies that are quite different from, what I’d like to say is a typical entrepreneur might be a six-foot-tall white guy who went to Stanford or Harvard. Who’s building a company. We were probably ex McKinsey, Bain, maybe banking as beautiful presentation skills and a beautiful PowerPoint.

But it has absolutely built nothing and can tell an amazing story like that is often what gets funded and there’s nothing wrong with that because a lot of times those things do work and, I’m not saying anything here to hate on Sandhill Road because they’ve been incredibly successful. Okay.

Well, we noticed as a gap in the market is what happens to like the Eric grins of the world who founded zoo, where he’s from originally. English is not his first language. He didn’t go to Harvard, you know? Who came from WebEx was starting zoom, which was kind of like WebEx 2.0 or really where WebEx should have went couldn’t get funding in the first several rounds. Like people, a lot of people don’t know Eric’s story, but it was incredibly challenging for him to get his seed series a and B rounds of funding. It really wasn’t until Saturday. At emergence funded him that really got him onto the stage. And people will often say, well, Sequoia invested in zoom.

I was like, yeah, in the series D as in dog. So, it was much, much later when things were very obvious. That’s a comedic look if Sequoia-backed them in the AI, I’d be like, okay, sure. But that’s not what happened. So, I always tell people like the prototypical entrepreneur that we’re looking for is kind of like Eric.

Where it has been challenging for them. They’re often, you know, not born here. And if you, so when you look at our body of work from fund one and fund two, over half of our portfolio, number one is not in the Bay area. The San Francisco Bay area is by far one of the most expensive places to scale your company.

And so that is why we actually went outside of a Silicon Valley to go find companies that were basically cheaper and more affordable. And what was also interesting. And again, not something that we had focused on or emphasized. But what sort of when we look back at our body of work, we had to show all these statistics for fund three, over two-thirds of our CEO, founders are immigrants or minorities, and it never occurred to Paul that we had funded so many immigrants and minorities, because again, our original thesis is not like, Hey, we’re the immigrant folks.

That’s, that’s not what it was. It was all about capital-efficient companies. What happened was when we looked at our data, we’re like, oh, these capital-efficient entrepreneurs tend to be minority and immigrants because they often don’t have natural networks into Sandhill Road second because they don’t have natural networks.

They have to go raise capital wherever they can just to survive. And because they do that, they then build companies with real revenue quickly because when you don’t have access to your series a or series B your series C, then you figure out a way to build a real. The scalable lasting company, because if you don’t believe my story, you’re going to believe my revenue.

And it kind of goes back to what I said earlier about how many Asian Americans believe have a 4.5 GPA weighted. I have a 1600 SAT, like, oh, why didn’t I get into Harvard? And that’s how a lot of our entrepreneurs are. Like, they are often not the best storytellers. They often have very heavy accents because they’re not born here and they often are terrible at times. Their story, but they have built really interesting companies that if you swapped the Asian immigrants guy or, you know, black guy out with a six-foot-tall white guy from Harvard, Stanford, like I think their valuation would call Google, but that’s the niche that we’ve found.

And so that’s what we’re continuing to double down on. So, it’s kind of interesting that I don’t think that we stumbled upon this. We had an original early thesis around this and what has proven out is because we’ve liked the funds are doing so well, these companies are doing so well. It then makes the thesis real.

So, in the beginning, you have this hypothesis around capital-efficient entrepreneurs and people are like, oh, hey, that sounds interesting. And then you can back it up with real numbers and real gains and real cash return. Then that’s when the ears perk up and the limited partners are like, okay, I get it now.

I believe you. So, it’s kind of interesting how this thesis has played into, Black Lives Matter of the last couple of years, and Asian hate over the last couple of years, but what’s so funny is that we did not set out to originally invest in minorities and immigrants. Does that make sense?

Bryan: (00:35:31) That makes all the sense. It’s amazing. It’s amazing.

Carey: (00:35:34) I’ve done a lot of emails since the announcement that I was like, hey, I know this fantastic immigrant. Yeah. Okay, cool. But that’s not, we’re not an immigrant fund. Like we’re good capital efficiency is the key here.

Bryan: (00:35:45)  We’re going to have to snip, that part into our social media. So now people know that this is your real business model here, but yeah. I can see how it gets mistaken at that right. And I like the fact that you guys the entrepreneurs are oftentimes overlooked and there are a lot of entrepreneurs who are overlooked, right? And to be honest, there’s a lot of us because of our circumstances, we are not grown up to be taught heads.

You’re gonna go pitch, you’re going to do this and that. And the idea of pitching is daunting to most Asian Americans or Asians in general because when the heck do, we ever ask our parents for money? It’s like, hey dad, you have a 30 grand I, you want to invest in me. I could potentially lose. No, it doesn’t work that way right. So, there’s a cultural difference already. And I feel like this is my own opinion too. I feel like it’s a great thing. But VC firms and the VC industry are targeting more cost-efficient companies because we’re seeing the past couple of years and over evaluations of a lot of. That’s right. And it’s getting crazy because even a prime example is fast, right.

They raise hundreds of millions of dollars but generate like $50,000 a month or something. And I think that it’s actually referring back to what it should be, right. A strong business model. All right. That’s the only way that any investment makes sense. It’s basically one-on-one is like there’s a company making money or do you guys have planted money while you’re reasonable?

What’s money. What’s the goal, right? And that should be the primary piece and people are catching on. Hence, you’re able to become so successful your fund one fund two, and fund three. So, hats off to that. So out of curiosity, as you raised your first fund, how did you build up your team, right? I would imagine it’s you and your partner at the very beginning.

Money is coming in and for you guys who don’t know what’s in, Carey’s past the amount of light in the middle and a high wins. You’re going to have everything. You have to have everything already in place. Like it’s even as an investor. If I come to you and be like, is this you or one other person, like who’s, is this just going to sit there? How’s this going to work, right? And tell us about how you built that team, to begin with.

Carey: (00:37:53) The first fund. And the initial thesis that Paul and I had. So, it was really pulling, I hustled, fighting deals, like did everything. And then as we were, I would say two-thirds into fund one, we decided to bring on a summer intern.

This was the guy who went back to business school. That previously worked at one of my startups that I had backed at Intel capital. And he was looking to get into the venture game. And again, most firms on sand hill road do not take summer interns. And Paul and I were like, why not? You know, we should do it.

So, we brought him in for summer. His name is RF and he did really great. And what we told RF was like, hey, look, we’re not really looking for a post MBA person we’re really looking for an analyst to help us do this stuff that Paul and I don’t want to do, like building all the models and stuff like that.

We’ve done that we don’t need to do it again. What we need to do is look at the analysis of the model, not actually build it from scratch. And so, we want to hire someone, two years out of undergrad, maybe did banking or consulting and can come in and help us. And so, we told RF we’d help them. And introduced them to a lot of firms.

We did, and he got an offer. And then he said, look, I really liked working with you guys over the summer is there an opportunity and maybe a chance that you guys would consider bringing me on? And so, Paul and I talked about it, we did think that he was, he was like a Ferrari and what we needed was like a Honda.

But it’s worked out great. RF has been indispensable in many respects. He’s done a fantastic job for us. And we recently promoted him to the principal where he’s beginning to lead deals, you know, sit on boards and all that stuff. And then earlier this year we brought on Stella who started with us in January.

She also has to ramp up, really has wrapped up really quickly. Has a great attitude, has been with us for close to four months now, and has just been executing really well. So, and then we have some biz dev folks that really help our portfolio companies get intros into large corporates.

If they’re looking for customer introductions and maybe JV partnerships and stuff. So, I would say, for us, we have a work-hard play, the hard attitude it’s kind of like all hands-on deck and an example of that is when someone’s on vacation, there’s a deal that needs to be done.

It just has to get done and I apologize profusely. I’ve had a number of my vacations, not wrecked, but you just have to get some stuff. But I think now that we have more people, the benefit is we can pass things off when we’re traveling or happen to be in transit, stuff like that.

We are a small, highly leveraged team. And so, we all know what each other is doing. We have an open calendar policy so everything from my kids’ activities in the afternoons to anything that’s, that’s been one of the huge benefits of being a really small, small firm and both Paul and I have this really, I’ll call it a weird goal because the venture business is such where once you have something modicum of success. There is this natural momentum to go raise tons and tons of money, like ungodly sums of money. And if you’re successful and you’ve proven that you can return the money, then yeah, there’ll be people who are like, take my money, take my money and take my money Paul and I have zero aspirations to raise billions of dollars because we don’t want to manage a big fund like we love ventures. First and foremost, we love working with entrepreneurs. Not because our egos are attached to our assets under management or because we like managing armies of people. No, I’d actually just like to have a really, really, really small firm and invest in a lot of amazing entrepreneurs.

And so, Paul and I are 100% online on keeping our fund sizes small in perpetuity, primarily because we have been at big funds. As I mentioned, Paul’s been at Kleiner Perkins. I’ve been at IVP and Intel capital and inevitable. When you get bigger and you have more people, you’re going to have more politics.

And that just sucks and it’s not fun. And so, we want to do everything possible to completely avoid that. And the one way that we’ve decided to go about that is to keep our fund sizes. Small and small forever. So that makes us a bit weird.

Bryan: (00:42:28) Actually. I would say our industry, I wouldn’t say a weird, I want to say it’s weird. I say it makes a lot of sense, right? And for our listeners by small, we mean like 200, $150 million.

Carey: (00:42:37) It’s small for these days. I mean there’s a natural tendency to be like, hey, why don’t you raise a billion dollars? And zero aspirations to do that.

Bryan: (00:42:49)  Let’s break it down for our listeners too. And I just want them to get an idea of what the small mean, right? So, like a $200 million fund, how many companies can that be invested into? And that should give a clear idea of what small is because when we hear that now from an average person listening to the podcast, 200 million. One of the worlds he is talking about. We have no idea.

Carey: (00:43:10) We’ll invest in between 15 to 20 core positions. We do fully reserve behind every company. So, what that means is when we invest in the series a or series B, right, we’ve already reserved that they’re going to raise a series C a series D, and we want to keep putting money into those companies.

I support them and protect our pro-rata and our position and our own levels. So, it basically ends up being 15 to 20 core positions in a $200 million fund. And, you know, again, Paul and I have talked about this, I think we’ll probably level off somewhere. Our 30,000-foot cruising altitude levels, probably like two 50. And then I think we’re done just keep raising 250, 250, 250, and that will. And we are happy as a clam doing that.

Bryan: (00:43:52) Thank you for bringing that perspective too because you know, it’s just an American mentality of like go big or go home, keep going big right. But true happiness doesn’t come from like an enormous company or raising a lot of money or, you know, having a big exit.

It’s doing what you like and what you love doing every day. That’s really what happiness is right. Yeah. And that’s, there are certain thresholds to it after you make a certain amount of money. It’s like, life is licensed the same for everyone, right? What is your true purpose? This is true why all those things.

Carey: (00:44:25) Exactly. I totally agree. I think it’s about being really authentic with who you are. I know that the word authenticity has been overused in a lot of ways, but I think it’s a, it’s really about thinking. What brings you joy? True joy. I think happiness is something that’s really temporal. I think joy is something. Is more, long-term more everlasting. And so, it’s really a question of what do you do in the daily routines that bring you true joy? And that’s how we think about it.

Bryan: (00:44:56) Absolutely. That’s a really good point too. And I feel like this part of the podcast definitely resonates with the younger generation, for sure.

Where it’s like, we’re kind of pivoting, right? I feel like our parents’ generation about survival, our generations by making a lot of money and the younger generations about purpose, right and I feel like you’re, you’re telling us what a glimpse of what purpose serves and what purpose is. So, thank you so much for that.

And Carey, as we were approaching the end of the podcast, we have two more questions. Right. And the next question is if someone is a young VC looking to start their own fund, what advice would you have for them?

Carey: (00:45:31) Don’t do it. I’m just kidding. I think, wow. I haven’t really thought about that. I will say this. I know what I do is not for everyone and starting your own fund is not for everyone either.

So, I think it’s, it comes back to being true to who you are. You can be very happy being an investing general partner, you don’t have to strike out on your own in order to make magic happen. But I think for those who do and have decided that that’s really what they want to do, then I think the biggest, the most important piece of advice I could give is you have to be different.

You know, think of it as a restaurant. There are lots of Chinese restaurants out there, but all of them are kind of different, right? Some specialize in Canada. So, I’m specialized in spicy, since one food, you can’t just be yet another of the same kind of restaurant and hopefully, when you’re different, you also do it really well.

So, I think that is something that I think I would say Paul and I have really reached our stride where we know what we do. We really stay in our lane quite a bit and we do it, I think very differently than other funds. Just because you’re different doesn’t mean that you’ll be successful. You can be different and bad, right?

I mean, we’ve all been to different, different restaurants that suck and we’re like, ah, I’m not going to go back to that again. Different. It doesn’t always mean good, but you have to be different. And what you’re selling has to resonate as both different and good to LPs when you raise capital.

Bryan: (00:47:08) Absolutely. That is really good advice and disengaged from the LP standpoint to you, they’ll probably get hundreds of hundreds of thousand pitches every day. It’s like, how do you stand out? Everyone has their own team, their own structure, and their own thesis, but you have to find something that resonates with you. And I think that can bring up a really good point.

Bryan: (00:47:45) Awesome. Carey thank you so much for being a show today. It’s an absolute pleasure to have you and thank you so much for being here.

Carey: (00:47:52) It’s been a pleasure. Thank you for having me.

Bryan: (00:47:54) Absolutely.