Episode 126: Joe Mancini of Front Porch Venture Partners on the Hybrid Fund Model and Building Software Moats

Episode Transcript   

Shiv Narayanan (00:10.542)

All right, Joe, welcome to the show. How's it going?

 

Joe Mancini (00:12.596)

I'm good, how are you?

 

Shiv Narayanan (00:14.146)

I'm getting excited to have you on. Why don't we start with your background and the firm and

then let's go from there.

 

Joe Mancini (00:19.626)

We appreciate you having us today, And, yeah, my partners, Greg and Nick can say hi. There's

three of us at Front Porch Venture Partners. We started the firm in 2020. We're a hybrid venture

capital fund that invests in both funds and directly into companies, which I know we'll get into in

a little bit. My background is primarily as a tech operator prior to being an investor, in kind of

COO or CRO style seats, across of, you know, a number of different

waves in the history of technology. So I rode the mobile wave for a little while. I rode the cloud

wave for a little while. I spent some time at Google, including the broadband wave, kind of the

second really act of broadband with Google Fiber. And then some time in the ad tech world,

which had, as we monetize some kind of traditional ad tech monetization strategies, as well as

some more SaaS based monetization strategies.

And then found myself with two partners and an investment track record in the background that

helped us kick off our firm in 2020 officially.

 

Shiv Narayanan (01:27.074)

Yeah, and we were just talking before we started on the episode is that we have a lot of mutual

connections because you're based out in North Carolina and there's just so many firms out there

and some of our partners are actually connected to the investments that you've made. And so

I'm really interested to get into this hybrid model. Can you walk us through how you look at

investments and how you're deploying your capital between firms and actual companies?

 

Joe Mancini (01:48.236)

Sure. Yeah, so it's a hybrid model about half our capital into venture capital firms as LPs into

those funds, you know, traditional fund to fund model and then half our capital directly into

companies. Never as the lead check, but typically as a second or a third check into the seed

round or the A round. A couple of things differentiate us. One would be

you know, it's the hybrid model is not uncommon in other parts of venture where it is uncommon

is in the Southeast, which is where we concentrate, you know, the lion's share of our capital in

the U.S. And we're a bit unusual as well in the sense that many hybrid funds will back, venture

capital funds and then typically entered their investments on the direct side of the. And we

actually tend to come in, fairly early.

as most of our directs are at the C or the A.

 

Shiv Narayanan (02:46.648)

Sorry, Joe, it's really cutting out for me. It's really choppy and I could barely hear half the things

that you said there. Do you mind redoing your answer on that?

 

Joe Mancini (02:48.955)

It's kind of choppy. Yeah, is it okay?

 

Joe Mancini (02:56.724)

Yeah, that's right.

 

Joe Mancini (03:01.814)

Let me...

 

Shiv Narayanan (03:06.166)

It should still be recording because it's records locally, so we're fine. Yeah. Maybe just take

another shot at it. Yeah.

 

Joe Mancini (03:09.802)

Okay. yeah, yeah, sure. So yeah, so it's where a hybrid venture capital, fund we invest about

half our capital into other funds as an LP and then half directly into companies. We do that

across tech, deep tech and healthcare. And we concentrate in the Southeast. You can read the

Southeast as an opportunistic bet on some new and emerging venture ecosystems.

Nothing against the Bay area or New York. We've all worked there and lived there and spent

time in those ecosystems, but we like to deploy our capital, into less well-capitalized places. And

you know, we do it, you know, there are other hybrid models in kind of other parts of the venture

world. Ours is probably unique in the sense that we're focused, you know, less on New York and

the Bay area. So kind of the first part. And the second part is that we.

tend to come in a little bit earlier than other groups that are like us.

 

Shiv Narayanan (04:11.481)

And so how does that work? Like, how do you understand as a fund, you're investing in firms

that are deploying capital, and then you're also investing in companies like, so how are you

making trade offs or is part of your fund allocated to back other funds, kind of like a GP stakes

model, and then other other parts of your fund are allocated to companies? Like, how are you

how are you balancing that?

 

Joe Mancini (04:31.446)

Yeah, so closed traditional funds, you know, with a 12 year life, 50% of the capital into funds as

an LP. You know, that capital typically gets drawn down, you know, from us over four or five

years. We, you know, we'll be highly engaged with those groups and support them as they need

that. And then we typically would back funds early in the life cycle of our own fund.

to get that money to work as early as possible. And then we layer in direct investments. About

half of those directs are with funds that we're invested in. About half are otherwise with funds

that we've gotten to know and or are getting to know. And often the gateway to an LP check

from us on the fund to fund side is to do a deal together on the direct side. So we might do,

we're getting to know a manager,

 

Joe Mancini (05:30.26)

We're co-investor into a company they invest in as part of their fund one. And then we come in

as an LP into their fund two. And once we come in as an LP on the fund to fund side, assuming

the experience is positive and the results are really great, we want managers to be able to count

on us to come into multiple of their vintages over time, which we've been proud to do since

2020.

 

Shiv Narayanan (05:54.474)

Yeah, I guess that there's a trade off there. I'm curious what you think about this is that you have

to kind of back these funds as an LP and that brings diversification, which is great and also gets

you exposure to their deal flow and all of that. At the same time, I guess I'm curious, how do you

look at that versus investing in like a core thesis that's built around your core competencies and

things like that?

 

Joe Mancini (06:16.427)

Yeah, what's interesting about our model is that is that each of our fund partners are highly

concentrated domain experts. Right. So if you look under the hood, you know, each of our funds

would include 15 fund investments and about 30 direct startup investments. All those funds are

specialists in their space, taking and building a pretty concentrated portfolio of 12 to 15

companies.

So that gets us, you know, some concentration in, in, in, you know, the parts of the venture world

that we want to play in across tech, deep tech and healthcare. And then we basically leverage

those relationships for just a mountain of deal flow. And one of the things we were solving for in

the early days is, you know, the downfall or kind of the false start of many of venture firm is, you

know, it's just a lack of both quality and quantity of deal flow.

 

Joe Mancini (07:12.456)

And for us, the fund relationships as well as, you know, whether we've invested or not, they can

also just be funds that we've gotten to know, you know, as we've, as we've grown. You know, it's

all those funds are looking for a very collaborative second or third check into their rounds. So we

wake up every day with a mountain of direct deal flow. And, it comes to us with a stack of

diligence from somebody who's an expert in their space.

 

Shiv Narayanan (07:40.717)

Right.

 

Joe Mancini (07:41.994)

moreover that diligence ourselves and try to figure out the things that we're most interested to

participate in.

 

Shiv Narayanan (07:47.65)

Yeah, I think that's definitely one of the benefits of a strategy like this because a lot of firms

struggle with deal flow. So I think something like this, when you're partnered with so many

different firms, you're also getting access to their go-to market and their deal flow engine. And

then you get the ability to either invest as an LP or kind of co-invest with them.

 

Joe Mancini (08:07.446)

Right. Yeah. And for us, I mean, it's important that we join around early and join when we come

in directly, you know, like I said, we invest earlier than many other groups who have a similar

strategy to ours. And that's because we want, you know, we want to be the second or third

check into the round. We don't want to be the 10th or 15th check into the round. And we want

that because we want a relationship with the founding teams such that we can also be helpful.

We want that because we want a side letter that gives us the rights to protect ourselves over

time. And we want that just so that we can make a number of bets that have a chance to be 10X

or greater outcomes, but do so from evaluation of 10 or 15 or $20 million post-money, not 100 or

200 or 300.

 

Shiv Narayanan (08:59.051)

Are you deal like talk about how you diligence these firms? Like obviously you mentioned like,

we might do a deal with them first to get to know them and get to know their approach and the

quality companies and all of that. like beyond that, like you obviously have to diligence them the

way an LP would. how do you, how do you handle.

 

Joe Mancini (09:14.252)

So first, mean, it's interesting. In the broader VC world, we talk a lot about founder market fit. On

the fund-to-fund side of our portfolio, we talk a lot about GP model fit. And why explicitly is this

the GP, the fund manager, who is best positioned to succeed in the strategy that they've laid

out?

How clear is that strategy in terms of the types of businesses they're going to invest in? How

much of the business they expect to own? Where they're going to enter and exit over time,

when they're going to step away from the table. And each of those, we spent a lot of time on all

of those topics with these managers. Over our history, we've backed 25 firms and 35 funds.

So we're very active re-ups with managers that we've backed in the past. On average, those

commits are fund number 2.6. And the reason for that is we get to know a manager a lot during

a fund one. We're probably not going to be an LP. We may be a co-investor. But we have

between their prior track record as well as what we've gotten to know over fund one, a huge

data set that help us make decisions when they come out to market with their second, you

know, or maybe their third fund.

 

Shiv Narayanan (10:34.893)

Mm hmm. Yeah, I guess that's a luxury that a lot of other LPs may not have is initially they're not

individually investing with the firms that they're deploying capital into. So you're getting the

 

Joe Mancini (10:36.01)

Please.

 

Joe Mancini (10:47.478)

Yeah, we get to see real life, right? And the incentives are aligned, right? We are, we want them

to succeed. They want to and need to succeed. Know, fund one start off as I'm raising a fund.

Our biggest question is, you building a firm? And you know, that fund one has to be successful

in order for that GP to eventually build a firm.

 

Joe Mancini (11:09.844)

And we get a shotgun seat when we get a chance to do a deal together and get to know each

other over the course of that investment period, as well as kind of the harvest period behind it.

 

Shiv Narayanan (11:20.589)

Walk us through the math of that. How do you think about returning fund to your own LPs?

Because you're deploying capital into these funds, those funds have a life cycle. Sometimes

your capital might get stuck. So how do the economics work there?

 

Joe Mancini (11:37.132)

Yeah, so we kind of have to break it into parts. So on the fund to fund side, it's important to us

that we diversify across stages as well as sectors. So you'll see in our portfolio, if we back 15

funds, you'll see some early stage managers, some scale stage managers and some growth

stage managers. And the growth stage managers are included for the express purpose of early

quality DPI to us.

Right. And really, you know, given the chance for the earliest, earliest stage managers to, uh, to

cook for a little while longer. Um, you know, the way that's played out in our first couple of funds

is that we can expect, you know, to start to distribute capital and year six of our fund cycle.

Right. So we'll, um, you know, we'll basically call capital from RLPs across years one to four,

maybe five.

 

Joe Mancini (12:31.948)

Proceeds start to pile up in year five. We can begin distributions in year six. And that way none

of our LPs are holding their breath for liquidity and DPI. They've started to see evidence that the

strategy's returning capital. And then that gives everybody, ourselves included, patience to let

the 10 or 12 year seed stage strategy come to life and come to its ultimate outcome.

 

Shiv Narayanan (12:45.687)

Yes.

 

Joe Mancini (13:00.202)

And then a question we often get is around economics. We, you know, we do want our fund

managers to make money and be well incentivized. We, pay a double layer of fees there, but

because we come in direct to the cap table on the direct side of the portfolio, we effectively have

a discounted fee layer on the direct side. So it blends out, looking like a single fund, even

though it's much more diversified.

 

Shiv Narayanan (13:26.583)

Can you explain that further? Like the fee layers, because often like the industry standard is like

2% and maybe some carried interest, 20%, something like that. So how does this differ?

 

Joe Mancini (13:33.58)

Yeah, on average, mean, our fund partners would have the same industry standard economics

of two and 20. Front Porch is a one and 15 model. So the way that plays out is that there is a

double layer of fees on the fund to fund side, but effectively a discounted layer of fees on the

direct side. And because it's a single pulled vehicle across both.

you know, it nets out to right at right at two and 20 when you when you kind of pull all the math

together across the holistic, you know, life cycle of one of our vehicles.

 

Shiv Narayanan (14:12.077)

I see, because they're going to pay you one in 15. And then when you invest, you're paying two

in 20. And then on the direct side, they're still only playing one in 15. Gotcha.

 

Joe Mancini (14:18.934)

Yeah. The thing that often it's funny, we often say, and, you know, it's, it's in, real life, more like

war because everybody's getting principal and fees back across all these layers before any

carries shared.

 

Shiv Narayanan (14:27.405)

War is coming up.

 

Shiv Narayanan (14:33.685)

Right. Right. So then talk about the side where you're investing directly in the companies,

because for that math to work out, your direct investments actually have to work out at a certain

level. So what percentage of your fund is going into that and what type of returns are you trying

to generate there?

 

Joe Mancini (14:52.108)

Yeah, so mean, across the portfolio, about 50% would go directly into companies, you know,

again, on average early, so seed or series A. On average, a 10 or a $15 million post money

valuation on all the directs, we're underwriting a, you know, a 10X of venture style outcome. But

we're doing it from a position where, you know, that can happen at 100 or a $200 million exit,

not a

Decacorn IPO So we'll invest in about 30 companies on the direct side, you know, that's the you

know That's the assumption we make going in it is a venture portfolio. So we will have zeros in

that portfolio So far we've had fewer than most venture firms would have So our you know track

records been pretty good there And then we basically are underwriting, you know call it a two

and a half X on the fund to fund side and a three and a half X

you know, on the direct side for a blended two, sorry, blended three over the course of the life of

our fund with a much higher floor than if anybody was trying to invest in any single fund

themselves because it's a much more diversified vehicle.

 

Shiv Narayanan (16:07.147)

Right. How are you operationally handling those two sides? Because I imagine on the fund side,

your diligence, seeing you're meeting the fund managers, you deploy the capital, I would

imagine it's more hands off. And with your companies, it's more hands on. Is that accurate?

 

Joe Mancini (16:23.436)

It's, um, yeah, it's, it's interesting. We have the great, uh, benefit of, you know, I've got two other

partners at Front Porch, uh, Greg and Nick and across the three of us, we've got a pretty wide

and kind of differentiated skillset. Um, so, you know, broadly I'll cover, you know, many of our

tech oriented investments. Nick and we'll cover our healthcare oriented investments. Um, Greg

has always been an investor throughout his entire career. Um, so we.

On the fund side, there is a lot of, we're going to make the commitment and we want the fund

manager to do their work. However, each of us is connecting with those funds regularly to try to

figure out, I mean, first off, how things are going. Second off, sometimes they'll have industry or

market questions for us or want to lean into our fund network for connections. And then third is

we want to be actively discussing with them chances for us to invest in the portfolio.

Um, so that's, know, a regular conversation, you know, with the managers that we've backed on

the direct side, know, Nick and, I have both been operators in our past and across the 53

companies that we've backed in our history. You know, Nick and I are active with call it four or

five at a time. Um, and when we say active, means, you know, effectively weekly with the

founder or somebody on the founding team on a very specific problem. Um, we're in touch with

the remainder.

for sure and helping them navigate the life cycle. But there's a period of time when our skill sets

are most useful and we lean into that. Nick and as an exited CEO and me as somebody who sat

in a lot of growth seats over time. But typically that's kind of four or five companies at a time

when the help is most needed.

 

Shiv Narayanan (18:11.263)

Yeah, yeah, I think, I guess that's, it's great to have experts like that, but I would imagine some

of these funds also, like we've seen some of the funds that you've invested in, they have great

managers too. So they have their own processes and their own value creation teams and all of

that. So is there, is there a level of involvement beyond which you won't interact with those

funds or like they're kind of like, let us kind of do our thing here.

 

Joe Mancini (18:33.516)

So we work really hard when we come into a deal directly with a fund to make sure that it can

work for everybody involved. We want the lead investor to be, we believe in really good, strong

lead investors. We want them to do that role, which is an important role. Sit on the board, run

the governance, have a certain relationship with the founder and the founding team. What ends

up being, I think, valuable to everybody is that

 

Shiv Narayanan (18:41.421)

Yeah.

 

Joe Mancini (18:59.092)

Because we're not in that seat, we end up often being kind of the pre and post board call. You

know, because, you you're not going to see such a board meeting and the conversation and the

relationship can be a little different, but it's always in concert with whomever is in the driver's

seat as the lead investor.

 

Shiv Narayanan (19:04.917)

Yes.

 

Shiv Narayanan (19:17.739)

Right, right. That makes sense. And then what about on the direct investing side? How do you

guys approach value creation and working with companies there?

 

Joe Mancini (19:26.774)

Yeah, runs, it's interesting. It runs the range, right? So I mean, and, and a range as wide as, you

know, Nick is an exited CEO. So he works a lot with, you know, our founders on how lonely the

CEO chair can be, how to structure your time, how to work in the business versus on the

business. How do you, you know, you know, how do you succeed in that lonely chair, over a

bunch of strategic inflections?

You know, my background's all in working with sales, revenue, growth, customer success

teams. So I spent a lot of time on the go-to-market engine, on the partnership engine, and how

customer insight can flow back to product and tech teams as a business continues to grow and

engage with more customers and learn more about what's needed in the market. But I would

also say, I mean, like I've gotten a call on a Friday at four, you know, from a founder who...

 

Joe Mancini (20:20.606)

needed to let go some of his team the next week. And he said like, Joe, I've never fired anybody

before. And I was like, well, I mean, this is going be really hard. It's going be one of the hardest

moments of your career, hardest for those folks who are impacted, but also hard for you. Let's w

let's walk through how that's going to go. So it can, you know, it runs the range of kind of very

operational kind of go to market things, but all the way back to topics that can be as simple as,

you know, hiring firing.

I send bottles of wine when somebody gets a big contract, you know? mean, it's a pretty wide

range.

 

Shiv Narayanan (20:55.486)

Yeah. Also, it's interesting at a stage that you're investing in, these are earlier stage companies,

right? Seed and Series A, a lot of these companies haven't figured out some of the foundational

elements. So how do you help them navigate that? Because they may not have an executive

team. They may not have figured out their go to market, even product market fit. Like the

founder may know a key insight about the market, but there's still a lot of foundation elements to

be built. So how do you help them navigate that?

 

Joe Mancini (21:21.344)

Yeah, in most cases they have it, right? I these are early, early stage companies, you know, we'll

invest as early as a founder with a few people around them. You know, it could run the range up

to, you know, eight or 10 people on the team. These teams are getting leaner and leaner as

time goes on. Right. mean, Carta said that the average series A used to have 20 employees

three or four years ago. Now it has more like 10. I'm surprised anybody who's listening. We

spent a lot of time.

 

Joe Mancini (21:50.86)

in, in, know, I mean, to your point, like often that we'll have people who have never structured a

sales incentive plan. So let's talk about what best practice looks like and what that can look like

and how to incentivize these folks. We spending an increasing amount of time trying to share

best practices on how our companies are growing and as lean away as possible. Which these

days relates a whole lot to.

 

Shiv Narayanan (21:58.987)

Yes, yes.

 

Joe Mancini (22:18.476)

tech and product teams, as well as to a degree marketing teams. And how do you think about a

new version of an early stage company that honestly looks a lot different than it did four or five

years ago as these teams are building with AI in their pocket.

 

Shiv Narayanan (22:33.516)

Yeah, I guess when you're on that C then series A side, the muscle that you're trying to build is

a different one because you're trying to bet on these companies that you can see, like, are you

trying to project that will break out or scale a lot faster? And then on the fun side, you're betting

on the fund manager and the fund. I would imagine the return profiles are just so different

between those two types of investments. And so, and I'm just curious, like, how do you balance

that? Because my, my

Instinct says that if you are really good at selecting the direct investing route, your returns

potentially would be higher because you're getting earlier into these companies. And if they

have figured something out, especially in a world where they have the valuations would be

much higher and you'd see a higher return. like, help me understand that.

 

Joe Mancini (23:16.62)

Yeah. Yeah. I mean, it's really, it goes to, you know, just the unique skillset that the three of us

have. Greg spends a lot of time with the fund managers that we've bet on making sure that

they're growing from, you know, from funds into firms. And yeah. And each of those, you know,

each of those assets, you know, we're projecting somewhere between, you know, call it a three

and a five or maybe a six X return for some of the pre-seed folks that end up in the top decile.

 

Joe Mancini (23:46.604)

Um, on the direct side, I mean, it could be, you know, it could be a hundred X. Um, so it's, you

know, it's, it's, uh, they're different muscles and we, we divvy up the work based on, you know,

all of our, you know, historical muscles and who's best fit to kind of work on what part of the

portfolio.

 

Shiv Narayanan (23:51.638)

Go.

 

Shiv Narayanan (24:05.406)

Yeah, yeah, I think that's really interesting. What are some characteristics that you're looking for

on the direct investing side, especially now with AI and how that's transforming companies? Like

what are some traits that you're betting on or some things that are maybe red flags or things that

you're potentially staying away from?

 

Joe Mancini (24:21.77)

Yeah. Mean, ticket to entry these days is AI native. What we mean by that is that you're building

with AI in your pocket, right? We're like most horizontal or consumer tech or system layer AI

bets will leave to the Bay Area and New York, right? We just, you know, we're going to leave

that to the deep, deep, deep pockets in those places.

 

Joe Mancini (24:46.452)

but we need to get really confident and not just in words, but seeing it in action that the team is

building with the efficiencies of AI in their pocket. And in the software world, that's not just

hearing a founder or a founding team saying, yeah, I've got Claude code open on my machine.

I've got terminal open, blah, blah, blah. But it's, going, you know, you know, really deep from an

end to end perspective of how they're.

 

Joe Mancini (25:11.634)

actually actioning that in their business and using it as a transformer for their business, not a toy.

And the other is, mean, in all of our businesses is really deep vertical focus with a founder who's

fit for the vertical and knows it really well. And in the software world, we see just this tremendous

heyday for vertical software platforms.

 

Shiv Narayanan (25:17.569)

Yeah.

 

Joe Mancini (25:36.812)

that are going to look a little different than they have in the past because the cost of code has

come so materially down and the moat is going to be built around go to market and really

purpose built features for a vertical. So we spent a lot of time trying to make sure that they're not

just, know, the founder is not a tourist in the vertical that they're building for, but they know it

really, really well.

 

Shiv Narayanan (26:00.285)

And are you seeing a lot of intersection between the vertical plus AI side where that's like a kind

of a Holy grail type of moat for these companies?

 

Joe Mancini (26:08.586)

Yeah, yeah, for sure. And I would say it, I mean, we talk a lot about vertical platforms. Mean,

this, this won't, you know, this better than anybody, but we used to talk about SaaS and software

as, you know, you had kind of had an ERP, you had a CRM, you had an HRIS or a people

platform. And we're seeing many more vertical, you know, platforms built for a vertical that have

features that, you know, represented across those legacy three categories. And the build portion

of it, you're getting a requirement from a customer.

 

Shiv Narayanan (26:34.924)

Thank you.

 

Joe Mancini (26:38.784)

And you're able to action it in days or weeks, not months or quarters. So the velocity of the

roadmap is super, you know, tight and accelerated. The cost of getting something to market is

much lower. The reason the customer stays with you is because you've built something that's

just so purpose built for them and their specific needs. We think that's, know, that's, that's a way

to succeed in a, in a, you know, in a world where, mean, we're all seeing it, the cost of code is

coming way, way, way down. So.

 

Shiv Narayanan (27:08.076)

How are you navigating the valuation multiples coming down? Because that's one of the things

that a lot of these companies are facing, even if there's a vertical software, potentially there's an

AI element. How do you look at that as you're making these investments?

 

Joe Mancini (27:21.484)

Yeah, I think it, you know, some of this, you know, will play out, but I I can tell you how we're

thinking about it now. I mean, we feel. You know, the reverberations hit hardest, the closer you

are to the public markets and we're about as far away from the public markets as you could get.

So that's, you know, everybody should know that as kind of a grounding factor. You know, I

would say that our entry valuations, we feel like give us some protection in terms of, you know,

 

Joe Mancini (27:49.684)

multiple compression in terms of eventual exits, you know, for just going to be in a

compressionary environment for a while, right? You want to be in early and not, you know,

betting that you need a DecaCorn IPO to make the math work. It's different in an expansionary

environment, right? And we've all seen how hard that, you know, can hit when we're, you know,

trending the other way. I think the, what's interesting for us is the, you know, the range of buyers

continues to expand.

 

Shiv Narayanan (28:01.888)

Yes.

 

Joe Mancini (28:16.736)

the range of investors in these businesses continues to expand. Mean, there's the traditional

routes towards strategic M&A or an IPO, but there's also many more PE, active PE and PE like

investors in the market these days. We're seeing many more secondary opportunities in the

portfolio these days, which we think is ultimately going to help a lot of this smooth out over time.

 

Shiv Narayanan (28:42.496)

Yeah.

Yeah, that's great. And then finally, I'm just curious, like when you look at the people side of

these companies, especially when they're earlier stage, like we talked earlier about the seed

days or succeeded in series A rounds, the company sizes are smaller. How are you trying to

guide them to build companies? Because

Let's say five years ago, people would go on hiring sprees and now it feels like the opposite

should be the approach. So I'm just curious, like doing these companies are earlier stage and

you make an investment. How are you trying to guide them through their different growth growth

stages on the people side?

 

Joe Mancini (29:16.682)

Yeah. Yeah. We talk a lot about, there's kind of two groups of people within a company. There's

the people who serve your customers and there's the people who serve the people who serve

your customers. And at the early stage, the most important, the place you want to be for as long

as you can possibly be are the people who are serving your customers. And that includes the

founder, right? And the people that you want to be thoughtful around hiring are the people who

serve the people who serve the customers, right? Not cause they're not important and needed.

 

Shiv Narayanan (29:26.604)

Yes.

 

Joe Mancini (29:45.952)

but that check first if you can get that out of a tool, out of an agent, out of something else that

can give you some arms and legs and help you avoid expanding your team in that direction

versus expanding your team towards the customer. I think one of the more interesting roles and

seats, I think, companies of all stages these days is kind of the artist formerly known as the chief

people officer.

 

Shiv Narayanan (30:14.06)

Yes.

 

Joe Mancini (30:15.39)

It's almost more like a chief resource officer. Maybe this all folds into the COO, but you have a

lot of decisions being made now of, right? Like where are we hiring a human? Where are we

hiring a human who's going to be armed with AI? And then where are we entirely handing kind

of our less mission critical, more rules-based decisions to an agent either in large part or in full?

And yeah, that artist formerly known as chief people officer seat is I think a fascinating one.

 

Shiv Narayanan (30:44.83)

Yeah. Are you trying to leverage agents more, encourage your companies to agentify a lot more

of their processes so that they slow down on the hiring side? Cause that's something that we've

seen, like even with our services flows, like we have a ton of agents that are helping us on the

backend and then our client services team, for example, it directly interfaces with the client and

has a ton of expertise on top of those agents, but there's a lot of road repetitive type of things

that can be automated.

 

Joe Mancini (31:09.548)

Yeah. Yeah. Yeah. We always talk about this in a two by two and I'm gonna, I'm Italian, so I have

to talk with my hands, but you know, kind of one access is, you know, we, just encourage every

founder we're working with as well as every fund we're working with, who's working with

founders to, have the team lay out everything that the company does.

across two axes. One is mission criticality, low to high, right? And the second is rules, like rules

definition, i.e. are the rules well-defined, low to high, right? And anything where mission

criticality is low and rules definition is high, you should either be handing it to an agent or

questioning while you're doing it. Because you had to do it, the rules are there and it's not that

important to you, right?

 

Shiv Narayanan (31:54.358)

Yes.

 

Joe Mancini (31:58.604)

The opposite side of that equation are scenarios where rules definition is low and yet mission

criticality is high. So things like leadership, team building, negotiation, All those types of things,

strategy, right? Those you need to your state in human hands. But it starts with that two by two,

again, mission, criticality, and then kind of rules definition so that you figure out where you want

to put your human energy and dollar and time versus where you want to

 

Joe Mancini (32:28.417)

lean on a tool to either get you some efficiency or do the work for you.

 

Shiv Narayanan (32:32.288)

Yeah, that's fantastic. No, we're coming up on time, but if people want to get in touch with you

directly, Joe, or your firm, or potentially even just a private equity investor that was like, be good

to have these guys be potential, all piece of this. What's the best way to get ahold of you?

 

Joe Mancini (32:46.422)

Sure, happy to connect with anybody who's found what we're up to interesting. So we're on

LinkedIn. Our website is frontporchvp.com. We have a sub stack, threerockers.substack.com.

And then I'm, I said Joe Mancini and I communicate always. I'm [email protected]. If folks

want to send an email my way, happy to connect with them.

 

Shiv Narayanan (33:08.904)

Awesome. We'll be sure to include all that in the links in the show notes. And with that said, Joe,

thanks for coming on and sharing your wisdom. It's a very interesting model. It's different than a

lot of PE firms that we have on the podcast. So I appreciate you coming on and sharing your

approach and the math behind it and how you guys approach investing.

 

Joe Mancini (33:24.276)

Really appreciate you having us, Shiv. See you in Durham sometime soon. See ya.

 

Shiv Narayanan (33:26.241)

Thanks, likewise.