Invest in the Future with Expo Ventures

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  Speaker 1:
  Hello and welcome everyone. I’m Alim Giga, partner at Expo Ventures. Expo is an Alumni Ventures fund for USC alumni and friends. I’m a USC 2007 alum and excited for today’s chat. Thank you very much for joining us for this introductory webinar for Expo Ventures Fund Three. Working behind the scenes on the call today is Emily Hamilton, who is Expo’s Community Manager. We do have a fair amount of material to get through today, so we don’t expect to get to questions live on the call, but Emily will be collecting them throughout the webinar, so please enter yours using the chat function on your screen. We’ll be able to follow up promptly with an email response. We look forward to working with each of you who may decide to invest with us and again, thanks for being here today.

  First, I need to briefly get some of the legal notices out of the way. We’re speaking today about venture investing in our Expo Ventures Fund Three and our views of the associated landscape. This presentation is for informational purposes only and is not an offer to buy or sell securities, which is only made pursuant to the formal offering documents for the fund. We ask that you please review important disclosures in the materials, which we will be providing to you following today’s webinar. You can access them by using the link in the materials or going to avfunds.com/disclosures.

  Before we get started, I’d like to go over a few housekeeping reminders. You won’t be on camera, and we’ll be muting everyone throughout the entire presentation. We’re recording today’s webinar, and afterwards we’ll follow up by email with the link to the recording as well as a link to our Fund Three data room where you can review additional materials about the fund. As far as the agenda for today’s webinar, I’ll begin with an introduction to Expo Ventures and provide some background on Alumni Ventures’ approach to venture investing and why we think investors should consider adding venture to their portfolio. I’ll introduce the members of the Expo team, we’ll talk about our strategy for building great venture portfolios for our investors, and then we’ll offer some highlights of Alumni Ventures portfolio companies with USC connections and provide some details on how to invest in Expo Ventures just to introduce Expo and what we do.

  We are fundamentally a venture fund that focuses on powering founders in and around the USC community. We seek to build wealth for USC alums and friends and family by bringing professional-grade venture to the individual investor and building diversified portfolios of venture-backed businesses that are associated with USC and beyond. Venture is just too important an asset class to be left to institutions or the ultra-wealthy alone. It’s been our ambition from the very beginning to democratize access to venture. We do this by raising an annual venture fund, and we’re currently raising Fund Three for Expo. We’re helping individual investors get into the venture asset class, which historically has had very strong returns but has been extremely difficult for individual investors to access. We do this in a simple way: you write a single check, the Expo investing team invests that capital over roughly the next 12 to 18 months to create a portfolio of 20 to 30 venture-backed companies diversified by sector, stage, and geography.

  As we get further into the presentation, I’ll explain more about how we actually build that portfolio just as we’ve done successfully with previous funds at Expo. Expo is part of a larger organization called Alumni Ventures, which is the world’s largest venture firm for individual investors. Alumni Ventures has raised more than $1.3 billion and is consistently ranked by PitchBook as one of the most active venture funds globally. What’s really important about our approach to venture is that it’s network-powered venture capital—a network that’s built around alumni communities. To date, we’ve built venture funds around roughly 30 different alumni networks, and that number continues to grow. Today, the Expo community includes more than 6,000 people who are part of our total universe of more than 750,000 people across all of Alumni Ventures. We leverage the strength and value-add of that network, along with the experience and wisdom of our investment committee, to gain access and invest in very competitive and compelling venture deals. And then we work really hard to leverage the network to support and empower our portfolio companies as they grow. We also have a fellows program that allows USC alums interested in venture capital to learn the ropes from the inside. It’s a great experience for fellows and a way to give back to the USC community.

  Moving now to the Expo team. I’ll start by giving you a bit of my background. I’m Alim, a partner on the team. Before joining Expo, I worked at American Express Ventures and GE Ventures focused on enterprise B2B, FinTech, and AI investments. Prior to investing, I worked in tech at Google managing a hundred-million-dollar book of business, working with large-tier advertisers, helping them grow their online business. I also spent time at Instar Logic, a startup backed by Andreessen and Kleiner Perkins, where I focused on business development and partnerships. The company was later acquired by Akamai. My connection to USC is from my double bachelor’s degrees from the Marshall School of Business and Leventhal School of Accounting, which is where I first became interested in the startup entrepreneurial ecosystem. I’m excited to be part of the Expo team and cultivate a strong portfolio from the USC network.

  The team also consists of Todd McIntyre, who is an experienced venture investor with more than 20 years of early-stage tech company operating experience. He has worked across capital structures all the way from seed-stage investments to public offerings. Prior to Expo, he was the founder and managing partner of a life sciences and digital health venture fund that was backed by one of the largest and best-known private investments globally. We also have Naren Ramaswamy. Previously, he was a venture investor at DCVC, a $3 billion assets-under-management fund focused on deep tech investments, which also has several co-investments with Alumni Ventures. Prior to that, he spent time at Apple and Tesla. In addition to Todd and Naren, working behind the scenes today is Emily Hamilton, our Senior Community Manager. Emily is an important part of our team, who is the day-to-day point of contact for Expo and investors.

  She does a great job of making the investment process smooth and seamless for all of you, as well as answering any questions that arise both during and after your fund investment. She’s a helpful resource if you should ever have a question about your investment in any Expo fund.

  So why invest in venture capital? We believe venture investing is smart investing for four key reasons. One is performance. Obviously, with a financial product, the goal is to make money—and that’s what venture capital has historically done very well. In the 5, 15, and 25-year periods ending in 2020, venture has outperformed public equivalents, which is one of the reasons that venture continues to attract strong interest from institutional investors like university endowments and pension plans. A second very important reason to consider investing in the venture capital asset class is that venture is not tightly correlated with other assets.

  That is to say that venture tends to move out of step with large-cap equity stocks like those in the S&P 500 and the bond markets—meaning that if the stock market tomorrow or next week has a large gain, it’s not going to have a material impact on the venture capital market. And by the same token, if the stock market makes a big move down next week, it’s also not likely—so long as the historic trends continue—to have an impact on the venture capital market. As a result, institutional investors have seen venture capital as another asset class that is different from and acts differently than the public stock market or the public bond market. And a large part of that is because, of course, venture capital is a very long-term asset, so today’s market volatility likely won’t have an impact on our portfolio companies, because we are really looking five to ten years out on the investment horizon.

  A third reason is that if you look at some of the largest tech success stories of the last decade or so, you can see that the bulk of the value creation occurred while these companies were still private. They were already very mature by the time they got to the public markets. This is a fundamental change that occurred over this period, because there are now more capital sources to support venture capital-backed businesses later into their development, so they don’t need to go to the public markets for expansion capital. That’s why we think it’s important for investors to have access to the venture capital asset class so they have an opportunity to participate in some of the private market value creation.

  Finally, we’ll talk more about our portfolio diversification strategy in a later slide, but industry data shows that diversified VC portfolios have better risk-reward profiles. And it’s these diversified strategies that continue to attract capital from sophisticated institutional investors.

  Alumni Ventures has 10,000 individual investors—that continues to grow. We are America’s largest venture firm for individual investors. Since 2014, we have invested in over 1,400 companies, and according to PitchBook, we have been the most active investors in the US the past two years. We have a dedicated team of 40 investment professionals that are supported by 80 employees that help through investor relations, engineering, and fund accounting to name a few. Alumni Ventures is being recognized by well-established third-party organizations such as CB Insights, a leading platform that covers trends and insights about the venture capital industry. Recently we were named in the top 20 VC firms in North America alongside notable VC firms like Accel, Andreessen Horowitz, and Kleiner Perkins.

  So just to double-click on venture returns, this is a chart of the internal rate of return comparing average venture capital performance to the S&P 500 index in each of 5, 15, and 25-year periods, respectively. What we can clearly see over this stretch of years is that, very consistently, the venture capital asset class as a whole—represented here by the green bars—has outperformed the S&P in all of these timeframes. It’s important to remember that venture investing is for the long term and requires patience. For that reason, we are not market timers. Instead, we take a disciplined, consistent, and process-based approach to sourcing and investing in the best venture deals. Now, this analysis is obviously based on historical returns information, and we can’t make guarantees about future performance, but as a firm, we have confidence that venture is a noteworthy asset class to consider adding to your portfolio.

  A core part of our investing model across all of our network—and this just makes sense—is that we co-invest alongside other established venture capitalists, many of which are top performers.

  We don’t lead rounds, we don’t take board seats, and we are not negotiating terms with entrepreneurs. We are pure co-investors, and we co-invest actively with well-established firms. We care a lot about the lead firm’s expertise at the stage and in the sector in which we are investing, and we look closely at the syndicates that are formed around the deals in which we are participating. It’s a key part of our decision-making process. And we’re just showing some examples of funds we’ve invested with in the past. You’ll see a lot of names I’m sure you’ll recognize as well-established firms in the industry, including Andreessen Horowitz, Khosla, NEA, Union Square Ventures. But of course, there are many others. As you can see, we’ve now done dozens of deals with these firms, and we’ve earned our way into these investment opportunities and established ourselves as a true co-investment partner.

  Our investment team is made up of over 40 experienced professionals. We organize these experts around specific strategies focused on the alumni networks of top universities. This provides a few key advantages. First, it allows us to serve as investors for the alumni of these schools—individuals who have gone on to start or join innovative companies. Second, it creates valuable connections for us in the entrepreneurial ecosystem, since graduates of these institutions are often leaders in starting promising new ventures. We co-invest as part of a financing round. It enables us to become aligned with founders and leverage our school-specific alumni networks on their behalf. Imagine closing a round and suddenly having access to a built-in group of potential partners or advisors from the alma mater. This unique structure allows us to provide that post-investment.

  Our aligned network plays an important role in value creation: making warm introductions, sourcing deals, providing diligence expertise, and more.

  After nearly 10 years perfecting this approach, our network continues to grow and become more powerful. This flywheel is why we’ve been able to identify and invest in particularly promising opportunities, even as others pull back. As our network expands, its worth increases exponentially. We are proud of the community we’ve built and believe it enables us to generate differentiated returns.

  So for Expo Three, I’ll just summarize the key terms and logistics if you decide you’d like to join us as an investor. We really try to keep things simple, easy to understand, and transparent. We charge the equivalent of a 2% management fee over the 10-year life of the fund, collected in a single capital call once. And until we return all of your capital back to you, there’s a 20% share of profits for Alumni Ventures. Typical first investments are $50,000 to $100,000, but we accept investments from $25,000 to $2 million.

  Speaker 1:
  Again, we would encourage you to think about your long-term investments and what percentage of that you might want to put into the venture asset class. You can invest with cash or through trust and retirement funds, and we can also accommodate investment vehicles designed for non-U.S. citizens. There is a regulatory cap on the number of investors we can allow into Expo, so if you’re interested, we definitely suggest you commit early. It’s important for us to know you’re interested so we can hold a spot for you.

  Providing a quick summary of what Expo Ventures Fund Three will look like: it will consist of 20 to 30 investments across seed, early, and growth deals across a variety of sectors. It’s a 10-year fund, fully invested over 12 to 18 months. We keep a portion for reserves to back our winners. Our investment minimum is $25,000, and we see on average $50,000 to $75,000 for our investors’ amounts into the fund.

  Our portfolio-building strategy has been the same since Fund One and will continue to be the same for Fund Three. That is, we seek to build in every fund vintage a portfolio that’s diversified across sector, stage, and geography. We firmly believe that broad and deep portfolios help minimize risk and maximize opportunities for return.

  In terms of stage diversification, we typically try to invest roughly 60% of the primary capital of each fund into seed and early-stage companies. As you might expect, we tend to see more failures in this early category, but these are actually the companies where you have the potential to deliver outsized returns. On the other hand, with growth-stage companies, the investment risk goes down a bit because we are coming in at a later stage when there’s more data around the performance of companies at this stage of maturity. That’s especially true for our seed and early-stage companies that move on to later rounds, because we have a lot of confidence in them and we continue to invest our reserve funds in the winners.

  That said, the returns from growth-stage companies may not be as large as the early-stage investments, so we’re really trying to build a balanced portfolio with the goal of optimizing the risk and return profile. We also seek to balance our portfolios by investing across sectors, especially ones with high innovation areas like biotech, health tech, robotics, artificial intelligence and enterprise SaaS, fintech, blockchain, cleantech, and others—companies that are potentially paradigm-shifting businesses.

  We also diversify across geography, so just because we’re based in California and we’re a USC fund does not mean that we’ll only invest in California companies. We do deals from startup hubs in the U.S. like New York, Boston, Seattle, Austin, and others. We also do a few international deals in places like Latin America, Europe, and Asia.

  Finally, it’s worth mentioning that another layer of diversification can also happen through the additional portfolios. Over time, many Expo investors choose to invest over several fund vintages, and that’s actually one of the benefits of our annual fund vintage model. It’s easy for you to add additional fund exposure and diversify across time by investing on an annual basis if you wish.

  So now let’s talk about how we get access to great investments for our portfolios. As I already mentioned, Alumni Ventures is a leading venture capital firm focused on investing in companies founded by graduates of top-tier universities. With over 10,000 individual investors and 1,400 founders in our portfolio of companies, we have built an extensive network with the startup and venture capital ecosystem.

  Our alumni-centric approach creates a powerful nexus of connections, empowering startup founders by providing not only capital, but also access to a network of over 750,000 community members from leading universities. One of our key differentiators is this highly engaged community of investors, entrepreneurs, and operators. With around 120 full-time employees, our team leverages this network to provide unparalleled resources and support to the startups we invest in. We believe our value-add is highly appealing to entrepreneurs, as we provide one of the strongest Rolodexes in the venture industry.

  As a core part of our venture product, value proposition is connecting portfolio company founders to advisors, potential clients, partners, and future employees. Through our community events, digital networking platforms, and personal introductions, we empower entrepreneurs to build relationships that help accelerate the growth of their companies. Beyond connections, we also have an in-house team called CEO Services that helps our portfolio companies operationally. They leverage their expertise and our community to aid with recruiting, marketing, product development, and other key functions.

  In summary, Alumni Ventures is differentiated by our engaged alumni community, robust platform for connectivity, and hands-on support driving growth—what we believe is a truly unique and compelling value proposition in venture capital.

  Now, to give you an idea of how all this comes together, we’d like to highlight some of the great investments that have resulted from our network-powered approach to deal sourcing. Let’s highlight a few Alumni Ventures deals that have a USC connection.

  Let’s start with Future. Future is a personalized asynchronous training app that allows people to train at their own pace at a much lower cost than traditional personalized training. Future recently partnered with OpenAI to offer AI-assisted fitness coaching with a human in the loop. That allows Future to provide personalized training at $79 a month—or $3 a day—compared to $150 for traditional training each session. The multiple on cash invested for Future has grown 2.5x. The company is backed by Kleiner Perkins.

  Cohere is an AI company that specializes in developing large language models and AI solutions for enterprises to transform their products with AI that unlocks a more intuitive way to generate, search, and summarize information than ever before. Whereas OpenAI is more consumer-focused, Cohere is focused on enterprise companies. Investors include Index Ventures and NVIDIA. The multiple on cash invested for Cohere is 2x since we invested.

  Next, we have Turing. Turing connects top companies and talent together to build, train, and scale technology using proprietary AI and machine learning. They’ve built an expansive network with millions of remote professionals. Combined with product and industry experts, they’re able to efficiently solve complex and intelligent business challenges in days, saving valuable time and resources. The company is backed by Foundation Capital and Founders Fund. Since investing in the company, the multiple on cash has grown 7x.

  One of our more recent investments is a company called Distributional that is tackling enterprise AI testing. Distributional’s core product aims to detect and diagnose AI harm from large language models and other types of AI models—attempting to semi-automatically suss out what, how, and where to test models. The software offers organizations a complete view of AI risk in a pre-production environment akin to a sandbox. Investors include Andreessen Horowitz and Two Sigma Ventures. 

  If you have questions, you’ll be receiving an email after this webinar with information on how you can talk to one of our senior partners directly. They’re more than happy to talk about your specific situation and answer any questions that you have about Expo.

  We want to respect your time today, so with that, we’ll conclude this webinar and close by just emphasizing that if you’re interested in investing in Expo, we would love to hear from you. Please follow the link we’re providing in the presentation materials, which you can also find on our website, to review our fund documents. If you have any questions about the fund, please book a call with me or one of my senior partner colleagues, who will be glad to speak with you.

  Thanks again for joining us today and for your interest in Expo Ventures. Be safe and have a great remainder of your day. Bye all.