An Introduction to Triphammer Ventures

Frequently Asked Questions

FAQ

• Where is the transcript for this webinar?

  Speaker 1:
  Hi everyone. I’m David Cynn, the Managing Partner for Triphammer Ventures. I’m excited to be able to share with my fellow Cornell community members about Triphammer Ventures, the venture capital market, and why it may be an interesting opportunity for you.

  We’ve had a lot of registrants for this presentation. So while we’re waiting, I’ll take the time to cover our legal disclosure statements. Give me one second.

  This presentation is for informational purposes only. It is neither intended as an offer to sell nor a solicitation for an investment. We’re also not sharing financial advice. Past performance is not indicative of future results. You should consult with your financial advisor on any decision to invest. Finally, our fund is not affiliated with or endorsed by Cornell, nor are any of ABG’s funds affiliated with any other school.

  Now that we’ve covered the legal disclosure, I’d like to start the presentation, as hopefully most of the registrants have joined. I’ll mention that this presentation will be recorded for your convenience, and we’ll send out the link afterwards in case you want to revisit it. For everyone attending live, thank you. I think we’ll get started.

  As a preview, we’ll be going over a few things today. I’ll give an overview of Triphammer Ventures, Alumni Ventures, and introduce our team. I’ll introduce venture capital as an attractive asset class and give an overview of what’s going on inside the VC market. We’ll also have a discussion about how you can access Triphammer as an investor, and then we’ll have a Q&A session at the end. I’d invite you all to send in any questions directly into the chat. My colleague Taylor will collect them, and we’ll address questions at the end.

  Let’s start with a little bit about Triphammer and Alumni Ventures. As you’ll see both names in this presentation, Triphammer Ventures is a part of Alumni Venture Group, or ABG for short. ABG is the parent company that has $600 million under total management and is made up of 18 alumni-centric funds representing top universities like Cornell, Stanford, and that school that tells people they went to school in Cambridge.

  We have 5,000 investors, 3,500 experts, and 600,000 subscribers in our community. Triphammer is a Cornell-centric fund, and we have 20,000+ alumni and friends of Cornell in our database.

  In each Triphammer fund, we’re going to make 20 to 30 diversified deals alongside top venture capital firms who are leading the transactions. For many of you here today, I’m guessing you’ve come to learn about venture capital and perhaps are looking to diversify your portfolio. Maybe you’ve done some angel investing, and you want to join an investment community like Triphammer Ventures to get better deal flow.

  Let’s move to the next slide. Taylor, you want to move to the next?

  Okay, let’s talk about the team. The Triphammer team is made up of myself and Wesley Yu, who’s a rockstar and is very experienced in both investing and understanding ABG.

  My personal background is 20 years of investment experience in venture capital and private equity. I started my investment career at Lightyear Capital, which manages about $5 billion in private equity focused on financial services. While at Lightyear, I was a Partner and Investment Committee Member and led the Specialty Finance Group for about a dozen successful years. I invested a little over a half-billion dollars and was fortunate to have had excellent returns on those investments as a group.

  After Lightyear, I co-founded a new investment firm called Killarney Capital, focused on growth and venture investments in FinTech. I recently joined Triphammer because my longtime friend Steve Greenberg, who may be on the call, asked me to take over this great business he founded back in 2018. I won’t speak on his behalf, but I know it wasn’t an easy decision for him to leave, and he worked hard to recruit me. This franchise is enhanced by that trust. I’ll note that I’ve been an ABG investor since Steve joined the firm—I voted with my wallet back in 2018.

  I’m also heavily involved with Cornell and act as Chairperson of the Dyson Advisory Council, and I also serve on the Johnson College of Business Senior Advisory Board. With these positions, I’m lucky to work closely with the Deans of both the Dyson School and its parent, the SC Johnson College of Business.

  I also work closely with Wesley, who was trained by my predecessor Steve. Wes is also a Cornellian and, before joining us, was with BlackRock and Goldman Sachs. It was an easy and seamless transition for me to begin working with Wes. He’s fantastic at what he does—he’s great at sourcing and managing deal opportunities and managing them once we have the investments. He really understands the intricacies of managing ABG’s internal processes, which are still new to me.

  A key component of our investment process is having trusted Triphammer investors serve as Investment Committee Members. Our Investment Committee acts as venture advisors who help us with deal sourcing, evaluating deals, and community development.

  Each active fund meets about 8 to 10 times a year, where we meet specifically with management teams, all of whom are very talented. We collectively determine whether we should make an investment. We’re very grateful to these talented IC members for their insights, questions, and time.

  To the extent any of you on the webinar have specific expertise in areas such as biotech, cybersecurity, ag tech, FinTech, or any other area relevant to venture capital, we’d love to discuss an opportunity for you to join the fund’s Investment Committee. We’re always looking for smart, well-connected people who can help our community.

  We’re also lucky to have an excellent team on the fundraising side. Our three senior partners are extremely active and knowledgeable in fundraising, and most, if not all, of you will receive outreach from them if you haven’t already.

  I’m particularly thrilled to have Taylor Warden as our Senior Investor Relations Manager. He’s on the call with us right now. Thanks, Taylor. He’s the point person for helping our community members interact with Triphammer and can answer almost all of your administrative questions.

  Let’s now move to today’s market and why it’s an interesting time to consider adding venture capital to your portfolio. I’d like to share recent venture capital trends and where we’re focusing our attention going forward.

  At its heart, venture capital is about disrupting the status quo. Startups are essentially about finding new ways to do things better. The deals that Triphammer invests in are about backing the largest and most transformative opportunities. We’re looking at businesses that are truly disruptive and focused on changing the status quo.

  The pandemic was awful, but perhaps a silver lining was that it led to a lot of personal and professional introspection. With that introspection, we’ve seen a massive amount of new business creation, which I think is fundamentally great for the world.

  I also don’t think that this startup trend is just because of the pandemic—I think it’s going to be enduring. It may be a bit hyperbolic, but I think we’re in the midst of the fourth industrial revolution in modern history. People refer to this as the technological revolution that blurs the line between the physical, digital, and biological spheres. This combination of ever-advancing technology is really changing the way we live, work, and interact.

  Venture capital is intricately related to this fourth revolution. VC investments are at the highest they’ve ever been, with over $150 billion of investment in 2020. The trend is phenomenal and ever increasing.

  So the question is: what’s driving this trend? In my opinion, the answer is innovation and change. When platforms and user behaviors change, it brings opportunities for innovation. Startups thrive on innovation and bring agility that established companies are ill-suited for.

  Startups have a strong advantage during times of change, and innovation drives venture capital. If you believe that we’re in a rapidly changing environment, startups will be a big source of innovation, and venture capital will continue to be an exciting engine of opportunity.

  As an investment class, it’s not just investing activity that’s really busy—it also exists. There were $290 billion worth of exits in 2020. Most interestingly, over the past seven years, we’ve seen a steady parade of companies monetizing their value each year.

  Exits are driven by emerging companies disrupting the status quo. We expect that trend to continue. Even if broader stock markets drop in value, we believe disruption will persist.

  Another note is that startups are now growing bigger prior to an IPO or exit. Because companies are growing larger before going public, this leads to bigger returns for VC and backroom investors like us who invest earlier in these deals.

  On the other hand, it also means we’re likely to hold deals longer than we historically have. Looking at sophisticated institutions like endowment funds and pension funds, we clearly see that the best of them make significant allocations to venture capital.

  Speaker 1:
  In fact, one of the leading industry consultants, Cambridge Associates, recommends a 15% allocation to venture capital. Our very own Cornell targets 24% of its endowment into private equity and venture capital, with the large majority of that in venture capital relative to private equity.

  While the largest and most sophisticated investors have increasingly allocated capital to venture capital, historically venture capital has not been accessible to individual investors. The minimum investment size for larger, top-tier venture capital funds is somewhere between $5 and $10 million. For most people, that’s not really doable or advisable.

  What Triphammer offers is a way for accredited investors to invest in the venture capital asset class in a diversified and strategic way, alongside top VCs, with amounts as low as $50,000.

  Why are the best institutional investors focused on venture capital? When we look at it over time, it’s pretty straightforward. Venture capital has outperformed the S&P index over many periods. As I previously mentioned, VC is driven by innovation in a changing world, and we’ve seen that investing in VC has historically led to higher returns.

  Furthermore, when you look at the top-performing funds—the top half or the top two quartiles, shown as the blue bars in the graph you see—they significantly outperform the S&P 500.

  This next page digs a little deeper into the analysis. When you look at the top venture capital firms, you see that the top quartile—the top 25% of firms—generate truly outsized returns, even compared to the average venture capital performance, which still outperforms the S&P 500 as a class.

  So the question becomes: how do I invest alongside these top investment firms? As we’ve seen, it’s very hard to do so given the large minimum investment sizes and the fact that these funds are oversubscribed.

  This really speaks to our strategy at Triphammer. We only co-invest in deals that are led by top-quartile lead investors. I’d point out that AVG is now the most active venture capital fund in the U.S., and we strongly believe that our leading deal flow gives us excellent insights into venture capital firms, including identifying the best emerging individual partners.

  That’s how we judge a transaction—not just by the firm, but by the specific partner at that firm, who is leading it, and what her track record is.

  For us, co-investing with top venture capital firms is a key strategy for Triphammer Ventures. This is the active part of what we do. To be clear, our model isn’t about leading deals—it’s about participating in great ones and offering a broadly diversified venture portfolio to you, our investors.

  One thing I’ll point out on this slide: please look at the returns for 2018 on the far right of the graph. The top quartile of investors is at 16% per year. I’m going to circle back to that number a bit later when I talk about the performance of Triphammer’s first fund, which was raised in 2018.

  Triphammer is also differentiated by geography. New York is a growing part of venture capital and is the second-largest market in the U.S., particularly strong in FinTech opportunities. At Triphammer, we’re also leaning into Cornell Tech as well as Cornell’s ag tech platform.

  We firmly believe that Cornell, as the best ag school in the world, puts us at the forefront of solving the world’s most challenging issues, including climate change and how to feed an increasing population. We think this will drive venture capital opportunities in the exciting ag tech space.

  Our next page talks about who our partners are. We back the best of the best—we’ve backed Sequoia Capital, Accel, Kleiner Perkins, NEA. As I previously mentioned, we are the most active venture capital firm in the U.S.

  We’ve built a robust database that drills down into each deal we see. We think and hope this gives us insight into who will be the top-quartile funds of the future, not just the past. As I mentioned, we’re trying to identify tomorrow’s leaders who are just emerging today.

  An example of our deal flow: one of our most recent deals was backed by Greylock Partners, who were backing a team for the second time after they successfully exited their first investment together. They also arranged to have the acquiring firm invest in the new opportunity as both an investor and a strategic partner.

  We were absolutely thrilled to get a large allocation in that opportunity. The company is called Utmost, which we couldn’t be more excited about.

  Diversification is an important strategy for any venture capital portfolio. We diversify by industry, stage, geography, and lead investor. This diversification strategy helps us mirror the trends of the market.

  I’d also recommend that any of you consider investing over multiple years, so you can diversify by time as well.

  Now, let’s get to some of the more interesting details—how is Triphammer doing?

  I recently did a webinar for our existing investors, going through our three existing portfolios. I took the opportunity to look at each fund with an outsider’s perspective, having recently joined Triphammer.

  In summary, Wes and Steve did a very good job building strong, diversified portfolios of companies. The first two funds are fully invested and broadly diversified. While it’s early, the results have been strong.

  Fund I is currently marked at a 40% profit, which, as I previously mentioned, clearly falls into the 16% return range for top-quartile 2018 firms.

  Even on this very first fund, the results have been outstanding. It’s still early, but I think the returns are quite promising.

  This valuation doesn’t even count the recent news that Better Mortgage has agreed to go public via SPAC at a $7 billion pre-money valuation. I believe our most recent mark valued Better at about $4 billion, so we should see a nice step up when this transaction closes in late 2021.

  Fund I has also had four exits with significant gains, seven up rounds in our portfolio, and only one company marked significantly lower.

  Moving to Fund II: it is fully invested, has had one successful exit, and we’ve chased our winners. By “chasing our winners,” I mean that we’ve made three follow-on investments in companies that raised more capital at higher valuations.

  We think chasing winners is fundamentally important for any venture capital company, so we reserve about 20% of investable funds for these follow-on opportunities.

  The companies we’ve followed on in Fund II—such as Hyperscience and Wasabi—are ones we feel very good about.

  Fund III is ramping up quickly. We currently have eight companies in the portfolio and expect to be fully invested in a couple of quarters, given the strong deal flow we’re seeing.

  Speaker 1:
  We’ve been really busy since I joined two or three months ago. We’ve completed eight investments in over two months, and three of them are listed here. We believe that all four of these companies are truly disruptive and are seeking to transform their end markets. Each of these companies is led by dynamic leaders affiliated with our broad Cornell community.

  Better is a company I mentioned before that has decided to merge with a SPAC and go public. What they’re doing is changing the antiquated ways that people access mortgages—which I think, for any of us who own homes, we realize is a terribly inefficient process. Better has come up with a quicker, more seamless experience for large-dollar-value items.

  Hyper offers passwordless security, which I’m sure we would all love to see become the standard, as these passwords are maddening and, quite frankly, not very secure.

  Utmost is a company I mentioned before, where we’re joining with Greylock Partners. Utmost has created a vendor management system that acknowledges that the extended workforce is a vitally important resource to manage. These critical stakeholders should not be treated as simple temp workers—they should be treated almost as if they were exactly the same as regular W-2 employees.

  Finally, Pulse Data is using machine learning to deliver better outcomes in the fight against kidney disease. Pulse Data is at the core of the movement away from fee-for-service and toward cost-effective managed care, which the entire healthcare industry is in the midst of moving completely toward.

  Going forward—what sectors do we like? Where are we focusing our attention? I had previously mentioned that we’re going to lean into Cornell’s inherent advantage in ag tech and Cornell Tech. We’re also going to leverage our New York City location to actively seek out outstanding FinTech opportunities.

  Additional areas that we believe have deeply attractive tailwind opportunities are cybersecurity, artificial intelligence, and machine learning opportunities—as we believe these are foundational to the fourth industrial revolution that I referenced before.

  We’re also constantly fielding calls from the Cornell community as well as our sister funds, so I would encourage any of you—if you’re aware of an exciting investment opportunity in the venture capital market that is looking for institutional capital and from the best venture capital firms—please reach out to us. We’d love to learn more.

  I mentioned ABG earlier. ABG is made up of 18 alumni funds who all leverage each other’s deal flow, and we also leverage technology to help each other. We’ve been around since 2014, and in a few short years, we’ve become the most active venture capital firm in the U.S.

  We’ve raised over $600 million to date, and really the key differentiating factor for us—relative to all the other venture capital firms out there—is our network.

  We offer our portfolio companies something that other VC companies are very hard-pressed to match: the largest network of influential people. That gives these portfolio companies the opportunity to access clients, employees, advisors, and board members.

  When we are telling venture capital firms or CEOs why they should want us to become part of their investor group, it’s a pretty simple pitch. We don’t sit on boards. We’re not here to advise at the senior level.

  In addition to our capital, we are a resource for them at the operator level. Do they need employees? Do they need access to clients? Do they need access to different advisors that perhaps they can’t get elsewhere?

  I’m lucky to say this pitch resonates. As I said, I think that’s something we’re very proud of and focused on. As we say, if a company needs a resource, there’s a pretty good chance we have one in our network.

  This slide goes over the key investment terms for you as a potential investor.

  I’ll first mention that we’re specifically restricted to accredited investors only. These investors can invest anywhere above $50,000. We’re going to build a diversified portfolio of 20 to 30 companies each year for our investors.

  Each fund has a standard 10-year term, which makes sense if you’ve seen that companies are taking longer to IPO and exit.

  We have a standard 2% management fee per year for the 10-year life of the fund—for a total of 20% fees over its life.

  We also charge a standard 20% carry. I’ll note that we are not a fund-of-funds. For those familiar with that term, it means that you, or any of our investors, are not paying double fees—fees to Triphammer and then fees to Sequoia or NEA or other funds we invest alongside.

  In fact, some of the funds we co-invest with charge their investors well over 20% carry. So even though we’re accessing the same deal as them, we’re able to provide our investors a lower cost than the lead venture capital firms’ own investors.

  A quick way to summarize how the economics work: all investors get 100% of their investment back, and then after that, the profits are split 80/20—80% to the investors, and 20% to Triphammer.

  The process to invest in Triphammer is very simple. You can invest with cash or other securities—or even with your IRA. In fact, a third of ABG investors use their IRAs to invest in Triphammer or in any ABG fund, because it’s a very tax-efficient way to access venture capital.

  We can also take investments from non-U.S. citizens.

  A final exciting opportunity is one we provide our current investors: you can access our syndicated deal flow, where we offer additional access to top deals across all of ABG, where we’ve negotiated additional allocation.

  Along those lines, we’ve recently launched our Triphammer Venture Club, which is a Triphammer-only venture club that provides syndication. It’s also a place where we share and discuss deal ideas and portfolio company updates.

  So we hope you become investors and then access the Triphammer Venture Club, which is part of your investment—you’re automatically enrolled.

  I’ve already covered how excited we are about Hyper, Pulse Data, and Utmost. I’ll note that these deals were all offered for broad syndication to all of ABG’s investors. Each of these deals was heavily oversubscribed. But you should know that our Triphammer Venture Club members always get priority access to Triphammer-led deals.

  So with that, that’s it for the presentation. I’d like to start our Q&A session.

  Feel free to continue sending Taylor questions. I’d ask him to start sharing the Q&A questions we’ve already received. We’re going to try and answer as many as we can, but if we run over, we’ll reach back out to you and arrange to answer your question.

  So let’s see what questions we have.

  The first question is: What is a typical time horizon per investment?

  The average investment will be held anywhere from three years—it could take as long as 10 years for that investment.

  The follow-up question is: Do funds pay out dividends with every exit, or do you reinvest in other opportunities?

  It is our intent that as we receive capital, we return it to our investors. We do not reinvest capital that we’ve received.

  The third question is: What are the geographical boundaries when making investments?

  I don’t think we have any geographical restrictions. In fact, we try to look outside of the normal Silicon Valley and New York areas to find areas that add extra diversification.

  If there are deals in Europe, Asia, or Latin America, we would consider them—as long as they still meet our stringent and high-level criteria. If we think it’s an attractive opportunity, we’ll explore it.

  The next question is: Why do companies let Triphammer into their rounds?

  That’s a really good question.

  Venture capital, as an asset class, traditionally involves a lead investor who does not provide 100% of every single round that they lead. That’s just how venture capital has evolved as an industry.

  So there’s traditionally a co-invest opportunity in most deals.

  And although capital is a commodity, what really separates us—when I’m talking to a CEO—is the viewpoint that we have access to a network that should be helpful for them.

  Compared to other people who are interested in investing a small co-invest amount, we think we can be much more value-added.

  We are also low-friction—we don’t seek board seats, we don’t negotiate terms, and we are very quick with our entire process. We can fund within two or three weeks after meeting the company.

  Speaker 1:
  The next question is: what percentage of deals do you invest in among all deal flow surveyed?

  I would guess that out of all the deals, we probably turn away instantly 50–60% of the deals we see. Of the deals that match our quality standards—which we think are interesting and have a good sponsor—I think we’re probably looking at one out of three that we do.

  So, we’re trying to craft a really good portfolio for our investors.

  Last question: what is the difference between Triphammer and ABG and AVG investments? I think the question is asking how we are different from our sister funds.

  You know, we all work together, so I don’t view us as competitive with our Stanford colleagues or our Penn colleagues. It’s a big universe out there, and we’re often asked to share deals with each other.

  Part of our investment process is that every single deal Triphammer leads, there is a sister fund that is tagged and asked to also weigh in on the investment criteria. Usually, that sister fund will also invest a small amount inside the deal.

  That being said, there will not be more than four or five deals that will overlap with any other fund inside ABG—that’s just the process that we have.

  The question is: could Triphammer compete with ABG in deals? We do not compete. If there’s a deal that has two connections—a Cornell connection and a Harvard connection—we’ll share that deal. We’re very focused on building ABG as a business and not competing with each other.

  Yes, that was Sage Chapel and the clock tower on slide one—to communicate the message “have faith, great investment terms take time.” I don’t know who asked that question, but that’s awesome. Yes, that’s exactly the message we’re going with.

  Another question: why are the fees upfront? Does that mean that $1 becomes $0.80 of capital invested?

  That is the case. The reason we’re different from others is that we’re going to invest this capital within 12 to 18 months. We didn’t want a concept where we’re asking you to cut multiple checks over time—a $5,000 check, a $20,000 check. It’s one check that you invest once, and then we seek to invest that capital over a very quick period of time and move from there.

  So in our minds, unlike a five-year fund where traditional venture capital firms start calling capital over time, because we’re investing the capital all within a year, we think the impact is de minimis relative to that structure.

  Another question: if you don’t invest through your IRA, can we talk about the tax considerations and investor filings necessitated?

  Traditionally, you receive K-1s from us, which would be typical for any investment you have, since we almost always invest in an LLC. Taylor, if I’m completely wrong, let me know—but I think it’s standard that for these investments, you’ll receive K-1s.

  Another question: what is our investment strategy for international startups?

  International startups are currently a small percentage of our portfolio—it’s one that I’d actually like to increase.

  I think the way we’re going to approach that is by reaching out to who we think are the top international venture capital firms in each country and seeing if we can gain access to that deal flow.

  Our pitch to them would be: if you have a business that has global aspirations and would like entrée into the U.S., being a part of Triphammer Ventures—and having access to our customers, clients, etc.—could be interesting.

  We’ve just started that process, but the dialogue has been interesting and seems to resonate with overseas venture capital firms. Because they’re only giving us a small allocation, it gives them optionality on entering the U.S. marketplace with a trusted partner.

  Next question: how do Triphammer’s returns compare to other AVG funds? Are we leading the Ivy League?

  Like I said, we don’t try to compete with our other funds. But I will point out that Triphammer Ventures I, which started in 2018, is clearly in that top-quartile group—maybe even beyond.

  It’s doing very well, and we hope that will continue. We think there’s a process in place that will continue to allow us to deliver top-quartile or above returns for venture capital—not just compared within ABG, but broadly in the VC market.

  Another good question: can you walk through the investment due diligence process?

  What we do is Wes and I will meet with a management team probably two or three times. We walk through their information deck, go through their data room, and learn as much as we can about the industry.

  I think we have a built-in knowledge set in leveraging the ABG franchise. Having seen a lot of deals in many sectors, we spend a lot of time trying to understand:

  • What’s the investment thesis?

  • How transformative is this business?

  • How strong is this management team? Have they done this before?

  • How strong is not only the venture capital firm, but also the partner leading the deal?

  • How many deals has she done? How good is she? What’s her future potential?

  After we, as a team, decide that this is an interesting opportunity…

  Speaker 1:
  We put it inside our system, we add one of our sister funds at ABG to work with us, and then that team will have an opportunity early on to give feedback. Quite frankly, if they don’t like the deal, we’ll kill it. To be fair, I don’t think that’s ever happened to a deal from Triphammer because I think we have pretty high standards across the board, but we offer that opportunity.

  Then we bring in the management team, who will meet with our entire Investment Committee. After we all get together, we’ll make a decision.

  Oh, I forgot to mention one thing: we also have a call—just Wes and I—with the lead venture capital firm so they can walk us through their investment thesis, what they see as the risks and returns, and how it fits into their overall strategy.

  Question: What overseas areas or regions of the world do you feel are undervalued?

  It’s hard to find anywhere in the world that’s truly undervalued right now. I do think we’re seeing strong opportunities in Asia. That market is robust, both in size and opportunity. I’d like to look at more emerging markets as well, but that also introduces country risk. So we’re always trying to balance those two factors.

  Question: Is Fund III closed?

  Yes, Fund III is closed. If you want to invest, the investment opportunity is in Fund IV, which we’re raising right now.

  I think that’s the last question I have, although I’ll note that my friend and predecessor, Steve Greenberg, is on the line—thanks, Steve.

  So with that, thank you everyone for joining us for this webinar. If you have any questions that we didn’t get to, please feel free to reach out to me or Taylor. We’re happy to engage in discussions with you.

  We hope you consider joining Triphammer Ventures, as we couldn’t be more excited about the opportunities this year to put capital to work.