Venture capital is often referred to as an apprenticeship business because so much important learning comes from day-to-day experiences. Yet, as an article published by the Business Development Bank of Canada (BDC) explains, you can shortcut the learning process by learning from experts: “Your learning curve can be shorter—and your results better—if you learn from pros who’ve already mastered key … ... read more
David ibnAle: Venture Investing With a Private Equity Mindset
David ibnAle accredits much of his success to his ability to develop strong relationships and leverage the power of his network.
David’s interest in private equity and investing was first sparked during his years at Stanford University, where he received degrees in Public Policy and International Development Policy. During that time, his roommate was an investor at Summit Partners, a premier private equity firm. As his interest in finance and private equity grew, David began to develop strong relationships with several members of the firm, thanks to introductions made by his roommate.
Despite David’s budding interest in investing, he opted to join Morgan Stanley as a financial analyst after graduating from Stanford, so he could develop the foundational skills for working in business and finance. As he continued to work at Morgan Stanley, David became more convinced that his true passion was in investing. As he explains, “More and more, I started to realize that I had been living with a guy that was doing exactly what I wanted to do.”
Laying the foundations.
It turns out that, just as David was recognizing the strength of his passion for private equity, he ran into Greg Avis, one of the early partners at Summit. After learning about his interest in private equity, Greg invited David to interview at the firm. After a grueling day of interviews at Summit, and recommendations that came from some of those early relationships, David landed a job at the firm. The fact that he had already developed strong relationships with members of the firm put him on the fast track to an offer.
After a successful stint at Summit, David joined the recently founded Francisco Partners, a firm that would go on to become another top-tier private equity firm. His path to Francisco was once again paved by his network, and, specifically, the connections he had established while at Summit. As it happened, one of the founding Partners at Francisco was one of David’s colleagues at Summit.
After a decade-long tenure at Francisco Partners, David became a Managing Director of TPG Growth—a private equity firm focused on small-cap leveraged buyouts and growth capital—where he led the firm’s global technology investing efforts. It was here that he solidified his view that, when it comes to venture capital, having patient and flexible capital is one of secrets to delivering attractive long-term returns. It was during his tenure at TPG Growth that David began to feel the itch to build a firm with a unique approach to investing.
Building Advance Venture Partners
In 2015, David co-founded Advance Venture Partners (“AVP”), an investment firm built in partnership with family-owned media powerhouse Advance, which is Condé Nast's parent company and holds significant ownership stakes in the likes of Reddit, Charter Communications, and Discovery Communications. David and his partners built AVP as a firm that would combine a flexible, long-term minded investment approach with the resources and impact afforded by a high-value strategic partner.
In building an independent entity, AVP’s Partners ensured that they could develop an investment strategy and approach that would not be unduly influenced by the potentially competing agendas of a corporate parent. The firm (now in its sixth year) has been a successful investor in both consumer and enterprise technology businesses, and has been the investor of choice for leading companies in both sectors because of their unique mandate and approach.
Random walks and not-so-random networking
Reflecting on his career, David says, “It’s been a bit of a random walk—what I have intended to do, hasn’t always been what I ended up doing, but I’ve been thrilled with both the path and the outcomes.”
Yet what hasn’t been random is his approach to networking. He’s built strong relationships at every step along the way, and these relationships have successively opened up new opportunities for him. He’s leveraged these relationships to the fullest, making a point of integrating learnings from a series of mentors along the way:
“I believe that my approach to investing has been shaped as much by the people with whom I have worked and learned from as it has been by my own personality and predilections.”
Don’t lose sight of unit economics
His relationships have driven his investment strategy, as well as the types of businesses that he invests in. His years at Summit, for example, profoundly impacted how he filters and evaluates businesses. Specifically, at Summit, he learned the value of evaluating companies on the basis of unit economics—at its simplest, the unit-level revenues and costs associated with the products or services offered by a particular business. David reflects that too many companies today prioritize growth, sometimes at any cost. He cautions that, by scrutinizing and prioritizing unit economics, investors can build great companies, which are not always defined by multi-billion dollar outcomes.
Look for complexity arbitrage
At Francisco, one of David’s major takeaways is the value of what the firm called “complexity arbitrage”. Capitalizing on complexity arbitrage involves answering a relatively simple question: How do you buy a complex business or buy a business in a complex transaction and eventually sell a business that is less complex and easier to understand? Oftentimes this requires having the conviction and patience to stomach complexity - to invest in something that others don’t understand or that popular sentiment doesn’t support.
Investing is an apprenticeship
David believes that developing and growing as an investor requires apprenticeship. David attributes his success to having worked alongside savvy investors and investing time in learning their perspectives. He still finds himself hearing his past mentors’ voices in his head and tries to ask (and answer) the questions they might have asked. In some cases, he still reaches out to those mentors to get their perspectives on investments he is evaluating.
David believes that by leveraging the different perspectives that are still resident in his network, he has been able to more holistically evaluate his investments and has been a better investor.