Swimming with Allocators: Three Key Criteria for Evaluating Venture Capital Managers—Decision-Making, Specialization, and Operations

December 13, 2023

On Swimming with Allocators, Earnest Sweat and Alexa Binns welcome Michael Ashley Schulman

Michael discusses his journey into investment management and the founding of Running Point. He emphasizes the importance of tailored financial solutions for families, highlighting the opportunities in alternative assets. Schulman delves into his criteria for evaluating emerging managers in venture capital, emphasizing intelligence, specialization, and efficient operational systems. He also addresses the distinction between ESG versus sustainable and impact investing, provides advice for allocators new to venture capital, and stresses adaptability as a key trait for manager survival in the industry. The episode also features Tyler Kirtley, partner at Gunderson Dettmer, who recommends new managers avoid overly inventive or complex terms in their financing agreements, emphasizing simplicity and operational excellence instead.

The podcast (Season 1, Episode 5) is live on Apple Podcasts, YouTube, Amazon/Audible, Podbay, Podtail, Rephonic, iVoox, iHeart, Podcast Addict, and Listen Notes, amongst others. Like most conversational podcasts, it sounds better at a 1.5x playback speed—just sayin’😉

Highlights from the interview include

Highlights from the conversation include:

  • The origin story of Running Point Capital (1:11)
  • Transition from public stocks to venture (4:30)
  • Running Point’s unique investment philosophy (7:13)
  • Building a Due Diligence Network (8:57)
  • Fostering Long-Term Relationships (10:23)
  • Advice for Managers Launching Their First Fund (14:07)
  • Challenges and opportunities for family offices (19:21)
  • Criteria for selecting venture capitalist managers (21:42)
  • ESG vs. impact investing (24:18)
  • Building and Selling Companies in Challenging Times (30:35)
  • Final thoughts and takeaways (31:35)

Running Point Capital is a multifamily office that provides a comprehensive and personalized approach to financial management. Their team of professionals, covering various disciplines, collaborates to address the diverse financial needs of their clients, including wealth management, financial planning, estate and trust planning, tax preparation, insurance, and more. The firm stands out for its one-stop-shop model, offering a range of services under a single roof, focusing on personalized service, clear communication, and a lifelong connection with their family clients. Emphasizing a true family office approach, Running Point Capital is committed to understanding the unique objectives of each client, constantly evaluating innovative strategies to drive intended financial results.

The information provided on this podcast does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this podcast are for general informational purposes only.

Swimming with Allocators is a podcast that dives into the intriguing world of Venture Capital from an LP (Limited Partner) perspective. Hosts Alexa Binns and Earnest Sweat are seasoned professionals who have donned various hats in the VC ecosystem. In each episode, they explore where the future opportunities lie in the VC landscape with insights from top LPs on their investment strategies and industry experts shedding light on emerging trends and technologies.

Please reach out to Running Point for your family office, multifamily office, wealth management, and estate planning needs.

Swimming with Allocators
Swimming with Allocators: Three Key Criteria for Evaluating Venture Capital Managers


Earnest Sweat 00:02
Welcome to Swimming with Allocators. I’m Earnest Sweat and each episode Alexa Binns and I give you a VC podcast from the LP perspective. You ready? Let’s dive in. Welcome

Alexa Binns 00:12
Welcome to Swimming with Allocators. Today we’re chatting with Michael Ashley Schulman, Chief Investment Officer and Founding Partner of Running Point Capital.

Earnest Sweat 00:20
Today’s conversation was an awesome one that I look forward to sharing with you all. We learned what everyone needs and their signature line as a fund manager, we learned three key criteria in selecting emerging managers. And lastly, Michael gave us a great take on what new allocators should do to win at venture. So with that, let’s dive in.

Alexa Binns 00:45
Today we are speaking with Michael Ashley Schulman, Chief Investment Officer and Founding Partner at Running Point Capital Advisors. Running Point is a multifamily office with a holistic approach dedicated to the total well being of their clients and their families. We are grateful to have you here today, Michael, based on your reputation as a thought leader in the family office sector. Thank you so much for joining us.

Michael Ashley Schulman 01:08
Thank you Alexa, and thank you, Earnest. Pleasure to be here.

Earnest Sweat 01:11
Thanks, Michael. So I wanted to start it off by just getting the origin story of how you can come to you know, Running Point Capital Advisors. So could you take us on what your journey to this point has been? And what are the most pivotal moments that inspired you to create Running Point?

Michael Ashley Schulman 01:32
Thank you. Earnest happy to bid on a long story, but I’ll try to be quick about it. I will start young. I bought my first stocks when I was six years old. Like children do. I collected Halloween candy, but I wasn’t much of a candy eater. So I sold the candy on the school bus. Bus drivers of course got a discount. They donated 10% of revenue to charity and invested the remainder. When Halloween candy ran out. I bought it wholesale and marked it up. Instead of putting it in a bank. I bought stocks starting with two stocks as a hobby. Through elementary school and high school when I graduated UC Berkeley, I realized this thing I have done as a hobby, I could make a career out of it. I started out my first seven years managing institutional money, huge stock and bond portfolios for companies like Blue Shield of California, Holland, American cruiselines. Taft Hartley union funds, pension funds, fire and police funds and so forth. For seven years, I went to MIT for my MBA, and had a phenomenal time. They’re focused on tech strategy and entrepreneurship. Actually, when I graduated MIT, I started with an MIT startup out of the Media Lab, and worked there for a while, did some tech consulting, and then went back to the investment side doing complex bond modeling for Deutsche Bank. And since 2005, have been managing money for wealthy families. About four years ago, we started Running Point, because it’s one thing to just manage money for wealthy families. But we thought it would be much better to create a firm where we provided all things financial under one roof for the families.

Earnest Sweat 03:21
Wow, there’s so many places I can, you know, pull threads on just that, you know, origin story, but first, I just wanted to just ask, was there always just an entrepreneurial spirit like that you learned from your family, even taking that on, like, selling candy and candy man?

Michael Ashley Schulman 03:42
Yes, I think there was a bit of an entrepreneurial, entrepreneurial spirit in my family, especially with my mom. She started a medical supply business that was very successful. And as a single mom, I always looked up to her.

Earnest Sweat 03:56
Oh, wow. That’s, that’s, that’s truly inspiring. And so then, the other thing I wanted to ask is, you know, I started my career out in equity research, so very familiar with publics, the public stocks, how did you make the transition of getting an interest in you know, venture and kind of how that’s shaped? How did that first experience and you know, public stocks, shape really your perspective on a venture, having an interest for it, and then how to apply those things to like this asset class.

Michael Ashley Schulman 04:29
There’s a well known quote, when the facts change, I changed my mind. What do you do? It’s been attributed to John Maynard Keynes, but without any proof that he actually said it. From my perspective, there are countless long term studies that show that small cap stocks, like you mentioned Earnest outperform large cap. However, much of the financial literature or textbooks that we study as professionals was built off of data from the 20th century, especially post World War 2 in the 50s, 60s, 70s, 80s, and 90s. Thus many pundits have built their careers off of this size factor and keep expecting it to return to the smart to the stock market, they keep expecting small cap to outperform large cap. They believe in this reversion to the mean or reversion to the average and that small cap performance will return and not only return, but come worrying back kind of like Harrison Ford in Indiana Jones, large cap stocks in the doldrums. Why? Well, because for the last few decades, small caps have horribly underperformed large caps, yet they keep beating the drum for small caps. Now as for me, I examined the data and tried to figure out what has changed. And in the old days, tech companies used to IPO into the small cap index. And then that gauge would benefit as those tech companies grew and matriculated into mid cap and eventually large cap. But for the last 15 or 20 years, most successful tech companies have not IPOed into small caps. Venture capital hangs on to them longer nurturing them for a mid cap or large cap IPO. So the small cap indices miss out on the upside. And even those that do IPO into small caps might not even be included in the index if they don’t have positive earnings. Tesla is a fine example of that. Even though it IPOs as a small company, s&p did not include it in its index until it turned a profit. And by then it was worth hundreds of billions. So why look at VC, well, the nature of stocks has changed. The small cap indexes which used to benefit from technology, that benefit is now being held onto longer by venture capital. So I’m following the money and going where the money and the growth is.

Alexa Binns 06:57
Makes a lot of sense and all. Running Point is renowned for a unique investment philosophy. Can you talk through this philosophy and how it’s leading to great outcomes for your clients?

Michael Ashley Schulman 07:13
Thank you. Thank you, Alexa. Our philosophy is that we are acquirers of assets and long term stewards of your capital. We tailor investment allocations to your specific interests and needs of tax efficiency, generational wealth, income growth, total return or preservation of capital. And fundamentally, we believe that some markets are more inefficient than others. Therefore, how you invest in them matters. Alternative or private investments like real estate credit, private equity and venture capital can add value to a high net worth portfolio. And many of these private asset classes, like venture capital, have an advantage that public company investors don’t venture capital private equity, private real estate can benefit from inside information on their private companies and on their deals. insider information is completely illegal in the public markets, but perfectly okay in venture capital, private equity and real estate. Thus, a well constructed strategic asset allocation helps protect and grow wealth over time, and is central to successful long term performance. went along with that tax efficiency is critical to the investment plan.

Earnest Sweat 09:15
Given your extensive experience in high net worth portfolio management. Can you share any advice you have for new entrants as allocators in the VC space? Yet specifically, what strategies or due diligence processes do you recommend that they navigate the world of venture?

Michael Ashley Schulman 09:36
My recommendation or suggestion is to take your time building your due diligence network. Get references on the venture capitalists and the firm’s and their staff and follow up on those references. So many times I see people get references, but then not make the calls. Now if you don’t have time to do that, because it’s a lot of work, then bring in a professional multifamily office like us, or a platform like allocate, or bridge funding global to help and guide you. From my observations, venture capital, Vc is a very tight and cooperative community. And in the investment world, we often think of investors as very competitive. But venture is unique in that cooperative aspect. Someone, a venture firm does the precede, they needed another VC to take the lead on the seed, and then another to leave the Series A, and so forth. It’s unlike any other investment space. No real estate developer builds the first four floors of a building, then brings in another developer for floors, five to nine, and a third developer for floors 10 to 16,

Alexa Binns 10:57
you’re crossing your fingers hoping somebody put the roof on it.

Michael Ashley Schulman 11:02
But funny enough, that’s how VC works. And it works very well in that respect.

Alexa Binns 11:08
I love that analogy. This is a relationship business. You talked about doing references, how have you seen GPS build long term relationships with yourself. managers who are listening would I think love some ideas on how to foster that, like mutual trust and long term relationships.

Michael Ashley Schulman 11:33
I’ve seen GPS build long term relationships with me by keeping me in the loop with emails and occasional phone calls. Not pestering me, but providing me access to a ship being genuine, sharing information, divulging their wins and their losses along the way. And the lessons learned. That’s super important. On top of that, also, I asked VCs to remind me who they are. I’ve seen over 120 Venture decks so far this year, and there’s still a couple of months left in the year. That’s not to mention all the direct company investments, real estate, hedge funds, private credit and private equity deals I’ve seen the names become a blur. You as a VC may be unique. But if I think I remember your funds name, would acronym or what your focus is no 19 times out of 20. I don’t, might be even worse than that. And quite frankly, neither do my peers on the investor LP side. So my request, and I asked this of any VC that I coach or provide guidance for or try to mentor is please do us all a big favor and in your email signature, use one line to say who the fund is. And its focus, are you a Series A and B CPG venture fund a pre seed and seed logistics, early stage e games or late stage cybersecurity fund C to be general venture fund, et cetera, et cetera. And when I say that, I also point people to my own emails. I mean, I don’t expect everyone to know who the Running Point Capital is. But in every email I send out, I figure I have free marketing in my signature line at the bottom. And so every email I send not only provides all my contact info, which many VCs don’t even provide, but it also says what we do. We deliver custom investment solutions, family office services, innovations and unique perspectives to you and your family. We are your family office, you can emphasize your enjoyment, priorities and legacy. That quote is at the bottom of every email describing who we are, what we do, and reminds people of what Running Point is. And I asked that actually not only venture capital funds, but have any fund that emails me because it’s hard for me just on a name to differentiate whether someone’s private equity or real estate, or venture capital or hedge fund.

Earnest Sweat 14:21
Now we’re going to take a quick break to speak with our sponsor.

Alexa Binns 14:25
Tyler is currently a partner at Gunderson Dettmer. PitchBook, has named Gunderson the number one law firm globally for investors five years in a row. Our guest Tyler is a dear friend from college his practice focuses specifically on structuring forming and operating VC funds. Tyler is that our loveliest lawyer to work with out there? Thank you, Tyler, so much for your advice and expertise. What advice would you offer for managers launching their first fund?

Tyler Kirtley 14:52
Yeah, so a few pieces of advice come to mind, one I’ve already mentioned, which is that it takes A very long time to raise your first fund. Even if you have an exceptional background and exceptional track record, it can take a lot longer. And you’re going to have many more meetings with prospective investors than you think you will to get to the first close. And then once you get to the first close, it’s gonna be a long time until you get to your final close. So it just takes a long time, you need to be ready to, to be in there for the long haul. And it’s just a necessary step to raising a long lasting firm. The stories that you sometimes see of people who raise their funds in a month, you know, are by far the exception rather than the norm. To is, when you’re speaking with prospective investors, you should have a clear and concise pitch for one, how you source deals to how you differentiate between the deals that you’ve sourced, and ultimately pick one over the 20 others that might look similar. And then three, once you’ve invested in a company, how you add value. So in other words, why is that company going to take your capital and put you on their cap table, as opposed to anyone else? I think investors really care about that. There is, and this is admittedly somewhat self-serving, but I think it’s real. And we see it when our client base hires service providers that really understand your industry deeply. It may be more expensive than the alternative. But those service providers can be your partners and your guides for what the common market terms are, how you handle common issues that other similar managers face. And they can really help you set the foundation for a long lasting firm.

Alexa Binns 16:50
Yeah, you don’t have to reinvent the wheel. I just had a chat with our classmate Dimitri. And he said, of his YC class, the people who tried to sort of get specific on terms or, or had anything that this is obviously in a VC to founder relationship, but anybody who got really inventive, or it was really committed to something sort of out of the ordinary. Those are the people who are no longer at it anymore. Yeah, it’s like you’re focused on the wrong thing.

Tyler Kirtley 17:24
It’s so true, keep it simple, don’t try to come up with some brand new structure that no one’s seen before. Just focus on building relationships, raising capital from investors making great investments, like those are the keys for a venture firm or in the company context, you know, focus on operations don’t don’t get, you know, wild and crazy with the terms of your financing.

Alexa Binns 17:48
And you’re very helpful to your clients, post-flight fundraising to advise your clients on the day to day operations. What are some issues that managers have been wrestling with lately?

Tyler Kirtley 18:00
Yeah, that’s right. So I’d say 70 to 80% of our work is actually raising the funds. And then we work with, with managers day to day, right now that what we’re talking most with our managers about is the panoply of new regulations that have come out. So the SEC has been particularly active. Last year, a new marketing rule came into effect for registered investment advisors. So many of our clients are registered. And so we focused on that with them. Earlier this year, there was a new Final Rule related to foreign PF reporting, that also impacted registered advisors. And then the big one was a couple of months ago, the SEC came out with a final rule as the new private fund advisor rule that impacts both registered advisors and exempt reporting advisers, such as Vc fund managers that rely on the VC exemption. So our clients are spending time trying to understand how that’s going to impact their operations and how to plan for those rules going into effect. And then states are also getting into the mix. So California, I don’t know if you saw recently came out with the new founder diversity reporting requirement, where any venture firm with any kind of a nexus to California that can include having up in an LP from California or having a single portfolio company in California, so it’s not just having an employee or an office there. They need to go out and survey all of the venture investments in their portfolio and report on the diversity of founders of those companies. And so our clients are trying to understand how to practically implement that, when the new rules go into effect.

Alexa Binns 19:50
To get in touch with Tyler currently, or any of the other fabulous lawyers that Gunderson Dettmer on the formation team. You can find their profiles at gunder.com, g-u-n-d-e-r.com. And now back to our interview.

Earnest Sweat 20:06
Now, with so much going on, with all the macro events, this investment landscape can be pretty dynamic. What do you see as challenges and opportunities for family offices? And how can they better navigate and capitalize on these conditions?

Michael Ashley Schulman 20:26
I believe most true family offices have a very long term perspective. But fundamentally inside the family office are people and people can succumb to common psychological feelings. And, you know, behavioral economics, which means they can still succumb to fear and greed. And when things look bad, they will pull back their investments and when things look really good, and they’ll dive in. And so sometimes, people miss out on the bottoms and put extra money in on the tops. I think one needs a good financial roadmap and good financial plan, and most family offices have that in order to navigate and capitalize on volatile or uncertain economic conditions. But right now, you know, valuations have contracted, it may be a good time to go in with fresh money. But no one wants to catch a falling knife.

Alexa Binns 21:34
Know that. Particularly among family members, um, there’s even different risk tolerances. So I’m sure that you are, you see, you see sort of the full swath of as you saved behavioral economics?

Michael Ashley Schulman 21:50
We see much different risk tolerances in families amongst the matriarch, the patriarch, the children and some children are more conservative, some invest more aggressively. Sometimes the husband might be a more aggressive investor; sometimes the wife. Everyone’s family is different.

Alexa Binns 22:15
Family dynamics and financial dynamics. When it comes to evaluating and selecting investment managers, you have mentioned you’ve already met 120 this year, what specific criteria or data points are you looking at? For venture capitalists, managers, and particularly,

Michael Ashley Schulman 22:37
At a high level, we look for three things. They must be smart, because we don’t want any dummies. Yeah, they must have a niche or specialty that differentiates them from other people and other VCs. And they should already have their systems and processes in place for managing the fund and processing investments and guiding their underlying companies. Because I don’t want them wasting my money, or my clients money, trying to figure out how to set up shop and run their business. And I’ve seen many funds, be it hedge funds, venture capital, or other funds fail because they didn’t have their processes in place. Maybe they came from a larger shop, they did great there. But they were dependent on the larger firm, let’s say Goldman Sachs or Morgan Stanley to keep them in line. Maybe they just had some rough boss that they didn’t like and couldn’t wait to get away from that boss vetoing two of their ideas that would have blown them up previously. And now they don’t have those systems and processes in place. On top of that, I want to know how venture capitalists make decisions. Sometimes you have a solo GP and it’s pretty easy. They are the sole decider. Yeah. But when you have a team, I’m always curious how they make decisions. Is it unanimous? Is it the majority? Or is it each one independently? And it’s not that I really have a preference, but I really want to know how they formulate their decisions and why. And beyond that, I also want to judge the steadfastness and commitment of the whole team. Have they worked together previously? What is their commitment to sticking it through? What happens if the one person who brought you in leaves?

Earnest Sweat 24:37
Wow, those are amazing questions and insights that I think all allocators should be thinking about and all fund managers should be thinking about how they’re presenting that to kind of switching gears. Are you finding any of your clients are interested in ESG and social impact considerations; and if so how are you trying to meet those demands?

Michael Ashley Schulman 25:03
I believe that a lot of our smarter and more caring clients have seen through the many faults and contradictions inherent in ESG. Investing, as promulgated by the large institutions. ESG is inherently backwards looking. An ESG investor would probably never buy an oil company, because it’s dirty and polluting. But an impact investor might, because impact investing is forward looking. And they might buy an oil company and say, Geez, how can we make it cleaner? How can we make it more environmentally friendly? Well, it was not going away or disappearing immediately. So what can we do to make society better? And I believe, and I, our clients, the smarter ones, understand that impact can make all of society better, whereas ESG, because it’s backwards looking, tends to maybe make a single company better. British Petroleum is a great example. They’re striving for net zero. It’s a good company, it’s a good oil company. But in order to strive for Net Zero, they’re selling off some of their dirtier assets. And they’re selling them off to smaller players. That won’t be as environmentally minded as BP. So BP might be cleaner. But their oil fields they’re selling off or being sold to lesser players, and the environment might be worse off because of that. And that’s why I say there’s contradictions in ESG. You want diversified boards, great, but actually, oil companies were amongst the first to diversify their boards ahead of many of the other industries. So how do you balance those contradictions, whereas impact is forward looking, they seek to make positive changes, and many of our clients seek to do that with their personal businesses? And we’ll do that with their investments also.

Alexa Binns 26:20
A parallel to ESG is maybe diversity. And Michael, you have a reputation for supporting emerging female managers and venture capital? Do you have any recommendations for allocators who are listening on what that process has been like and and certainly, as a female manager, I would never want anybody to give me capital because I have a ponytail. But what that process looks like for you, even considering some people who wouldn’t necessarily have been on your radar to start.

Michael Ashley Schulman 26:55
Let’s say, if you have an interest in that, either, please reach out to me at Running Point Capital and I can help or better yet, reach out to Sophia Platt and Emna Ghariani, the founders of Bridge Funding Global. Bridge Funding Global is a fundraising platform and investor community for top performing woman emerging managers. The vision for the platform is to provide all resources to women and underserved GPs to optimize their fundraising process and match them with deploying LPs and deploying investors. There are a lot of good venture managers out there and there are a lot of not so good ones. And you can find them in traditional areas, which can be male dominated, and you can find them in female lead. And there’s some very, very good firms out there with very good investments. Some are fund 1’s, some are fund 2’s, and some are fund 3’s or later. So there’s a wide variety to choose from and I look forward to bringing more of those options to our investors. Several of them have reached out to me directly, but most of them I found via Bridge Funding Global.

Earnest Sweat 28:52
Thanks for sharing that. Looking forward to it. Looking forward, what specific trends do you foresee emerging in the VC asset class? And can you detailed how allocators should prepare for these shifts, offering insights into the strategies and strategies to strategies to adapt proactively

Michael Ashley Schulman 29:15
Looking forward to it? I believe there may be a cleansing of managers. There are well over 7000 or 8000 VCs, incubators, accelerators, angel investing groups and venture clubs. Honestly, I don’t think there are enough novel ideas to go around to support that community. Therefore, you know, think it through if 60 people around the world have a similar brilliant idea. You need to do some scenario analysis and roleplay through which the manager will be likely to see it. When it is, nurture it. Foster its success. And then pass it off to the next lead VC. As Darwin realized it’s not always the smartest or strongest that survive, but those most adaptable to change. So as we look out as allocators to prepare for the shifts, I think we need to be prepared for a cleansing of some managers, and figure out who can adapt who is smart, who is strong, and who is adaptable, and will survive as a venture firm, and who can nurture the good ideas and the good people all the way through.

Alexa Binns 30:38
Darwin is at work, Darwinian evolution in real time! Any parting words of wisdom or final thoughts for this audience? This has been delightful to hear how you’re approaching this asset class, thank you. I’ll just hand you the mic.

Michael Ashley Schulman 31:02
Thank you, I’ve enjoyed speaking with both of you. For venture capital, you know, we’re, if we’re talking about the emerging VCs, the majority won’t go beyond fund one, at least not in their current state. And maybe that’s okay, they’ll drop out and start over. I’ve seen it in hedge funds, hedge funds is a perfectly successful asset area. But most hedge funds fail within two and a half years. It takes a little longer for a new venture fund to figure out if their track record is good enough for a fund to and even so by then four years later, the partners may split out strong solo VCs that can build their teams and methodically slowly over time, and strong fund one teams that have worked together previously, may have the best odds by building slowly and carefully, as you know, but looking forward as long as interest rates stay elevated and money is no longer free, building and selling companies will be more of a challenge, more of a commitment, and more of an opportunity.

Alexa Binns 32:15
Thank you so much, Michael. Really appreciate your time and your thoughts.

Michael Ashley Schulman 32:19
Thank you, Alexa. Thank you Earnest. It’s been a pleasure being on swimming with allocators which is a really unique name.

Earnest Sweat 32:30
Thank you. Thank you. Appreciate it.

Alexa Binns 32:32
See you later, allocator!


In fact, the general model for successful tech companies, contrary to myth and legend, is that they become distribution-centric rather than product-centric. They become a distribution channel, so they can get to the world. And then they put many new products through that distribution channel.

Elad Gil, entrepreneur and venture capitalist, from his book, “High Growth Handbook: Scaling Startups From 10 to 10,000 People”

Disclosure: The opinions expressed are those of Running Point Capital Advisors, LLC (Running Point) and are subject to change without notice. The opinions referenced are as of the date of publication, may be modified due to changes in the market or economic conditions, and may not necessarily come to pass. Forward-looking statements cannot be guaranteed. Running Point is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Running Point’s investment advisory services and fees can be found in its Form ADV Part 2, which is available upon request. RP-23-134