Base10's TJ Nahigian on using automation and research within the firm as a competitive advantage, ways to optimize outcomes in the current investing climate, and thoughts on crossover investing.

Follow me @samirkaji for my thoughts on the venture market, with a focus on the continued evolution of the VC landscape.Our guest today is TJ Nahigian, co-founder and managing partner of Base10 Partners, a SF based early stage firm focusing on investing in companies that help automate the real economy. They currently manage over $600MM in AUM and have invested in companies such as Figma, Notion, Brex, and Plaid.Prior to Base10, TJ was the founder and CEO of Jobr, which he led to a successful acquisition by Monster in 2016. Before that, he worked in investment roles at Accel, Summit Partners, and Coatue, where helped launch the private investing efforts of the firm. A word from our sponsor:Invest in innovation. 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Follow me @SamirKaji and give me your insights and questions with the hashtag #ventureunlocked. If you’d like to be considered as a guest or have someone you’d like to hear from (GP or LP), drop me a direct message on Twitter.Transcript:Samir Kaji:Hi, I'm Samir Kaji. And welcome back to another episode of Venture Unlocked, the podcast that takes you behind the scenes of the business of venture capital. Our guest today is TJ Nahigian, co-founder of Base10 Partners, a San Francisco based early stage firm focused on investing in companies that help automate the real economy. The firm currently has over 600 million in assets under management, and has invested in companies such as Figma, Notion, Brex, and Plaid.Samir Kaji:Prior to starting Base10, with his partner, Ade, TJ was the founder and CEO of Jobr. And prior to that he worked in investment roles at Accel, and Summit Partners, as well as Coatue where he helped launch the private investing efforts of the firm. Having known TJ since the early days of Base10, it was so fun to go back in time to hear the origin story of the firm, how they've evolved using automation to drive better outcomes, and how they think about navigating the current markets to drive alpha for their investors. Without further ado, let's get into the episode to hear all of that and more. TJ, it's so great to have you on the show. Thanks for being on.TJ Nahigian:Thanks so much for having me, Samir.Samir Kaji:There's so many threads I'm going to pull on during this entirety of this conversation. But let's actually start from the beginning. You've worked at a number of firms, including some iconic ones like Coatue and Summit, and others, but how did you first get into investing?TJ Nahigian:I grew up in an entrepreneurial family, which is what got me into business in the first place, and then graduated with a finance degree in the middle of the financial crisis, which many would say it was just awful timing. But it ended up being probably the luckiest thing that's ever happened to me because it actually brought me out to Summit Partners in the Bay Area in early 2009 just as the world was starting to emerge from that financial crisis, and venture led on a significant change starting then. In '09 there were 20 to 30 different venture firms all cobbled around Sand Hill Road and Palo Alto. I was at one of them. So, I was lucky. And if you look at the landscape today, it's meaningfully different. And there's a number of reasons why but platform shifts like mobile, social, etc. have enabled so many companies just to grow to be so much larger than I think anybody had ever expected.Samir Kaji:Yeah, it's interesting you started your career right after that global financial crisis, which actually turned out to be one of the best times to start investing. It also came several years after AWS redefined what it meant to develop software and certainly via the iPhone the year after. I look at your career, and you've been at firms that are both later stage and early stage. And I was thinking about when people start firms it's like a blank sheet of paper that you're staring at. And you have to figure out an ethos, an operating model, an investment thesis. If you have a partner, you have to have a shared vision of what the firm is going to be. But looking back at your experiences, whether it was Accel , Coatue, Summit, oftentimes there's things that you want to pull from those firms, and there's things that you don't want to pull for them, those firms. What exactly was that mental model for you as you were sitting with Ade in the early days of saying, "This is the type of firm we're going to build together."TJ Nahigian:First of all, I feel so lucky and fortunate to have gotten to work at Summit, Accel, Coatue, and then later actually become an entrepreneur and start a business called Jobr, because those all as you mentioned totally shaped my experience. Each of those firms is great in their own right, and will be long standing firms. When I look back on it, what we've done with Base10, is we've tried to pull the best of those places for the opportunity that we feel like we're going after. Base10 just for those in the audience that don't know, we're focused on automation for the real economy or problems for the 99%. And we started out in 2017 setup to invest the early stage and now at the late stage into some of the largest trends that are shaping the real economy, leveraging technology.TJ Nahigian:When Ade, and I sat down to start Base10, that was really the most important thing was figuring out that what. What are we going to do and what are we going to be? How was also really important and I would say that's where experience at those different investment firms, and being an entrepreneur has helped us significantly. And so, we've invested from the early days in building out a research process that we think is unique and differentiated and really helps to win both in the real economy, but also in this new venture landscape that is markedly different than the 2009 venture landscape.TJ Nahigian:The way that works is we summarize it by saying we do very much trend based research, like a hedge fund. So, very similar to what Coatue will do. We do outbound and we're proactively reaching out the best companies in a given trend. Very much like growth or private equity firm. This is very much like a Summit Partners, an Accel, or an Insight where a few of my colleagues have come from. We still invest like a venture fund. But this is where Ade and to an extent my background come in handy is we do so with software and data at our core. We use workflow automation, and data so that we can actually effectively manage that process, and pipeline. And so, that's really the how of what we do at Base10.Samir Kaji:I'm glad you brought up some of the threads that you did pull from some of these other firms in instructing how you fill out that blank sheet of paper in terms of the vision. What also struck me is that your experience you had some experience starting a company and being a founder, which Ade I know was an investor in the company. But a lot of your time, pre Base10 was actually on the investing side. I think Ade is almost reverse in that he spent time at Workday ventures, but really was a serial entrepreneur. And oftentimes, when you have those two backgrounds with such extensive experience both on the operating and investing side, it brings some really interesting ways that you can build a firm and help founders.Samir Kaji:There's the off balance sheet, also that I also think about, which is a function of looking at somebody and saying not only are they good from a complementary standpoint because they've had operating experience, but they have a shared set of values. I've seen a lot of funds get with two partners that have just met each other and you have a high risk of partner divorce over some period of time. How did you feel comfortable the two of you were the right people? And what were some of those discussions that got you to the point where you said, "hey, we have a shared vision, we can do this together?"TJ Nahigian:I was again very fortunate in the fact that I actually got to meet Ade well before starting Base10. I'd just started a business called Jobr, which actually was really informed from my time at Coatue, where I helped start our first private investment fund, and was leading a lot of our work on mobile investing. And we essentially built a mobile app in the job space called Jobr. Ade became one of our first investors in that business. So, Ade, as you mentioned Samir, is entrepreneur turned investor. I’m the opposite, I'm investor turned entrepreneur. Ade, ironically, was my VC.TJ Nahigian:He ended up being by far the most helpful VC that we had. But he also quickly realized that I had an investment background. And he was ramping up his personal investing and work at Workday Ventures, which he had started, and started pinging me with regularity around different investments. And so, that's what brought us closer and closer together. By the time we had scaled and sold Jobr, Ade and I had become quite close and thinking about starting a new venture fund and what we thought would be the most impactful mega trend over the next 20 years of automation in the real economy.TJ Nahigian:The thing that was most compelling to me about partnering up with Ade and vice versa is just how I would say unique and special he was on so many different aspects. And then how mission, values, and work ethos aligned we were. And we've had a number of amazing guests on the show, Samir. I think almost everybody will tell you starting a venture fund is no small feat. Being an investor actually doesn't really help much in starting a venture fund, ironically, being an entrepreneur does. And so, going from zero to one, honestly, the number one thing that we needed was grit and a mindset of being able to teach ourselves and learn how to do things. And I saw that with Ade massively. Ade is just so incredibly unique in so many different ways. But also, the skill set is very complementary to mine that when I was setting out on this, hopefully 50 plus year journey with Base10, the most important thing was who I was going to be doing that with. And so, that made it easy to make that decision despite a number of other very interesting opportunities to potentially pursue.Samir Kaji:I think you've pointed out something that I remember when you started Base10. And you and I met pre fund one when you were starting to get into the fundraising. We'll get into that in a second. And it really is building a company from scratch. You're writing checks versus code, certainly. So, that's a little bit different from a software company. But there are all of these elements that can be quite scary when you're starting a firm. You had historically worked at really well established firms that in many cases had been around for decades with astounding success. What was the internal calculus that got you when you decided to go back into investing to actually go down this path of starting something from scratch versus what you had done in your past, which is work at these large firms where you can spend all your time really focusing on investing?TJ Nahigian:I was fortunate and lucky to have the opportunity to go back to some of those firms. When I started there, they may not have been as large as they are today. I think Coatue has grown 10 plus times since then. And Accel has also grown dramatically. I think part of it was really a huge opportunity and the belief that there was a change coming into venture. So, I think that was one thing that we did get right, that the venture landscape would change. And two, that a new type of firm was needed. Three, and again, the most important thing was just who I was going to be doing that with, and do we have values and mission and work ethos alignment on that? And so, that was the main calculus for us. I think if I was honest with myself, I knew how hard it would be to actually get started. It would not have been as easy of a decision. But now four and a half years later, since we got started in 2017, it definitely was the right decision.Samir Kaji:Well, speaking of degrees of difficulty, oftentimes the most difficult thing to do is get that first fund off the ground getting to a first close, and at the risk of bringing back a traumatic event that you experienced in fundraising. Tell us how you engineered that first fundraise and how you approached it? What was it like? And what do you think now looking back you got right and what you get wrong?TJ Nahigian:A ton, a of ton of learnings from the early days, and Samir, you had a front row seat to this when we were working together. We were fortunate. Our first fund, our target was $100 million to do seed in series A investments in a relatively concentrated portfolio focusing on automation for the real economy. Our initial strategy was to get to a first close so that we could get started. And so, we were fortunate enough to find two groups that we ended up going deep with and really just took a bet on us. One of them, we've worked with in prior lives, and that let us get to that first close so we could actually start investing. But we knew if we wanted to build Base10 for the long term we would need a diversified LP base. And we would want an LP base that could scale with us longer. We started proving that we could actually make investments and start to build our Base10 track record different than our prior track records, and then went back out to market focusing primarily on institutional piece that we thought could scale with us.TJ Nahigian:I think we were really fortunate in those early anchors that we found that took a huge belief and leap of faith in us. I think that may have gone to our head a little bit and saying like, "Oh, this will actually be easy." But we had a rude awakening. I think we talked to hundreds of LPs really before we knew what it actually meant to raise a fully institutional fund. Honestly, the number one thing that helped us be successful was grit, was not giving up and continuing to iterate until we found this product market LP fit a year later in mid '18. We ended up closing our first fund was $137 million that came in a little over our target. Although, a lot of that happened towards the end of that fundraise after we were able to tweak the messaging and approach quite a bit.TJ Nahigian:We were incredibly lucky and fortunate to get to partner with some very helpful LPs for us. Name one of them being Cambridge Associates who ended up coming in at for a very small amount in our first fund, but has been such an incredible thought partner for us as we've built the firm and the strategy over time. And that was very impactful for us. I would say it's way too many things to list to tell you what we got wrong. It's like almost everything. But we got lucky and just by sheer grit and persistence and luck landing in a really good spot. And I think really learning our audience, the market, really over rotating on being institutional from day one. There's a number of things that that actually means but getting to work with a bank like First Republic and a whole list of other providers how we actually ran and operated the firm, our investments, etc. I think was one of the factors that ended up getting folks to take that leap of faith.Samir Kaji:Yeah, you mentioned these two anchors that came in early and obviated the cold start problem, which is a luxury to have. A lot of people don't have anchors and they have to fight and scrap for the initial set of LPs to come into the first close. And while the anchors are great, I think the thing that sometimes becomes a little bit of a risk is as you go from a fund one to fund two, if those anchors do not then come into fun two. You have these big craters that you now have to fill. How did you de risk yourself between the funds? You mentioned Cambridge, which increased in terms of how much capital they brought in. You didn't know that in advance that they would do that for fund two. Or there are items in particular that you did tactically to ensure that you could actually mitigate some of the risk and that you would not have a cold start problem for fund, which is what? Almost 2X the size of fund one.TJ Nahigian:Our learning coming out of fun one was, this was an area we needed to continue to evolve. And so, I wouldn't say we had time to actually build the firm and progress a lot of the things that we had started manually by building processes around them. One of those areas we really invested into was LP relationships, and LP management. And with LPs, you're often looking at things like data room and performance and talking to your companies. And we were doing this over and over and over again with existing as well as new LPs. And so, we took a step back and thought about, "oh, how do we actually transform this experience and make it almost somewhat magical? How do you make it 10X better?" And subsequently, we ended up investing and building our own internal software after looking at in the market and not seeing much, which has now become our LP portal.TJ Nahigian:I would say, a combination of investing into that, which was an opportunity to show off how we thought and how we operated our backgrounds as entrepreneurs, as well as what we were doing. And pairing that with actually getting some fantastic advice from the folks that ended up being most helpful were people that had recently successfully started firms, not people that had started from 20 years ago, and building deep relationships with LPs over that entire time frame. So we did that really nonstop. Once we finished fundraising fund one, we maybe took a few weeks off, but that that was about it. I think we went into fund two not really knowing how it would go and expecting that it may be the same thing all over again. But it ended up turning out in a very different way. And we were really fortunate to get to work with a number of folks in fund two, almost all of which were with us in fund one, but many net new names as well that can help us take Base10 even further.Samir Kaji:This whole entrepreneurial mindset has really come through in every conversation I've had with you. Certainly, during this conversation where you're building a company, and there's these different components and pillars, which we'll get to in a minute. How have you seen the market evolve? So, you mentioned this new era of venture capital, which I would wholeheartedly agree with. In fact, if you look at the market today with over 4,000 US firms being much more fragmented by region and sector and the type of product they're offering founders. In your mind, what is it that you're offering as a product that allows a firm like yourself to win? And what are the key ingredients that if you look across the market, that if somebody is coming to market as a venture fund, they really need these ingredients to truly thrive in such a competitive and hot environment?TJ Nahigian:I think there's a host of things, Samir. Just to set the stage, when I started in VC in 2009, 12 years ago, there were, again, those 20, 30 firms, those were the only firms that were around on Sandhill Road. Ade was pitching those firms to fundraise then, and if you didn't raise capital from them you were kind of screwed. There's nowhere else to go. I think we did the math. If you were a partner at a venture firm in '09, you needed to see three to five deals a week to look at everything. That was your job. In order to do that today, you need to see 100 deals a day. It's not possible. The process has to have changed. Way more capital than ever, entrepreneurs have more and more choice. And so, how do you win?TJ Nahigian:We do that based on really two pillars. One is our research pillar, and number two is purpose. With research, it's really that process that I described to you before, which is the how, which is we do research like a hedge fund. We do outbound like a growth or private equity firm, invest like a venture fund, but we're able to do that at significant scale, but only within the swim lanes, the trends that we think are the most important trends. And that gives us significant advantage versus others. It helps from sourcing, to selecting, to selling, to supporting all those companies and entrepreneurs, which I think are the four primary roles of the individual investor at a venture firm.TJ Nahigian:More importantly I think today when capital is really becoming more and more of a commodity, purpose and really the why is actually becoming much more important. That's something that we've started to tackle. We have been big levers from the beginning that we're solving problems. Investing in companies solving problems for the 99%. This isn't by design, but those entrepreneurs that we back look like the 99%. Most of them are outside of Silicon Valley, many of them are underrepresented. And so, that's what our portfolio has done.TJ Nahigian:We've made conscious decisions to put a portion of our profits from the early days to back some of those things that we have purpose in. But more recently, and coming out of the events of George Floyd, we've launched our advancement initiative, which is a growth fund where we've partnered with historically black colleges and universities who have historically been shut out of venture for a whole host of reasons, but are really an incredible engine of growth for underrepresented folks in the United States and beyond. And we've raised a growth fund in partnership and really anchored by those HBCUs to invest in the top late stage companies of our generation. We've also raised additional capital from our existing LPs, but we donate half of the profits, half of the carry, actually, back to those HBCUs, and scholarships in the names of companies we back. And so, aligning research in our investment, philosophy, process, and approach. Combining that with purpose, we feel like gives us a significant edge to find and win some of the best opportunities and in venture today.Samir Kaji:If you don't mind, I'd like to pull on both of those a little bit, both the research and the purpose. Let's start with research for a second, and I look at today's market. And you're right, I mean, the number of deals that are being done, and the number of players that are competing for those deals are exponential step function of what they were even five years ago. And you worked at a firm that historically had done mostly public and now is doing a ton on the private side. There's a lot of crossover investors. You've seen what Tiger has done. And one of the things tiger has done, where I have not seen this level of respect is that, yeah, they are preempting a lot of deals. But they seem to be able to have figured out a way to move at scale, at a level of speed without sacrificing a ton of diligence in the sense that they often do a lot of the research on the front end before having the conversation with the entrepreneur. It seems like the research function that you're doing within the swim lanes that you've identified as right inappropriate for the type of deals you want to do. Has that manifested into faster decision making? And has that allowed you to compete more effectively in those series A deals that you're doing?TJ Nahigian:I think that is absolutely right. Those firms are some of the best at what they do. And they're showing up very much prepared, right? Tiger looks at really three trend areas to invest in. They're investing in software, and fintech, and internet. And they're different folks responsible for each, but that's really all they do. They don't stray from that too much. And when they show up, they're oftentimes showing up with 50, 100 plus page decks pre-prepared and have a really, really deep understanding of that industry. Coatue, very similar. Like you are, they're focused on just a few core trends at any given point. And they show up incredibly prepared. This was the playbook that I helped engineer and design when we got the private investing side started at Coatue.TJ Nahigian:We very much have taken that to heart at Base10. We felt like particularly an early stage venture, there wasn't that type of firm that was built before, there was not that process. And there was a huge opportunity for us to go and do that. And so, that's very much what we've taken into account as we've designed and built out our process. And we've doubled and tripled down on that building out a research team. We do weekly meetings as a team. This is very different than any other venture firm I'm aware of. But we do weekly trend meetings as a team where we do these trend-based dives, typically we have one or two going at a time led by one person, but worked on by everybody at the firm.TJ Nahigian:And so, if you've done that for a month, a month and a half. The entire firm is working on that collaboratively. If you've talked to 50 different companies in the space becomes a lot clearer. Is this trend interesting? What sub trends are interesting? Who are the most interesting entrepreneurs? What go to market opportunities are working? If I've had that conversation with 30 other entrepreneurs in the space, the first time I talked to the next person in that space they're going to come away saying, "oh man, that person actually knows their stuff." It's so much better than just a random network. Hey, this person's interesting. Check it out, which is what firms did 10, 15 years ago. Many still do it today and some still successfully, but I'm a firm believer that that is going to change.Samir Kaji:So, a lot of what you're doing within the research function is transponding and figure out a way to peer in the future to then go into your diligence of company before you meet him. And I suspect that also allows you to be a little bit more proactive in reaching out to companies versus waiting for a seed investor to send something your way. Tell us a little bit about how that works in terms of allowing you to see because you mentioned earlier, you are investing in people that often look like the 99%. They may not be in traditional Silicon Valley circles. How does the research function allow you to find those deals?TJ Nahigian:So, without giving up too much of our secret sauce at a very high level, how our research function works, and it really starts with Base11, which is a software and data platform that we built internally. Oftentimes, we're plugging in eight to 10 companies in a given trend. Let's use an example of mental health, which is one of the dives that we've done recently. We'll plug in eight to 10 of the marquee names in that space. Our Base11 software will go out and globally find 1,000 plus companies in that trend. It then splits them into sub trends, and will filter out based on 30 different data points on each of those companies, which ones actually are the top five to 10% for what we're looking for, high growth venture opportunities.TJ Nahigian:That's really the universe that we're starting with. You go from that 1,000 down to 70 or 80 different companies or so. And then we're proactively reaching out to those companies. We've done some workflow automation, so that we can do that at scale with a relatively small team. But they're highly customized, highly personalized emails that go to the entrepreneurs and those businesses that are sharing some of the insights that we've already learned from the space. After we're done with our dives, there's times midway through we'll even publish research papers on them. You can see some of this on our website. In many cases, we're quoting entrepreneurs in there and giving them a bit more visibility as well. That enables us to really build and hone in on that universe in a matter of days.TJ Nahigian:And then, by the end of call it 40, 45 days, we've had conversations with 30, 40 different entrepreneurs that we think are up and coming the best within that sector. Timing doesn't always work out. It's not necessarily going to be perfect timing for any of them. And so, there's still some work to do. Where we don't have automated decision making, which is how some of the data driven VCs really describe themselves. We don't think that is going to happen anytime soon in this industry for a number of reasons, but it really helps us to hone in on a specific area. And it helps again, with that sourcing by being proactive. Selecting because you're really pulling from the best of this one specific universe. Selling into them because there's a lot more value you can add once you have different industry insights, and then supporting shortly after.TJ Nahigian:And so, that's been a huge, huge part of our process. It does enable us to move faster if we completed a dive as a team, and we see something that's just off the charts great. It enables us to move on that much faster. So we've done our market work already. We can do our business diligence on that relatively quickly. We can get industry references on the business relatively quickly. And there's still some work to do on our end, but it's you front load a lot of that work, which ends up being better for the entrepreneur.Samir Kaji:Well, and I think the other point that is probably worth making here is that when you are able to do these deep dives, you're getting a good sense of these companies before you actually meet them. And when you do talk to the entrepreneur, you're giving them a clear sense that you really understand their markets, you understand their pain points. And your proactive outreach allows you to preempt, which I think would probably help you from overall investment standpoint and getting lower valuations perhaps where otherwise you might have been part of a competitive bidding process.Samir Kaji:You mentioned this other pillar, which, of course, we've talked a lot about diversity over the last year and including on this podcast. It's still early progress. We haven't seen a ton of capital go behind it yet, particularly with the underrepresented managers. You have taken an approach both within your team. And if I just challenge anybody to look at any website and find a more diverse team. You've built one with the advancement initiative, which is investing in these late stage companies, and really driving returns for these historically black colleges. I'd be curious on both sides of the spectrum. Do entrepreneurs care about that where when you're going out to these growth stage companies, they really care about that mission, where it allows you to have access to some really interesting companies you otherwise wouldn't? And then what is the net effect if this all works? What does this mean in terms of really driving societal growth?TJ Nahigian:This comes back to that second pillar of ours, which is purpose. Our belief is in a world with infinite capital from super angels to hedge funds, entrepreneurs want to work with capital that has meaning and purpose. Entrepreneurs can choose. And so, why are they going to choose you? And what do they want to align around? Software is really eating the world, but I think there's this broader trend within asset management that that ESG, environmental social governance is going to be bigger than software, and is going to transform assets under management faster. As of a few years ago, the percent of assets under management that were "within ESG" were low single digits.TJ Nahigian:Our belief is in the next five years, it's going to be north of 50%. And there's a reason for that. Purpose driven profit is starting to affect outcomes. D&I to your point, which is an area that we've started with, and is incredibly important for us for a number of reasons. But one of them being obvious, I think we are the largest black founded venture fund. But that has and particularly after George Floyd, that's become a top five business concern. It's affecting IPO readiness, it affects stock price, it affects employee and client retention, and overall happiness.TJ Nahigian:And so, it's not just venture companies that are paying attention to this, it's the broader world of asset management, and I think that's going to really affect long term change. With the advancement initiative, this is really, I think, the first fund that at least I'm aware of, that actually, structurally, ties profits to purpose. And it does so because we have an LP base that is highly curated. And for a number of reasons, is by far the highest ROI and in our minds to actually contribute to just a quick example, if you were to look at just endowments today of universities, which are common source of capital into venture funds. They're I think the largest LP by grouping. Stanford has a north of $30 billion endowment. If you combine all HBCUs together, endowments are a fraction of the size just of Stanford. Yet, 60% of grad students are coming out of HBCUs.TJ Nahigian:It's this huge engine for change for so many reasons. So, we feel lucky that we were able to put this fund together so that this group that had historically been shut out of investing in technology, and particularly in venture, which as you know today is actually the best performing asset class, overall. We were able to create a fund structure that actually gives them leverage. They essentially get 2X back on every dollar that they put in, and our hope is that the fund would create unique opportunities for us to invest in. We didn't know how this would go. I think we had an inclination because the reason we started this was we heard from a number of later stage entrepreneurs saying like, "hey, I look around my cap table and I need help in this area. This is actually becoming a top five business issue," which is why we got started on it.TJ Nahigian:It wasn't something we'd necessarily planned from the beginning. But when we launched it, I would say product market fit was instant. The best entrepreneurs, the best companies in the world are prioritizing working with us. They don't need capital. Their rounds are beyond oversubscribed. Some cases, they're even creating rounds to partner with us. These are entrepreneurs like W. Bellows and Nubank, like Dylan from Figma, like Zack at Plaid, who are saying, this is a huge, huge issue for us, and we need help, and we want to do more. And the way we've designed the fund, it becomes a win, win, win really for everybody involved.Samir Kaji:You're right in that I have not seen a firm take this approach. But given it is a top five business expense, which... I mean, concern, rather, which I totally agree with. Why aren't other firms doing this? Because typically, when you see something work in venture, everyone copies it, and it becomes a trend. And I haven't seen anything, and the advancement initiative I know is fairly new. The fund was raised earlier this year. But do you anticipate we're going to see more of these opportunities that are created for individuals, endowments, and others that now can have access? And actually, if things go right can benefit by actually creating more opportunities where otherwise there would be no opportunities?TJ Nahigian:I hope so. I think when we started the advancement initiative, that was honestly our goal was that more people would do this because then we know that's actually working and you're going to actually affect and create more change. I think you have seen ESG affect other areas of asset management more significantly than venture. Venture is actually a laggard. It's a very small part of asset management overall. And for structural reasons, it takes time to change etc. We are lucky in that we have a firm and a platform where we were able to move quickly on this, but I don't think we realized how large the overall opportunity was and what this actually could mean for asset management long term.TJ Nahigian:We now feel like the mission is much larger than us, and we have a huge responsibility, but the opportunity is just so incredibly large. And I think Ade actually is... I try to recite a quote from him. He's always very, very great with how he words things. But he's essentially takeaway after seeing the reception of the advancement initiative is, well, over the next five to 10 years, we're going to get to the end of the world of no sum capitalism and move into the win-win era, essentially, aligning profits with purpose because that is what the best companies, investment opportunities, etc., are going to want to align with. And in a world where capital is commoditized, that becomes incredibly important. And so, we're, I would say, one of the earlier managers to go after this and do it with a somewhat unique model. But our hope is that many more too.Samir Kaji:Yeah. And look, I mean, I think one thing that is acting as a major tailwind is the size of the innovation market. I always think about venture capital, and I think we've redefined what it means to invest in technology companies. When I started my career, technology was very much fringe. There was very little in terms of widespread adoption, there's very few funders. And today, innovation is very horizontal in nature. And that's all happened really over the last 14 or 15 years. So, I do anticipate the market is getting bigger. The redefinition of what a technology company can do, and the different industries they affect. But as you look at the private markets, because you've had experience early stage, and you've had experience actually starting and working within a firm in Coatue that understood at one point that in order to invest in innovation, you had to dip into the private markets.Samir Kaji:This year, if you read the headlines, it seems like venture is going crazy. I would make the argument that still a very small asset class. Even if 500 billion goes in, that's still 1% of the public market cap of which public market cap is about 47 trillion of which the top six companies are all tech companies valued at nine trillion. How do you foresee the private markets moving? Do you believe that they'll become larger and larger? As the trend of companies staying private longer just never really reverses. In the '90s, you did see companies like Amazon go public in three years. And now it's seven to 12 years, sometimes even longer. A company like Roblox was closer to 20 years. And so, what's your assessment of the current private markets? And how do you think this is going to play out over the next 1, 2, 3, 4, 5 years?TJ Nahigian:Yeah, so it's a great question and fun to bring up, Roblox, one of my nearest and dearest misses, and unbelievable lesson learned where at Summit Partners in 2010 we nearly led the, I guess it would have been a Series A or Series B, which today would be a Series A, and we were off on price by 20%. Goes to show you what actually matters over the long term, right? I think one thing that we were lucky and we got right when we started Base10 is that technology was going to touch every industry, essentially, the real economy. COVID was a massive accelerant to that. I think that is very much going to be true. We're still really early in seeing the penetration of this. Like eCommerce and percent of retail pre-pandemic was 15% of overall retail sales. It jumped up in the pandemic, but there's still so much more market to go out and build.TJ Nahigian:And so, I don't necessarily think of venture just as innovation. I do think it's now essentially the bridge to the new world and to all economies. In terms of will the private markets continue to grow? It's likely and I think different innovations in the financial markets like Spax, like Direct Listings, etc., will potentially help mitigate that, but probably not at the rate that companies are being built, and that they're scaling, and there is capital available in the private markets. I do think that there will be more and more growth in private companies. You can look at the numbers. They're undoubtedly getting larger and larger before going public. I do think that will continue.TJ Nahigian:I think for a number of reasons that may not be the best for the retail investor. And you could argue that there are other verticals within finance and fintech like crypto that are actually creating different opportunities for retail investors to invest earlier. But I do think that, that will continue to happen. For in some ways that is self-serving for me as a venture capitalist and private technology investor because it allows companies to get larger in the private markets and compound and that can be incredibly valuable.TJ Nahigian:If you look at the number one mistake that almost all venture funds make is you sell too early, and why? In many ways you have to write. Like it's my job for our LPs is to invest in the private markets. Once it's public, many of them are expecting me to distribute that and not hold that. They're not paying me at this point to be a public markets manager. But you look at companies like Atlassian. You look at companies like Snap where I was lucky to be involved in both. They've compounded so much in the public markets. At Accel, it's amazingly. We invested, we were the Series A lead in Atlassian. We invested $400 million valuation. That was a significant check. Guess what? We sold some of that along the way to firms like Tiger. And since then it's compounded by 40X. So, it does benefit, particularly private markets investors for companies to stay private longer. It does take a longer amount of time to create liquidity. But I do expect that that trend continues.Samir Kaji:Yeah, I do, too. And there was a time and certainly some people still say this, but they would look at some of these firms that are putting in large amounts of capital at late stage and call them tourist capital and say that they're here now, but they will ultimately vacate the area when the markets change. I don't think that's the case. In fact, the later stage of market today approximates what the post IPO market used to be 15 or 20 years ago, and I don't anticipate a Coatue or Tiger to actually come out to the private markets anytime soon. I at all, I think that private market investing is going to be continually part of their overall investment thesis given the difficulty of generating alpha in the public equities market.TJ Nahigian:Yeah. And it's funny you say that. I joined Coatue when we started our private investment business. Before I joined, we were just a $4 billion long short tech focus, public hedge fund. I joined along with another colleague and Thomas to help open our Menlo Park office and launch our first private fund. The number one thing we said, "why not let these guys in?" It's like they're tourists. Here today, gone tomorrow. Fast forward 10, not even 10 years, and Coatue has gone from four billion of AUM just on the public side to over 40 split evenly between public and private. And the returns have been stellar on both sides, and it wasn't always easy or simple. And there was a lot of zero one, and reinventing over time. But it's in some ways, almost incredible that, frankly, where I got started like the Summits, the TAs, the TCVs of the world have actually let somebody come in so quickly, and take that market from them. Those businesses are great businesses, and they haven't done poorly, but they've definitely allowed new entrants in like the Insights, like the Coatues, like the Tigers.Samir Kaji:Yeah. And the level of aggression and tenacity by some of those firms has been extraordinary to watch. So, I want to end with our heat check segment. I'm going to ask you three questions. Rapid fire in succession, the first being now that you've been an investor and largely in traditional venture capital for a decade, what's the largest myth that you think gets perpetuated that's just objectively untrue?TJ Nahigian:I don't know about today. But since I've been in venture, everything is always so expensive, and so overheated. Literally since 2009. Oh, my God, I can't believe we're paying these prices. These multiples are insane. That has not stopped any single year in the 12 or 13 years I've been in venture at this point. So I think that is untrue. I don't know about today, but I will say that definitely is the rhetoric, like I said time and time again.Samir Kaji:Things are always expensive until they're not. So, we will definitely see how the years ahead are. In all of the folks that you've worked with. I think about some of those iconic firms. It's particularly folks like Accel, which have done extraordinarily well in backing companies like Facebook in the past, you've run across a lot of investors that have likely nurtured your career or mentored you. Name the investor that's made the biggest impact on your career.TJ Nahigian:This one is really challenging because I am a venture nerd and venture and investing history nerd. So, I have three for you that I'll list. I would say probably the most impactful is a friend of mine's father, Howard Marks, who started and scaled Oaktree. I was fortunate to get to see what he was building as he was building it. And now I get to work with him as an LP and his son. And it's just incredible what they've been able to achieve over there, and has been influential and just getting me excited about investing at all.TJ Nahigian:Number two, Jim Breyer. I was at Accel when Facebook went public. I wasn't there, unfortunately, when we made the investment, but when we went public, and just opened my eyes to how large technology could be. And then Philippe Laffont who I was lucky to work for and work with at Coatue who when I joined that that was crazy because he wanted to be the largest tech investor in the world. And fast forward eight, eight years later, and he's well on his way. So, those have been the folks that have been, I would say, most impactful on my career.Samir Kaji:Yeah, amazing names. Howard is somebody that I followed, and there's a great podcast that he did recently on invest like the best, which I thought was one of the most thoughtful interviews and discussions out there. And certainly, with Jim, Facebook really made Accel nine I think it was. A lot of LPs regretted skipping that one. So, those are great names. As we talk about impacts on your career, as you take all these reps with working with companies and investing, there's always that one investment that you look back on and say this defined who I was. It forced me to think in a different way. Either it was a miss, it was actually a success, it was an entrepreneur that said something that was truly impactful to your career. Can you think back of an experience with a company where you're like, "this is when I really became an investor?"TJ Nahigian:Yeah, I would say the one that probably got me out of my comfort zone, but has really influenced how we think, or at least I think at Based10 and some of really the how of what we do was investing in Snap, which taught me so many different lessons. But this was one of our first investments on the private side at Coatue. It was pre-revenue. At the time, the investors, the largest enterprise value I'd ever invested into, which was a billion and a half enterprise value at the time. It was also the only company I'd invested in pre-revenue. We had insight from China, and particularly seeing WeChat. Both the growth and engagement and as well as the monetization in terms of how impactful mobile messaging businesses can be.TJ Nahigian:I would say Evan was also just an exceptional, exceptional entrepreneur, that you could really see from the early days. It hasn't always been a straight line up and to the right, but I think just checked, it's $120 billion business. So many different learnings on how to evaluate and analyze different investment opportunities, how to essentially act within a deal process when things go well or poorly, and there's a bunch of that, and how to play the long game. And so, I'd say that's probably the most impactful so far in my career, but number of others within the Base10 portfolio that hopefully can get there someday, too.Samir Kaji:Well, it's interesting that you bring up Snap because I do remember some of the earlier days relatively and you mentioned $120 billion market cap. I remember when the round I believe was IVP did prior to Coatue to everyone thought the valuation was crazy that they paid at the time. Of course, that in retrospect has been an extremely cheap deal.TJ Nahigian:We had a handshake deal with Evan on that round, and it went to them the next day. So, yeah, that was a rough one, but we... A lot of inside baseball, but another lesson of don't burn bridges and continue to add value to entrepreneurs because you never know what will happen.Samir Kaji:Love this story, and it certainly speaks to this belief that I think we all have, which is you have to look at these companies can really bend the arc of what the future is going to be and figure out how to underwrite the power of what is actually possible. And no one thought Snap would be $120 billion company, let alone a $10 billion company. And so, again, this aligns even with your prior comment of everything feels expensive until it's not. This has been a great interview. I really appreciate you coming on. Excited about everything you guys have done at Base10, and really tracking guys in the future.TJ Nahigian:Samir, thanks so much for having me on, and I really appreciate it.Samir Kaji:Thanks so much for listening to another episode of Venture Unlocked. We really hope you enjoyed our conversation with TJ. To learn more about him or Base10 Partners, be sure to go to ventureunlocked.substack.com for detailed notes of the show as well as my ongoing commentary about the world of venture capital. Venture Unlocked is also available on iTunes or Spotify for download. And while you're there, please leave us a rating and a review as it really helps us out, and hit the subscribe button in order to get each and every Venture Unlocked episode as soon as it's released.Podcast Production support provided by Agent Bee Agency This is a public episode. 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