Democratizing Care: Announcing our Investment in Counsel Health
Today, we are excited to announce our investment in Counsel Health.
Investing with Intention in a Dynamic Market
Sharing some remarks from Monday’s 2025 Asymmetric Annual Meeting
We’re in the midst of a dynamic time in early stage private capital. As with all prior periods, including the rise of the internet, opportunity abounds. But, as in every such period, investor demand exceeds the supply of compelling opportunities. Add to that a complex macroeconomic story and we believe the value of thoughtful asset selection has never been higher.
Accordingly, we expect a huge dispersion in returns from this era, and we’re doing everything we can to remain on the right side of it. Our first quartile Fund I performance across Net IRR and TVPI and top 5% performance in DPI validates the decisions we’ve made since 2021. We will continue to back high-upside ideas at rational entry points, with founders we’re proud to support—often long before they’ve incorporated or even ideated.
Overall deal volume, which had dropped off a cliff in 2023, has returned to quite nearly the excesses of 2021. But the data shows that about 3/4 of these dollars are chasing a very small handful of opportunities in the core LLM space. So in some sense the current dollars being deployed towards the markets in which we participate may look a lot more like the 2023 bar than the 2024.
Venture fundraising beyond the megafunds has never been more difficult. We are fortunate to be in just the 8% of 2021 first time funds who have gone on to raise a larger successor vehicle1. And that was before the most recent round of government hostility towards higher learning institutions, which seems to have had the effect of stalling most illiquid fundraising currently in progress. Given this, many of our smaller competitor firms are on their back foot. Fundraising has never been more difficult for properly sized funds, and many firms are burdened with the baggage of 2021 portfolios requiring constant capital, work and attention. We have a full fund of dry powder, a supportive LP base and top 5% DPI at precisely the moment when it’s been harder than ever before to raise a private fund.
1 Source: Pitchbook 2021 Venture Capital fund data
On the technology side, very important developments like AI, and particularly its impact on the broader world via APIs and the physical world via IoT will change the economics and strategic landscape of every industry. With the excitement of AI has obviously come some overheating as well, with billion dollar seed rounds and pre-revenue entry points at an all-time high in certain sectors. The sheer size of certain funds in the market necessitates that they go find hundreds of billions of dollars of enterprise value creation every fund cycle. This restricts their aperture to the largest and most general markets. It also skews their efforts to capital consumptive models, as companies which can grow and reach impressive exits with minimal burn do not fit their model. We believe this is the root cause of some of today’s market froth.
Conversely, we see many ways to benefit from all of these tech trends that don’t mean investing in LLMs directly. We see our portfolio as well poised to benefit from a lot of the tech development others have funded; we don’t plan to fund LLMs and infrastructure directly but instead continue to find ways to make money that’s agnostic to the winners in LLM. We see AI as an enabling technology and perhaps the most definitive trend in tech since the internet; we want to make money and do well regardless of who wins that game.
We remain focused on multi-decade themes that are in the first inning of a very long game. Sensible unit economics and tech-driven industrial disruption are perpetually interesting, and the reality of our current environment is that many attractive sub-sectors have seen serious declines in investment interest.
The net of these variables is that creating and reinforcing a data moat has never been more important; this is why we’ve focused much of our energy and attention on vertical players who can aggregate and monopolize data at the industry level. These companies are hedged against changes in LLMs and will in fact benefit as that industry may become more price competitive and even commoditized. Whether we are making minority investments in new tech ventures, hatching companies, or consolidating the small players in a sub industry, data is the enduring moat.
We prosecute this thesis by investing in a handful of ways. We build software companies, we invest in tech-enabled service providers and we consolidate small businesses that can be made more efficient by ruthlessly incorporating technology. Each area represents an unusual opportunity to quickly and cost-effectively build technology to benefit from historical inefficiencies. Each also has ever-present demand from scaled investment capital: even before the four year mark, we’ve already sold investments to both public and private acquirors, and expect both IPOs and private equity transactions in the remainder of our Fund I and II portfolios.
Having run this firm for four years we have obviously learned many lessons (and fortunately most fall into opportunity cost versus capital impairment for LPs!)
First, Fund II will have 20-30% fewer companies than Fund I. Too much diversification runs counter to outsize returns. We would like our ownership at exit in most cases to fall between 15-20%, ensuring that a $ billion outcome returns the fund. We have made great progress on this front with the first four deals in Fund II; our current ownership in those companies is 20%, 20%, 27% and 10%.
Second, and somewhat related to the first point, we must decide quickly if things are working, and follow on aggressively when they are. While the pre-seed market remains the least competitive place to play, the next rounds for our companies often get over-heated, with the megafunds arriving quickly with large checks. As such, we now work constantly as a team to calibrate companies’ performance with the moments for fast follow-ons. Of recent deals, we’ve succeeded in quickly re-investing in a handful, and are aggressively pursuing those others performing well in whom we have not yet written a second check. We want to own more of our winners while keeping founders focused on responsible capital deployment and minimizing any unnecessary dilution for them.
The net of these two points: Fund II will be more concentrated than Fund I.
Finally, we continue to re-allocate time away from investments with a low chance of returning the fund, towards first and second quartile companies. While we’re proud of the fantastic work across the portfolio in Fund I, we certainly allowed one or two companies that were previously performing below expectations to consume excess resources en route to success. We are proud to share that all five of the first investments in Fund II are proving to be quite hands off, and our time with those companies to date has been spent purely chasing upside.
While we are of course still nominally a venture capital firm, we don’t have much in common with most of the industry. The reality is we’re chasing a very different north star.
As others have drifted to very large initial checks and valuations, often still pre-revenue, we remain squarely focused on the early stage, because it’s where we see the most interesting risk-reward.
We also continue to be disciplined in how we play today’s trends: we work to isolate the core underlying economics of new themes and bet selectively, away from the herd. Undisciplined trend-chasing created a lot of paper mark-ups during the 2011-2021 ZIRP era; going forward, we continue to believe the basis for DPI will be creating real assets with downstream strategic value and powerful economic models.
On deal pursuit, we work patiently to build multi-quarter and in many cases multi-year relationships with prospective founders long before they are going to launch (or indeed even have an idea).
Most firms only make passive minority investments; we have successfully hatched multiple companies, as well as begun shifting some of our investments to a MoiC-milestoned structure which creates mutual incentives for founders to shoot for the sky. In a frothy market, creativity is a powerful weapon.
Finally, most firms condition their returns on market timing and exit multiples, and a small handful of IPO-driven returns; because we are building real companies with a path to free cash flow, we have access to many different exit channels including the perpetually more competitive asset class that private equity continues to become.
All in, we expect our strategy to produce more consistent, and cyclically-resistant, returns.
As we look ahead, we are proud to be building something that feels increasingly rare: a capacity-constrained, conviction-driven venture firm with staying power. We will never have the highest AUM or write the largest checks. But we are deeply committed to being among the best—both in terms of how we invest and how we partner. Thank you for being on this journey with us.
