The Fund Of Fund and Its Role In Venture Capital – A ‘Panic With Friends’ With Patrick O’Connor Of Summit Peak Investments

The fund of fund structure and strategy has a bad rap from the hedge fund world. The returns for hedge funds have lagged the S&P returns so you can imagine a fund of fund structure with fees on fees is not a popular strategy with investors. In the early stage investment world, the fund of funds play an important part allocating to niche managers and the returns have also also been high enough to justify investors allocate to these funds which also provide much broader diversification and the added benefit that the fund of fund managers can and often do co-invest.

I would love to see more fund of funds in the early stage markets and asked Patrick O’Conner from Summit Peak Investments on the podcast to explain how it all works.

You can listen to the episode here or on Spotify and Apple. The notes to the show as always are below.

Guest: Patrick O’Connor

Profile: Managing Partner at Summit Peak Investments

Where to Find Him: LinkedIn

Fun Fact: Patrick was the Chief Investment Officer at University of Arizona where my wife and kids attended. I am a Sun Devil of Arizona State and therefore took it upon myself to try and make Patrick squirm a few times.

What’s the Panic About:

I get asked all the time, “Howard how does your business even work?” And the truth is — it is pretty simple. I beg for money to invest in startups. Luckily I have a podcast and know people who will explain the inner workings of the business. I was excited to bring Patrick O’Connor on this episode to help me look good and talk about what the experience of raising capital is like from both sides of the table. Patrick is managing partner at the recently founded Summit Peak Investments, which focuses on investing in early stage venture capital funds. In this episode, Patrick and I had a great conversation about raising and allocating capital, the difficulty of this decision making process, COVID’s impact, how exactly our industry works, and what types of firms Patrick will and won’t invest in. And of course we also had to talk about Arizona for a bit too. Enjoy!

The Takeaway:

Raising money is hard! If you’ve done it for a long time like Patrick, it’s all about betting on people and building those strong relationships. You have to trust your gut in our industry.

Favorite Quotes:

On working during COVID: “It was almost as if in some cases we’ve made even better relationships.”

“I had to figure out how I would be able to go from looking at everything mathematically to all of a sudden just going on a whim and just going for it.”

“If you’ve done this for awhile, you know right away whether you’re going to allocate or not.”

Food for Thought:

One thing I admire about Patrick — and what he demonstrates in this episode — is his openness and honesty in reflecting on how he and his business can improve and grow. This is a valuable skill to have not just professionally, but in life. I encourage you all to check in with yourselves in this way every once in a while. Growth is never a bad thing!

PS – I am now doing two ‘Panic With Friends’ podcasts per week. Thanks for listening and make sure you subscribe over on Spotify or Apple.