LP SPOTLIGHT: Chris Douvos, Founder and Managing Director of Ahoy Capital

Chris Douvos founded Ahoy Capital in 2018 to build an intentionally right-sized firm that could pursue investment excellence while prizing a spirit of partnership with all of its constituencies. 

A pioneering investor in the micro-VC movement, Chris has been a fixture in venture capital for over two decades. In addition to successfully identifying and catalyzing nascent funds, he bridges a gap between the providers of capital and the consumers of capital by creating platforms for transparent dialogue. Chris authored the blog SuperLP throughout the 2010s and more recently was a co-founder of the OpenLP platform. 

Prior to Ahoy Capital, Chris spearheaded investment efforts at Venture Investment Associates and The Investment Fund for Foundations. He learned the craft of illiquid investing at Princeton University’s endowment. 

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EVCA: What are the most important factors you consider when evaluating emerging managers and early stage VC funds?

Chris: Emerging managers are often told that they should emphasize differentiation, but differentiation for its own sake is not always inherently a positive thing. Instead, we look for a sustainable competitive advantage derived from managers’ background, experience, body of work, and outlook that suggests that they have some unique insight into investing in a repeatable way. Repeatability is often undervalued, yet it is a critical focus for us as LPs because the essence of our job is striving to distinguish between the lucky and skilful as we evaluate funds.  In short, we try to understand the people in depth.  What motivates them?  What is their behavioral footprint, etc. We look at the strategy to make sure it makes sense relative to who they are.  We examine their prior portfolio or body of work.  How have they deployed unique skills or insights to find deals or assist companies? Performance is a lagging indicator and doesn’t factor heavily into our evaluation.

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The second of our First Principles is alignment of interests. The average venture fund partnership lasts twice as long as the average U.S marriage. We want to see that emerging managers are committed to investing as a craft and will be long-term participants in the space, not dilettantes or tourists. Understanding both their financial and psychic alignment for deploying others’ money is critical to our decision making process.. 

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EVCA: How does your experience in direct investing inform how you evaluate potential fund investments?

Chris: Launching our direct investment program shed a lot of light on the range and variation of diligence, rigor, and thoughtfulness amongst venture investors. Direct investing has given us a lot of insight into which investors and funds have truly established great deal flow and processes for supporting their investments and who is “cosplaying venture”. 

Unfortunately, over the last decade, many people have successfully window-dressed their capabilities, dealflow, or value-add to portfolio companies. This can be challenging to assess when solely viewed from an arm’s-length LP perspective when the rising tide seems to be lifting all boats. Actively investing in deals offers a lot of clarity around who the real stand-out investors are, and what their processes and engagement look like. As an example, our relationships with portfolio founders have revealed who truly has a dealflow edge or effectively brings their network to bear for post-investment portfolio support. I’ve been surprised to learn about certain groups whose promised value-add to founders is far less impactful than expected. Often, people claim credit for things in which they were tangentially involved. Success has many fathers, but failure is an orphan.

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EVCA: What is one piece of advice you would give to emerging managers launching their first fund?

Chris: Building a venture capital firm is a marathon, not a sprint. We have lived through a time where it seemed relatively easy to raise capital, but this was an unusual exception. The reality is that emerging managers will spend a great deal more time raising less money than they hoped for with their first fund.

My advice for emerging managers in this environment is to declare victory and move forward. Living to fight another day is the watchword of this era. Doing well with the capital that you are entrusted with will pay dividends when you go to raise the next fund. As a mentor of mine in private equity once said: ‘The unfortunate reality of private capital is that raising your first fund is much harder than you feared, but raising the second is easier than you dreamed.’

One thing LPs are looking for, particularly in this post-tourist era, is commitment and passion for being an investor. Too many people will have raised fire-and-forget funds, leaving LPs frustrated. Long-term engagement and transparent communication will pay dividends in time as most LPs are trying to avoid marrying in haste and repenting at leisure.