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Finding LPs who want to engage
CLF co-invests with other funds in the Andreessen Horowitz portfolio. It’s the first VC fund that raised money exclusively from Black investors. Past and current LPs include Diddy, Shonda Rhimes, The Weeknd, and more.
But CLF isn’t solely focused on big names when vetting LPs. The key thing Megan looks for in LPs is engagement.
“The most important thing for us is that we have LPs that want to engage… it’s a symbiotic relationship. At the end of the day, our largest goal is to support our portfolio companies. Whether it’s the a16z team, our LPs, it’s all hands on deck.”
The fund has presence at several events where both LPs and founders can engage, like NBA All-Star Weekend, Art Basel, NBA Summer League, Super Bowl, and its own CLF Summit.
The last thing CLF wants is celebrity investors who slap their name on products and then disappear. This isn’t a brand that hires celebrities as “creative directors.” Megan wants a strong “why” behind each LP.
The four categories of diversity efforts
The fund’s ultimate mission is to develop more Black talent in tech at early-stage companies. This is how generational wealth is built. CLF is doing its part, but there’s more that other firms and companies can do.
Megan says that each company’s efforts are in one of four categories:
– Aren’t interested whatsoever
– Committed, but don’t follow through
– Committed, but have a narrow view of finding Black talent
– Committed, and have a holistic view and plan
This dynamic persists at the recruiting level. For instance, there are 100+ HBCUs nationwide, but tech companies in category 3 tend to recruit Black talent from startup accelerators, elite universities, or from Howard, Morehouse, and Spelman. There are gems at all the other HBCUs being glossed over.
She also compares the category breakdown to the historical debates between Booker T. Washington and W.E.B. Du Bois. Both leaders wanted Black empowerment but Washington wanted the Atlanta Compromise, pushing for Black folks to prioritize education and work as opposed to fighting discrimination. Meanwhile, Du Bois’ ideology “The Talented Tenth” took issue with Washington’s claim and wanted Black people to continue fighting for civil liberties.
“Reasonable people can disagree on what the solution is but I think there are multiple approaches. We don’t have to just go one route.”
Builders keep building
2022 has been a rough year for venture capital, but that didn’t stop a16z from rolling out CLF III, which includes investments from athletes like Maya Moore, entertainers like Pharrell Williams, and business leaders like Erin Teague.
CLF III was announced in June, but funds were raised when asset markets were relatively healthier. Still, Megan had to instill confidence in the high-net-worth individual investors.
“When you’re dealing with individuals and their personal wealth and people who are really new to venture, that’s a really scary moment…so making a long-term commitment like that during a period of economic uncertainty is actually more difficult for an individual than an institution.”
Listen to our full conversation on the Trapital Podcast here:
0:00 Takeaways from the Cultural Leadership Summit
2:48 Building despite economic uncertainties
5:20 High-worth individuals also affected by macroeconomy
6:52 How has the Cultural Leadership Fund evolved?
11:40 Difference between entertainment and executive LP’s
15:55 Web3’s knowledge imbalance
18:35 Megan’s interest in DAO’s
20:10 Will CLF’s investment model change?
22:07 How CLF used relationships and trust-building to scale its operation
28:38 Megan’s vetting process with LP’s
30:54 How VC industry at large can create more opportunities for black founders and talent
40:19 Has the Bay Area lost its monopoly on tech?
47:30 What CLF is focusing on in 2023
[00:00:00] Megan Holston Alexander: What we hadn’t considered on the executive side is, while the athletes and our kind of entertainers can partner on different things or, like, help them go into new markets, when it came down to, like, core operations or how you should run on your board, or how to think about hiring X, Y, and Z, our black executives, like, hold that information, like, in the palm of their hands. These are people who’ve been, you know, operators for 20 or 30 years, and so they brought kind of an additional level of skill and kind of insight to bolster what our other LPs on the more kind of athlete or entertainment side were doing.
[00:00:40] Dan Runcie: Hey, welcome to The Trapital podcast. I’m your host and the founder of Trapital, Dan Runcie. This podcast is your place to gain insights from executives in music, media, entertainment, and more, who are taking hip-hop culture to the next level.
[00:01:01] Dan Runcie: Today’s guest is Megan Holston Alexander. She’s a partner at Andreessen Horowitz, currently leading its Cultural Leadership Fund. And to date, this fund has raised over 60 million, invested in over 300 Andreessen Horowitz portfolio companies, and has brought over a hundred black leaders into this space. I’m talking to Megan right after the Cultural Leadership Fund hosted its first-ever in-person summit. It was a pleasure to attend that summit myself and meet so many of the people that are friends of the fund, LPs of the fund, and really make it what it is. So this conversation, we talked a little bit about what it was like bringing that event together, especially after the pandemic. We also talked about how events like that fit within the fund’s overall strategy and how that strategy has evolved over the past few years. For a little bit of background, the LPs in the Cultural Leadership Fund are all black, and it is one of the first funds to have ever done that in the VC space, and specifically, to date, a lot of the investors had been athletes and entertainers, but Megan talked a little bit about how they’ve expanded to bring on more black executives, what that looks like, and how that ultimately helps support the goal of the fund even more. One of the fund’s other goals is to increase the amount of black talent and interest in tech. So we talk about what some of the opportunities are, what some of the challenges are, and what the VC community can do to help improve this even more. Great conversation, so many insightful points that Megan shared. I enjoyed this conversation and I know you will too, especially if you are an investor or you’re a founder yourself. Here’s my chat with Megan.
[00:02:39] Dan Runcie: All right, today we have Megan Holston Alexander from Andreessen Horowitz Culture Leadership Fund, and first, I got to say congratulations on an amazing summit. It was a great event to be a part of and to attend. How does it feel for you now being on the heels of that and just seeing the impact of everything?
[00:02:57] Megan Holston Alexander: Yeah, so thank you so much for coming. It means so much that people would be interested enough and engaged enough to spend time with us away from their, you know, everyday grind. But we’re really pleased with how it turned out. We were motivated because so many of our LPs had said to us, we want to get together, we want to meet each other, we want to meet the founders, we want to meet the investment team. So as an LP and kind of partner summit, I think it had the intended effect and it seemed like people really enjoyed their time, but also learned a ton. So I could not be happier. I will say I was telling myself that after it was over, I was going to have so much time to, like, get so much other stuff done, but, like, it just never, it never stopped. So, we were really proud of what we were able to put on.
[00:03:38] Dan Runcie: ‘Cause I’m sure an event like that makes you think about what else you could do, right? I’m sure you had a bunch of people buzzing with ideas on what other in-person events or what other things could look like, too.
[00:03:48] Megan Holston Alexander: Yep. And that’s always the hope, right? We bring people into a room together in hopes that, like, we can help some serendipity happen. So many people in our network work on similar things or adjacent things or things that would have a really nice kind of partnership together. And so anytime we get to make those introductions, our hope is that people will be buzzing after, and have ideas for events and programs and partnerships. So we’ll see what comes out of it.
[00:04:12] Dan Runcie: And I imagine that a lot of this probably had been in the plans for a while. It was just a matter of timing. So much of CLFs rise and growth had happened during the pandemic as well. And it was just a matter of, okay, when can you bring people together safely to make something like this happen?
[00:04:28] Megan Holston Alexander: Yeah. Yeah. And when I say it was three years in the making. I am not kidding, because we were planning actually to host the first summit in 2020. So we were in process of like, you know, picking out venues and cities and where we wanted to be. And then, like, so many people when the pandemic hit that spring, it just kind of cleared everybody’s calendars. And so it’s nice to know that 2 and a half years after the original that the motive was still the same and the demand for what we were building was still the same that we got to put it on, I think, even better than we could have hoped in 2020.
[00:05:00] Dan Runcie: Yeah, I agree. And then looking at, now, you, of course, get to have it on the tail end of your announcement for fund three. You’ve now raised over $60 million for this fund. What was it like raising in this climate though, just given where things are with the market and how things have been so far in 2022?
[00:05:19] Megan Holston Alexander: Yeah, totally. Totally. So when it comes to like the market environment, you just never know what’s going to happen and unintentionally, you know, I actually got to raise ahead of kind of the market changing earlier in the spring. And that was actually because I was expecting and planning to be a new mom. And the firm was really supportive of that. And they said, okay, kind of up to you. Do you want to do it before mat leaves? Do you want to wait until the fall when you come back? And me being like, I don’t want to think about this while I’m trying to raise a baby. I was like, Let’s knock it out early. So lucky enough, you know, I was able to close that out before people really started tightening their belts. But, you know, as a firm, we really believe that, you know, no matter what the economy looks like, what the macro, you know, face of the world looks like, builders are always building. And even more so, during times when they can be home and spend time thinking about the problems that they want to solve. And so our hope is that, you know, even in moments like that, we can still really rely on founders to keep, you know, pushing great, great companies out.
[00:06:17] Dan Runcie: Yeah, and I like to think of these moments as well as when you do start to filter out some of the companies or ideas that maybe were a bit more fleeting, and you can focus on the real things happening, you look at the last economic downturn that we had, and all of the companies that came from that timeframe, too. So I feel like the call to action for so many fund managers like yourself, you mentioned the LPs or even to others is, like you just said, people are still building, and if anything, it’s the real companies that are going to come out of this timeframe.
[00:06:46] Megan Holston Alexander: Yep. And then a piece that I would add onto that is in these moments, while we know that like great companies will be built, we don’t truly know what they are because people do build for the time and you don’t know what kind of instances will be, like, permanent behavior changes or what things are like, just for now, it seems like it’s a, you know, a really good idea, but in six months people won’t behave the same way. And so the hope is that you just always try to lean in the things that you think will have kind of staying power. But you just try to do risk reduction.
[00:07:15] Dan Runcie: Right, Right. And I assume, too, from a fundraising perspective with you and this fund specifically, because a lot of the LPs are high net worth individuals, some of their willingness to invest in funds hasn’t necessarily changed as much as some of the more institutional investing in things that we’ve seen in the past year or so.
[00:07:36] Megan Holston Alexander: Yeah. So actually I might argue the opposite. So when you’re dealing with individuals, right, in their personal wealth and people who are really new to venture, right? That’s a really, really scary moment because venture is a long-term play, right? It’s not like you put your money in and then two or three weeks later, you can be like, Hey, Megan, where are my dollars? And so making a long-term commitment like that during a period of economic uncertainty is actually more difficult for an individual than it would be for an institution because one, it’s not any particular individual’s capital, but also institutions have much kind of more thorough game plans, right? They know what percentage they’re putting into venture versus private equity versus, you know, bonds or whatever the case may be. So they’re kind of more consistent and they understand that the market kind of goes up and down and that there will be moments like this, and it’s actually a little bit more difficult when it comes to individuals to kind of get them over that hump.
[00:08:30] Dan Runcie: Yeah, that’s fair. Because I do think that even in some conversations I’ve had with folks, things like the price of Bitcoin or the price of Ethereum having a pretty impactful influence on what their net worth is and their own willingness to invest in particular things.
[00:08:46] Megan Holston Alexander: For sure.
[00:08:47] Dan Runcie: And for you with this fund, specifically, now fund three, but the fund itself has been around for a few years now. Do you feel like the vision for the fund has evolved at all in that time? I mean, I feel like the core mission is the same, but have any of the ways that you’ve either talked or pitched the fund evolved in that timeframe?
[00:09:05] Megan Holston Alexander: Yep. So I think you’re right. We’ve kept our two kind of core missions the same, but what we do understand now is there are a number of different ways to execute on it. So if you will bear with me, I’m happy to share kind of two, you know, how that looks on both missions. So on the first mission of connecting the world’s greatest cultural leaders to the best new technology companies. You know, historically we set, you know, athletes and entertainers and musicians, people who, from, you know, a large scale of consumerism have contributed to cultural change. But over time we’ve realized black executives also have like a really, really huge impact on this space. So people who are in leadership roles at Fortune 100 companies, or even at startup companies, they can have a huge impact on culture and consumer behavior more generally. And so we wanted to be sure that we really leaned into bringing in more black executives into the fund than we ever had before. And that has proven to be really helpful for the firm because they end up being, you know, equally if not more useful to the portfolio than the musicians and the singers, and the actors, et cetera. And so we have really enjoyed kind of expanding and involving that side of the network. And then on the second side of getting more young African Americans in tech, you know, fo fund one, we committed all of our management fees and carried to, like, one set of organizations. We picked them in the beginning and wanted to support them through the life of the fund. But what we realized by fund two was like, well, that doesn’t really give us an opportunity to invest in new non-profits that are kind of on the cutting edge of technology, right? As things are growing and changing, we want folks who are being innovative on the non-profit side as well. And so what we did for fund two and now for fund three is we opened up kind of the spectrum of what we would support from a non-profit perspective to kind of match where we thought the technology world was going. So for fund one, you see a supporting kind of big well-known organizations that have proven over time if they are directly putting black folks into the pipeline for technology. But now we’re saying like, okay, how do we add to this? Well, Web 3.0 is a huge thing, not only as a space for investment for the firm, but also generally of wanting to be sure that black folks don’t get left behind in this Web 3.0 revolution. So we support organizations like crypto tutors that is meant to do just that, and that’s not something we would’ve had insight into in that first fund. Gaming is also a new, huge area in technology. It is now, I think, you know, people play games more than they watch TV based on current research. And so how do we ensure that black folks are being supported in the gaming industry? So now we support black and gaming. We support the Black Collegiate Gaming Association. So just ensuring that our philanthropic efforts can support and are aligned with what we’re doing as a firm and where technology is going overall.
[00:11:51] Dan Runcie: I actually want to talk about each of those two things separately. Let me go back to the first one.
[00:11:55] Megan Holston Alexander: Let’s do it.
[00:11:56] Dan Runcie: I think it was really interesting what you said about athletes and that sector around sports in general, if I heard you correctly, them being but not even more influential or helpful for the fund overall, but maybe relative to some of the other folks, whether it’s your LP such as your musicians or entertainers. Did I catch that right?
[00:12:16] Megan Holston Alexander: If I’m hearing what you’re saying, you’re saying that I said that the athletes are not as useful?
[00:12:20] Dan Runcie: Oh, the other way around. Like, more useful than, like, some of the others that work with the fund?
[00:12:24] Megan Holston Alexander: Well, I was saying, from the executive side, did I say athletes and not executives?
[00:12:28] Dan Runcie: I think it was athletes.
[00:12:29] Megan Holston Alexander: Maybe I misspoke. But what I was essentially trying to say is from a cultural leadership perspective, historically, it has very much been athletes and entertainers and we wanted to involve, we wanted to evolve our kind of mission overall to include more black executives.
[00:12:45] Dan Runcie: That was helpful. Yeah, ’cause I was curious to tap into more about like, why that is and how that’s impacted the fund so far.
[00:12:52] Megan Holston Alexander: Yep. Because I feel like, everybody thinks that when you bring on like just a celebrity, everything skyrockets, right? That it’s just like, ooh, if you put this name on there, things just grow. And that’s not always necessarily the case. We’ve, you know, really supported our companies in being thoughtful and strategic around the ways in which you use a celebrity. And we’ve also been, you know, in deep conversations with our kind of LP network and our network at large about wanting to be more than like a disengaged kind of passive investor. And so they love partnering with the portfolio companies, et cetera. But what we hadn’t considered on the executive side is, while the athletes and our kind of entertainers can partner on different things or like help them go into new markets or help them with the launch of a new product, when it came down to like core operations or how you should run on your board, or how to think about hiring X, Y, and Z, like, our black executives, like hold that information like in the palm of their hands. These are people who’ve been, you know, operators for 20 or 30 years, and so they brought kind of an additional level of skill and kind of insight to bolster what our other LPs on the more kind of athlete or entertainment side were doing. So now we have this really robust group of black cultural leaders who can help in a number of different areas.
[00:14:07] Dan Runcie: That makes sense. Yeah, I mean, we see the influence, we see how influential they are in all of these sectors, and if you’re thinking about just like how your fund is structured, I know that you do have different folks on the team focused in sports, focused in entertainment more broadly, and I feel like eventually having, you know, whether it’s even more of those or just being able find the best ways to lock in on talent, because I think we’re seeing this more and more. I think a lot about like, let’s say like 10-plus years ago when we saw the era of a lot of artists being named as creative directors for particular companies. And some of those turned into, you know, really flourishing partnerships, and some of them necessarily didn’t. But now, and I feel like your fund was timing this. You captured this moment where we’re seeing more than that.
[00:14:54] Megan Holston Alexander: Yep, absolutely. And it’s not just because you know, sometimes it works and sometimes it doesn’t. And it’s not just because, and not only because, you know, athletes and kind of other entertainment folks want to be more engaged, but quite frankly startups are requiring it. They don’t want you to just let your name on something and then you disappear and like, you know, take the money and run or whatever the case may be. And so what we’re trying to do is really build up to kind of core groups of people who are interested in each other and want to work together. And so there should be an equal expectation when we bring our LPs in and on our startup side that the startups want to work with these LPs and they’ve been thoughtful about how they want to engage with them, right? So if you want a particular person, why, right? Why is this person the best fit for your company? And so we really challenge our companies on that, where it’s not just like, you want to get the biggest name, but the person who will actually be most influential for the product that you’re building. And on our LP side, we say like, okay, what is it about this company that makes you most interested that you want to bring to the table? So it really is about working together. We are trying very hard not to make it where it’s just like, kind of one-off, really transactional doesn’t make a lot of sense ’cause those tend to be the things that don’t work out. We try to be thoughtful on all fronts.
[00:16:11] Dan Runcie: That makes sense. ‘Cause it’s like, otherwise, then it would just be like an Instagram ad or something like that, being like, oh, hey, go sponsor this product. And like, that’s not what this is about.
[00:16:21] Megan Holston Alexander: And it doesn’t make sense. Like, make it make sense. That’s the most important thing for us because those are what can be fruitful. And then say it’s something that, everything doesn’t always work out, but if you went into it with the right intentions and everybody did their best, like, that’s all you can hope for. And then those people usually want to work together again, even if it didn’t work out. So we really do take this long view on relationships, not just as a firm, but as a fund and the way in which we interact with people and hope that they’ll interact with each other.
[00:16:47] Dan Runcie: Right. And then at the second piece of what you were talking about, you talked about investing in companies that are ultimately helping to either further access or knowledge. Web 3.0 was an example and wanting to make sure that black talent doesn’t get left behind in this space or in other spaces that may emerge. Where do you feel like things are right now? Do you feel like folks are on board? Do you feel like there’s still a huge opportunity specifically with when it comes to Web 3.0 and black talent?
[00:17:16] Megan Holston Alexander: Yep. I think until we get to a place where we feel like we have like, peer across the board equity, there’s always work to be done. And being like an HBCU grad being from, you know, born and raised in Alabama, I have a very core sense of like what inequity looks like and how, what are the ways in which we can try to approach solutions to that problem. And so I think I’m lucky enough to have you know, that, sort of background where I can bring an interesting perspective into how we solve those problems. But I am finding that Web 3.0 overall has a lot of opportunity. One, because, like, nobody’s an expert, right? Nobody’s been doing Web 3.0 for 30 years. It is relatively new, right? There’s people who’ve been doing it for the last 10 ish years, and there are a few people who are just really hardcore, but there is so many of our Web 3.0 companies, because there is just like a lack of, expertise in the space, they’re just excited to get people who are interested and passionate about Web 3.0, right? So you kind of get to jump over this need for a long period of time having worked in X, Y, and Z or Web 3.0 in this case where you get to just work off of passion and start building the product. So that’s one of the things I love about Web 3.0. The hard part is that there’s a knowledge imbalance, right? It takes a lot of reading. It takes a lot of listening to podcasts and going through the a16z canon that a lot of people just don’t have, right? The information is there, but everybody doesn’t have time to read hundreds and hundreds and hundreds of pages on Web 3.0. And so the kind of that asynchronous ability to get information, I think, is where we have to fill in the gap. What is the answer to that? I’m not completely sure, but organizations like crypto tutors that I mentioned earlier, are making content easy, accessible, fun, really big on entertainment. And so while I think the opportunities are there for the roles, I do think we need to fill in the knowledge gap in terms of who gets the knowledge.
[00:19:09] Dan Runcie: Agreed. And for you specifically, which areas of Web 3.0 are exciting you the most as an investor?
[00:19:16] Megan Holston Alexander: Whoa, well, you know, with CLF being a co-investment vehicle inside of the fund, I feel like I get lucky enough where I get to see all the cool stuff, but I don’t have to make the strenuous, anxiety-ridden decisions about, you know, which ones to pick. I just get the benefit of spending time with them all after the fact. And so for me, I am most excited about and I’ll just say the one piece that I’ve been looking into a lot lately is like, DAOs. I love this concept of like governance and people getting to vote on what they do with capital and making decisions of that, like, things to buy and things to sell. I think the way in which communities are being built around kind of DAOs and that type of governance is really interesting.
[00:20:00] Dan Runcie: Yeah, for sure. I think some of these conversations, whether it’s DAOs buying sports teams or Dows trying to get involved with different things, we’ll see. I think, like anything, we’re in the early days and some of these things will come to fruition but there’s definitely something there. Just looking at how decentralized so many things are becoming then I think a lot of those things do need to.
[00:20:20] Megan Holston Alexander: Agreed and I think there’s pros and cons of everything, and I think that’s one of the things that, you know, gets missed in the hype cycle. There are things that will be really great about web 3.0 and there will be things that don’t work out in the way that we hope, but in the end, we hope we shake out with the best kind of the pack.
[00:20:38] Dan Runcie: Right. And then you mentioned it earlier about just the way that CLF invests and you co-invest. So you do get to see all the things that come through and you’re not necessarily picking or, you know, making them the investments yourself. But do you think that’s something that may change with either the vision or the evolution of the fund itself, where you would be making those investments?
[00:20:58] Megan Holston Alexander: You know, we, at the firm, we never say never. We don’t know what the future holds, but I think right now, the way that we’ve structured it, you know, we’ve got two really core goals at CLF, and the first is like getting black dollars onto the cap tables in Andreessen Horowitz companies and the more that I can do that, whether it’s through co-investing or otherwise, I think that the structure that we have right now is one that works and that I’m I’m really pleased with. And then in that second mission or actually still the first mission, but the second way that we execute on it, right, so CLF has a fund and dollars out of that fund go into kind of the deals across a number of the funds inside of the firm. Not all of them, but most of them. But then the second thing that I get to do and spend a lot of time on, because I don’t have to do, you know, a ton of that behind the scenes like diligence work, et cetera, is get additional strategic rounds for our portfolio companies. So not only is our LP base as a whole represented on the cap table, but anytime that there is a really thoughtful or smart partnership or somebody wants to add an additional strategic capital, we now can give even more black people on the cap table. And so I really enjoy spending my time doing that and I want to keep at it, but the firms, we never say never to stuff. Who knows? If it ever makes sense, we’ll see.
[00:22:14] Dan Runcie: Yeah, definitely. And then I think too, you mentioned this a few times just in terms of how the firm is structured in terms of building and investing in relationships. And I think this is something that I know you’ve talked about in other interviews, something that rings true with a16z overall. Can you talk a little bit about the way that you have the divisions or the way that you have the different verticals for, whether it’s entertainment or sports and some of the events that you attend as well, and how that helps the overall mission?
[00:22:42] Megan Holston Alexander: Yep. So for CLF, you know, historically when probably two years ago when it was just me and Chris the two of us, we did everything right and we realized that if we really wanted CLF to scale and to grow and to really have an impact on the communities and generational wealth, we needed to scale what we were doing. We need to get more cultural leaders involved. We needed to be able to make more kind of partnership introductions, et cetera. And so the way that, you know, made sense was, okay, we’ve got these cultural leaders. How do we bring together the best at what they do in order to help manage these networks? So we brought in folks like Derek who have been on the management and agency side for a number of years to manage the entertainment vertical, right? So when you have one thing to focus on and it’s only entertainers, you can make much more kind of clear and thoughtful decisions around who to introduce to whom or who to bring into this company, or when a portfolio company says, I need this type of person, you can make a quicker decision. We brought in Deb on the athlete side. She was a manager at Rock Nation Sports for a number of years, so she really just has the depth of knowledge. And not only that, they both have this really interesting knowledge just about who players are, but how we can structure deals with them, right? This is what they’re used to, and now we’re bringing in this tech side, how do we make those deal structures match, or how do we make it more, you know, favorable to everybody involved? And so they brought another level of rigor to the deals and the strategic rounds that we were putting together that we needed a lot. And then both Julie and I work on the executive side, which I said is burgeoning. And so we really try to specialize. One as a firm, right? We’ve got a crypto fund and a bio fund, and people who are specialized. We do the same thing inside of CLF. We try to have people focus on a swim lane. And it’s proven to be successful. So far, we’re really pleased with that decision.
[00:24:29] Dan Runcie: Yeah, I think it’s effective and I think the names that you’ve been able to have as LPs in each of the rounds speaks to that too. And at the end of the day, especially in these industries, of course, I know relationships drive everything, but I think it’s more so in these industries because especially with some of these high net worth individuals in entertainment, there’s so many people from coming out of the woodwork who are trying to swindle them out of stuff or trying to propose them the most horrible deals and investment opportunities. So I think that’s where the value add is here, as opposed to, or even more so than someone else who, you know, isn’t in these fields. So they’re not necessarily getting as much of the crap, if you will, from the proposals. So being able to sift through the good ones.
[00:25:12] Megan Holston Alexander: I think you brought up a really good point. And I think that point is trust, right? So when you have people coming out of the woodwork, like you said, with investment opportunities, I got a good investment opportunity for you. But that person has no real background to be able to speak to like kind of whatever that item is or whatever that company is. We try to really mitigate the risk for our LPs and, and kind of partners that we bring into rounds for CLF, like, we never bring deals to people that we haven’t invested in ourselves, right? We feel like how can we tell you like, you should invest in this, but like we didn’t do it. And so people know that anytime we bring something to them, it is fully invested through Andreessen Horowitz, like, process, deal team, GP, et cetera. And so we try to, you know, really eliminate risk for them. And obviously, we always have them, you know, do your own research. Here is the information you make the decision for yourself. But we just pride ourselves on building trust with people because if we mishandle people and we swindle people, like that gets around and then that doesn’t benefit us, right? If it goes around like, oh, those. sneakers over there, a16z are doing that. But we feel like we have really put forth a concerted effort that people know that they can trust us and they share with their friends that they can trust us. And that really is I think how we try to maintain and engage with our network. And so far, you know, that network has been able to grow and we always say, you know, we’re not going to sacrifice a relationship for a quick buck that’s just not our style. That’s not what we do. I hope that that is kind of what’s making the rounds. But so far it feels like people really have built a lot of trust in us and we don’t take that lightly.
[00:26:53] Dan Runcie: And I do think that information and understanding of these things has just gotten better in decades overall. And couple that with the fact that this is venture capital. Of course, it’s a risk. Most of the companies that we’re investing in probably aren’t going to take off, but the ones that do are going to hit. And you’re doing it with a firm that has a track record in this. So I feel like there’s so much transparency.
[00:27:16] Megan Holston Alexander: Well, I don’t think I’m allowed to agree with that, so I’m just going to say okay.
[00:27:20] Dan Runcie: Fair enough. Fair enough. And I think the difference there though is that I think about so many of these athletes, whether it’s you get pitched on like opening restaurants with their name and all these other things that you know are just dated things. Of course, those things can still work. We’ve seen them be effective. But we’ve come a long way.
[00:27:39] Megan Holston Alexander: And then one of the other things is, you know, we tell people, you know, that invest in our fund to please consider us a resource when things like that come up, right? We say we’re a VC firm in your back pocket, right? So if something comes your way and you want us to, like you have questions about it, you know, obviously we can’t tell you what to do, but we can help you figure out what are the right questions to ask when these opportunities come in front of you. And so that education piece that we do, I think is really valued by a lot of the folks who trust us with their capital.
[00:28:10] Dan Runcie: And then with your LP specifically, is there anything that you’re specifically looking for from a vetting process? Like, not necessarily talking about like commitment levels or anything like that, but more so things that you’re looking for ’cause earlier we’re talking about, of course, we’ve come a long way from the celebrity investors slapping their name on things. But I’m sure there are probably still some out there that may want to do that. And you’re making sure that that’s not who you’re attracting.
[00:28:35] Megan Holston Alexander: Yep. I’m trying to tell you all my secrets. You know, the most important thing for us is that we have LPs who want to engage. We want people who are willing to like, you know, hop on a call with us and share their interests or if, you know, you join the fund and you are entered in particular deals or we, you know, come across a company that would be a really great fit for you to talk to, maybe just have a 15-minute conversation with the CEO. There are people who love opportunities like that. So people who want to engage and want to learn and spend time with us and spend time with our LPs is who we try to really, really lean into because it’s a symbiotic relationship, We want to support them. But at the end of the day, like our largest goal is to support our portfolio companies and whether it’s the a16z team, whether it’s our LPs, like it’s all hands on deck. And so I love people who come in and have a genuine curiosity and they’re excited about technology and innovation and they want to play a role in things that are being built. And so, we love those conversations and you can kind of really tell, like I’ve had people who you would never think, people who you would think would be super disengaged. Like, that person is interested in tech who are, have gone down like the Web 3.0 rabbit hole and they’re like, ooh, and I’m going to do like a token that has this, and then I’m going to give it to my whole community back in Texas or whatever. Like, really is just a really, really thoughtful people. You don’t have to be an expert. Like, that’s not what we’re looking for, but we just look, want people who want to be involved.
[00:30:04] Dan Runcie: That makes sense. That makes sense. Shifting gears a bit on the talent side of things. We talked about it a little bit about how important it is to the fund to be able to just help develop this space and obviously your fund’s doing its part. We talked about some of the areas that you’re looking to invest in, how you’re looking to just elevate this space overall, what do you think the rest of the VC community and landscape needs to be able to do to ultimately get things to where it should be.
[00:30:31] Megan Holston Alexander: Sorry, when you say get things to where they should be, you mean in terms of like talent as an employee of companies? You mean talent in what way?
[00:30:40] Dan Runcie: So I’m talking about talent in terms of whether it’s black founders who are leading companies or black talent that are just interested in the space that are either going on to get jobs in the space or to work for other established companies, overall investing and then just being able to grow and see more black talent in tech.
[00:30:59] Megan Holston Alexander: Yep. So I’ll start by saying there’s no one way to do it. I think there are a number of different approaches that people can take. But I usually divide it up at least of this industry into three things. One, funds can, or you know, firms can support black founders, right, by putting capital directly into their hands so that they can build their companies. Two, they can help more black talent get into early stage companies, right? So, employee 10, employee 15, employee 20, because we know that early employee equity can really change a life, right, when a company has a liquidity event, whether it’s an IPO or a sale that now that person has capital to start a company or to angel invest in companies and kind of create some generational wealth for themselves. And then the third thing is getting more black dollars on cap tables, right? So ownership stakes, not just monetizing on a platform, right, for all of the amazing things that we’re creating, but actually having its ownership in the platform to create generational wealth. And CLF focuses on those last two, but there are a lot of firms, again, focused on, you know, funding black founders. I think kind of focusing on those three core areas can really create economic, you know, extreme economic kind of opportunities for the black community. And so, you know, with CLF focusing on those last two, I think we’ve got a really special niche that we get to support in a number of ways, which I mentioned before.
[00:32:26] Dan Runcie: Yeah. I feel like the closer that, or at least the more people, whether it’s in this generation or in, you know, people that are a little bit older that are still trying to do it, being able to just get more focus on building generational. And just the knowledge and the mindset of it. I think all those things help. I think we’re seeing more podcasts, more shows, more content from black folks that are specifically focused on this, which is great. I think, you know, there’s never too much of it. So personally I think that I would love to be able to see more dollars and more hiring that happens in these places too ’cause I think we saw, especially in the past couple years, there was so many press releases that came from particular companies, and I think I saw recently there was a big tech founder that just announced, you know, a $400 million fund to invest.
[00:33:16] Megan Holston Alexander: 400 million. Yeah, yeah.
[00:33:17] Dan Runcie: But like, wanted to be able to actually see the results from those and being able to see the impact and being able to see people, you know, become their own Robert Smiths that can then, you know, pay for, you know, tuition for a future class. The more of those we see, and it’s not just the one, you know, few names we already know would be great and I think those things will happen, but ultimately I think that’s what so many of us want to see in this space.
[00:33:39] Megan Holston Alexander: And there’s so much embedded in this conversation, right? And I’ll go on a little bit of an aside because I think one, we have to understand that like when we think about the future and black equity and empowerment, some people still don’t care. Like, there are a lot of people who just do not care. It’s not their problem. They don’t want to help solve it. And then you have people who kind of commit to things but have no follow-through. And that’s what we saw a lot of over the last couple of years. Like, after the murder of George Floyd, all these companies were like, yes, we’re going to give this, we’re going to do this. And then the follow-through two and a half years later is just not there. And then you have the people who are really, really committed but don’t understand the expanse of the black community and think of it as a small sliver, like, really high, like, accelerators that they would want to support who still go to like a very specific set of schools, right, the talented tenth of the black people and are willing to support that. But then there is this holistic perspective around, like, non-monolithic blackness and how do we encourage economic empowerment and growth across the community as a whole? And that’s what I want to get to. When we think about HBCUs, there’s over a hundred of them, right? And how do we support more of them as opposed to like the same ones that get, you know, a ton of shine. Mind you, when it comes to HBCUs, like, they don’t work outside of the community, be like, we depend on each other and we rely on each other. So, you know, I want to get to a more comprehensive perspective on, like, what supporting black economic empowerment looks like from a long-term perspective. So I think we’ll get there, but there’s a long way to go.
[00:35:25] Dan Runcie: What you just said reminds me of, there was one of the tech companies that announced that they were going to have a black board member and that someone was going to take their seat away and they were going to make the opportunity for a black board member. And people were very curious, okay, who should it be? And to the point that you’re making, who can we elevate to that point? Who could we provide an opportunity for? And I think they ended up choosing one of the most successful and high-profile black founders in this space. And while it is great to see that person in that role, that wasn’t creating a necessarily a new opportunity in that same type of way, and it goes back to the talented tenth thing.
[00:36:02] Megan Holston Alexander: Yep. We’re here. And you know, I think you bring up a good point when, and now we’re about to get into black history, but that’s okay ’cause this is for the people. Conceptually, when you think about the talented tenth that’s, you know, W. E. B. Du Bois and, like, his concept from a sociological perspective, and you think about who he was at tension with the most, Booker T. Washington and this concept of the Atlanta Compromise. Two very powerful black men, the founder of Tuskegee University versus, like, the first black man to get a PhD at Harvard. Conceptually thinking there are multiple ways in which the black race can succeed. And I think that’s still very much the case, right? So, you know, W. E. B. Du Bois is very much like, we should be going to college. We should be getting these advanced degrees. Like we can have these like high power jobs, et cetera, and be in government, but Booker T. Washington is like, our people down here, don’t even have running water, right? We should be focused on trying to get like basic level of education, jobs that provide us, like, a source of income that’s steady, et cetera. So my point is, you know, reasonable people can disagree to what the solution is. And, again, I think there’s multiple approaches and so I think if we can, you know, not just go one route, right? It can’t always be about only the talented tenth, but kind of like also bring up a pathway where in Booker T. Washington space, right? That’s why we’ll have all the like, black agricultural people. Tuskegee is, like, the best university for, like, mechanical engineering and industrial engineering. And that’s all like thematically with Booker T. Washington. So there’s room for both. We just have a habit of focusing on one. Ali went there and went into a total black history tangent.
[00:37:38] Dan Runcie: We could do a whole episode on that. But I’m glad you brought that up ’cause I do think that analogy and just, it ties so much of this together and ultimately the purpose of the fund and what you’re trying to do. When I think about the nuance of all these conversations and the comprehensiveness of it what people need to hear so thank you for that.
[00:37:56] Megan Holston Alexander: Fun fact. I’m actually a sociologist by trade. It was my undergrad. My undergrad degree, I got a Master’s in it. I went to get a PhD, dropped out ’cause I hated it, moved to California, and got into tech and my dog is actually named after W. E. B. Du Bois. So fun fact for the people out there.
[00:38:14] Dan Runcie: Still fresh, I mean for some of that, you know, I’m sure the sociology degree may have been, you know, some time ago, but still fresh. You still got it.
[00:38:21] Megan Holston Alexander: It’s good stuff. I love social interaction and studying how people engage with each other. So it’s my secret passion. I’m a sociology capitalist, I guess so.
[00:38:32] Dan Runcie: Of course, no, I think that there’s some term there. But shifting gears a bit though, this is also somewhat on a sociology perspective, especially among VCs, the concept of where to live and where people are investing in has just been a bigger discussion ever since the pandemic had started and you are someone that lived in the Bay, you’ve recently moved to Alabama. And it’ll be great to hear two parts. One, not just why you made the move, but also what is your take right now on the Bay Area, on San Francisco, because it is such a polarizing discussion point, especially from whether it was even people I talked to when I was at the summit or in so many conversations, for me as someone that still lives here.
[00:39:15] Megan Holston Alexander: Yep. So it’s polarizing for a lot of people, but my feeling is clear and I’ve always felt that, like, talent is truly, truly all over. So I moved to Alabama because, you know, I got two little babies and, you know, my parents are getting older, and I wanted to be able to have my kids spend time with them and to go to Mimi’s house, and Mimi to be able to come to their school stuff. And so, you know, the pandemic really allowed us the opportunity to do that because as you know, Andreessen Horowitz moved to the cloud. Prior to the pandemic, we were very much a, you know, in office culture as most firms were. But you know, much to the credit of our leadership, they saw how much flexibility people had while still being productive and wanted to be sure that, you know, people were able to maintain that. So I’m really grateful for it. But, you know, my stance has been the same. I’ve always felt like people, smart people come from everywhere and they can be everywhere. I used to get really offended, actually. So I went to an HBCU undergrad. I went to Clark Atlanta, but ultimately got an MBA at Stanford. And somehow after I went to Stanford, everybody starts, like, picking up the phone for you, right? And then they’ll, like, respond to your emails when they, you know, see a certain thing there. But people are like, oh, I see you went to Stanford. Like, you must be smart. And I’m like, I was smart before I went to Stanford. I was smart in Alabama, you know what I mean? And so I’ve always conceptually believe that, you know, yes, people get these extra markers, but that doesn’t necessarily determine, like, I didn’t go to Stanford and get smart. I didn’t go to Stanford and get some magical thing that makes me, you know, smarter than everybody else. And so I’ve just always been a believer in, you know, talent being everywhere. As far as like the Bay, in particular, I do think, you know, something special happens when you can kind of create some serendipity and put people in the same place. It’s not that like, oh, you know, everybody was just born there. They’re very smart. It’s like, no, like, people were actively coming there to join companies, et cetera. So you did get this great critical mass of people living in one place, especially when offices were in office culture. But now kind of that disbursement has happened and I think it just shows people that like, yeah, people who are interested in tech and building things. Also, they desire to live outside of the Bay Area for whatever reason, whether it’s family or friends or I want to live near Warm Beach. Whatever the case is, I just think, and again, have always believed that you can live anywhere and be smart and productive and happy.
[00:41:38] Dan Runcie: And I think a lot of this was inevitable. We knew that as technology got better and better, the power of conglomeration, especially from a physical location perspective, was only going to lessen. I don’t think it necessarily goes down to zero. There, of course, is benefit and why people live in particular places, but I do think that what we saw the past 15 years up until maybe the past two years was at least like the last wave. And you saw it before, whether it was with, you know, the auto industry or the Midwest of all these other places. Like, we’ve seen this happen time and time again. But what’s different now is that things are so fragmented and it makes me think a lot of things we see in music as well. We saw so many areas that were just such culture beds for where the new hot sound was coming from, where the hottest music was. And I think we still see a lot of that. But we’re starting to see even that spread out of it too. So this is happening across the board.
[00:42:31] Megan Holston Alexander: Yep. I agree. And, you know, I think as long as companies support their employees’ needs in whatever it is to be productive, I think we’ll get to the right answer. So for example, our firm allows you, if you want to go to the office, you can. There’s, like, no office that exists, so, like, you can’t get interaction if you desire it. But not requiring it allows both types of people to be happy. And quite frankly, like, most people don’t even know I live in Alabama. Like, I’ll be on the phone with somebody from work and I’ll like, no, I’m in Alabama. And they’re like, oh, how long you visiting for? And I’m like, no, I live here. And like, everybody’s eyes bug out and they’re like, what? You can be equally as productive and no one have no, you know, no idea where you are.
[00:43:14] Dan Runcie: Yeah. And I think that, and it’s interesting, I’ve heard, you know, from some founders that are trying to go back in the office, some founders that are, you know, doing things remotely a hundred percent. And part of it is all that works for you, but the fact is we have options now and that’s basically it.
[00:43:30] Megan Holston Alexander: And I appreciate, again, the flexibility of so many companies to, like, actively buck against what the normal used to be, because I think it would’ve been really easy or conceptually easy to say, like, we’re going back into the office. Like, that’s what it is, and, you know, that’s the end. But for all the companies that are like, hey, the world is changing, let me adapt. I and I know so many other people are really grateful for that. And me as a new mom, the flexibility it’s given me is just huge.
[00:44:00] Dan Runcie: Right. And to tie it all in too, it just allows the greatness and the genius to come from so many other areas that aren’t filtered by all of the other things that let people pick from the pools of talent that existed before.
[00:44:13] Megan Holston Alexander: Agreed. The CLF team, at this point, I don’t think anybody’s in the Bay.
[00:44:17] Dan Runcie: Makes sense.
[00:44:18] Megan Holston Alexander: I knew we’ve got New York and Miami and LA. Okay, wait, no, we do have one person in the Bay. But the fact is that this team, CLF as it is now, could not have existed if we could only be in Menlo Park.
[00:44:31] Dan Runcie: Right, right. No, that’s a good point. That’s a good point. All right. Well, Megan, this is great. Covered a bunch. We got a deeper look behind the fund. Everything that goes behind the work you’re doing.
[00:44:41] Megan Holston Alexander: Wait, we’re not done, are we?
[00:44:43] Dan Runcie: We’re getting to the tail end. We’re going to the tail end. Oh, you got more?
[00:44:46] Megan Holston Alexander: You couldn’t convince me that that wasn’t only 20 minutes.
[00:44:50] Dan Runcie: No, we definitely, we definitely had some good deep dives in here. This was good. But no, before we let you go though, what’s one big thing that you’re excited for 2023?
[00:44:59] Megan Holston Alexander: One thing I’m excited for 2023 for the fund, I am really excited to continue to, like, bring people together. In the last two and a half years, we haven’t been able to do that, but CLF as a fund and as a network really relies on putting interesting people in a room together so magic can happen. And you probably heard me saying it’s all around like the summit a few weeks ago. Like, my favorite part of my job is when, like, I know somebody and I know somebody else and I see them and I’m like, ooh, they need to talk. And I’ll bring them together and I’ll say, like, I don’t know what’s going to happen here, but y’all need to talk and whatever happens, give me my credit. And then I walk off. And then there’s like all this like zhooshing and this magic that happens. I love those moments. So hopefully I can get to create more of those in 2023 with the awesome team that we’ve built at CLF.
[00:45:50] Dan Runcie: Well, we’ll definitely be looking out for that for sure. Megan, thank you. It’s been a pleasure. Thanks for coming on.
[00:45:56] Megan Holston Alexander: You as well. Thank you. I appreciate it. You’re doing something very amazing with Trapital, and I mean, I just feel honored that you wouldn’t let me be on your platform.
[00:46:04] Dan Runcie: Of course, these are the conversations you want to have. Thank you. Appreciate that.
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