Jared Klee: Hey, Joe. Welcome to the show.

Joe Hasselmann: Hey, Jared. Thanks for having me.

Jared Klee: Take me back to the beginning of Invicta. So you're managing money for the first time and critically, it's not your money, it's other people's money. That emotional burden, the seriousness with making the decision to invest in those first companies out of Invicta.

How did you get the conviction to make those investments, how did you get comfortable with what it means to be allocating other people's money?

Joe Hasselmann: Well, I appreciate the question. It's certainly one that kicks off this conversation well. You know, I've spent the last five years allocating capital into private markets. Most recently at Forge. We were putting hedge fund capital, family office capital, behind private market assets.

The difference in launching Invicta was having perhaps a more refined view as an investment manager focusing on parts of the market where we saw perhaps undiscovered value. And so I think it starts with the insight of having a great idea and pursuing it in line with the client objectives, right.

Return profiles, risk profiles. And then it's running our process, focused on driving to what matters in an investment. The valuation, the end market, the productization. At the end of the day, what really matters is the client success and aligning that with ours. Every early investment decision is quite an emotional one.

We want to put our best foot forward as a brand, as we're building Invicta Growth from the ground up. And our client success is imperative to that.

Jared Klee: You had less than a traditional path into venture capital. I think your, your co-founder Burke Brown, if memory serves was in the investment world, in the venture capital world. Tell me a little bit about what Forge was like, what you were doing there, how that set you up for Invicta.

Joe Hasselmann: Yeah, just to comment on Burke, his background's very complimentary to mine. He went through Lazard and then cut his teeth under Kevin McQuillan at Focus Ventures. Yeah, my background was quite a bit less traditional. It went from environmental engineering to M&A, and IBM's cloud group, which is how we met. Then I found myself in Forge as an early employee. When I joined, we were 12 people in an office above a bar. Two and a half years of growing that business scaling head count 10x from 12 to 125 people when I left.

My role was really building out that institutional client function. The marketplace at its onset was really focused on accredited investors purchasing six figures worth of shares from early employees, early investors that wanted liquidity on the secondary market. But really what that business evolved into was it certainly it had the broker dealer, there was also an RIA component.

We had made some acquisitions as a corporate. And we were providing both primary and secondary access to a number of the landmark private companies in the late stage pre IPO asset class. And so what was interesting for me, coming from an M&A strategy background, call it research heavy, deal light, to getting to Forge. It was more providing an access point, so it was deal heavy. Those two experiences paired with the, the operational scar tissue of building teams, shifting organizations, moving offices, more than a few times, traveling around the world, building the business. You know, that those were all pretty darn instrumental to the confidence in helping to launch Invicta.

Jared Klee: What is Invicta? Why is it different from your competitors? Why are your investors interested in Invicta as opposed to allocating their capital to say a different venture capitalist?

Joe Hasselmann: It might make sense to just zoom out and provide some context too. If you rewind back to the Facebook IPO, this is when mutual funds had really started standing up their private market programs. Following that the hedge funds moved quickly thereafter and over the last five years, we've seen family offices and other large allocators, RIAs, moving into venture and both the funds investment manner and a direct investment matter. And then of course you've also seen not just these hedge funds that have been doing this for awhile, but hedge funds that have stood up proper venture programs that are raising enormous sums of capital annually to deploy into an asset class that has grown significantly over that time period.

You know, you don't have to look 10 years in the past to, to see the entire market as you know, tens of billions of dollars in venture capital in funds, dry powder. And if you look at just January, February of this year, I think 50 billion was raised by five funds. Right? So the market is orders of magnitude larger.

But what does that mean for an allocator and, and where does Invicta fit in that? The velocity markets of these last two years have proven a couple of things. Outcomes can be far larger than previously anticipated. The Bessemer cloud index and their predictions being accelerated by a number of technology adoption trends.

But then the ways in which capital is being put to work in venture has also changed. Indexing strategies to later stage markets, a la Tiger and some of the other hedge funds and mutual funds. Earlier stage strata widening, and also becoming more varied. There didn't used to be a pre-seed strategy now there's first check, pre-seed, seed, early stage, expansion stage, growth stage. It's been divided a number of times.

Where we fit in. We're a boutique manager. We are raising humboldt size funds as we go in from fund one to fund two. For instance, this next fund, we're targeting a hundred million dollars. We aren't overly concentrated, but we're not overly distributed in our investments either.

Some seed strategies, that'll invest in 50, 60, 70 companies per portfolio or more. They kind of lean against the power law of those outcomes to double and triple down on bets. So that's one cost of capital. And then you look at some of the concentrated or completely diversified funds later stage that are making a number of either very concentrated bets or a high number of lower concentrated.

We're somewhere in the middle. Our target portfolio construction is 15 to 20 companies. We're investing across the expansion and growth stage life cycle. These aren't ideas in a garage, and they're not pre IPO buzzer beaters, but we're finding that the small, but growing businesses in large end markets and building conviction through a thematic view in this very focused B2B centric model of ours. We've been liking to what small cap or mid cap, long, only hedge fund investor looked like maybe 20 years ago, whereas now that alpha is really in the private markets.

We're nimble and boutique. We don't have $80 billion of chips on the table in private markets capital at risk today. So we can shift and rotate into these markets as they evolve. My being focused on the expansion and growth stage, we find perhaps the most attractive risk reward profile of venture across our relatively concentrated, relatively diversified strategy.

Jared Klee: Why is a founder choosing Invicta the partner, as opposed to somebody else? Not just the LPs choosing Invicta.

Joe Hasselmann: First of all, it's a relationship business. I mean, at the end of the day we'll only invest in strong relationships and founders should only select for investors where they're able to build those strong relationships.

But how, how do you build that? At the forefront is an entrepreneur investor mentality. We're young GPs pursuing a big and ambitious vision of building a venture fund. And oftentimes go through some of the most mundane challenges that founders go through, standing up payroll systems, handling taxes. I mean, we have a three person team and can see eye to eye with some of these founders going through that.

And then it's zooming into where we can really move the needle. We talk about flexible check size, but a three to $15 million check is very different to bring on board versus 25 to $50 million in these series B's and series Cs.

We're a second or third largest check in a round, or we help construct some of the secondary aspects of what they're doing. That's been a great foot in the door. We have teed up a number of corporate conversations, commercially strategic partnerships. We've facilitated proper seminars between large engineering departments and co-founder CTO types. One of our portfolio companies actually closed on a sales introduction that we made just recently and that was really exciting.

What we're doing is, we're monitoring what helps us win and we're doubling down and investing behind that. But it ultimately comes down to relationships. We're really excited that the founders that we've partnered with have selected us so far and many more to come.

Jared Klee: What you're talking about with the check size compared to the scale of the startups you're investing into, what you're talking about with a three person team operating at the scale, you are, that's a different structure than I think we would expect.

Talk to me a little bit about what it means to build a venture capital firm. Clearly you've got tools available to you that allows you to operate as if you were a lot bigger, but still keep the team small, nimble build those deep personal relationships directly with the managing partners, as opposed to with a much bigger team.

Joe Hasselmann: Yeah, it's certainly an ecosystem play. Our three person team is mean and lean and excellent at what we do. We leverage external partners all the time. One of our most productive sourcing channels is our early stage manager relationships, both established and emerging managers, that we've gotten to know. And so some of these larger funds that have an early stage strategy and a growth strategy that kind of feed off of one another more so the growth strategy picks the winners from the early stage, we try to do the same thing across dozens of relationships that we have earlier on and, and create that win-win scenario.

Similarly, you know, we don't need to have that much in house. As an emerging manager, certainly we'll bring more in house over time.

It takes a perspective around modularity and I think that's really key is understanding what we do well, what is our strategic advantage to do well. And what is non-core non strategic for us to have in-house and bring in the right partners to do so.

That said we're ever expanding made our first full-time hire last year, who joined from a multi-family office environment where she was focused on public equities and selecting long short managers as well. You can imagine how that type of perspective is additive across our full operation. And then we're looking to bring on additional capacity in the operations and investor relations area of the business. And so kind of understanding where we have strong presence and operational excellence, where we need to improve that and drive scale.

It certainly takes a business building mentality. And you could sit down at your desk and always have a million hours of work to do ahead of you. But it's, it's really about focusing on what you do great, what differentiates, and then standing up the must haves around that.

Jared Klee: I love this. Cause you're talking as a founder, as a business builder. I think many times when you're a startup and you're engaging a venture capitalist, your viewpoint is them as a partner, as a capital allocator. You're maybe not always in the mindset of actually they're building a business as well.

That's gotta be a really healthy relationship for the founders you're working with. Where they understand you have top of mind, not just the capital allocation, which is fundamentally your product, but also the we're turning our business into modular. We're building out the operations, we're scaling. That's gotta be a really healthy alignment.

Joe Hasselmann: I think it matters to both allocators, our LPs, and founders. We're hungry. We haven't had multiple exits and are sitting in comfortable chairs at the top of a tower, right. We are in our apartments, we are traveling around, we're in coworking spaces. We're gritty. We're putting in the work to win and to matter in this growing market.

It's not a surprise perhaps that funds one through three, tend to outperform later funds and vintages. And I think for founders the type of leverage that you can get from somebody that, that has 10 bets on the board and you're one of them is so much different.

Even if you're working with these large platforms, the chances that you get to the top partner that has the most outspoken view on your market, those chances aren't all that high. You're typically going to be working with an associate. I mean, you're working with our whole team when you work with us and we put a lot of weight behind every investment we make.

Jared Klee: You talked as well about sticking to your core competencies. Talk to me a little bit about the types of structures that you guys get comfortable with that you've pursued, why those can be useful vehicles for founders to think about alongside the traditional equity raise.

Joe Hasselmann: Secondaries at this point are not really riské anymore. It's a pretty commonplace structure in the market. You see the growth in unicorns, naturally the equity is going to turn over. The more and more equity value that's in the market, the more and more secondary volume there's going to exist.

And it's seldom these days that I see a venture firm investing in growth in late stage markets that doesn't invest in some form of secondary. What it does is it, it really changes the profile of an equity raise. You start to consider equity as potentially non-dilutive.

You think of it as an employee benefit. Right. These companies that are four plus years into their existence, they've hit their full vested equity packages for a lot of those early employees. And it's a great benefit to be able to provide liquidity as you're growing a business.

And then from the investment perspective for us, it's really all about conviction in the business, the team and the market. If we're able to get to that level of conviction we can look at different ways in which we can acquire an interest in the business. And that can be ideally the latest preferred equity round. But we'll also play a part in, you know, a tender or purchasing out in earlier shareholders equity, if they need to trim their position or exit the position for some reason.

We certainly talk about that with founders as we build positions. We can use it to initiate a position. We can use it to concentrate a position. It's a tool in the modern venture toolkit that we deploy.

Jared Klee: We've talked a little bit about the types of founders types of startups that, that you target series B series C. Talk to me a little bit about the major themes that guide some of the investments you're making. If you want, some of the startups that fit within those themes.

Joe Hasselmann: We invest behind modern B2B technology. It's the operating stack of today's enterprise. Thematically, there's a couple of different buckets that we look at. Data and intelligence in the enterprise. We've made a number of bets behind that, whether it's DevOps tooling or more on the infrastructure side. Similarly embedded financial technologies is very important to us.

Naturally this is a massive market that has gotten a lot of media attention lately. But we have a view as to how data and infrastructure is playing a role in modernizing and digitizing financial services.

And then a number of other themes, you know, ultimately looking for the businesses that are defining categories, seeing what is emerging from the pack as a breakout business and in a new or refreshed category and seeing how these businesses are executing against the market opportunity.

Ultimately, you know, we're looking only at B2B businesses. I think what we've seen over the last five, 10 years is the wave of modern digital financial services requires new data infrastructure.

So if you look at a business that we've invested in called pinwheel, which provides an API for payroll data, they're powering some of the largest apps for consumer permissioned payroll data to be a part of direct deposit and other services. Or if you look at a business like Ocrolus, which is doing back office automation for loans and mortgages, they're helping facilitate a loan evaluation process.

Ultimately where we like to play in that market is the picks and the shovels and providing the infrastructure for how that next generation of financial services applications are gonna be built.

These are the engines that power this next wave of innovation. It's pretty impressive as you prove out, go to market and you can move into adjacent verticals that look and feel similarly, and you can scale a repeatable go to market program around that.

Jared Klee: As the fund you're investing in series B, series C, these companies are getting bigger. At some point, many of them are going to go public. I think you've actually had some within the portfolio that have already. What happens at that point in time?

Joe Hasselmann: Yeah. So we're where we invest is between expansion and growth stages. So that might look like a series B through series E but perhaps better suited to consider it along a valuation threshold. We're typically between 200 million and 2 billion in entry valuation.

And to the topic of how these matriculate through their maturity through exits. I think one thing that we're going to see more of you know, as the market continues, its correction course is not every one of these venture funded businesses is going to be an IPO. It's not going to be a standalone business. We're seeing large private equity firms go into the public markets and pursue large acquisitions.

We are seeing corporates outside of some of the trust concerns still be fairly aggressive in how they aggregate assets and, and inorganically grow. Just reflecting on our portfolio, we've seen direct listing, we have a SPAC.

And then we'll hope to see a more traditional IPO as well. I think what everyone's seeing is that the alternative asset classes are converging. Growth equity, venture capital, IPO investing, tech broadly is the common thread between each of these. Sequoia and Andreessen and the crossovers have all stood up phenomenal talent programs to be managing what that transition looks like. For Invicta, it's more of a traditional venture approach once a company goes public. We look to exit in a moderate timeframe and, and distribute cash or shares depending on the relationship with the LP and what they desire.

When you look at these life cycle investors, full-stack investors, that have seed and pre-seed programs all the way through some of them even have SPAC programs internally, it's pretty impressive how some of these full-scale operations are providing capital market services to their companies.

I think also it does kind of hint at what their incentives are, right? As you're scaling AUM, not only are you looking to write bigger checks, but you're looking to play a different role with those companies. And that can be both a good thing and a bad thing, but I think this type of innovation that we've seen is really just beginning. You have venture funds are starting to tokenize their LP interests. There's there's a lot on the horizon that I think will become a part of this venture conversation that we haven't yet seen.

Jared Klee: You're pulling me back in the we're a small fund, we're gritty, we're keeping things relatively tight and focused on our core competencies rather than stretching what we can do, try to be all things to all people. And it sounds like what you're talking about with the later stage, the crossover, the many different varieties is: you've identified with Burke, a really attractive niche that's healthy for founders that they like, that's healthy for your LPs, that they like. And the focus is going to be continuing to double down, double down, double down on that niche. It's going to continue to grow as the fund grows, as the venture capital ecosystem grows, but there's a long runway of what you can do focused on just that before we start a bigger conversation, what else can Invicta be in time?

Joe Hasselmann: Internal innovation is really important to us, but the way in which we do that is through a fairly confined set of parameters. We're innovating what our sourcing channels look like. We're innovating what new themes or sub themes we should pull into our research process. We're innovating what types of relationships we want to explore from a LP profile perspective, moving from family offices into RIAs and to endowments and pensions and the like.

We've got the right recipe. It's now seeing what types of variations we can still pull together. And then we use a few tools that can help us kind of test those outer limits. For instance, I mentioned a hundred million dollar target on this fundraise, that's a confined volume relative to our annual deployment rate.

Our first fund was 60 million. Our annual deployment rate closes in close to 200 million. If we're deploying a hundred million over the course of a two to three-year period you can do the math on how confined that makes our process. It enhances our selection. But what we also do is we add a co-investment element to our offering where LPs in our fund can access our research and our access point. Oftentimes we have excess allocation that we win based on the relationship or over the course of being an equity holder in these businesses. And that helps test the, you call it the asymptote of the scale of our strategy.

And so I think we're very innovative, kind of self disrupting culture. We do retrospectives quarterly. And it's important for us to use these different tools that we have to see how we can evolve, to continue to fit as an interesting and value additive differentiated fund in this evolving market.

Jared Klee: You talk more like a startup founder. We found our niche. We're innovating rapidly within that. We're trying stuff, we're trying on for size. When it fits, we scale it up. We go to the next level without ever overextending ourselves. You talk more like a startup than you do, I think, many of the more established venture capitalists who have perhaps been in the game for many years and may not be quite as hungry anymore.

Joe Hasselmann: We like to think of ourselves as a startup. I mean, my background is more operating perhaps than it is investing and so it's a very prideful for me to be building a fund and to have a team and a culture that we really invest behind and product market fit and scaling that and evolving that is all part of that journey.

Jared Klee: That's a great lead in to the closing question here, Joe. What's the biggest win you've had? That could be personally, that could be professionally. Take it anywhere you go.

Joe Hasselmann: Hmm, I love the question. When I started my career, I always had my eye on being a part of this venture ecosystem and contributing in a big way to the way that startups were changing the world in which we lived.

I played a very non-traditional hand of cards to get there. I think the biggest win is sitting in the seat that I'm in. Sometimes I have to kind of blink and pinch myself that, you know, Invicta Growth is a business where I'm founding partner.

It is a total privilege to serve the founders that we invest in. And privileged to invest the capital that we put to work for our limited partners. And it's really just the beginning. So I think the biggest win is probably ahead of me, but certainly from the place that I'm sitting, it's humbling and I'm very proud of what we've built to date.

Jared Klee: That's a great answer. Joe, appreciate you coming on.

Joe Hasselmann: Yeah. Thanks again, Jared.