Lone Wolf

Not VC Series >> Building a Conscious Fund

As an introvert (I believe so, though some think I am an extrovert, sorry, I don’t want to hang out with you. I need my Kindle and let me go to nature and cut off from people), I'm drawn to the concept of solo fund managers. I romanticize it because of the autonomy, accountability, and active role that appeals to me. By solo fund managers, I don’t mean to say they are just doing it on their own, but I mean they are doing it independently, working on their own, making decisions, and rolling up their sleeves rather than relying on large teams.

I fundamentally disagree with the large team approach, as I believe incentives are not aligned when associates & analysts are not committed to the fund, don't have skin in the game, and have no upside. For example, large teams can lead to diffusion of responsibility. So, I think the best way to build funds & enjoy allocating capital is to go solo or have a partner-led approach wherein partners source and make investment decisions while working closely with business managers day in and day out.

“Charlie is simply content to trust his own judgment even when it runs counter to the wisdom of the herd. This lone-wolf aspect of Charlie’s temperament is a rarely appreciated reason why he consistently outperforms the larger investment community.”
Book: Poor Charlie’s Almanack

Let me peel back the curtain a bit on the realities of being a lone-wolf fund manager

» Complete autonomy to geek out over deals and make investment calls without pesky partners slowing you down. The flexibility to zig and zag between different strategies and opportunities like a ninja. No endless partner meetings or team politics. Just me and my spreadsheet in harmonious solitude.

» Resources are tight - no army of analysts to rely on, break the fees problem - charge way less than 2% - charge for survival and rest put it into the fund as the skin in the game. My reputation will be everything, so I must schmooze and charm LPs despite my anti-social tendencies. And without different viewpoints, I risk missing red flags or opportunities.

» So how does a solo fund manager thrive alone? Laser focuses on a niche to become the guru. Recruit advisors and co-investors to fill knowledge gaps. Stay disciplined and selective with deals rather than spreading myself thin. Wine and dine LPs so they keep the capital flowing. And be a learning machine to spot trends before others.

» So, do these lone wolf funds actually hunt successfully? It's hard to say conclusively since tight-lipped GPs don't trumpet returns. But data whispers promise. Per Cambridge Associates and Preqin's study, small fry funds swim faster than their whale-sized brethren. Solo funds fall into the compact category, so they likely outpaced the giants. Their sleek and nimble approach may be an advantage, not a weakness.

» As a soloist, laser focus beats broad dilettantism. Pick a niche and go deep. Become a GOOD at something. Dominate a corner that others overlook. Forget breadth, achieve mastery. Tight niche aligns with introversion. Success relies on sorcery in a sliver. I'll flourish by going narrow and deep on a pocket of expertise. Leave general knowledge to big teams.

The solo path isn't for everyone. But for an inward-looking, highly motivated operator, it offers the chance to build something completely your own, unencumbered by others. The risks are real, but so are the rewards. Now, back to my daydreams!

“Charlie is content to swim imperturbably against the tide of popular opinion—indefinitely, if necessary—which is a rare attribute in the average investor”
Book: Poor Charlie’s Almanack

Have you read my last two pieces from the Not VC series, please give it a read and share!

Sign-off for humanity,

Sagar

Follow me on LinkedIn» https://www.linkedin.com/in/sagartandon/

Mail me at » sagar@firstfollowers.co / sagar@beyondimpact.vc

Stay humble, stay curious 🌟🌟🌟!

Note: These are my personal opinion.

---

---

If you have not subscribed, please do subscribe to keep up to date with my musings on venture capital, venture building, impact investing, conscious capitalism, and fund management.