A venture capitalist walks into a room, looks at a pitch deck, and says, “I’ve got a good feeling about this.”
That sentence alone has probably cost (and made) billions of dollars.
But here’s the uncomfortable truth Aram Attar surfaces: in venture, your “good feeling” is often your worst enemy.
The Invisible Game Behind Venture Capital
From the outside, venture capital looks like a game of information—market size, growth rates, traction, CAC, LTV.
From the inside? It’s a game of decision-making under radical uncertainty.
Aram Attar, General Partner at The VC Factory, has lived both worlds. He spent years in LBOs and growth equity—where spreadsheets actually mean something—before moving into early-stage venture, where… they mostly don’t.
Why?
Because in early-stage VC, you’re making bets on:
Companies with little to no data
Founders you’ve known for 30 minutes
Markets that may not exist yet
In other words: you’re guessing—but calling it strategy.
The Myth of Intuition
Most investors will tell you their edge is “pattern recognition.”
Translation: intuition dressed up in a suit.
Aram flips this on its head.
His research suggests:
Intuition isn’t useless
But in venture, it’s often mis-timed
The best investors don’t ignore their gut—they delay it.
Instead of:
“This feels like a great founder.”
They do:
Notice the instinct
Pause it
Collect behavioral and contextual data
Then decide—consciously
It’s like putting your intuition in airplane mode… until you’ve actually checked the map.
The Real Divide: Playing to Win vs. Not to Lose
Here’s where things get interesting.
Aram introduces a deceptively simple idea that explains a huge amount of investor behavior:
Every decision comes from one of two mindsets:
Promotion-focused (trying to win)
Prevention-focused (trying not to lose)
This shows up everywhere.
Founder A:
Ships early, breaks things, takes risks, pushes boundaries
→ Might fail spectacularly
→ Might build Airbnb
Founder B:
Polishes endlessly, avoids mistakes, waits for certainty
→ Rarely fails dramatically
→ Rarely wins big
The same applies to investors.
The best VCs aren’t the ones who avoid bad deals.
They’re the ones who capture the rare, asymmetric ones.
Why Track Record Might Be Overrated
Here’s a spicy take: past performance may not predict future returns in venture as much as people think.
Research Aram references shows:
Top-quartile funds only stay top-quartile ~40% of the time
That’s barely better than a coin flip
So why do LPs obsess over track record?
Because it feels safe.
But venture isn’t a safety game—it’s a power law game:
A tiny number of outcomes drive the majority of returns
Missing one breakout matters more than avoiding ten failures
In that world, evaluating how someone thinks may matter more than what they’ve done.
The Six Signals That Actually Matter
Instead of blindly trusting track record, Aram highlights six signals sophisticated LPs use to evaluate emerging managers:
Team cohesion & experience
Proxy track record (angel investing, prior roles)
Clear, differentiated investment thesis
Deal flow access (not just quantity, but uniqueness)
Portfolio construction logic (do they understand the math?)
Alignment of incentives (fees, carry, structure)
Notice something?
None of these rely purely on historical returns.
They’re all about judgment, behavior, and system design.
The Hidden Biases Running the Show
If venture is a decision game, then biases are the bugs in the system.
And there are many.
A few of the most dangerous:
Confirmation bias
You look for data that supports your initial impression
Halo effect
“Stanford grad = must be great”
Loss aversion
Avoiding risk at the cost of missing upside
Self-serving bias
Success = me, failure = external factors
These aren’t edge cases—they’re default settings.
The best investors aren’t bias-free.
They’re just aware enough to counteract them.
Why Most Investment Committees Get It Wrong
Here’s a quietly brutal insight:
Investment decisions are often not based on the deal itself.
They’re based on:
What the deal reminds you of
Past wins or losses
Internal politics
In other words: memory > reality
It’s like judging a new movie based on the last one you watched.
Helpful? Sometimes.
Dangerous? Often.
The Bigger Shift Happening in Venture
Zoom out, and a pattern emerges.
Venture is splitting into a barbell:
Mega funds playing long-term, post-IPO strategies
Small, specialized funds with sharp edges and unique access
The middle? It’s getting squeezed.
Why?
Because average thinking doesn’t win in a power-law world.
Only:
Scale
Or edge
…does.
So What Actually Matters?
If you strip everything down, Aram’s thesis is surprisingly simple:
Better decisions beat better data.
And better decisions come from:
Awareness of your biases
Clarity of your intent (win vs. not lose)
Discipline in how you evaluate uncertainty
It’s less about having the perfect model…
and more about not fooling yourself.
Final Thought
Aram started in a world where every decision had data.
Now he operates in a world where almost none do.
And instead of trying to eliminate uncertainty, he’s doing something more interesting:
He’s learning how to think inside it.
Because in venture, you don’t win by being right often.
You win by being right when it matters most.
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Chapters:
00:01 – Intro & Aram Attar Background
02:30 – Transition from LBO to Venture Capital
05:00 – Intuition vs Data in VC
08:00 – How Investment Committees Really Work
11:30 – Missing Deals & Veto Dynamics
14:00 – Move to Austin & VC Factory Vision
16:30 – Mindset-Based Investing Framework
20:00 – Founder Evaluation & Drive
23:00 – Promotion vs Prevention Mindset
26:00 – COVID Insight & Decision Psychology
29:00 – LP Mistakes in Evaluating GPs
32:00 – Track Record vs True Signals
35:00 – The Six Key Criteria for Emerging Managers
38:00 – Portfolio Construction Debate
42:00 – Power Laws & High-Volume Investing
46:00 – Deal Flow, Networks & YC Strategy
50:00 – AI in Venture Decision-Making
54:00 – System Design as a VC Advantage
58:00 – Pattern Recognition vs Bias
01:02:00 – Common Cognitive Biases in VC
01:06:00 – Investment Committee Blind Spots
01:10:00 – Venture Market Shifts & Barbell Effect
01:14:00 – Advice for Emerging Managers
01:17:00 – Rapid Fire Insights
01:20:00 – Closing Thoughts & Legacy
Transcript
Brian Bell (00:00.886)
Hey everyone, welcome back to the Ignite podcast. Today we’re thrilled to have Aram Attar on the mic. He is the general partner at the VC Factory where he’s built a research driven approach called mindset based investing. Basically a framework for understanding how founders and investors think, decide and take risks when the data is messy, which it really is. Thanks for coming on Aram.
Aram Attar (00:19.196)
Thanks so much for having me, Brian.
Brian Bell (00:21.35)
Well, I’d love to start with your background. What’s your origin story?
Aram Attar (00:25.038)
So I’ve been, I’ll talk about my professional origin story, unless you want to more. And I think actually a lot, we’ll talk about maybe childhood or some VCs because it plays a role in their investment style. But I was an investor for about 15 years, so early 2000 to 2018. And did around, closed around 50 deals across LBOs, growth equity, VC and M &A. And then in 2018, I founded the VC Factory, started training founders, then training VCs. And I trained probably 50 VCs all over the world over five years. And while I was doing that, I always have this question in mind, which is, how do the best VCs make decisions? And in 2025, I relocated the company in Austin, in Texas. And now most of what we’re doing is thought leadership. We’re promoting what you said, what you did. talked about mindset-based investing. And we do it through reports, through events, and not yet a podcast, but you never know. And also through workshops.
Brian Bell (01:35.302)
That’s amazing. So you spent years across, you know, LBOs, growth equity, venture. What did that path teach you about most pure play VCs, what they never learned?
Aram Attar (01:47.31)
So I went the other way. So I went from LBO to VC, some very large deal, 1.6 billion to small deals. And I learned a couple of things. One is that everything that’s happening in VC now happened in LBO 10 years before. We can go into details if you’re interested in that. So for example, we had this thing of the big funds, the KKRs and the Blackstones in the early 2000s.
Brian Bell (02:03.62)
Yeah, I’d love to like what’s changed. Yeah, what? So it tends to happen in LBOs first is what you’re saying.
Aram Attar (02:15.54)
And one of my last articles is talking about how VC is going now, being this dichotomy between the huge fund and the Exactly, exactly, because the asset class is maturing, Also, and LBOs probably started after VC but matured earlier. And the other thing I learned was how different it is in VC because of the uncertainty. When you do LBOs and growth equity, you have a company that has 10 years of history, cash flow and so on.
Brian Bell (02:21.446)
It’s becoming much more institutionalized, much larger, right? Yeah.
Aram Attar (02:43.662)
And what really I was attracted by was in VC, how do you do when you don’t have, especially early stage VC obviously, when you don’t have any information. and so it’s interesting you say that because I’m writing my second report and it starts with intuition, the hunch, intuition, the gut, the feel, because as an investor, thought finally I made it. I’m finally able to listen to my gut.
Brian Bell (02:51.728)
Kind of like a hunch, you know?
Aram Attar (03:06.88)
And then I did a lot of research in psychology. And what I’m writing now, which is the subject of my second report, and it’s one of the principles of mindset bed investing, is actually intuition doesn’t work in VC. So yeah. So and, know, again, we can go into the research of Kahneman and so on. But there’s this thing where there’s so much uncertainty and not enough predictability. Doesn’t mean that your intuition is wrong. But when you listen to the best at the game, if you want, quote unquote, what they do is they have the intuition, but many times deposit, so you delay your intuition, collect more data, and data means sometimes behavioral, right? And then you make a decision, and that’s something I introduced also in mindset-based investing, is that when you make the decision, be conscious of what we call your focus, which is, you trying to win or trying to not lose? Are you trying to focus on gains or are you trying to focus on not losing money?
Brian Bell (04:00.496)
How do you think that differs between early, mid, and late stage VC? Because the later stage stuff kind of more behaves like a private equity or LBO, right? Because you have a lot more data and you’re running DCFs and things like that versus where I invest with almost no revenue. You kind of are like, yeah, you’re gathering data, but it’s a hunch.
Aram Attar (04:05.912)
So super true.
Aram Attar (04:24.376)
So let me ask you, what’s the kind of data that you would be a non-brainer? What are you looking for both ways? Either the red flag that you know you’re going to pass right away, or something that if you have it, you will go for it.
Brian Bell (04:39.258)
Yeah, I mean, there’s hundreds of factors, right? There’s hundreds of factors. I’ve written articles on this and talked a lot about it. But I mean, it starts with the team, obviously, for early stage, right? It starts and ends with the team. Are they, you know, like A plus talent that will kind of put a dent in the universe? What puts a chip on their shoulder? And there’s like, there’s like probably 30 things like that that I think about, right? You know, what is it about this person that’s like stellar and special? Have they overcome adversity? You know, is the Force strong with them? Padawan, you know, kind of like a Star Wars reference there, you know.
Aram Attar (05:08.59)
How about if you could choose only one? Like if you have this, just time for one question.
Brian Bell (05:28.836)
Yeah, because I find a lot of founders that are successful. They’re just like they’re just so driven and ambitious for some reason. And they’re almost like they come across like like Steve Jobs might have to people. Right. They just they have a vision for the universe and they have to build it and get the hell out of my way if you don’t agree. Right. It’s that kind of attitude a little bit. Right. And so like if I if I leave if I leave a call with the founder I’m like whoa like that is some strong energy.
Brian Bell (05:59.226)
Like one, I have to get over my cognitive bias of like, that person’s an asshole or, you know, like they’re going to be hard to work with. I have to get over that cognitive bias and kind of go, no, like that person’s going to break down walls to be successful. Right. And so you’re kind of looking for.
Aram Attar (06:12.942)
You’re going to love my first report because we’re like 100 % in agreement. The only thing, the one thing I would ask is the driver. I totally agree with you. It’s about, is it a toxic driver first of all, or is it something, as you said, it’s viscerally attached because as you know, it’s so hard that if you don’t have that kind of driver, you will abandon. And then you’re also subscribed to what you said is, I’m trying to get to understand are they trying to win or to not lose? And the people who trying to win are the founders that you probably like as well who are trying to do anything because they don’t want to fail because they haven’t tried something. So there are the ones who are to knock at every door. I always play this clip with Brian Chesky who’s saying, know, payment was scary. We did it anyway. I love that quote. It’s like, we’re not going to stop because nobody did payment in app before, and we don’t know how to do it. We’re still going to try. Maybe we fail. We learn something. Whereas the other ones, the ones who are trying not to fail, not to lose, are the ones who say, you know, I need one more feature because I can ship my app and there’s always a reason why it’s not working and so
Brian Bell (07:22.15)
Yeah, love that. was there a specific moment where you realized that the spreadsheet is in the game here and that the mindset decision psychology were the real leverage?
Aram Attar (07:30.606)
There was a couple of moments, but one I remember was during COVID. I was on the startup juries, maybe you were also. And for the first time, you’re not in an investment committee with your peers and so on. You’re just peering into other people’s mindsets and how they make decisions because then you go to a room just with the investors and we talk about deals. And I realized actually they’re not making a decision based on what they heard. It’s just based on what these deals that they’ve been pitched reminds them that they’ve done in the past, positively or negatively. or what they know about the founder and so on. And then it clicked and reminded me in all my investment committees, same thing. Some people arrived. I don’t know how you guys make decisions at Woodfarm, but many people arrive and they already have a point of view. If you have seen this movie, 12 Angry Men, I always train VCs with that. It’s like...
Brian Bell (08:16.934)
I just watched that at a play at my local high school actually, a rendition of the.
Aram Attar (08:20.162)
The 1957 one or the recent one? I think there’s a more recent one or the old one with the Henry Fonda, the black and white one. the play, sorry, the play. Okay, I see the play. Did it remind you of investment committees?
Brian Bell (08:26.724)
No, I watched the play at the local high school. Yeah, like a production. Yeah.
Brian Bell (08:34.662)
You know, what’s interesting is I’ve never sat in an investment committee because I’ve always been a solo GP, right, which I enjoy because I don’t have to answer to anybody. My investment committee tends to be sometimes my analyst, you know, sometimes my analyst who does all my due diligence or an intern. Right. I’ve had a lot of MBA interns over the years. And, you know, we used to we used to sit in an investment committee every week and talk about deals. But like they were like they were so junior. It wasn’t like a bunch of partners that were equal to me and we were debating. They were like interns and like very, you know, very entry level analysts. Kind of my main my investment committee member now is AI. You know.
Aram Attar (09:20.142)
Okay, so you are able to, I have this post I wrote actually after going to a conference at Harvard, which is actually ChatGPD is very good in trying to break confirmation bias.
Brian Bell (09:30.852)
Yeah, yeah. So chat GPT is my primary tool. I’m starting to kind of use Claude more. I feel like chat GPT is kind of fraying at the edges in terms of their UX and UI and Claude and Anthropics especially. And I’m an investor, I’m into Anthropics, so I’m biased, but late stage investor, not early. I wish early, but I just feel like their app is just more polished or something. know, Anthropics app is they just seem to be building a better product. And I hate that because I like chat GPT. It’s just like, their project based UX is terrible. Like their search is terrible. Especially compared to cloud. But I think chat GPT and I’ve run many head to heads now at all the different levels, you know, standard thinking and pro on evaluating startups and chat GPT still does a better job in terms of it’s just raw intelligence and IQ power. But yeah.
Aram Attar (10:20.142)
For me, the switching cost is too high. So going back to investment committees, I had the exact opposite experience because in my first job as a fund, we had partners in New York, in Paris, London, Hong Kong, and people have different cultures. There’s some deals we were defending didn’t exist in their geography and so on. So for us, it was the contrary. And it worked. as long as nobody had veto. And then, you know, we messed up. It was 2008. We messed up on some deals in Europe. I was in Europe at the time. And then the US partners had a veto. And then we stopped doing deals, right? And we missed the great, we missed some bad deals, but that’s just a one X loss, right? But we also missed errors of omission. We missed four deals that, you know, I had brought up to partnership. that, and that was the reason I left that phone actually.
Brian Bell (11:34.394)
Yeah, and so I kind of missed the story there, you’re so you had a firm and you’re you’re missing deals. Tell us more about that.
Aram Attar (11:40.558)
Yeah, so at the time I was like 31 in 08 when I got into because I wasn’t doing LBO financing before. So I got into really as an investor in PE and VC in 2008, right before, right just before Lehman collapsed. And after a couple of years, I’m bringing my own deals to committee, the partners work with me. So we are defending the deals in the team and That’s the frustrating part of the job, right? You’re spending a lot of time, you have conviction, you go to investment committee and people are not really listening or they’re thinking there’s something else here or they, which is not the case at our firm because people were actually nice and good people, but in many firms that I’ve visited since, people are trying to keep capital for them. They don’t want you to have the money. So they’re going to vote against your deal or there’s some reciprocity vote for my deal and you go against. So that’s also something I do is that I advise the, because I didn’t tell you, but I also invest in emerging GP funds. So I’ve made two investments so far and I take part in investment committee. And one of the things I do is I help the GPs put together their investment committee rules and so on.
Brian Bell (12:50.126)
interesting. So you moved from Europe to Austin. Tell us that story. What changed and how you saw the ecosystem and what stayed the same?
Aram Attar (12:58.606)
Yeah, so I’m still traveling back and forth. I spend my time 40 % Europe, 40 % US, 20 % Latam, because my wife is from Latin America. But we’re going to move, I think, full time this summer in Austin. Obviously, this is where it’s happening. Not in Austin, but in the US. That’s where it’s happening. And so that’s why now I have a team now. have a the people who get in touch with you and so on. so we’re really trying to push this message. The first event we organized was during Austin Tech Week a couple of months ago. And we invited 20 LPs and GPs. And every time you talk about this thing, mindset-based investing, and you give examples, people react to it. Because the people in the room are senior people. They are making decisions. Just like you, they’re making the decisions. In some cases, we have people with like funds with hundreds of millions. And they make decisions also for the team who to recruit. And they’re interested in knowing, do those people have the right mindset or not? also, obviously, LPs are interested in investing. And our first report, which we presented at this event, was actually trying to help LPs to invest in emerging GPs when there is no track record. So how do you do that? How do you break what I call the emerging VC conundrum?
Brian Bell (14:04.934)
Yeah, so how do you do that?
Aram Attar (14:11.278)
So interestingly, mindset, right? But just to tell you how we went at it is not that we’re trying to push our thesis. We looked at three people. We looked at how Bizeh Clarkson, Michael Kim at Sandana, Bizeh obviously at Sapphire Partners, and Samra Kejri at Allocate, who have been very vocal the last few years. And I thank them again for that. We went through hundreds of data points on podcasts, videos, articles. And we found those six criteria that they use. to bypass track record, right? And I can list them for you afterwards. And then we found out that if you want, as a GP, to perform with each of those criteria, you have to have a kind of specific mindset, which is something we call a promotion focus. You are trying to win. And again, I can give you some examples on that. So that’s the answer is try and assess the GP’s mindset. That’s one insight. And the second insight is you should, as an LP, evaluate GPs such as yourself. as founders because you guys first and foremost, you’re entrepreneurs and then you’re investors. And because I have this background as a direct investor, I learned how to evaluate founders and I use the same toolkit to evaluate GPs. What are you doing with your firm? Are you talking to entrepreneurs or only spending time with lawyers to set up your fund? You know, and all these reflexes, low signals that give you a lot of information on the mindset.
Brian Bell (15:34.574)
Yeah. Well, yeah, I mean, I think I got into it because I’d like to meet founders. mean, all the other stuff is just extra, you know, extra busy work. Right. And, the podcast is kind of an extension of that. It’s like it’s an excuse to dive deep with people and kind of get to know, like, how they think. And there’s kind of three main guests we have on the podcast. It’s obviously the founders. That’s what we started with. But it’s also, you know, VCs and LPs. Right. And kind of all the adjacent partners and folks like that. That’s my favorite part of the job. So tell us more about mindset based investing. What is that? You know, give us a definition.
Aram Attar (16:12.421)
So the definition is to take into account psychology in VC. And the way that you do it is to. Recognize that your intuition, as you said before, may be flawed. OK, you have all these biases. Have your intuition, but put it on the side. Then go into more data and analyze the founders and the behavioral analysis. And we can talk about examples. And I’m happy to exchange the tips with you, because I’m sure you have a lot of those. And then when you make the decision, so hopefully maybe you revised your intuition and maybe confirmed it. But you had an open mind when you collected the data. Now, when you make the decision to recognize, you a promotion focused investor? Are you trying to win? Do you have those traits that are you’re OK with the certainty, ambiguity, and risk? Which 90 % of VCs are not, actually, surprisingly, in early stage. Do you have a low loss aversion? V.CostLas did best. I don’t mind the 90 % probability of failure if the 10 % probability of success changes the world. That’s the mindset. Can you focus on what can go right and so on? I think you are by definition because you are an entrepreneur and you went into VC, you probably are like this because you took the risk yourself with your own wealth and money and time and so on.
Brian Bell (17:32.006)
Yeah, I a I like I like to say I took a 90 % pay cut when I left Microsoft to start my my fund. Yeah, I closed on I closed on my first close of kind of my first real fund was 700,000. Yeah, and I had a little rolling fine. I had some money coming in for my first fund that little rolling fund I had. But, you know, yeah, it was effectively. Yeah, effectively a 90 % pay cut when I left. yeah, that was that was a burn the boats moment for me.
Aram Attar (17:57.422)
So why don’t you tell if you’re okay, because I think you’d be a perfect poster child for what I’m talking about. Why don’t you walk us through what you did? I’m sure you didn’t start talking to lawyers and spending 200k or that 700k with lawyers and then you didn’t spend 90 % of your time going to events to meet the LP. I’m sure you were much more hands on and scrappy and bootstrapping and so on.
Brian Bell (18:18.202)
Yeah, I I started with a syndicate. I spent the first, you well, the first couple of years I was an LP and an angel, right? Just investing in other people’s syndicates and some direct angel stuff and LP and a few funds. And then I was running the syndicate called Team Ignite on Angelus, as one does. This is 2020, 21, 22. And then I realized I was getting pushed out of rounds because I couldn’t syndicate fast enough or valuations would change or founders didn’t want to syndicate for a variety of reasons. Because at that point, I think I had about thousand people on Team Ignite.
Aram Attar (18:46.701)
Wow.
Brian Bell (18:46.822)
And they’re like, I don’t want it to send it out to thousand people. Well, we have 13,000 now. But back then it was like, founders like, I don’t want to send it out to a thousand people. And then so our first one was a YC focus fund. was a rolling fund so people could come on, join and whatever quarterly. And that worked really well. that fund for a 2022 vintage is performing really well. It’s like 2.2X Moic right now. Yeah.
Aram Attar (19:12.312)
Wow, for 2022 vintage? That’s great because valuation was still really high in the first half of 2022. Especially YC always there.
Brian Bell (19:18.584)
Especially in Y.C. Right. So like. Yeah. And our fee load was really high because rolling fund fee loads are like 25 percent higher than a standard fund. But when I when I realized I had to have a standard fund that was non Y.C. I went through VC lab. You know Mike and Adele and those guys and Desil. Yeah.
Aram Attar (19:36.022)
Yeah, I love them. love them. had lot of people came from them to us. Actually, the manager I invested in last did VC lab until the end. So love VC lab what you’re doing.
Brian Bell (19:45.582)
Yeah, yeah. So I went through there and got a lot of tough love on how to launch a fund and, you know, and still I’m an investor in Decile. So, you a big fan of those guys run funds, two and three with them. And yeah, the rest is history. But yeah, it took me two and a half years to raise fund to five million dollar fund to during like probably the first fundraising environment in 15 or 20 years. Yeah. And that was. That was I close I did my first close December of twenty two, probably the
Aram Attar (20:08.042)
It is. When did you close? Did you close recently or?
Brian Bell (20:15.334)
One of the worst times in history to close Adventure Fund was, you know, maybe 2009, maybe 2001 after the dot com collapse, but it was pretty bad. And yeah, we grinded it out and that funds doing really well, too. You know, like that.
Aram Attar (20:29.806)
What do you think the LPs who did close with you at that point? Why do you think they invested? Because the 5 million is not a small fund for especially at that time, even now,
Brian Bell (20:40.71)
Well, it took me two and a half years to raise five. I closed on I actually had one point five million of commits. And then when I went to do my first close, half of the commits fell out. You know, so I want to close on one point five million and I close in seven hundred and ten K. I remember right before Christmas in twenty twenty two. And then a couple of months later, I left Microsoft and I was like, I can’t I can’t keep up this Microsoft facade anymore. And it really was a facade at that point.
Aram Attar (21:06.99)
you
Brian Bell (21:07.626)
I was like, it was getting uncomfortable at work. I was going to get on a PIP pretty soon. But I found a job at Microsoft where I would work in the evenings with China. I was a product manager. I went, yeah, yeah, yeah.
Aram Attar (21:18.865)
Wow. You were doing that and raising the fund. And so what do you think? So DLP’s were mostly people that you had interacted before or who had been part of the Angel syndicate or...
Brian Bell (21:28.858)
Yeah, mostly people in Team Ignite, mostly people in the Syndicate, you know, some friends and family, obviously. Well, maybe no family, but lot of friends in grad school, friends and stuff like that. Yeah, lots of little 100K checks, you know, that was fun. That was fun, too.
Aram Attar (21:44.64)
Yeah. And so, and so you said now you’re on front three?
Brian Bell (21:48.626)
Closing Fund 3, which is our second YC fund. It’s a public fund so I can talk about it. Right. So please invest if you’re listening. It’s actually already marked up. Yeah, it’s my podcast. our we started making investments in 2024 YC focused and those 2024 investments are marked up 80 percent already. So like a year and a half later. So it’s off to really good start. Got some good markups. And there’s some companies in there that have 20 or 25 million of ARR. They haven’t even raised the A yet. So they’re just growing so fast.
Aram Attar (22:21.104)
So let me show you I’m a good mindset-based investor and I have an open mind because I had a bias until you told me about everything you just said. I had a bias against YC, not YC companies, YC is great and again love what they’re doing and Paul Graham is probably gonna stay in one of the best business writers in history as well. But how do you, what I used to say but maybe gonna change my mind is that When you look for this type of approval, it’s great, but then you pay the price and then it’s hard to differentiate. So how do you guys beat others maybe or how do you create value of that?
Brian Bell (22:54.298)
Yeah. Well, I think part of it is we’re kind of a known quantity in the ecosystem there. We have 110 Y.C. portfolio companies now. So one of the most prolific probably at this point, not the most prolific, but definitely in the top five, top three or three to five VCs who invest in Y.C. just in terms of sheer deal quantity. We’ve also taken some of our founders that we backed previously and made them alumni scouts. So give them a little piece of equity in the fund and they’re in
Aram Attar (23:01.934)
Well.
Brian Bell (23:23.302)
They’re in book face every day. kind of got their those to the grindstone ear to the whatever. And so they’re they’re listening what’s going on in the community. And they’re like, hey, I’m hearing really good things about X, Y, C company. You should go talk to them. So we have a little bit of inside scoop from those alumni scouts. And these are team Ignite founders we previously backed. And then, you know, the game on the field there is just go super early. You know, I remember showing up to my first demo day five years ago and, know, All the good companies were already like oversubscribed. Right. And so you got to go super early. way before demo day. Yeah. Like weeks.
Aram Attar (23:55.968)
Yeah, exactly. How you guys get in before Demoday then? okay. So that’s something else. Okay. So, okay. Okay. Okay. Get it. it. Yeah. Yeah. No, that’s different.
Brian Bell (24:04.718)
And I I and I told Gary this I was like it’s kind of unfair to like everybody who goes to demo day that you know all the best rounds are already full but I don’t think like why he doesn’t for some reason they just don’t have this incentive to do the big reveal. I feel like it’d be a lot better if everybody started at the same starting line at demo day. We all saw the same companies at the same time and then we could say thumbs up I want to talk to that company and then you you do a mad dash the days after demo day. And that would be a typical demo day format, but YC allows them to start fundraising a couple of weeks before demo day. So that’s always been sort of the, you know, so we get
Aram Attar (24:35.502)
It’s a good wedge that you’re exploiting that’s great. So, okay, so I’m happy I wasn’t reminded.
Brian Bell (24:46.736)
But that’s not it. Let me tell you one other thing we do, which is pretty interesting. we have this air table. And so my EA will put the LinkedIn profiles of all the founding team, the launch page, all the metadata we can grab, we can scrape online into the air table. And we actually have air table scripts to kind of pull it in actually now. All she has to do is go like populate it. And then this automation runs across the air table. that basically ranks and scores the YC companies on the thousands of companies that we’ve evaluated in the past on successes and failures. So our prompt for YC, it’s basically chat GPT, but our prompts like 4,000 words long now. And basically what it does is it prioritizes, you know, from, hey, this is the highest probability unicorn startup to like the lowest probability. And it doesn’t do a really good job of making investment decisions, but it does a good job of like a stack ranking the entire batch. And then that way we start reaching out very early to the best ones first.
Aram Attar (25:49.204)
And so it’s going to probably take you a couple of years to know how reliable the system is,
Brian Bell (25:55.854)
It’s going really well. I said, our Fun 1 is doing well. Our Fun 3 is doing well. So yeah, so far so good.
Aram Attar (25:57.676)
Yeah, yeah, Okay. So I’m happy I kept an open mind because people sometimes don’t like dissent. when I could also have politely said, oh, great for you, YC, but privately think, yeah, but that’s how can you get. But now I learned something. So the same thing, right? When you talk to founders, a lot of the time, I also spend some time between two funds raising money for founders. So I was on the other side. It’s just fun because when you talk to VCs as a fundraiser, They always tell you, oh, this looks like this, and they’re really off the mark. So if you are bit more open-minded and collect the data in that fashion, I think that’s what makes you a better investor.
Brian Bell (26:38.978)
No, it’s been it’s actually I think it’s been hard to raise the YC fund because it is undifferentiated and it’s hard to tell the story. There’s a dozen of these YC focus funds out there. Lots of really good GPs are investing with this strategy. So it’s been kind of hard to break through the noise a little bit with LPs and kind of say, hey, here’s what’s differentiated about how we do this. But, you know, let’s get back to kind of you. And what are some common decision mistakes you see LPs making when selecting emerging managers?
Aram Attar (27:08.642)
Well, the first one is going to be a bit controversial. don’t have my mind 100 % put on it, but I’m not sure, even for established manager, looking at track record makes sense. I’m not sure. I saw just today a post, there was the data coming on. Yeah, because, yeah, and I’ll tell you why, because I looked at the data and there’s one paper, great paper by...
