As allocators develop larger appetites for hot, new investment managers, they have to dig deeper into the emerging manager market to find talent.
But not every asset owner has the resources necessary to find the next Andreessen Horowitz.
“Institutional LPs can be overwhelmed, and a lot of them don’t have the systems in place to process at scale,” said Winter Mead, a former allocator. “They’re used to a cottage industry that looks at a few dozen investments per year.”
Enter Oper8r, Mead’s incubator for emerging venture capital firms that aims to polish them for institutional investment. Now recruiting its third cohort, the program’s alums have since scored investments from funds of funds, family offices, foundations, and other allocators.
Mead and his cofounder, Wellington Sculley, launched the program in 2019 and accepted their first cohort a year later.
Mead said he cut his teeth in institutional investing, having spent time investing at Hall Capital Partners, a multifamily office, and then at Sapphire Partners, a venture capital fund of funds.
“I helped build out the early investment portfolio,” Mead said of his time at Sapphire. “Most institutional LPs inherit portfolios. There, it was building an institution.”
This experience, he said, is what makes Oper8r an attractive program for young venture capital firms. The eight-week program involves classes, office hours, events, and one-on-one meetings for the venture participants. They stay in touch after completing the program, with access to additional classes, networking, and an online community.
Institutional limited partners, family offices who have invested in emerging managers, and other industry experts teach the curriculum, Mead said. This facilitates the connection between venture firms and potential investors.
According to Mead, the program participants learn about the right service providers, operations specialists, and organizational structures that attract institutional investment. In this way, the program echoes the guidance Massachusetts Institute of Technology Investment Management Company’s Joel Cohen is offering through his emerging managers website — details on the law firms, auditors, and fund administrators favored by small managers, among other nuggets of wisdom.
“What I’m trying to do is help emerging VCs become better versions of themselves,” Mead said. “I can quickly identify what are areas of improvement, but I think room for improvement is on both sides.”
According to Mead, some allocators simply don’t have the resources necessary to devote themselves to finding the best emerging managers. While large organizations like the Teacher Retirement System of Texas have entire teams focused on finding these organizations, many institutions have less than 10 people on staff total.
“I just think institutional LPs can be overwhelmed and a lot of them don’t have the systems in place to process at scale,” Mead said. “They’re used to a cottage industry that looks at a few dozen investments per year.”
According to Mead, though, there is money to be made at these smaller, more specialized funds that raise not only equity, but also debt. “You don’t just need to be the traditional spinout,” he said. “You can come from a different background.”
As Mead and the rest of Oper8r’s team sift through the third cohort’s applicants — just under 500 firms — for top talent, the program’s previous participants are scoring big investments.
Interlace Ventures, for instance, announced its first fundraise in June with backing from PayPal, Bain Capital Ventures, Carta, and family offices. PayPal has also invested in Chingona Ventures, another cohort graduate.
Chinonga and Hannah Grey Ventures — both female-founded firms — scored funding in June from Twitter. Hannah Grey, like Interlace, has received funding from Carta, as well as an unnamed foundation and family office.