An Introduction to Westwood Ventures

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   Hi everyone. Uh, my name is Edward Saya and I’m the managing partner for Westwood Ventures. Uh, welcome to our Introduction to Westwood presentation. I’m excited to be able to share with fellow UCLA alumni interested in venture capital. Uh, we have had a lot of registrants for this presentation, so I’m going to wait a minute just to let a few more in. In the meanwhile, as people are coming in, this presentation will be recorded for your convenience and we’ll send out the link afterwards. If you have any questions, feel free to send it in the chat. My colleague Jordan will be collecting the questions and we’ll be answering them at the end. So I see everyone coming in. We’ll just give it another minute and then we’ll get started.

  So for everyone who’s attending, I think we’ll get started. To use everyone’s time best, I’m going to do a brief introduction of our fund. But before that, I’d like to tell you two things. One is a little bit about Westwood and Alumni Ventures. You might see both names in this presentation. Westwood Ventures is part of Alumni Ventures. At Alumni Ventures, we are a flagship firm that has $600 million under management. We’re made up of 18 alumni-centric funds representing top universities like UCLA, Harvard, and MIT. Altogether, we have 5,000 investors, 3,500 experts, and 600,000 subscribers in our community. So Westwood is the UCLA alumni-centric fund, and we have 13,000-plus alumni and friends of UCLA in our subscriber base. So if you’re a UCLA alum or a friend of the university, you’re in the right place. Let’s go to the legal part of it—Jordan, legal PR presentation—and I’ll just cover that part briefly.

  So to briefly now cover our legal and disclosure statements: this presentation is for informational and educational purposes only. It’s not intended as an offer to sell or solicit an investment. We are also not sharing financial advice, so you should consult with your financial advisor on all your decisions. For disclosure information, please review the disclosure of information in the presentation. Past performance is not indicative of future results. Alumni Ventures and its funds are not affiliated with or endorsed by any college or university. So when you have time, please do, after the presentation, take a look at the presentation at your own time for more detail. Okay, now that we’ve covered the legal and disclosure information, I’d like to start the presentation.

  
  Introduction. So UCLA—we’re Westwood Ventures, a UCLA alumni-centric fund within Alumni Ventures. We’re a community of UCLA alumni and Westwood Ventures. In each fund, we make 20 to 30 diversified deals alongside top VCs. As a preview, today I’ll be going over four things: I’ll introduce the team, I’ll give a market update, I’ll introduce venture capital as an attractive asset class, and we’ll take a look at startup innovation. At the end, there’s going to be a Q&A for any questions, so feel free to send your questions directly to the chat. My colleague Jordan will collect them and we’ll go over the questions at the end.

  And so, for many of us here today, you’ve come to learn about venture capital and perhaps are looking to figure out how to diversify your portfolio, or perhaps you’ve done a few angel investments and would like to join an investment community like Westwood Ventures and get better deal flow. In either case, I’d like to help us think through three questions that I aim to address today. The first question is: is venture capital an attractive asset class to invest in as part of a diversification strategy? The second is: how should one invest in venture capital? And the third: who should I invest in venture capital with?

  So in each, I’m going to address a few questions like what drives venture capital, what institutional investors allocate to VC, and what are historical venture capital returns. As for how one should invest in venture capital, I’ll talk about a strategy of investing with top quartile funds. I’ll talk about diversification and also a disciplined scorecard when evaluating deals.

  
  So on the— Westwood team. The Westwood team is made up of myself and Jordan McCarthy, who is very experienced at AVG, as well as our senior partners, Darren, Stacy, and Dan. My background, which I’ll go into more detail on the next slide, is 15 years of investment strategy and strategy experience in the U.S. and China. I started my venture career at DCM. It’s a $4 billion AUM institutional VC firm. A number of my investments have had large exits such as Cruise, Palantir, and Life360.

  When I was at DCM, I learned under a lot of great mentors—people like Dixon Doll, who was the past NVCA chairman and is now the chairman of Menlo Ventures. He recently won the NVCA Lifetime Achievement Award. Another one of my mentors is Ruby Lu, who invested in Kuaishou, which was one of the largest IPOs this year—$120 billion in Hong Kong.

  By the time I left DCM, there were $2 billion of assets managed. I like to think that $2 billion of asset management at DCM was paid tuition for me—learning from decisions with the partners, seeing them doing deals, and seeing the maturation of the companies we invested in.

  I also worked at two VC-backed companies in China, 360 and Anxin. At 360, I worked for the CFO and CSO. I led strategic development and international investing. So Qihoo took 360 private during my time there and later IPO’d again in China. At Anxin, as a corporate development exec, I led $700 million—equivalent to $700 million USD—of fundraising for them, which was the top in cybersecurity unicorns at that time. They just had a successful IPO last year.

  Under investments, I’ve been thankful and blessed to have worked on a number of good investments, including Cruise Automation, which was acquired for a billion by GM, then recently invested in by Microsoft at a valuation of $12 billion. Life360—I also invested in and sourced—it was a mobile location security app and IPO’d in Australia. I also worked on an investment in Palantir, Brave Software, and also two funds: Nona Capital and 1011. 1011, as you might know, invested in Cylance and Darktrace. Darktrace recently IPO’d for $3 billion. So that’s a lot of my prior experience in investments, particularly in the recent years in cybersecurity.

  At UCLA, I studied computer science and did my bachelor’s and master’s there. Most of my time was hidden away in the bowels of Boelter Hall, but I was able to venture out when I was in grad school to Anderson for a few classes.

  
  Also volunteered in a number of activities and served on the planning board at UCLA, the CIO search committee, and also was the Engineering Week Chair. Furthermore, I was trained at the Kauffman Fellows program, which DCM sponsored me for, and from that I have a lot of relationships with VCs from 700 other firms.

  
  And they’re very important. Darren, Stacy, and Dan are all experienced with working with high-net-worth and accredited investors on investments. They’re going to help you walk through your interest and decision-making process for investing in Westwood Ventures. Because they’ve seen so much, including public markets, they can really speak to understanding a diversified portfolio.

  
  So our investment committee—investment committee is very important for us. At Westwood Ventures, we have an investment committee and venture advisors who help us with deal sourcing, evaluating deals, and community development. All of our venture advisors have affiliations with UCLA, and many of them are from Anderson. They are from places like Nvidia, Apple, Monster, Microsoft, and Siemens. So they have deep experience and are very helpful for helping us take a look at technology and deals.

  The takeaway is: at Westwood, we’re led by an experienced investment team with a track record, and supported by many in the UCLA community.

  Now, I’d like to speak about the VC market update, and I’ll share with you recent VC investment numbers, regional trends, and exits.

  U.S. VC investments are at the highest they’ve ever been—over $150 billion in 2020. That might surprise you. So the question is, what drives that? The answer is innovation and change. When platforms change and user behavior changes, it brings opportunity for innovation. And because startups thrive on innovation—and because it requires agility and people that spend extra time to think about these hard problems—startups have a strong advantage when there’s time to change. And startup innovation drives venture capital.

  So when you look at innovation, technology, and business models in a post-COVID world—you may be using, for instance, companies like DoorDash or Uber Eats for food delivery—that’s an example of when there’s a lot of change and new products that need to be created. Startups are able to take advantage of that. And so, as long as you believe that startups will be a big source of innovation, then you’ll likely believe that VC will continue to thrive.

  
  So Southern California’s venture market is now the second largest in the U.S. This slide showcases all the different regions and the trends of venture growth. The Greater Los Angeles area is now tied with New York at $19.3 billion. It’s also the second fastest-growing market at 38.9% year-over-year. You might be surprised to hear that, but it’s true. And the UCLA community is a big part of that. Because of that, Westwood Ventures is able to have a unique advantage for sourcing the best deals in LA because of these UCLA connections.

  
  UCLA and Southern California are a growing part of venture capital, and we saw that in the numbers on the prior slide. I want to share with you a few examples. UCLA—U.S. News now ranks it the number one public university in the U.S. We’re also among the five largest universities in the U.S. in terms of number of alumni. Within entrepreneurial endeavors, we’re top 10 for MBA and top 12 overall. But if we also look at the number of entrepreneurs who are at unicorns, by PitchBook, we’re tied for number five in 2019. Also, UCLA alumni have headed up a number of top companies such as Uber and Honest. And now there are multiple deals in Southern California that have done well—CrowdStrike, Snapchat, Cornerstone, etc.

  So, all in all, venture capital—you know, we should be going long on UCLA and going long on Southern California.

  
  The really important slide to think about—and content to think about—is really about exits. Because yes, you can say, “Okay, yes, there’s a lot of investments into venture capital,” but are we getting exits? And the answer is yes. So you might be surprised, but 2020—even in the middle of COVID—was the largest amount of U.S. VC exits in total deal size: $290 billion of assets in 2020. That might be surprising to you, but it’s really driven by innovation again. In a rapidly changing market, innovation is rewarded. So it’s not surprising that VC-backed startups would do well, because they’re focused on new platforms. And so, a lot of the names that you’re probably invested in or familiar with in the public markets—like Snowflake or Zoom, these companies or Uber—these companies were all venture-backed at one point, and that’s really what’s driving returns.

  Two additional things to note about this: you might be asking, “What else is driving this?” Well, it’s not just startup innovation, but it’s also that startups are now growing bigger prior to the IPO. So if you look at companies like Coinbase, their IPO price was about $100 billion. Kuaishou IPO’d and ended up at $120 billion. So in other words, because companies are growing bigger prior to their IPO, this is leading to bigger returns for VCs that invested early in these deals. So bigger VC exits drive bigger VC returns.

  
  Venture capital, when we look at it over time, has outperformed the S&P over many periods. VC and innovation-driven investing lead to higher returns. And so, when you especially look at the top-performing funds—the top two quartiles, which are the bars in blue—they’re significantly higher than the S&P 500. So the question is: what’s the right strategy to get into venture capital? How do I invest—how to invest alongside these top quartiles?

  
  So when we look at sophisticated institutions like pension funds—for instance, the Packard Foundation—they make significant allocations into venture capital. The Packard Foundation, for example, puts 20% of their investments as a target into private equities, and much of that is in VC. Cambridge Associates recommends 15%. But the issue is, while institutional investors have had access to VC and they’ve been deploying significant capital into VC as a diversification strategy, historically, VC has not been accessible to individual investors. The typical investment sizes for a larger VC fund are $10 to $20 million. So for most people, that’s not really doable.

  What Westwood Ventures and Alumni Ventures offer is a way for individuals to invest in venture capital in a diversified and strategic way—alongside top VCs.

  
  This really speaks to our strategy at Westwood Ventures. We co-invest with established lead investors. When you look at the top VCs, the top 25% get outsized returns. So for us, co-investing with the top VCs is a key strategy of Westwood Ventures. This is the active part of what we do. We source deals that fit our investment profile, and we don’t ever invest alone in a company. We only align ourselves with top investors.

  Who are the firms that Alumni Ventures invests with? It’s people like Sequoia. It’s Khosla. It’s First Round Capital. For example, one of our most recent investments, Steno—in Fund I—we co-invested alongside First Round Capital. So they were the lead investor, and we were a co-investor. First Round Capital, as you might know, was an early investor in Square, which is now about a $100 billion market cap, and Uber, which is about $86 billion.

  Another investment, Ardis—we invested alongside Mucker Capital. And Mucker Capital was an early investor in Honey, which was acquired for $4 billion by PayPal.

  
  So diversification is an important strategy with your venture capital portfolio. Westwood Ventures diversifies across industry, stage, sector, geography, and even lead investors. So in Fund I, we have companies in FinTech like Plaid, enterprise tech like Fauna—which is led by the ex-Chief Product Officer of Okta—and direct-to-consumer plays like Yumi. We recently also had an IPO in Fund I of a real estate company called Compass.

  This diversification strategy really helps us mirror the trends in the market. And many Alumni Ventures investors choose to invest over multiple years. So if you think about Westwood Ventures, in Fund I we’re going to have around 20 investments. In Fund II, we’re also going to aim for that 20 to 30 investments. So when you invest in us over multiple years, you’re going to have a very diversified portfolio.

  
  The process. Alumni Ventures, as I mentioned, we’ve been around since 2014. And we’ve seen thousands upon thousands of deals, and we’ve done over 550. An important part of being a venture capital firm is being consistent and disciplined. So we’ve honed a scorecard that looks at the deal, the investor, and the company to score deals. And this is how we ensure that we’re making good investments.

  I’ll touch upon a few. For instance, the CEO/COO is responsible for strategy, for hiring, for fundraising. If they don’t have the right strategy or can’t build a team or can’t raise money, the company is not going to be successful. An example of a great CEO is Kyle Vogt of Cruise Automation. He was the CEO at Cruise when I did an investment in a prior firm. The valuation was a little bit high, but they were a team that had done Twitch, which was acquired for a billion. So a very strong team. So we decided to back them in a prior firm.

  A second area is capital efficiency. It’s a great way to see if the company has done a lot with the capital that they’ve raised. If they’ve done well, then okay, that might be a candidate for investment. If they didn’t do well, why should we give them more money?

  Finally, for us, probably the most important part is a strong lead investor and a strong partner who’s experienced in the particular area—the lead partner’s expertise, if you will. So if I’m looking at a cybersecurity deal, I would like to see investors who know cybersecurity. For instance, in Fund II, we’re in the process of closing one of our first investments, and the co-investors are top executives in cybersecurity—including one of the co-founders of Palo Alto Networks.

  
  Thank you. So when we look at deals—we just saw that VC investments are at an all-time high, and there’s a lot of change—and we’ve also shared about how we look at deals. I’d like to talk about the attractive sectors. There are four attractive sectors I’d like to talk about in particular.

  One is post-COVID. When there’s change in user behavior and needs, that creates opportunity. So post-COVID-related companies are a part of that. We’re seeing needs in distributed workforce, remote entertainment, even health monitoring.

  Number two is cybersecurity and secure tech. Everything needs cybersecurity. You might have heard recently or seen about the gas pipeline issue in the South—that was due to a cybersecurity hack. And things like that will continue to happen. Having worked in two large cybersecurity companies, I know that attack methods are always changing. So there’s always going to be new needs for better cybersecurity.

  AI-driven enablement. AI is going to continue to drive improved performance and it’s going to do so across multiple industries—through a lot of interesting technology in computer vision, audio and language processing, and increasing human capabilities. Our Fund II will be in a top deal I’ll talk about a little bit later on our syndication side, which is doing an AI chip in a very innovative way.

  Finally, UCLA advantage. Top companies are coming out of UCLA—companies like Uber and Honest—and also Southern California. So as a UCLA alumni-centric fund, we have a natural advantage in Southern California. Areas like entertainment, health tech, and defense—those are areas that we look at. What’s also important to note here is Westwood Ventures is the only alumni fund, school-wise, that is based in Southern California or that has alumni that are largely from Southern California. So what that really helps with is deal sourcing. And so, when there are deals that even other alumni funds do in Southern California, usually we—in all our deals—make sure that we’re investing alongside another Alumni Ventures fund. And so, when there are top deals that are out of Southern California that have a UCLA connection, Westwood Ventures is “tagged,” if you will, on that deal. So we have a first look and a lot of access to top deals.

  
  So, Alumni Ventures. I talked about this a little earlier. We’re a fund made up of 18 alumni funds, including Westwood Ventures. We’ve been around since 2014, so we’re a stable company. We’ve raised $600 million, and we were also the most active VC in 2020 according to PitchBook.

  We leverage each other’s deal flow and we also leverage technology. So one of the benefits from working in a large organization like this is we’ve created sourcing tools that help our investors help us find signals—from LinkedIn, from Twitter, from the web—to identify deals earlier. So every week, every other week, I get 20 to 30 deals from that system.

  Also, the power of the network. We use the power of the network to win deals. So like I was talking about—venture capital—you want to invest with the top-tier, top-quartile VC funds. Well, the question is: how do you get in? Many other VC funds, when they invest, maybe they bring their partner. Maybe they have a small portfolio services team. For us, we bring the power of our network. We have 5,000 accredited investors, 3,500 experts, and 600,000 people in our Alumni Ventures community. So when we invest, we sell them on this volume.

  And so the takeaway here is: being affiliated with Alumni Ventures, and with the network, we’re able to have a more stable platform and stronger reach.

  
  So you might be asking, “Okay, I see venture capital has had a lot of investments. I’ve seen venture capital has had a lot of exits—exits consistently. And Edward, I also believe what you’re saying about diversification and investing with top investors. So the question is, how have you been doing that?” And the answer for Westwood is: yes. Fund I—for Westwood Ventures—we’ve seen lots of strong deals, we’ve been very active investing, and we’ve executed to our strategy.

  I’m going to go into a few of the specific companies listed here to give you—

  
  So Ardius—they provide an automated platform to help businesses claim post-COVID tax credits. And they’ve been growing very, very rapidly. Their team is led by strong UCLA alumni, and I’m good friends with the CEO and the head of product. Their investor was Mucker Capital, which I just mentioned was invested in Honey, which was acquired for $4 billion.

  Another company we recently invested in was Capital RX. They’re basically making the prescription supply chain more efficient and transparent as the industry’s first cloud-native pharmacy benefits platform. So when companies need to buy pharmaceutical products—to buy drugs—right now there’s a lot of incumbents, but the price is not transparent. A lot of the incumbents are making the spread, if you will, in those transactions. Capital RX is changing that. Their revenue growth has been strong, and we have strong co-investors in Edison Partners and Transformation Capital.

  Moxie—they’re an online fitness platform providing everything exercise instructors need to monetize. So studio technology, scheduling technology, music, even a CRM. They’re sort of like the Substack for exercise. Our co-investors there are Bessemer and Greycroft. As you might know, Bessemer is another top VC fund. They invested in companies like Pinterest, PagerDuty, and Life360, which I was a co-investor of—so top investors.

  Finally, Excision Bio—they do CRISPR-based therapeutics to cure viral infections. Their CSO was formerly the head of genome editing at CRISPR Therapeutics, which had a $7.5 billion IPO. Our co-investor is Norwest, which was a prior investor in Uber, Spotify, and Health Catalyst. So if you think about these top teams, interesting areas, top co-investors…

  
  These are a set of our earlier investments in Fund I, which I can talk about and which have had very good traction or we believe will do very well.

  Axiom Space—they’re building the replacement for the International Space Station. Now they’re commercializing low Earth orbit. The founding team is exceptional. They were from the NASA ISS program—for instance, the CEO was the prior NASA ISS program manager for 10 years. This company raised $130 million, so they’re well-capitalized. And we co-invested with C5, which was invested in Shape Security, which got acquired by F5 for a billion, and IronNet Security, which was underway for a billion-dollar-plus SPAC.

  Compass—you might’ve seen Compass, particularly if you’re in the Bay Area. That Compass you see in real estate—as a real estate company—that’s the company we invested in prior to their IPO. So in Fund I, we already have our first IPO in Compass. I think that shows that we’ve been able to select deals that can exit.

  Third is Yumi, which is a high-growth organic baby food provider. They’re like the Gerber of organic baby food—growing very rapidly, double-digit millions in revenue. Very, very good exec team—former Goldman Sachs and Impossible Foods. Our co-investor for that round is Goldman Sachs. This company, we also—what’s interesting is, if you were a Fund I investor, many of you might have had a chance to invest in Yumi because we did a syndication. I’ll talk about this later, but one of the benefits of Westwood Ventures is you get to see a number of deals that we do also as individual investments.

  Finally, Steno—a very exciting company. They do remote deposition services. Executive team previously sold their company to A.M. Best, and they are UCLA-affiliated—UCLA alumni. The co-investor for Steno with us is First Round Capital. They invested in Square and Uber.

  
  So in summary—the question is: is now a good time to invest in venture? Is venture capital a good asset? Well, what we’ve seen is venture investments and exits were strongest ever in 2020. Startup innovation thrives in change. And when we look at institutional investors, they signal that diversification in venture is attractive because they’re allocating 10 to 15% to that asset class.

  
  So the second question that we were asking is: how should one invest in venture capital? Well, the strategy is—we feel we want to invest in a diversified portfolio, and we want to invest alongside top venture firms. But in post-COVID, we do have an intensified focus on fresh capital, on capital management, and strong company leadership. The most recent company that we’re about to invest in—Fund II—was led by a successful entrepreneur. He led his company with a lean team and in low-cost regions that were able to save capital, save money. And we want to see companies that are able to manage the cash well and efficiently.

  
  The third question we asked earlier in the presentation was: who should you invest in? And I believe Westwood Ventures, through the power of Alumni Ventures, is one of the strong choices that you have. Alumni Ventures—again—we’ve invested in over 550 portfolio companies. We have over 600,000 subscribers, including the 12,000 subscribers in Westwood. In 2020, we were the most active VC in the U.S.—sixth most active in the world.

  In Westwood Fund I, which you can see in the investments we’ve done, we’ve shown that we have a very strong start, and we’ve invested alongside top investors and followed our diversification strategy. In Fund II, which we’ve already started to invest in, we have a number of attractive investments that we plan to do in the near term, including a fast-growth AI company with a UCLA investor, a FinTech company in LA with a UCLA lead investor, and a cybersecurity company, which I just mentioned.

  Now, on this slide—Alumni Ventures Syndicate. One special aspect of investing in Westwood Ventures is that it brings the benefit of investing into individual companies. We will be launching a Westwood Ventures Club next week, which is a Westwood investor-only club where we share deals and discuss deal flows of individual companies that we’ve gotten additional investment allocation for, to give our individual investors. So next week, we’re going to be opening up the AI company—a very promising AI company—to our Fund II and Fund I investors.

  So those of you on this call who have already made a commitment to Fund I or Fund II—you’re going to see that deal shortly. If you want to see these top deals, please remember to register and log into the investor portal link that Jordan will be sending out to start the process.

  Now finally—one thing. With these investments, the key terms: Westwood Ventures is an investment opportunity specifically for accredited investors. You can invest anywhere from $50K to $2 million. For Fund II, we’re targeting building a 20 to 30 company diversified portfolio for you—which we’ve already started to do.

  And as startups, you know, take longer to IPO and exit, we are a standard 10-year fund. So when our companies exit—for instance, for our Fund I investors, for Compass—once the lockup period is done after the IPO, if the company IPOs, we plan to get your distributions back and sell off the stock and directly route that back to you.

  So for operations—you might be asking, how do we make money? For our basic operations, day-to-day operations—we have the standard percent management fee.

  
  Per year for the 10-year life of the fund. So that’s 2% for every year, a total of 20. And we also charge a 20% carry—but that’s basically a profit share. So after we get back your money—first, 100% of your money—for us, the aim is that every dollar above that… so let’s say if you put in $100,000, after you get your money back, if we make another $100,000, or $200,000, or $500,000 for you, we get 20% of that above your initial investment.

  So investment is also very simple. You can invest in cash, you can invest through crypto, and even your IRA. 35% of Alumni Ventures investors use their IRA to invest in us. We can also take investments from non-U.S. citizens.

  Now that we’ve covered the key terms, I’d like to ask Jordan to send out that link to the Westwood investor portal, where you can find out more information about our fund, our legal docs, and decide to make a commitment—and also be able to book time with one of our partners to learn more.

  So now, as I have completed my presentation, I’d like to start our Q&A time. I’d like to invite Jordan to share with me the Q&A questions. Feel free to continue to send questions to him. We’re going to try to answer as many as we can. For those that I don’t answer here, I’ll try to reach out to you directly, for those who have asked. And for those who don’t have time now and need to leave—we’re happy to book a one-on-one call with you.

  One of the questions is: what’s the minimum and maximum range for investments in startups?

  So the minimum we plan to invest in a startup is usually around—as a firm, Alumni Ventures—about $100K. Westwood Ventures can go as low as $50K as an investment into a company. That’s usually for a seed deal. What’s the largest investment? Probably a couple hundred thousand.

  Overall, at Alumni Ventures—because we co-invest together with our other funds and we have syndication—our typical investment range for a startup is anywhere from, again, $50K–$100K on the low end to $2–$5 million USD, up to even $10 million USD on a deal. That flexibility in investment amount for a startup, when we talk to an entrepreneur, is very attractive.

  
  The prior in-flight indicated minimum investment $25K for each investment opportunity. This slide indicates minimum $50K. What’s the difference between the two?
  So the prior slide that talked about syndication is when we have an individual investment that Westwood Ventures has already made, and we give that to our individual investors to make. So the $50K minimum is for an investment in Westwood Ventures—that’s the investment into our fund. Now, as Westwood Ventures makes investments and we see other great deals from our other portfolio, from our other sister funds, some of those deals we’re able to get extra allocation, and we’ll give that extra allocation to our individual investors in Westwood.

  So for those who’ve done angel investing, this will be a very exciting part for you. For those who want to do individual investments in companies, but together with Westwood Ventures, this is also one way to potentially get even higher returns, but at a higher risk. So when you think about your base portfolio made up of Westwood Ventures, and you have additional capital, that’s where the additional $10K to $25K comes in per deal. $25K is for the syndication, and $10K is for deals that we show through venture clubs. So that’s the difference between the $25K and the $50K.

  
  So how do we invest through our IRA? We have a company that we work with that is able to take your IRA investments that you can open up an account on. Some of the larger platforms for IRAs don’t have that capability yet, but we work with one that we can help get you set up with so you can transfer your cash from your current IRA to that new higher platform. Jordan can lead you through that process. Many of our investors have done that. Thirty-five percent of AVG investors—that’s one way that you can quickly get diversification.

  
  The question is, Alumni Ventures: 2% per year for 10 years, no matter what, even if ventures exit sooner than 10 years?
  So, yeah. So that 2% fee—management fee for 10 years—that’s taken up front. So when you invest in Alumni Ventures, when you invest in Westwood Ventures, we’re investing that capital over new investments over a period of 12 to 18 months. We’re raising a new fund every year. And so because of that, the investments that we do, we’re taking the fee up front—the 2%—but the company that we invest in, we continue to do follow-on investments in.

  The investments that exit sooner than 10 years—we give that capital back to you. But the fee is on the total amount that you do investments in, but we do return capital to you as we exit. So we don’t wait 10 years to give you your money back. We give you money back as we exit.

  
  The question is, have you ever been a lead investor by series or plan to be in the future?
  Our investment strategy really is to co-invest with top lead investors. So we never do investments by ourselves. The reason is because we construct for you a very diversified portfolio. So we want to make sure that we’re, for instance, investing alongside the top cyber investor—so guys like Ten Eleven Ventures. We’re investing in top early-stage funds—so Sequoia, Accel. We’re maybe investing alongside top late-stage funds—like IVP.

  We want to make sure that when we invest, we’re investing alongside someone who’s a top quartile investor and someone who’s done the due diligence. So our model really lends itself to co-investment in 17 funds.

  
  Funds also participate in the same deals?
  So one of the strong points about Alumni Ventures is, because we have 17 other funds—funds affiliated with Harvard, with Stanford, with MIT—we also see their deal flow. Every time an Alumni Ventures fund, such as Westwood Ventures, invests in a company, we’re going to have at least one other Alumni Ventures fund investing in the same company.

  But we’re not investing in all companies—we’re investing in select companies. And so, for instance, I see a company—our Harvard fund, Yard Ventures, invested in a company where the CEO was HBS, but the investor was UCLA. So that deal—I had a special notification to say that deal is being done. And it happens to be a follow-on investment, which means that it’s an investment that we’ve seen was successful. So that kind of deal access we get as Westwood Ventures by being a part of Alumni Ventures.

  
  One question is also: Can you speak to why these top VC firms allow Alumni Ventures to co-invest with them?
  That is an extremely important question, and I’m thrilled to answer that. So the main reason—there are two main reasons. One main reason is that we can bring the power of our network.

  So if you think about companies—it could be a direct-to-consumer company like Yumi; they sell organic baby food. Their clientele is typically higher-net-worth or higher-income clientele. When we invest in companies like Yumi, we can bring them in front of our own investors—fund one investors, fund two investors—so people like yourself: accredited investors. That kind of exposure to accredited investors, to high-net-worth, high-income people in our community is very attractive to many companies.

  It’s a way that they can get their brand out very quickly.

  The second reason is because we can also do very strong business development through our network. If you think about other VC firms and the partners there, you might have one partner and his or her network. But that is sometimes very limited. For us, Alumni Ventures, we’re leveraging the network across all venture funds.

  So it’s also leveraging—when I do a deal at Westwood, we’re also leveraging experts from Harvard, from MIT, from UC Berkeley. For instance, one of the investments in Alumni Ventures was a cybersecurity deal. Alumni Ventures helped them find customers. For example, they introduced the Chief Data Officer of Rakuten to that company, and they became a customer.

  So that’s the kind of value add—that power of the network is very unique. Other large lead investors normally don’t have that power. They don’t have that network.

  If I were to add a third reason, it’s because our model is very efficient. We’re very quick with investments. We don’t take board seats. We only do co-investments—10 to 15% of a round. So we’re not competing with the lead investors.

  If you have a lead investor, for instance Accel or Sequoia, they would probably compete with each other on a deal. But when a fund like Khosla is investing in a company, and there’s additional capital to put in a round—10 to 15%—sometimes they could put in an angel, sometimes they put in very experienced people in the industry. That’s where we fit in, Alumni Ventures.

  So they see: “Hey, we have another 10 to 15% of the round that we want to fill out.” You know, Sequoia won’t go to Accel—probably won’t go to Accel—to take that because it’s too small for Accel. But for us, as a co-investor, that’s perfect. That’s where we fit.

  Speaker 2:
  So—

  Speaker 4:
  Is this a one-time investment, or are we expected to invest over a period of time?
  For investors in Westwood, you can invest one time, or you can invest over time. Some people—let’s say they choose to try us out for $50K or $100K in the first year. If they like us, they can continue to invest. $50K over an initial $50K—let’s say you wanted to allocate $200K—you could think about breaking that into four pieces, $50K each over four years.

  But you don’t have to invest multiple years. You can only invest one year with us and try this out.

  So a top-tier VC fund—if you look at the historical performance for a top quartile fund—the IRR is really 20% to 30%. That ends up to be about a 3x fund. Now, if we can do 2x for you, that’d be great.
  But again, it’s venture capital—it’s a lot of work. There is risk in venture capital. But as we see from historic returns, venture capital is an asset class that performs above the S&P 500. So it’s our hope that through hard work, through prayer, through the deals that we’ve done, we aim to give you a high performance that’s consistent with a top quartile fund.

  
  To bring in potential opportunities to Westwood, you can feel free to email me directly at [email protected]. If it fits in our model, then great—we’d love to do more deals. Again, when we invest, we’re always investing with top co-investors—sorry, top lead investors.
  So if there’s a top lead VC for that deal, for the next round, that’s a great deal for us to look at.

  Could a deal be included in multiple fund vintages? This is also a very great and very important question.
  Yes, a deal can be included in multiple-year vintages and even follow-on investments in the same fund. One of the most important aspects of VC investments is to back your winners—so it’s continuing to put more money into your winners.

  After you put your first set of investments in—after maybe a year or two, usually two or three years—you’ll be able to see who are the winners. For instance, if we have one of our companies, let’s say RDS, if RDS’s next round, let’s say NDA or Sequoia or a top fund puts into them, and in the next round we can co-invest—we look for those opportunities. We try to get pro rata rights to continue to invest and back our winners.

  I’ve seen that strategy at DCM. I’ve seen that strategy at Sedona Capital and these other funds I’ve been affiliated with. That’s a winning strategy, and yes—the answer is yes.

  So that means winners from Fund One—Fund One can continue to back—and also Fund Two, Fund Three, Fund Four, or subsequent funds can take a look at winners in our portfolio. And that’s true not only in our portfolio, but also for winners in Alumni Ventures’ other portfolios.

  So that deal I talked about with Yard Ventures, which is the Harvard-affiliated fund—one of their winners, because they had a UCLA investor—that deal came to us and that deal will be in Fund Two.

  
  The total dollar target for Fund Two, given that individuals can invest over time?
  We’re looking anywhere from $3.5 million to $5 million+ target for Fund Two. These funds—we plan to invest in over 20 or 30 deals for the fund, so that’s going to be $100K to $200K per deal. That’s our target, and we’re hoping to meet or exceed that.

  How many individuals are typically involved in scoring deals?
  Alumni Ventures has two different methods—one for seed deals and one for core deals.

  For seed deals—because seed deals move very quickly and the investments might be shorter or smaller—we have the sponsor team. For instance, it would be myself and then two other AVG managing partners or senior executives who score the deal. So it’s three people that score a deal for seed deals.

  For our core deals—meaning ones that we invest more in, or it’s a Series A and afterward—we have the sponsoring team. So it would be Westwood Ventures, one other AVG team (Harvard, MIT, Berkeley, etc.), and while I’m there, executives will score the deal.

  We also have our investment committee—Westwood’s investment committee. Usually, it would be two to four people from our investment committee who also score the deal. We aggregate those scores, and if it passes those three groups, then we can do the deal.

  Do deals have to come from UCLA, or is there flexibility on deals outside the UCLA community?
  Our preference is UCLA deals, but as a venture fund, my number one goal is returns. So I’m going to invest in the top deals I can find, whether they’re UCLA-affiliated or not.

  But because Westwood Ventures has a strong UCLA alumni community, we happen to be able to access top UCLA-affiliated deals a lot more easily. That’s taking the best advantage of both worlds—we have the flexibility to invest in top deals regardless of affiliation, but we also make an effort and benefit naturally from UCLA access.

  Okay. If there are any other questions, feel free to add them. I see that we’re heading up on our time—a little bit past the 45-minute mark.

  It was great to get the questions from everyone here—a lot of thoughtful questions. Again, I think on your venture investments—everyone has a different situation, so you should talk with your financial advisor.

  But when thinking about the three questions—I go back to the three questions:

  • Is venture capital a good asset class to invest in?

  • How should one invest in venture capital?

  • And who should you invest in?

  I think we talked about that today. You can make your own conclusions, but we talked about the strength of venture capital, historic returns, the number of exits being high, and investment continuing to be high.

  We talked about the strategy of investing with top quartile funds and diversification and AVG. And we also talked about our team, my background, our Fund One investments, and our strategy.

  So I hope you can join us for Fund Two. Again, Fund Two is already starting investments, and we also have a syndication coming up. Please click on the link that Jordan sent.

  If you have any other questions, I’m happy to answer them.

  I see another question about great startups. I’ll answer this last question and then we’ll close the session.

  The question is: If you come across a great startup, can you facilitate an intro with a top lead investor instead of waiting for the investor to find the startup?
  The answer is absolutely yes.

  One of the things that I do—and I work to do—in our investments is, once we find a great investment, I try to facilitate that to my network. My network includes people in the Kauffman Fellows Program. You can search for that—Kauffman Fellows Program includes investors from 700 other top funds.

  From my network—recently I was working on a sports-related deal, ex-Bain alum. I started my career at Bain right before DCM, so there’s a lot of alumni from Bain & Company that are doing startups.

  One of those people—the person who actually hired me into Bain—reached out to me and wanted to talk about investing. So I said, “Okay, well, I want to get in your deal. I’m going to work to introduce other investors to you.”

  So I reached out to my Kauffman network in that area—it happened to be a sports-related deal. I got four introduction offers to other sports-related VCs, and I made that offer back to the company I was trying to get into.

  That’s one of the ways that we try to win.

  
  So if there are no other questions, I appreciate everyone’s time and thoughtfulness in this discussion. Please again click and register on the link that Jordan sent. We’ll send out a link to this webinar.