Michael Kim is the Founder of Cendana Capital, a fund of funds that makes anchor investments in very early stage VC funds.

We talk characteristics of the best investors, how Cendana does diligence on fund managers, portfolio construction best practices, Michael’s “60x rule”, and why high ownership to fund size is the main driver of returns.

We also get in to how VCs are using AI, the competition between Seed and multi-stage investors, why US endowments are under siege, and how secondaries are driving most early stage venture returns today.

Michael also opens up about the early days of starting Cendana, the 18 month grind raising Cendana Fund 1, the day he almost died, and ranking in the top 2% globally in Call of Duty.

Special thanks to Roger Ehrenberg, Kevin Hartz, Semil Shah, Jeff Claviar, Beezer Clarkson, Jack Altman, Jeff Morris Jr, Sheel Mohnot, Nichole Wischoff, Ted Alling, and Rick Zullo for their help putting this episode together.

Thanks to Bolt for supporting this episode. Help them break a world record for the largest hackathon (up to $1m in prizes): https://bit.ly/ThePeelBoltHackathon

Timestamps:

(4:24) The day Michael almost died

(5:10) Call of Duty & video games

(9:34) Hiring @ Cendana

(10:31) How Cendana uses structured and unstructured data

(16:51) How VCs are using AI

(19:55) Why secondaries are driving most early stage venture returns

(22:01) Deciding when to sell secondaries

(24:28) Best performing venture funds ever

(27:26) The best VCs have amazing access to the best founders

(33:42) Why Cendana backs Solo GPs

(35:57) How to invest over time and hype cycles

(41:35) Why multi-stage firms are investing earlier

(44:45) Cendana’s current thesis: High ownership % to fund size

(45:51) Why Cendana started backing non-lead VCs

(48:41) How Cendana does diligence on fund managers

(52:22) VC NPS Scores and Ron Conway’s Silver Bullet

(53:49) Good vs bad new VC firm strategies

(56:36) Determining defensibility of a strategy

(57:57) “Messy middle” software buyout fund

(1:03:25) Portfolio construction best practice

(1:08:11) Michael’s 60x Rule

(1:14:28) How Seed funds compete with multi-stage funds

(1:20:05) Should you collect logos writing small checks?

(1:21:07) Becoming an LP for the city of SF

(1:24:42) Taking 18+ months to raise Cendana Fund 1 in the GFC

(1:26:48) Warehousing the first Cendana Fund 1 investments

(1:29:56) How to do a first close

(1:34:29) Why it’s hard to kill a VC firm

(1:37:00) What happens to ZIRP tourist fund managers

(1:40:22) How to raise a Fund 2 or 3 today

(1:42:07) “US endowments are under siege”

(1:44:55) What the best GP LP relationships look like

(1:46:41) What Fund of Funds get wrong

(1:50:43) The three most interesting trends in venture today

Referenced

Check out Cendana https://www.cendanacapital.com/

Deep Checks https://www.deepchecks.vc/

Prior episode with Eric at Bolt https://www.youtube.com/watch?v=7Q6n1vqUrF4

Follow Michael

Twitter: https://x.com/MKRocks

LinkedIn: https://www.linkedin.com/in/michael-kim-cendana-capital/

Follow Turner

Twitter: https://twitter.com/TurnerNovak

LinkedIn: https://www.linkedin.com/in/turnernovak

Subscribe to my newsletter to get every episode + the transcript in your inbox every week: https://www.thespl.it/

The Pre-Run: Mammoth Trail Fest🦣