Next Play Capital’s venture-focused fund of funds strategy

Transcript

I'm Ryan Nece, founder and managing director of Next Play Capital. I started investing all the way back in the late nineties when I was in school, and then I played in the NFL for seven years. I won a Super Bowl. After I was done playing, I left and went to a family office as an investor, and analysts left there to go co-found a business. And that brought me back really into the world of tech full-time. That process of being both a founder and early investor and continuing to engage in this industry has given me a unique perspective on how to find ways to see around corners and identify the women and men that you want to invest in. 

Next play Capital started in late 2014. We have really four key products on the platform at Next Play. Our flagship product, which is investing in established tier-one access constraint managers. And within that fund, we also do a few direct and co-investments as well. We also have a dedicated co-investment fund, and then we have our fourth product, which is our emerging leader product, which is a fund-to-fund product very similar in structure of our flagship that invests in funds one through three using the lens of gender, ethnicity, geography, and strategy to identify really amazing managers.

We're a very diverse team. We're a minority-led team, minority-founded firm that naturally creates a minority community that's maybe slightly different than traditional VCs. And we also have unconventional backgrounds. And so we've traveled the country in the world. Many of the individuals from our team have very unique and differentiated networks relative to some of the more traditional players in this space.

When we think about strategy, we think about how we want to approach investing in a world-class manager. That approach is trying to identify managers that have proven a long legacy of generating outsized returns. There's a thousand-plus VCs out there. There's really 30 that have been around for over a decade that have found their way to continue to put points on the board and generate upper quartile, upper decile-like returns. So our job with our flagship fund is to identify those managers. It's important for us to make sure that we are creating a comprehensive, diversified approach. We don't want to over-dilute our returns. When we think about our emerging leader fund, that's slightly different, right? We're thinking about younger managers, smaller fund size, and the strategy there is really trying to identify individuals that have unique access and unique relationships and expertise in a particular focus, let's say fintech, which is obviously ripe for disruption in so many levels. Finding the manager that has world-class expertise there that's running a smaller fund that also has deep relationships with the legacy players is a really important place for us to look at. Those are some of the approaches that we think about on the fund side. 

When we do a direct investment, the first thing that we're going to look at is, why us? All of us should be asking that question. So we have to understand what is the value proposition that Next Play brings and has created that makes us an attractive investor to be a strategic, to fill out a round, or to co-invest and lead something with our managers. The second thing that we need to look at is who's in this? Birds of a feather flock together in all walks of life. We have found over the years that when you're in the huddle with amazing people, that they're talented, and proven, and have strong values, that you give yourself a chance to win. And so that's something that we look at when we're investing directly into a company. And then, when we look at the company itself, we go through an entire diligence process. We spend a lot of time on a proprietary concept called Tomcat R, and we take that company through that process to give us a score to know if we should lean in and if it's going to be something that we think will help us get to the goals that we've underwritten that company to perform at. And so all of those things are how we think about investing.

Our edge is we've been in the valley since the eighties. And so when you're in an environment that has been so transformational, that allows you to see the men and women that continue time and time again to rise to the top. And you start to recognize a pattern. Our community is invested in us, but they also give their time. They give their expertise, they give their resources as they provide a lot to our companies, our GPs, and vice versa.

We have a simple mission. We want to give our community the ability to have a seat at the table, to invest, to engage, and learn from the best venture funds and companies in the world. And to do that, we start with values and our values drive our ability to deliver on that mission.