6 Questions for Peter Teneriello

Interesting People #3 + Thoughts on Immigration & Entrepreneurship

I first met Peter Teneriello at SxSW in 2015. We hit it off over some unbeatable Salt Lick BBQ which is maybe the best way to meet (or meat) new people. I had just launched my venture career and Peter was a relatively recent addition to the ranks of institutional LPs so we had plenty to talk about. As we’ve gotten to know each other over the years Peter has consistently been one of the most forward thinking folks on the LP side of the table and it has been a real professional treat to have him as someone with whom we can workshop new ideas.

I hope you enjoy my interview with Peter below, but first a quick note on immigration and Trump’s action to block H1-B visa immigration amongst other high skilled avenues for immigration.

IMMIGRATION

Immigration is the foundation of the USA. This is both true from a historical as well as a business perspective. The US’s approximately three million immigrant entrepreneurs employ six million Americans and generate more than 65 billion dollars in revenue for the USA. The solution to both short term and long term job creation isn’t preventing skilled immigration, its encouraging it across the board.

I’m profoundly worried about the impact Trump’s consistently anti-skilled immigration policies will have on US competitiveness over the next 20 years. The students, researchers and technologists that used to seek a home in the US to build their businesses are increasingly looking elsewhere. While many of them are going to Canada, I worry that others may be heading to countries less friendly to an American 21st century. In either event we and our children are losing out. In one version we lose jobs and economic power, in the other we may lose so much more.

Pure economic issues aside, remember that many of the technological edges we enjoyed over the Soviet Union during the Cold War were generated by Soviet defectors. One of the US’s super powers has always been our ability to attract the world’s best and brightest, to provide those people with a platform for success and to turn their successes into American successes. If we lose that, we lose much more than just our reputation as a nation of immigrants, we lose what makes us powerful.

For more, here is a short piece I wrote for the San Jose Mercury news a couple years back https://www.mercurynews.com/2018/08/01/opinion-trump-restriction-on-immigrant-entrepreneurs-misguided/

INTERVIEW WITH PETER

1. You were an LP when we first met and you're an LP now but there was a time when you left for the startup life. What made you decide to leave for startups and why did you come back to being an LP?

When I made that decision I was working for a small family office, helping vet their flow of opportunities (directs and funds), in addition to working with their portfolio companies. They had been contemplating raising an early-stage fund, and when they decided not to, I wasn't ready to leave behind my involvement in Austin's startup ecosystem. So, I joined a local startup backed by Upfront Ventures. After a few months in that role, I realized that maybe I could become a good operator–but that maybe I had a shot at becoming a great investor. I felt like returning to investing would be the highest and best use of my own skills. So, here I am. 

You've started writing your own substack at https://petert.substack.com/p/20200516. Writing well takes a long time, what are you hoping your newsletter will do? Who is your main audience?

The writing does have a very real cost: if I didn't care about this work as much as I do, then the amount of time spent on writing alone would seem insane. I hope that the newsletter shows people how I think about investing, and how that thinking evolves over time. And, I hope that the readers appreciate that cost.

I believe that the main audience has to be myself. If I didn't enjoy writing and shaping my own thinking, then what would be the point? However, if I were the only reader, then what would be the point of that too? If I have a unique view or skill to offer the world, then it's my duty to do so.

2. Are you ever tempted to try your hand at being a GP? If you were to start your own firm, what would you do to stand out from the crowd and build a sustainable competitive advantage? 

Very. But the GP label is somewhat limiting. Such a firm would ideally have a completely opportunistic mandate: agnostic to sector, geography, fund vs. direct, public vs. private, but likely oriented towards growth stories. I also have to imagine I'd be drawn to GP seeding. However, none of those are necessarily competitive advantages.

What would be a competitive advantage? Approaching this work like it's art. Art is the bonding of creativity with conviction, and I think the world of investing (let alone the world entire) lacks that. Many investors don't feel like they can take the risks needed to create interesting opportunities themselves–and yet they're starved for something new. I believe articulating a vision for building a different type of portfolio, a different type of firm, could be enough for the right LP looking for that new new. 

3. You have such a broad view of the VC market, what do you think most GPs are getting completely wrong right now?

This applies to the investment world beyond VC, but I don't think most GPs know how to fundraise. It's actually okay to allow the LP to feel like the decision to invest is optional, and to treat fundraising like the infinite game that it really is.

4. I know you really have a soft spot in your heart for VC, more than most LPs. What do you see in the asset class that excites you that you think other LPs just don't understand?

It may just be a part of who I am. Steady-states have never really been interesting to me. The growth stories appeal to my mindset much more than the regular-way buy-out investments, which are largely predicated on leverage and cost-cutting. 

And as an LP, choosing to play crowded and competitive games is easier. Committing to a mega-cap firm takes so much less work than backing either a much smaller VC fund or an emerging fund one/two (the LP version of a startup investment). That's because the mega-cap firms make it easy for the LPs: they realize they're in the business of fundraising, and that their customers are in the business of allocating ridiculous sums of capital.

That said, I don't think I see the asset class differently. Every LP understands the outperformance that VC can (theoretically) add to their portfolio. Every LP also understands that the median VC fund underperforms the median buy-out fund though. There are many traps and pitfalls to avoid as an LP new to VC, and there are many stones to turn over as an LP new to VC, but doing the work will get you to the top of top quartile.

5. If you could pick one trend, geopolitical shift, technology, or cultural phenomenon that will most capture/inspire the zeitgeist of the next decade, what do you think it will be? What makes you think that and how do you think we should be thinking about capitalizing on it.

tHe FuTuRe Of WoRk

Kidding. If there's any single trend, it's that of people realizing they actually can terraform the world around themselves. Think about the past several weeks. We have NASA and SpaceX advancing the limits of humanity's potential through the return of crewed spaceflight. We also have millions of people protesting and pushing together for a more equitable world for all, one marked by the presence of justice. These are each totally different pursuits, but they're each helping create a better tomorrow, and they didn't happen on their own. They required individuals to covert hope into action, and to build critical mass behind their ideas. And, they're showing it can be done.

I don't know how to capitalize on those trends, aside from clearing the obstacles for the people driving these world-changing pursuits. Investing one's own time or money can help though.

6. What are the last 3 books you've read and what is the one book that has had the greatest influence on how you think about the world? 

The last three books I've finished are business-related, but let's not encourage that behavior if we can help it. 

I first read The Chocolate War the summer in between my undergraduate freshman and sophomore years, after finding the book at my grandparents' house. The story features a T.S. Eliot quote that plays a prominent role in driving the protagonist's actions: "Do I dare disturb the universe?" The protagonist does, in fact, disturb the universe, but to his own detriment.

There's so much pressure in life to make easy and unimportant decisions that lead to average outcomes. Maybe there's relative safety around the mean, but those outcomes frighten me because they ultimately don't matter. They don't help push the future forward. Accepting risk and making difficult, high-gravity decisions can though.

That said, just seeking to disturb the universe doesn't guarantee great outcomes at all.  But by approaching life with creativity and conviction, I think I have a shot. And even if I don't disturb the universe, at least I'm still stardust.

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