An Introduction to Mirror Lake Ventures

Frequently Asked Questions

FAQ

• What is the transcript for this webinar?

  Speaker 1:
  Welcome everyone. I’m David Beasley, your managing partner, but I want to quickly hand things off to our senior principal Lucas to preview our agenda. Then we will both dig in on introducing you to the fund. Lucas.

  Speaker 2:
  Thanks David. Just a reminder to everyone, this is not an offer or solicitation and is intended for information purposes only. Interested investors can access investment materials through our website or by booking a call with us. I also just want to let everyone know that we have about 28-ish minutes of prepared remarks if we talk really fast, which will leave a couple of minutes for Q&A, and we’re happy to stay a few minutes longer if necessary. Please submit your questions through the chat feature and David will take point on answering most or all of them while I provide additional color if necessary. So with that, let me quickly walk through the agenda for today. In a moment, David will do a 90-second commercial on Alumni Ventures. Then each of us will give you a minute or two on our backgrounds, and then we’re going to highlight what network-powered means and why our model is great for investors. We have seven slides just on this because it absolutely is our differentiator and our competitive advantage in the marketplace. And then we’ll address why venture is important to a well-diversified portfolio, and finally, how and why to invest with us. David.

  Speaker 1:
  We’re going to move fast, but we’re recording and we’ll be sending this out, so feel free to go back and rewatch the parts you may have missed, read the fine print, or book a call with us to learn more. I will formally introduce myself in a couple of minutes. For now, I want to take a quick commercial break. Alumni Ventures has made venture capital accessible to accredited investors by leveraging affinity connections from alumni of top universities. We access great deals, which helps us assemble diversified portfolios targeting the future economy. In just a little over seven years, or about the time that I’ve been here, we’ve become the most active investor in the United States and the largest VC for accredited investors in the world. Also, we were just ranked by CB Insights as a top 20 VC ahead of Kleiner Perkins and Benchmark. We’re raising and deploying around 200 million per year, investing in 300-plus companies.

  We have more than a billion dollars under management and that is just the beginning. Our key competitive advantage is the 625,000 active members of our AV community, 3,000 and 6,000 of which bleed Scarlet and Gray and Maize and Blue colors respectively, who can help effectuate positive outcomes for those portfolio companies. With this actively engaged group, we’re likely one LinkedIn connection away from anyone our founders may want to meet. Alumni Ventures is network-powered VC at its best, creating a virtuous circle of value. So we’re building something great here and we would love anyone and everyone who hears our message today to be a part of our story in some way, either as an investor, a deal finder, a fellow, or even just an engaged community member we can activate to help our companies succeed. So welcome everyone. Thank you for carving out 30-ish minutes of your busy day with us. Lucas, can you share a minute or two of your background and I’ll do the same?

  Speaker 2:
  Yeah, happy to. So for our OSU grads in the audience here, don’t hold it against me, but I am a University of Michigan undergrad, and after a few years cutting my teeth in investment banking, I made my way to Evanston to get my MBA at Kellogg where I focused on finance and entrepreneurship. While I was in school there, I launched a marketplace business in the gaming space. I won pitch competitions and had some pretty good traction, but ultimately I learned how hard it is to be a startup founder. I wound up operations for that business prior to graduating and developed a lot of founder empathy in the process. I did want to get more experience on the operating side, so after school, I joined a co-living PropTech startup backed by Coastline Founders Fund called Bungalow and ran market operations there for a couple of years. Then in the beginning of 2021, as VC dollars flew into digital health, so did I. I built out the business operations org at a diagnostic startup called Let’s Get Checked and saw some awesome growth there over two-plus years. Now I find myself on the other side of the table working with David and Mike, who’s not on the call today, and I love working with the two of these guys.

  Speaker 1:
  Thanks Lucas. We feel grateful and lucky to have you too, just like JJ McCarthy—definitely worthy of a first-round draft choice for us. And despite being rivals on the field, these two communities are definitely collaborative teammates when it comes to building incredible venture portfolios. But I’m going to digress and address that in a little bit. Look, to be successful in your career, I’ve always been advised to surround myself with hardworking, humble heroes—people with grit, high integrity, and an element of scrappiness or determination. I think that’s clearly the case here with Lucas and Mike.

  For anyone who doesn’t know me yet, like Lucas, two Big 10 degrees, but for me both are from Northwestern and both are journalism. Right out of grad school I built and successfully exited from a newsletter company, which was my foray into finance and entrepreneurship. From there, I became a professional money manager. Then in 2002, I built my own firm, which quickly evolved into a boutique merchant bank. But by the end of 2016, the only thing I was having any fun doing was investing in venture-stage businesses, trying to leverage my own social capital and intellectual capital to advance the initiatives of those companies and effectuate positive outcomes for me and the syndicate following me into those opportunities.

  It was right around that time that I was approached by Alumni Ventures and the rest is history. Multiple funds completed, 170-plus portfolio companies, 242 investments if you include follow-ons, more than a hundred million dollars under management, en route to having the most capital deployed and the best IRR under the Alumni Ventures umbrella. Not the Stanford Fund, not MIT, not Harvard—it is the little engine that could be right here in the Midwest, and we are excited to get more Big 10 schools participating with a chip on our shoulder to keep competing with the Ivys and the Stanford/Cal Berkeleys. We intend to maintain that success with all of you. Mike, by the way, is also a Big 10 alum. He is a Hawkeye. Lucas, back to you.

  Speaker 2:
  So I’ll shift gears here a little bit. One of the fun things that I get to do every day is collaborate with really smart people. In addition to who you all see on this webinar, my colleagues running each of the other alumni funds are all investing from the same playbook that we are. So that puts 40 other investment professionals in the field uncovering incredible opportunities that we get to invest in as well. Almost a quarter of our portfolio will be deals that we cherry-pick from the best of what we see from our sibling funds, which is probably the perfect segue for David to talk about our process—how one of our deals gets into the portfolio.

  Speaker 1:
  Thanks, Lucas. We do look at about a hundred deals per month, looking for two key guardrails. One is a high-quality lead investor. Two is an alumni connection we can leverage to gain access to the opportunity. Of the hundred, maybe four or five make it to the next phase of underwriting, which is us talking to the founding team and then ultimately the lead investor. And this may come as a surprise to many of you, but we actually learn more from the lead investor than we do from the founding team, primarily because the founding team is pitching us, spinning everything positive, whereas the lead investor is helping us understand the risk factors, why they priced the deal the way that they did, and how they intend to provide positive outcomes for the investment, helping the company overcome those identified risk factors.

  After we talk to the lead investor, we score the deal with our proprietary scorecard. Two will make it through our scoring process. One or both may make it into our portfolio. By the way, we score the deal as a team, debating both the merits and the risks. Then our investment committee will score the deal. Lucas can talk about the investment committee in a moment, but one other team at AV will also score the deal—all done to avoid confirmation and sunk-cost bias. If the weighted average surpasses our threshold score, we greenlight the deal and we get ready to fund. Lucas.

  Speaker 2:
  Yeah, so briefly on the investment committee, and then David, maybe you could give a bit more color on what we’re assessing through the scorecard.

  Speaker 1:
  Yep, happy to do that.

  Speaker 2:
  So the investment committee is composed of investors from the fund who have deep domain expertise in areas where we see significant deal flow. Many of them have also been professional investors in the past, but taken together this process helps us to avoid things like adverse selection within the fund.

  Speaker 1:
  All of the IC members, by the way, have been hand-selected by me. But to Lucas’s point, let me go one step deeper on the scorecard. Because we are a high-velocity model, I don’t want our speed to be mistaken for a lack of process. In fact, we have a rigorous process—but an efficient one—and one that is being enhanced by artificial intelligence. We’ll save those specific details for another webinar. Anyway, our scorecard is assessing four key things, in no particular order of importance.

  We’re looking at the deal: valuation, runway, round composition.
  Two, we’re assessing the lead investor: the quality of the firm, the conviction of the lead based on the size of their check (comparable to similar deals they have in their portfolio invested in at the same round), and then the lead partner’s track record in that specific domain. We don’t want to follow a B2B SaaS expert into a rocket launch company—which was a very real scenario for us at one point.

  Number three, the company: meaning customer demand, business model, momentum, capital efficiency, and the defensibility and moats to fend off fast followers who are inevitable if the company begins to gain traction.

  Last, but certainly not least, we’re assessing the team, starting with the founder. We’re looking for an opportunity-founder fit first: Is this someone who’s been there and done it before? Do they have an exit in the past? Do they know how to build shareholder value over time?

  We’re also looking for that very elusive “it” factor, which we define as passion, charisma, gravitas, energy, and the ability to clearly articulate a vision for the company in a compelling enough way to attract key human resources and enough capital to help them tactically execute toward specific milestones for the business. Lucas, I’m going to come back to you—can we talk about how we access these great founders who are obviously leading the great companies?

  Speaker 2:
  Yeah, sounds good. So this slide really captures more about how we sell our way in once we source a deal. I’ll quickly cover how we find these opportunities. We do get a lot of inbound opportunities. David probably gently lets down entrepreneurs every day via email. Mike and I do also through social channels like LinkedIn. So, a lot of inbound for sure, including our entrepreneurs portal where we get two to three submissions per week.

  Our community also sends us deals, and we look forward to seeing what the addition of Michigan and Ohio State bring to us—massive alumni communities. We will immediately try to cultivate that. Our current community is pretty good at finding venture-stage opportunities everywhere in the world.

  The universities themselves also introduce us to companies, and we welcome the addition of these two new schools. They were selected for a reason—there’s great talent coming out of these schools. But to be totally honest, the vast majority of the ones that are coming directly from the university, possibly current students, won’t fit into David’s first guardrail of having a high-quality lead investor attached. So there’s some give and take on that element. David?

  Speaker 1:
  Yep, yep. So to streamline our process and make the best use of our time sourcing, we have ambassador relationships. An ambassador, just for clarity, is someone who attended our alma maters but now works professionally in venture capital. Although Lucas and Mike are redefining that—building relationships even with VC partners and principals who didn’t attend any of our schools but believe in our value proposition.

  Speaker 2:
  Yeah, that’s true. When anyone shares awesome opportunities with us, I definitely don’t hold it against them if they did not land in Ann Arbor, Columbus, Evanston, Iowa City, or broader Chicago at any point.

  So, a natural question you all might be asking is: Why do they share great deals with us? The answer is surprisingly simple—because we share our best deals with them. I think this slide really says the rest.

  Our community wants to be activated to help our companies be successful: revenue-producing customer introductions, filling any HR gaps—those are just a couple of ways that our community helps our companies.

  And let’s not forget our CEO Services team. They have a set of tools that help us use our network to propel our portfolio companies. There’s a jobs board that gets 1,000-plus hits each month, marketing materials like a 10-minute podcast interview which we then share with our entire community and boost through our own social media channels.

  My personal favorite is being able to work closely with CEOs to understand who in our network of almost 625,000 alums from top-tier universities could be a mutually beneficial connection—and seeing the founder’s excitement as we make those introductions.

  Speaker 1:
  In the interest of time, we’re going to fly through the next few slides since we touched on many of these topics already. But here’s a list of notable stats that should give you some validating comfort looking at these numbers. Lucas, I guess we’re not a startup anymore ourselves, although we definitely operate like one.

  Also worth noting, we are coast to coast as Alumni Ventures—with offices in Boston, New York, Chicago, and Menlo Park—and our community is also worldwide, so it’s really hard to hide innovation from us. Lucas.

  Speaker 2:
  Yeah, so moving from size to performance here: historically, venture has outperformed the S&P 500 and is largely uncorrelated. But I don’t want to be dismissive or cavalier about this fact.

  To create context—it is extremely difficult for any fund manager to beat the market. Really good VCs can beat the S&P 500. As a company of disparate funds taken together, we are doing that at Alumni Ventures. Great VCs can do even better.

  And as a quick sidebar, I think people are flocking to our funds specifically because of our track record (which we will cover on the next slide). But I think people are investing with us because we are putting money to work for outcomes five to seven years from now. So the market conditions today really only affect us in ways related to valuation and survivability of the portfolio companies.

  In other words, non-correlation with the broader public markets.

  Speaker 1:
  I just want to show you all this chart and want you to focus on our team’s track record since our first fund inception in 2017. Note all the qualifiers at the bottom in fine print—you’ll be able to stop the recording when we send it to you to read those.

  But to create more context from the previous slide, Lucas talked about how top quartile firms can double the S&P 500. As a team, I think we’re on track to get there. When I have one-on-one conversations or even in my weekly Friday office hours, I tell everyone my goal is to double the S&P 500 over the life of the fund and triple everyone’s invested capital.

  If we match or do better than that, we’ve done our job. And speaking of realized gains, Alumni Ventures as an entire firm is top quartile in DPI (distributions to paid-in capital), or in other words, realized gains. Focus on the right-side graphic here.

  In summary, it means as an entire firm, we are among the absolute best—top 25% in the world—returning capital to our investors. Lucas.

  Speaker 2:
  As much as our investors love getting distributions (me too, by the way), they also like diversity—and we deliver that deliberately, investing across stage, industry, geography, and lead investors.

  We’re targeting 25% of our capital in seed, 50% in early growth, and 25% in maturing growth or opportunistic deals. We also keep up to 25% of our capital in reserves to keep investing in our companies that are signaling success.

  This all but ensures that we maximize our investment in our winners, which, according to Harvard Business Review and other sources, is the number one way that VCs optimize returns for investors.

  Speaker 1:
  Another distinguishing factor for us is we don’t lead deals, set market terms, or take board seats. That allows us to run a quick, efficient process after a data room has been stood up and the lead investor has spent three to six months deep-diving on diligence, stress-testing the software, talking to customers, etc. We come in when a term sheet has been signed, and if you look at the middle paragraph here, these are just a few of the leading firms we’ve invested with in the past year.

  One thing that’s notable here is that venture is a hit business—or a power law business. A third of our portfolio could be responsible for the vast majority of our return. So every deal we do has to have the ability to pay back the entire fund.

  A couple early examples are BlockFi and SonderMind. BlockFi returned more than 96x our original investment in realized gains. It was our smallest investment in Fund One, but returned nearly all of our invested capital when we exited that company in the secondary market. SonderMind, which you see featured here, is another good example. Our original $242,000 investment is worth more than $22 million in our portfolio, almost tripling that entire fund. Lucas.

  Speaker 2:
  One unique thing about our fund is investors will get access to individual opportunities to invest more into companies alongside us and the notable lead investor. We call these syndication opportunities. It’s an option that you can exercise or not entirely at your discretion.

  But if you have a passion for sustainability, enterprise software, robotics, marketplaces, mobility, healthcare, AI—we will have opportunities for you to boost your portfolio holdings in those deals. Specifically, for every investor in our fund, you will have at least a year to see those investments. The minimum is $10,000 for one of those investments, and note that those are reduced investment minimums versus past years.

  David already talked about a couple of those deals, so in the interest of time, just know that you could see up to two individual deals per month, or throttle that down to one deal per month, or none if this isn’t of any interest.

  Speaker 1:
  Minimum investment in our fund is $25,000. You need to be accredited—meaning you make $200,000 or $300,000 if filing jointly, or have a net worth above $1 million exclusive of the value of your home.

  It is a single close—or in our technical terms, a single capital call—which creates a single K-1. Investors can invest cash, retirement funds, trust funds, and we do have an offshore vehicle for non-U.S. citizens.

  We are set up as a 10-year fund, but we will certainly see capital returns well ahead of that timeline. So, one check in, with the possibility for lots of checks coming back to you. Our current funds are proof of that.

  Checking the time, it actually looks like we’re a little early, so I want to share a little sidebar of why we are winning and why we have the most deployed capital and the best IRR under the Alumni Ventures umbrella.

  This is a story I share with anyone who attends my aforementioned Friday office hours, which is open to all of you, by the way.

  To create a little bit of context first: Back in 2018, I was told by the CEO of Alumni Ventures that me and my fund were relegated to the medium-to-small bucket in terms of dollar size and community. I was told only Harvard, Stanford, and MIT would rise to becoming large funds with large communities, and that resources were being spent to ensure that.

  What he didn’t know was he just told the most competitive person in the company that finishing in the middle of the pack or near the bottom was the best I could hope for, despite the other funds having a year head start on me. We surpassed all of them in 2021 and have never looked back.

  So let me now tell you how. If it’s not obvious from what we’ve shared with you already, it really starts and ends with my team. I’ve surrounded myself with driven, intellectually savvy, hardworking, but incredibly humble humans and colleagues. Everyone on our team, as I mentioned, has grit, ambition, and an element of scrappiness—something I call a collective effervescence.

  And as I view venture investing as a team sport, I can’t think of a single firm in venture more poised for success than us. All of us have been operators. All of us have developed empathy for founders. And all of us have a willingness to outwork everyone.

  If I’m ever asked—which I often am—what sets us apart, what’s our secret, I simply say: We know enough to know we’re not smarter than the other teams or firms. But what we can control is how hard we work.

  If other teams see 500 new deals a year, we are going to try and see 1,000. Seeing more deals refines our pattern recognition, and over time we will win. That is a small example of incremental improvements made every day leading to outcomes that we can claim and be proud of.

  Plus, our friends, colleagues, and classmates—like all of you—are investors in our funds. We owe it to them and all of our stakeholders to do everything we possibly can to ensure the success of our investments. That’s why we are winning.

  And one last thing before I dive into questions: I did make a small declaration to the executives at Alumni Ventures. I told them that these two communities specifically would be massive in two years. So I’m challenging and counting on all of us to grow exponentially from here.

  Now for a few questions. Thanks for sending these, Brandon, and thanks to everyone who sent us questions in advance of the webinar. We can’t get to all of them—expect direct outreach from me to address any we can’t cover specifically today.

  So here we go. First question: Are there specific industries, categories, or geographies you’re focused on?

  This is a great question. In every fund, we are seeking exposure in the following categories—and forgive me, I’m going to rattle off a quick list here. These include but are not limited to cloud services, marketplaces, cybersecurity, crypto, blockchain, FinTech, AgTech, IoT, big data, enterprise software, AI, machine learning, robotics, AR/VR, mobility, cleantech, greentech, e-commerce, mobile commerce.

  Even innovative CPG (consumer packaged goods) are interesting to us. Think plant-based proteins as something that we’re actively tracking. And then, like the overall economy, almost 20% of our capital touches healthcare. For us, that’s pharma, med device, healthcare IT, and most recently, with tailwinds still from COVID, it’s telehealth everything—doctor’s visits, psychology visits, even connected exercise—we’re actively tracking.

  So think of intentional diversity.

  As for geographies: A third of our capital will be deployed on the West Coast with a concentration in Silicon Valley—the center of innovation on our planet and also a place where we have a satellite office. A third on the East Coast with a concentration in New York and Boston, where we also have satellite offices. And the rest everywhere else.

  We are in our Chicago office, so we see almost everything brewing here, but that also includes all across the Midwest, stretching down to Columbus, Ann Arbor, Nashville, Austin, west to Boulder and Salt Lake City.

  We also have a venture scout based in Tel Aviv who sends us incredible opportunities spinning up there. Again, our community is global—so think of it this way: It’s really hard to hide innovation from us anywhere on this planet.

  Okay, timing to invest. I would recommend committing as soon as you can and funding before the end of October to secure your spot. We have had funds in the past oversubscribed, and as markets continue to do great, we expect this one may as well.

  Tell us about the closing process. It’s actually a super easy four-step closing sequence:

  1. Identify the amount you want to invest.

  2. Sign our subscription documents.

  3. Prove up your accredited status.

  4. Fund.

  It’s that easy. We’ve had investors get through the entire process in less than 15 minutes.

  Next question: Once invested, how will I be able to monitor my investment, and how do you communicate with investors?

  After we invest, we have a proprietary investors portal where you have 24/7 access to see how much capital we’ve raised, how much we’ve deployed, and how our portfolio is performing overall. I will also author semi-annual reports, and you can track our deals through our updates written by Mike and Lucas—all found in the portal.

  We are also launching a new initiative called Why We Invested, which will be small one- to two-minute videos that I deliver highlighting the reasons we like those deals. Those are going to get started here in the early part of August.

  Sorry, next question here: What happens when a portfolio company goes public?

  Well, we’re going to have six months to celebrate during our typical lockup period. Then, along with our exit committee, we will come up with a systematic liquidation plan.

  Next question: What’s the capital deployment period?

  I see we’re running out of time here. We will usually deploy our primary capital in about 12 months. We do keep between 20–25% in reserves, as Lucas mentioned, for follow-on investments. We have two additional years to seek out those opportunities—so three years in total to fully deploy our capital.

  In the interest of time, let’s make this the last question: Is this fund only for OSU and Michigan alums?

  Thanks for asking this. My answer is no. Alums are our primary investors for sure, but friends of alums are always welcome. So please introduce us if you know anyone who’s interested in gaining access to venture for their portfolio.

  Thank you all again for taking the time with us today. Please dig into our materials on the website and book a call with me or one of our senior partners if you’d like to learn more. Be well, stay safe, and have a great rest of your week everyone. Bye.