E240: The Edge: Risk, Discipline, and Judgment in Venture
Timestamps are as accurate as they can be but may be slightly off. We encourage you to listen to the full context.
Podcast Summary
This episode features Mike Annunziata, Founder & Managing Partner of Also Capital, a solo GP fund focused on hard tech investments. Mike previously spent three and a half years at the Cornell University Endowment, allocating over $1 billion across venture and private equity managers. (00:08) The conversation explores how LPs identify top-decile fund managers, the unique characteristics of world-class founders, and the art of backing outliers in hard tech.
- Core discussion centers on what separates great investors from generational ones and how to identify the next Elon Musk-level founders through behavioral indicators rather than just business metrics.
Speakers
Mike Annunziata
Mike is the Founder and Managing Partner of Also Capital, a solo GP fund that backs ambitious hard tech founders in aerospace, defense, robotics, advanced manufacturing, and energy. He previously spent three and a half years at the Cornell University Endowment, where he helped allocate over $1 billion across venture and private equity managers, giving him unique insights into world-class investment talent and firm operations.
Key Takeaways
Excellence Requires Early Risk-Taking with Correct Timing
Great investment managers and founders consistently demonstrate a pattern of taking calculated risks early in emerging themes and being correct on those themes. (01:27) Mike observed this pattern repeatedly at Cornell, noting that tier-one investment managers "took risk early in the firm's life cycle and were right." This principle applies equally to founders - they must have the courage to pursue contrarian views while maintaining extreme credibility and the ability to execute consistently.
The Amateur Pilot Archetype for Ideal Founders
The best founders exhibit the characteristics of amateur pilots: risk-seeking yet disciplined, calm under pressure, and capable of making sound decisions in unforeseen circumstances. (13:59) As Mike explains, "An amateur pilot is actually the best characterization of a founder who is risk seeking, calm under pressure, does not take extreme risks that would put their own life at risk." This archetype represents someone who pushes boundaries methodically while maintaining the discipline to manage risks intelligently over time.
Track Record of Competitive Excellence Predicts Future Success
Look for founders who have consistently pursued excellence and competitiveness at increasingly higher levels, regardless of age or domain. (22:21) Mike emphasizes that "it's very hard to teach the competitive gene" and that successful founders show evidence of this through Formula SAE, Math Olympiad, science fairs, or athletics. The specific domain matters less than the pattern of seeking and achieving excellence under pressure.
Focus on Network Quality Over Deal Volume
Success in venture comes from being disciplined about deal selection rather than chasing every opportunity. (45:48) Mike's key realization: "You don't have to be in every great deal. You just have to be in a handful of really good ones and own a lot of them." This requires building genuine relationships with exceptional people and positioning yourself as someone who adds value, rather than constantly pursuing the latest hot deal.
Edge Comes from Willingness to Take Specific Risks Others Won't
True investment edge isn't about being smarter, but about taking informed risks that others avoid. (08:28) Mike defines edge as "the risk we're willing to take that most others aren't" combined with being "uniquely situated to reduce that risk relative to the competition." This requires deep understanding of why you're comfortable with specific uncertainties that make others uncomfortable, whether due to sector expertise, network advantages, or unique insights.
Statistics & Facts
- Mike spent three and a half years allocating north of $1 billion across investment managers at Cornell University Endowment, giving him exposure to world-class investment talent and firm operations. (00:08)
- It took approximately 18 months of seeing various managers before Mike could distinguish between top quartile and top decile performers in venture and private equity. (01:18)
- Also Capital operates as a solo GP fund with just Mike and one full-time analyst, emphasizing the need for disciplined deal selection due to resource constraints. (49:22)
