20VC Mac the VC on the Journey from Homeless To Becoming A VC, What It Takes To Raise a Fund on Twitter, Why the Venture World is F Up and How Institutional LPs Need To Change

In this episode of 20 VC, Harry Stebbings interviews Mac Conwell, founder and managing partner of Rare Breed VC, a fund investing in early-stage startups outside major tech hubs. Conwell shares his unconventional journey from homelessness to software engineering, founding companies, and ultimately raising a venture fund largely through Twitter. His approach challenges traditional venture norms, focusing on larger checks at the pre-seed level, with a portfolio that includes 77% underrepresented founders. Conwell emphasizes the importance of diversity in venture, both for GPs and LPs, and advocates for greater support for emerging managers and diverse founders. He also discusses the pitfalls of equating "hot deals" with successful investments and the need for venture capital to offer more grace and education to entrepreneurs. Conwell's story is a testament to breaking barriers and innovating within the venture industry.

• Mac is the founder and managing partner of Rare Breed VC.
• Rare Breed VC is a pre-seed fund that invests outside of large tech ecosystems.
• The fund has a concentrated portfolio approach, often being the first check in with up to a $200k check.
• Mac's journey into venture capital deviates from the typical path of Stanford, McKinsey, Bain, Goldman Sachs.
• Mac's background includes going from homelessness to engineering, founding companies, and raising a fund largely on Twitter.

"Mac is the founder and managing partner of Rare Breed VC, a pre-seed fund that invests outside of large tech ecosystems with a very concentrated portfolio approach being the first check in with up to a 200 check."

This quote introduces Mac and his venture capital fund, Rare Breed VC, highlighting its focus on early-stage investments and its unique approach to investing outside major tech hubs.

• Mercury offers full-stack banking for startups, including FDIC insured accounts and various tools for financial management.
• Terminal helps tech companies scale engineering teams by providing pre-vetted remote talent and management platforms.
• Both companies provide essential services for startups, from banking to scaling engineering teams.

"Mercury is building full stack banking for startups... Terminal helps fast growing tech companies rapidly scale engineering teams."

These quotes describe the services provided by Mercury and Terminal, emphasizing their role in supporting startups through financial and engineering resources.

• Mac was a software engineer and government contractor before becoming a founder.
• After his second company failed, Mac worked at a marketing firm, which he left due to ethical disagreements.
• He applied for a role with the investment arm for the state of Maryland without a college degree or finance background and was hired four and a half months later.

"I don't have a college degree, I don't have a finance background, but I know startups and I know a lot of people in Baltimore. Let's go ahead and try this. Four and a half months later they hired me, so I broke in."

This quote explains how Mac transitioned into venture capital by leveraging his experience with startups and his network in Baltimore, despite lacking a traditional finance background.

• Mac experienced failure with his startup and initially struggled with depression and isolation.
• He learned that the support and respect from friends and family are unconditional, regardless of success or failure.
• This realization was liberating for Mac and helped him move forward.

"Love and respect from your friends and your family members can truly be unconditional."

Mac reflects on the importance of personal relationships and support systems in overcoming the emotional challenges of failing in a business venture.

• Mac has candid conversations with founders, sharing his own experiences as a founder.
• He provides a supportive environment for founders to discuss their challenges openly.
• Mac's approach to founder relationships is grounded in empathy and understanding.

"I'm okay having any and every conversation with them because for people I remember as a founder, just like how hard it was, how lonely it could be."

Mac emphasizes his willingness to engage in honest and supportive dialogues with founders, drawing on his own experiences of the difficulties and loneliness that come with being a startup CEO.

• Mac's venture career was influenced by the killings of two black men in America.
• The killing of George Floyd in 2020 coincided with Mac's increased Twitter activity and the decision to support a Latin founder in Texas.
• A mentor encouraged Mac to raise a fund during the pandemic, and he used Twitter to network and learn about fund-raising.

"I started tweeting consistently and I noticed other VCs were following me. And so I was like, okay, whenever I see a VC follow me on Twitter, I'm going to send them a DM and ask for a meeting because I need to learn how to raise a fund."

Mac describes how he used Twitter as a tool to network with other venture capitalists and learn how to raise a fund for his venture, Rare Breed VC.

• Elizabeth Yen from hustlefly expressed interest in backing Mac the VC, which was a pivotal moment.
• This support gave Mac the VC the confidence to pursue fundraising more aggressively.
• Mac the VC utilized Twitter extensively for networking and fundraising.

"This is Elizabeth Yen from hustlefly. And that gave me the spark of like, oh, GPS will back other gps. I can do this."

The quote highlights the significance of Elizabeth Yen's support in inspiring Mac the VC to believe in the possibility of raising a fund with the backing of other general partners (GPs).

• Mac the VC had over 1100 meetings from June to September 2020.
• These meetings allowed him to soft circle his first 2 million.
• The success rate of responses was around 70-75%.

"I just doubled down the strategy of staying on Twitter between the middle of June 2020 to September 2020. I had over 1100 meetings, which allowed me to soft circle my first 2 million."

This quote describes the intensive networking strategy Mac the VC employed on Twitter, which led to a significant number of meetings and preliminary fundraising success.

• Individuals like Elizabeth Yen, Niv from Shrug Capital, and others were particularly helpful.
• Mac the VC received critical feedback and support from various members of the venture community.

"People who reached out like, Elizabeth was really helpful. Niv from Shrug Capital was really helpful. Marlon Nichols from Macventures. That dude has been great."

The quote lists several individuals who provided support and assistance during Mac the VC's fundraising process, emphasizing the collaborative nature of the venture community.

• Mac the VC challenges conventional venture capital fundraising norms.
• He adopted unconventional strategies such as rolling closes and flexible LP contributions.

"I don't care about any of these rules. Like, fuck the rules."

This quote captures Mac the VC's dismissive attitude towards traditional fundraising rules and his willingness to innovate in the fundraising process.

• Mac the VC had no GP commit and did not pay legal fees initially.
• A lawyer who found Mac the VC on Twitter offered pro bono services.

"So remember when I said, fuck the rules, so I have no GP commit, I didn't have the money for it."

The quote explains Mac the VC's approach to the general partner (GP) commit, which is typically a financial contribution made by the GP to the fund.

• Mac the VC criticizes the practice of relying on relationships with top-tier funds for deal access.
• He argues that hot deals are not synonymous with good deals and emphasizes the importance of returns over hype.

"I don't give a fuck about a hot deal. Hot deals don't mean anything. The deals that matter are deals that return capital."

This quote reflects Mac the VC's stance on the overemphasis of "hot deals" in the venture capital industry, highlighting his focus on deals that actually generate returns.

• Mac the VC discusses the lack of response from institutional LPs to calls for diversity post-George Floyd.
• He suggests that institutional LPs are more focused on returns than on diversity initiatives.

"I don't know how much they actually care about diversity. I know what they do care about. They care about good returns."

The quote indicates Mac the VC's skepticism about the commitment of institutional limited partners (LPs) to diversity, suggesting that their primary concern is financial performance.

• Institutional LPs should create avenues to support diverse and emerging managers with smaller funds.
• There is a need for a more inclusive ecosystem that values the contributions of diverse individuals in venture capital.

"There needs to be more creativity around how we get money to emerge management."

This quote calls for innovation in funding strategies to support emerging managers, particularly those from diverse backgrounds.

• Mac the VC plans to invest in 40-45 companies with a focus on larger checks at the pre-seed stage.
• He aims for high multiples and returns with a limited reserve strategy for follow-on investments.

"Really, we're going to do somewhere between like 40 to 45 companies. I'm trying to be the next lowercase, so we'll see how those returns come out."

The quote outlines Mac the VC's ambitious investment strategy for his fund, with a clear focus on maximizing returns through strategic check sizes and a targeted number of investments.

• Rare Breed Ventures allocates approximately 5% of the fund for off thesis investments.
• The fund focuses on quality deals, regardless of whether they fit the primary investment thesis.
• An example provided is an off thesis investment in Main Street's second round, which was a $60 million round, where a $100k check was invested.

We got about 5% of the fund allocated for off thesis. And I'll tell you, it's funny, I have a precede fund. I invest super early. Well, it just so happens that we got to be a small check in the second round to Main street.

This quote explains the fund's flexibility in investing a small portion in opportunities that do not necessarily align with their main investment strategy but are considered high quality.

• Rare Breed Ventures primarily invests in companies outside major tech hubs like Silicon Valley, New York, and Massachusetts.
• The geographical focus includes North America, South America, and the UK.
• The goal is to support overlooked founders or those building great companies regardless of their location or background.

The strategy is some off thesis things for really opportunistic quality investments. But mostly it's companies outside major tech hubs outside Silicon Valley, New York and Massachusetts, North America, South America and the UK for these founders that are just typically overlooked.

The quote outlines the investment strategy of focusing on regions and founders that do not receive as much attention from the mainstream investment community.

• Rare Breed Ventures prides itself on investing in a diverse range of founders.
• A top-performing company in the portfolio is BeautybyMe IO, based in Memphis, Tennessee, with a founder who is expected to revolutionize the beauty industry.

People ask me sometimes, what makes rare breed different and unique. I was like, we invest in everybody.

This quote highlights the inclusive investment approach of Rare Breed Ventures, which sets it apart from other funds.

• Mac the VC faced feelings of inadequacy due to his non-traditional background.
• Lack of a college degree and finance background contributed to self-doubt.
• Finding LPs (Limited Partners) was challenging without an existing network.
• Raising funds was difficult without the means to travel, but the COVID-19 pandemic allowed for virtual meetings, which was an unexpected advantage.

The biggest challenge was getting over my feelings of being inadequate. I don't have a college degree. I don't have a finance background.

This quote reveals the personal challenges faced by Mac the VC in establishing credibility and confidence in the venture capital industry.

• Validation from peers and mentors helped overcome feelings of inadequacy.
• Participation in 500 Startups' VC Unlocked program at Stanford provided reassurance of his capabilities.
• Realization that he already possessed the knowledge and skills required for venture capital.

But I also think in August 2019, I went through 500 startups, VC unlocked program based in Stanford... Having somebody who I look up to and respect, and it's already been adventure for years, being like, yeah, you could do this.

This quote illustrates the importance of external validation and education in overcoming imposter syndrome and realizing one's potential.

• Mac the VC emphasizes the importance of staying grounded despite early successes.
• Returns are the ultimate measure of success in venture capital, not just early markups.
• Previous failures serve as reminders to remain humble and focused.

But I think I've had enough failures in my life to know I need to stay grounded... What matters is returns.

The quote underscores the need to maintain humility and a realistic perspective on success in the venture capital industry.

• The growth of Mac the VC's Twitter following was an unexpected surprise.
• Opportunities arose from the increased visibility, including podcast offers and TV show interest.

The biggest surprise has been Twitter.

This quote reflects on the surprising impact that social media can have on one's professional opportunities and recognition.

• Mac the VC sees rolling funds as a sign of the lack of innovation in the venture capital industry.
• He chose not to create a rolling fund due to concerns about LP returns and equitable access to investments.
• Instead, he used a combination of 506(c) public solicitation and technological solutions to create a traditional fund with the advantages of a rolling fund without its disadvantages.

I think rolling funds are another sign of the lack of innovation in our industry... I knew for me that a lot of my earliest lps were just going to be people who truly supported me and cared about me, and some of them were going to be writing small checks.

This quote explains Mac the VC's decision to forgo a rolling fund in favor of a traditional fund structure that offers benefits to LPs without the drawbacks associated with rolling funds.

• Fundraising is extremely difficult, even more than one might expect.
• Traditional fundraising strategies and advice are not mandatory; managers can be innovative.
• Will Zelle's creation of an access fund is an example of innovation in fundraising structures.
• Being bold and innovative can lead to success in the venture capital industry.

"Fundraising is going to be one of the hardest things you ever have to do. Everybody's going to tell you that, and it's going to be harder than that."

This quote emphasizes the extreme difficulty of fundraising, suggesting that it surpasses common expectations.

"You can be innovative with your fund. You can be innovative with your structure."

The quote encourages fund managers to think outside the box and not feel constrained by traditional methods.

• The goal is to build a top-tier, multistage firm based in Baltimore.
• NEA and Greenspring Associates are used as examples of successful Baltimore-based firms.
• The speaker is inspired by his Baltimore roots and mentorship from industry leaders.

"I'm going to build the next NEA, the next Greenspring Associates, the next top tier firm."

This quote outlines the speaker's ambitious goal to establish a leading venture firm comparable to the industry giants.

• Strong company metrics can overcome investor biases against non-traditional locations.
• Founders should focus on growth and strong performance to attract investors.
• The speaker advises against worrying about location bias and instead encourages focusing on company strengths.

"If you're growing by 40% month over month and you got strong margins and the business looks like it's unstoppable, you'll get a check from somebody somewhere."

This quote suggests that exceptional company performance can negate geographical biases from investors.

• The speaker prefers casual social gatherings with friends to relieve stress.
• He values the support of his friends and uses it as a way to unwind and regroup.

"When shit hits the fan? I call up my friends, tell them we should go to Buffalo wild wings and go have a drink and have a beer or two and some spicy hot wings."

This quote describes the speaker's personal method for dealing with stressful situations, highlighting the importance of a support system.

• Balancing family life with the demands of starting and running a venture firm is challenging.
• The commitment to a venture firm is long-term, often spanning multiple decades.
• Quality time with family becomes a priority due to the limited quantity of time available.

"The hardest element of my role at rare breed today is figuring out how to be present for my family."

This quote reflects the difficulty of maintaining a work-life balance in the demanding field of venture capital.

• The speaker desires more diversity among Limited Partners (LPs) and General Partners (GPs).
• He advocates for more grace and education for first-time and diverse founders within the industry.
• The speaker wishes for venture capitalists to be more helpful and forgiving rather than punitive.

"I want venture to be more diverse on the LP side, the GP side, all the way through."

This quote calls for increased diversity across all levels of the venture capital ecosystem.

• The speaker supports public health measures such as mask-wearing and vaccination.
• He longs for a return to pre-pandemic normalcy in social settings.
• The desired message on a billboard reflects his public health stance and personal desires.

"It's going to say, wear a mask, get vaccinated. Let's all do this together."

The quote conveys the speaker's public health message and his wish to overcome the pandemic collectively.

• The speaker's investment in Unspun was driven by the founders' passion and the revolutionary potential of their technology.
• Support from industry leaders like the head of design at Levi's reinforced the decision to invest.
• Team conviction is valued highly in the decision-making process.

"Nothing. Okay, I'm in. That works for me, right? This is a combination of the amazing people, the ambitious goal, and then the support they have behind them."

This quote explains the rationale behind the speaker's excitement and commitment to invest in Unspun.

• The speaker expresses gratitude for appearing on the podcast and acknowledges the significance of the opportunity.
• There is a sense of achievement in reaching a milestone by being featured on the show.

"I can't believe I'm here. I'm on the show like mama, I made it. I'm on 20 Minutes VC."

The quote captures the speaker's excitement and pride in participating in the podcast, recognizing it as a notable accomplishment in his career.