From Family Offices to Private Equity Power Plays w/ Joel Sandhu, Top Tier Access

SCS (Intro): 

All right. Billion dollar besties.

Today we are taking you to the heart of Europe's private equity pilgrimage for Berlin. Super return super venture ring a bell where venture and private equity heavyweights converge. Joining me is Joel Sandhu, co-founder of Top-Tier Access, a unique platform connecting family offices with best in class private equity and venture capital managers.

From navigating the challenges of emerging markets to understanding the dynamics of building a diversified portfolio, Joel brings deep insights and candid perspectives on the world of private equity, venture capital, and beyond. This conversation was yes, recorded last summer, but the beauty of billion dollar moves is that our insights here are evergreen.

In this episode, we dive into the art of picking great managers, the role of family offices in shaping the next wave of innovation and the delicate dance between tradition and transformation in wealth management. Get ready for an unfiltered look at how private capital really works. Let's dive in.

Joe Sand, Joel Sandhu. What brings you to Berlin today? Sounds like the whole venture community has landed in Berlin for the last couple of days. Sort of a pilgrimage. 

Joel Sandhu: 

It's the private equity pilgrimage, right? Once a year. 

SCS: 

That's right. 

Joel Sandhu: 

Once a year everyone ends up here crammed into small hotel rooms in the intercontinental… they're not the most comfortable this year. They also had small cabins. The first meeting I had was in one of these very small cabins. It was quite a cool setup. A lot of light. But there was some rather like. Muscular chaps in this room with me, and I was kind of cramped in a corner.

As I got more and more uncomfortable, my questions became more and more aggressive, I think, to this man. 

SCS: 

Oh, right. Love it. 

Joel Sandhu: 

He's maybe, maybe a suboptimal setup, but…

SCS: 

What a great way to start the week. 

Joel Sandhu: 

Yeah, yeah, exactly. 

SCS: 

What are your impressions? I mean, the pilgrimage, is it worth the time, and I hear you've had a different strategy. You don't actually sit in for those sessions, do you? 

Joel Sandhu: 

Yeah, like, you know, I feel bad because I'm sure people put a lot of effort into. What they're saying on these panels. But yeah, I think for us it's just about meeting gps. It's about meeting as many as possible. If you think about it, our job is to talk to managers and to invest into managers.

So if I can cram 30, 35 meetings into three days. That's sort of a quarter of work done. Right? So, yeah. The most efficient way to do it.

SCS: 

So you've met how many managers by your account now? 

Joel Sandhu: 

In excess of 30, I would say. 

SCS: 

30. Wow. So quite an inventory there. A couple of managers in the last couple of days.What are your impressions? What are we seeing? 

Are we seeing fund managers say the same thing of times a little bit tough, we're on an uptick, but there's a little bit need for secondaries and liquidity. Like what is the pulse of the market today? 

Joel Sandhu: 

I think the interesting part of the market that we're in now is, we're in this stage where everyone's say, okay, it's starting to pick up again. It's starting to pick up again. You hear it's starting to pick up again. Like you've kind of been hearing that for maybe a year. 

It maybe is starting, but you know, not to the levels that it was before. But what's interesting is people are actually comparing it to, I think, ‘20 and ‘21 deal making activity.

And what I find strange is they're acting like sort of this peak to trough of ‘20 to ‘21 to now is, you know. is evidence of a decline in deal making. But actually for me, it's sort of just a reversion to more of a… 

SCS: 

Mean.

Joel Sandhu: 

A mean, right? Yeah. So if anything, we should just be saying, okay, I'm glad that ‘20 and ‘21 are not happening anymore because… You know, everyone's complaints were that it was, it was free debt, the prices were too high, et cetera. So that shouldn't really be a benchmark that we should be aiming for in, in kind of any capacity. So fundraising was very good. Then deal making was extremely high. You should have a little bit of a pullback.

I think if you look at a lot of the levels, fundraising and deal making basically are correlated perfectly. Yeah. I'm guessing pricing is also correlated with that, uh, with that curve. It may be slower in terms of the growth of the industry, but they still, a trillion was still raised last year and basically private equity.

Last time I checked, I think that's still a decent amount of money. Right? 

SCS: 

Just a little more than your bank account. 

Joel Sandhu: 

It's a little bit more… And I think it's less than the PIF right? 

SCS: 

That's right. 

Joel Sandhu: 

The activity is still fairly strong. The industry is still strong, but once you get to the heady heights of $ 1.5 trillion in fundraising and doing a deal every week, to go back to a slower pace of life for these, uh, you know, maniacs who work in private equity, maybe it feels like a step backwards, but I think yeah, it's kind of a normalization in my point. 

SCS: 

So you started top tier in 2020, Top Tier Excess. Of course not Top Tier Capital. Not to be confused, but where are we today?

Are you seeing more tourist VCs or has that normalized, because of course we had the ‘21 and ‘22 high. Where are we today? Are we seeing folks already exit the market? Are you still early on in your journey of investing into managers? 

Joel Sandhu: 

Yeah. Look, I think the… here’s the thing with this industry is, you are buying a product that you have to pay for for 10 years. You're not really gonna see bankruptcies happen like that in the community of GPs. 

You need to give them a long time to do their thesis. There are some managers who will have taken a bit of a hit in 2021 'cause of, you know, all of the things that happened, and they need to be given that time to recover as well.

So, you know, just because someone is maybe underperforming now doesn't mean anything. Doesn't mean that they should be executed from the market, shall we say. But I think fundamental to this whole thing is that because the time periods are so long, and if you have your sort of corporate governance in place as a fund manager and you have a sort of a team and a reputation, it's kind of hard to go outta business at a certain point.

If you're a solo GP and you know, you raise some money, then you couldn't do any deals, okay, maybe then you'll just return the money back to the investors and you know, go own a coffee shop or something like that. This sort of tourists exiting that was more in hedge funds, I think, than they, they just now have switched back to buying stocks probably.

Or, you know, not following SoftBank into every big deal. But I think you'll see it after, after there's been some sort of maybe difficulty in their performance over time and they couldn't, maybe, couldn't raise their next fund. I think it's gonna be more about not raising their next fund. 

But you know, if you raise a hundred mil on a 2% management fee. You have a decent revenue base for the next 10 years, right? 

SCS: 

Yeah. So, but what we were seeing is, I suppose, you know, we've had earlier vintages, so we call it 2016… 2015, 2017, in which they may have paid high prices in ‘21, ‘22.

Now, you know, it's about time where the dry powder has run out, right? So they're out in market again, and unfortunately performance hasn't been the way that it's meant to be. Are you seeing sort of questions and performance in venture and buyout, and how do these two compare just for those that are not in buyout in the way that you are?

Joel Sandhu: 

Yeah, they're two very interesting but different asset classes. Selection risk is extremely high in venture. The mean return of venture is quite difficult to get your head around from sort of a risk return perspective. Just like in a venture portfolio, a few companies make up all the returns, but then from the actual manager perspective, a lot of the returns that come…

So if you look at sort of dispersion of results over time, it's extremely high venture, you know? Everything from 0X your money to 15X, 20X your money on a fund level. That's the sort of main thing with, with buyout, you know, you're never really gonna lose money. 

SCS: 

Might get like a 1.8X.

Joel Sandhu: 

Yeah. I think look, you want to get a 2. I think that's kinda what you wanna get right, is in buyout, that's the sort of acceptable 2X in 10 years. But still selection is super important. There are a lot of bad buyout managers as well. Of course. 

SCS: 

Yeah. 

Joel Sandhu: 

Not to, not to be offensive, but… 

SCS: 

So I was with Dominic who hits the fund of funds program for AXA Venture Partners, and he said this in venture, it is like kissing a lot of frogs to find your prince, but you find out if the prince is a prince 10 years later.

Do you agree or can you tell pretty early on, like, okay, they're hitting the metrics. Wait, what do you think here? 

Joel Sandhu: 

Ultimately from an LP perspective, your DPI comes in right at the end, right? Your returns coming right at the end, but I think it also depends on, if you look at sort of from a dollar at work perspective. 

Venture managers, you know, they have quite high convictions after two to three years of a company or four to five years of a company. And that's when they have their second pool of capital then goes into their good deals. I think they have to kiss a lot of frogs, I'm sure. But then if you look at some of the explosive growth in some of these companies, like we're, we're invested in a growth manager. And if you look at some of their portfolio, it's some of the fastest growing companies you've ever seen, like short time to a hundred million ARR. 

I'm not super sure if you need to wait 10 years to get an exceptional return on an asset. But then also the question is the valuation might be extremely high. But you know, who are you gonna sell it to if you can't IPO it's, there's also, there's also that difficulty as well.

So you might be sitting on a very cool, high growing asset that on paper is worth tons of money. But, you know, exit window has completely changed now. And so, maybe the frog stays like a frog for a while, but he's a very sexy frog.

SCS: 

So I dive way deep there really quickly, in the hot seat as we pop your cherry off podcasting here. Thank you very much for that. 

But let's take a step back. Who is Joel Sandhu and what really brought you to the work that you're doing today? I mean, you know, with the family offices and also in venture.

Joel Sandhu: 

I'm not your typical finance bro, shall we say, although I'm not wearing socks and I'm wearing like loafers. So I'm leaning heavily…

SCS: 

I was curious about the lack of a Patagonia vest as well. 

Joel Sandhu: 

But yeah, it is gonna happen. You know, it's gonna, eventually it's gonna happen… But my background is a little different I think. So I did maths at uni, which I was terrible at, but there we go. I should have been like literature or something. That's probably what I like more. 

SCS: 

A disappointment to the Asian side of our family. 

Joel Sandhu: 

Well, you know, actually, like my parents for some reason are very cool about that there. They were just like, my mom was just like, just do what you like. 

So that was nice advice. But, you know, I was a cocky kid and I thought, what's a difficult sounding degree? I'll do maths. Yeah, that's right. And then I like suffered for three years basically. 

SCS: 

So good. Yeah. You like, suffered, looks like a trend in your life here. 

Joel Sandhu: 

Oh, really? Okay. That's an interesting one. We'll have to dive deeper on that.

SCS: 

That's right. 

Joel Sandhu: 

So I did that and then I worked for a bit in the family business. I think I've just been trying to prove something to my father who was kind of a businessman, so…

SCS: 

What was the family business? 

Joel Sandhu: 

So at that time it was a fruit and veg distribution. 

SCS: 

Nice. 

Joel Sandhu: 

My father's a bit of like a serial entrepreneur, wheeler dealer, type of chap, you know, typical Indian kind of guy. You know, he did a bit of finance work early in his early days. He likes going to court. He likes trying things and he is always like, I don't care about money. I just, you know, it’s about the thrill. So yeah, I don't think he's ever gonna retire.

He'll just continue doing weird stuff and, you know, calling me about it. It's all about the art of the deal. It's about the chase job. 

My therapist tells me I was just trying to emulate him. I had an entrepreneurial kind of desire, shall we say, started a bunch of, uh, crappy things that didn't work out. And then I joined a startup, which was a lot of fun. It kind of gave me a taste for that world. I always wanted to do something in the more financial side of it. And then when I moved to Belgium. I lost the negotiations with my wife, so… 

SCS: Okay. 

Joel Sandhu: 

She's Belgian. So, and yeah, I was sort of looking for a new opportunity and then I came across my current co-founder. He’s got a family office background, so that's a little bit how I got baptized into that world actually. It was just from, he kind of had a network of other family offices. There was a whole bunch of different deals that were being done, some real estate, some debt, some venture, and then that sort of rotated into this strategy of allocating to managers basically exclusively. 

SCS: 

I've had a similar encounter in finding my own co-founder, but how did you know, all right, this is gonna stick. 

Joel Sandhu: 

I think our relationship evolved from a employee-boss relationship to sort of partners, shall we say. We've known each other for a few years and it's like you become… we're fairly complimentary, I think, in how we think about stuff. We're both probably like more on the salesman side than really hard technical guys. He's been investing into private equity for a long time with his family. 

So a very decent, stable base of, you know, understanding and like a trustworthy kind of moral compass. It was a good match, I think, in terms of his experience as well. 

SCS: 

He was a single family office on his own. He was managing his own money and then brought in others like club deals. Is that? 

Joel Sandhu: 

Yeah, it's a little bit like that. It's, I mean, it's always slightly more complicated than that. He wanted to build, I guess, kind of a community of these other family offices mainly for his own earnings probably. I think that was, that was the initial idea and then it sort of spiraled into, you know, us getting into the middle of a few deals.

We did like almost some sort of placement stuff. We did some kind of events. We did some like deals. It was, it was all rather opportunistic. I think we were trying to find ourselves, I think, as a team in 2020, and that's when it became… we saw the light and decided to sort of go for it. I mean, it was also a couple of the families that we knew. Well, the idea also slightly came from them. 

SCS: 

Yeah. And who are these families to the extent that you can, I guess give us a sense of the persona here. Were they already active in venture, Private Equity? 

Joel Sandhu: 

It's like I always say family offices. It's a broad term. On the one hand you have people who maybe it's. Second generation, third generation… They're divorced from the family business completely. That's more just a sort of numbers optimization game.

It's about like an allocation and an access thing, but then you have also people who maybe they're still running their business, and they just need to do something with all this like lovely cash they have lying around. I think overall people are fairly active in private equity and that's also why they realized that there was kind of, for a mid-size family office, there's a bit of a limitation as to how you can do the asset class, I think properly. 

I think that was basically the pain point here. I see it everywhere, to be honest. It's basically, it's not just, I mean, it's mainly just Flemish industrial families that we're working with right now. Basically the same problem. It's very expensive to go via a bank and you kind of overindex to the big names Blackstone, KKR, fine, but that's all you have access to and it's usually very expensive.

Then there's sort of local private equity you can invest into like, you know, your mate's fund who might do a decent job, but you're often overindex to your local geography as well, right? And then the other option is sort of fund of funds, right? Which works from a diversification perspective.

SCS: 

So to create top tier access into the best in class managers in venture and private equity, what does that look like? I mean, in terms of structuring, so it sounds like it's a hybrid of a fund of funds, but not really without the exorbitant fees.

How do you structure top tier access? 

Joel Sandhu: 

The fees are kind of simple. It's basically priced like an ETF. There's no carried interest. 45% basis points is actually the fee range. So it's pretty economic, shall we say, we think we should get paid for selecting good funds and managing that portfolio. 

But also if you look at what sort of double carry does to your returns over 20, 30 years, it's with the assumption of reinvesting. It's an enormous chunk of wealth. 

The thing with family offices is, they're kind of a unique beast. You'll oftentimes hear these like wonderful horror stories about sub docs couldn't get signed 'cause they're on a boat in Monaco.

SCS: 

And you gotta ask mom. 

Joel Sandhu: 

You gotta ask mom. Yeah. That's always the anecdote that I always say is, right? You hear a full grown man, full grown man says, yeah, I really like enjoy the thesis. Fantastic. Makes perfect sense. But I gotta ask my mom, you know?

You don't hear that every day. And if you go to like a pension fund or something, I don't wanna call 'em irrational, but, you know, not necessarily…

SCS: 

Unique situations. 

Joel Sandhu: 

Unique. Yeah. It's, but, and it should be as well. It's their money, right? You should be able to do whatever you want with it and whatever the decision making process is there, it's fine. 

But we realized that as, you know, to be able to do this as programmatically, you can't really be beholden to those types of dynamics. So what we did was we said, look, it needs to be an LP-GP relationship. We need to have a fund of funds structure.

But what we do is we bring the investors onto our investment committee. So it's that way, it's structured. We have discretion. They can then have a say in what we're investing into. So we do all our work and then we present to the investment committee. We don't vote, we just present. And then ultimately it's their decision.

So I guess you could call it like a hybrid club deal. Structurally it works the best because if we want to be doing a decent pace of investment, 'cause it's about a program, long term, a funder fund structure makes the most sense. 

SCS: 

I don't think everybody has the background that you do on Flemish family offices. How that is different from others that are maybe more quote unquote a typical of European family offices if there is such a thing. 

Joel Sandhu: 

Yeah. The one thing to know about this region is there's a lot of money there. There was sort of a very decent industrial kinda heartland in Flanders. A lot of great entrepreneurs who made a lot of good money, but they're very discreet, right?

Barclay Square doesn't exist in Belgium, right? People are sort of spread all over the place. I think it's like that in other countries as well. They're quite like a discreet type of people. They're not super flashy. 

If I was gonna compare them to sort of more institutional, like London Family offices for example, or New York Family offices, I think they're a bit more institutionalized generally, just because also the ecosystem is more evolved in those financial hubs. 

But then also, you know, you kind of know where to find them, right? You can throw a rock in Mayfair, it’ll bounce off three family offices, right? That's the key difference. How far along they are in the sophistication of their investment program is probably a bit different but then also we see it's a lot of newly created wealth. From industrial families after the SHEIN plan, basically that's where the wealth began to be created. 

SCS: 

So how are they thinking about their wealth? What you're saying is essentially new wealth created, right? In some ways, a lot of first gens as well.

But of course, I think as a whole we are seeing, you know, the greatest generational wealth transfer of our lifetimes, into baby boomer wives that are inheriting and earning the potential as well as the next generation. How has that influenced your thinking of where to invest and how to invest? 

Joel Sandhu: 

The themes around sort of impact are coming in. Well, that's typically what you hear when you talk about this sort of transfer of wealth. They want to have some sort of connection with it. I think that's something that's important. 

Whereas, you know, so there will be like naughty lists that you don't want to invest into. Even though oil and gas is having a bit of like a resurgence, investing into defenses. Now. Cool. Like, you know, these things can sort of come up and down. But I think fundamentally people want to have a bit of a connection with it. 

I think there's like meaning is important for our generation as well, whereas if I look at the boomer generation, it was a bit more, I don't wanna say pragmatic, but more just about generating return in a kind of a sensible way. In kind of a conservative way. 

I have no predictive ability to be able to tell you what it's gonna look like in 20 years when our generation takes the keys over. But I would imagine that, you know, some sort of connection with what you're investing into is probably important to know. 

SCS: 

Yeah. I think we've heard the word impact over and over again. But what does that really mean? Are folks thinking about the environment. Is it about DEI? What framing of impact matters to the family offices that you work with? 

Joel Sandhu: 

We're not necessarily experts in impact. I think we're just like everyone. We're endeavoring to have some sort of way of standardized, looking at it in a standardized way.

If you talk to any of these big institutional at super return, also the same, I think in the FT today when their little expose on super return, we're making the same kind of argument, right? No one really knows how do we measure this properly. You can measure your IRRs, multiples, you can measure all these things, but how to exactly measure sort of impact is still, I think jury is very much out.

SCS: 

Even with all the ESG mechanisms and all those developments over the years. It's still a question mark. 

Joel Sandhu: 

I think so. You can measure maybe carbon, you can measure diversity. There are some things that are measurable. Someone explained to me, I want to make the world a better place. ‘Our capital makes the world a better place.’ That was a conversation I had the other day. But effectively then, making the world a better place is an extremely personal call.

I think it's a very tricky topic. I think I'm just encouraged by the fact that it is a conversation. If you're trying to do something good or you're trying to do anything, it comes in stages. I'm not like overly worried about the fact that it's not perfect yet either. I think over time, we will understand what it means more and more.

I think it just needs to continue being a conversation. That's probably the only way to do it. 

SCS: 

Yeah. So when you think about your thesis, you are definitely here to generate the returns that you promised your family offices, but how are you thinking strategically? 

I know you've used your tagline, investing in the best in class venture capital and private equity managers. What does that look like and where do you see yourself investing moving forward? 

Joel Sandhu: 

Yeah, I think with Venture it is a fundamentally quite a difficult asset class, I think, to create sort of long-term investment programs around. The best returns are there. Of course, we're just investing into the biggest ecosystems, i.e., the US and Europe.

There's amazing opportunities in India and Asia, et cetera. There's, of course, there's amazing opportunities, but at this point, I wouldn't say we're sort of well placed enough to be able to make those calls. 

SCS: 

Why did you say that is? 

Joel Sandhu: 

In those kinds of geographies, the upside is tremendous, right? It's bigger than anywhere else, probably theoretically, but from a, like a risk for term perspective, you'd hope that is the case.

Anyway, diving into India, completely different set of problems, completely different set of way of thinking about things. I was in Mumbai a few months ago and I spoke to a venture manager there and she, you know, mentioned how the science done in sort of, you know, Western or European and US universities don't really address Asian problems.

So, for example, there's a lot of research around flour, but not much about around rice. Something that in rice eating countries they think about a bit more. It seems like a silly example, but I think there is massive potential around that. But again, even Europe compared to the US there's a massive delta.

You can have good science, you can have good investors. Ecosystem is still super important. And a depth of an ecosystem still is what enables capture that opportunity set properly. So, look, thesis is really just, you wanna be in the top managers. I think in venture there's a bit of a mafia effect.

Where there are are like people who disagree with me on this, of course. The idea of the best deals going to the top guys, right? now, you hear the other way, which is that emerging solar GPs and small managers are the ones they're gonna be able to capture all the deal flow because the landscape is changing.

So maybe that is the future. But up until now, our thesis has always been, we wanna be in sort of the deals that all of the top US guys in as well. 

SCS: 

But still the brand names, you're talking sequoias. 

Joel Sandhu: 

It's true, but not necessarily, not necessarily going directly into that either, but being in those deals is what's important. We invested in one sort of secondary, if you look at the logos, it's all sort of top logos, right? And then, in Europe we did a sort of one of the longest standing European GPs as well. 

And again, logos are sort of fantastic there. That's like a very kind of simplistic look at it. And, you know, we haven't done enough venture investing to, for me to be able to flesh out an entire thesis.

It was more a testing of the market, shall we say, compared to our buyout thesis, which is much more OT evolved. The one line thesis is like private buyout companies or private companies that you know are targeted by buyout will continue to unlock value in the next sort of 20, 30 years.

That's basically the only thing I need to believe to be able to like build a portfolio. But what does that mean? Tomorrow you give me like a billion euros, right. Please? You give a billion euros and I could dump it all into great, like tech buyout funds. I could do 20 of them and I'd probably get decent returns. 

If you're thinking about like being a custodian of someone's capital, especially sort of families, it feels like hard earned money that someone has entrusted you with. I need to think in sort of 20, 30 years. What you don't want to do is then take a bet on a geography, on one single geography, one single sector, one single EV range.

People talk about diversification right at the beginning. It's easy 'cause you just pick your first one. You think, oh great. But then by fund 8, 9, 10… we do 10 in two years. That's kinda the program. By the end, you know, you're really trying to make sure that you're not overweight in one thing. It's just about being thoughtful around sectors. 

Geography is, you know, US, Europe, so we just... We wouldn't do three Nordic funds, for example, like five British funds or something like that. So you wanna get spread there. EV range, we have some big companies, but then also all the way down to, you know, the smallest fund we did was like €850 million local dark player buying companies of a couple million ebitda.

So everything in between, you wanna kind of capture that entire spectrum. I think that's important. And then even on top of that, right, it's what we call like the type of companies diversification. So you got market leaders and then you have what we like to call sort of hairy companies.

And you wanna get a little bit of a range there as well. A €5 million EBITDA company in consumer, for example. You can have two of them next to each other and normally they're the same, but one could be a market leader in some sort of niche and one could be a having a real tough time of it and about to go bankrupt. So these are not equivalent companies. 

And you need a completely different skillset to be able to unlock value. So that's also then you have to be mindful with your managers to sort of. Ensure that you are hitting those different pockets, that whole kind of spectrum of the different companies.

I said it was a one sentence thesis and then I spoke for five minutes. 

SCS: 

Yes. So for private equity and buyout specifically, what kind of check sizes are you guys writing? 

Joel Sandhu: 

We do 10 funds in two years, right? And it's like evenly split right across each one. So, you know, at the moment it's sort of like 10 to 15, the sort of size. We hope to scale that to more sort of 15 to 20. 

Like I said, venture has been, you know, a little smaller. We have far less exposure there. It's really just be more of a market testing thing. It's far less of a program, shall we say. 

SCS: 

But of course you are testing it because you have inclination that it's probably going to be where the growth area is, right? Otherwise you wouldn't even spend any capital in that space. What is your strategy there? 

Joel Sandhu: 

You wanna build a good portfolio of assets. And you don't have venture in it like you're missing something.Even if what I said earlier about the risk return being quite difficult of that asset class, from a philosophical perspective, it's actually the most important part of that kind of capitalist chain, right?

Because that's where you are funding innovation. That's where you're creating new stuff, which even if loads of it gets marked down to zero by the end of it. It's such an important part of the entire sort of, if you believe in capitalism. It's another conversation, I guess, but you know, if you believe in it, the money needs to be put with people who are creating new stuff, basically.

In buyout as well. As you get closer towards the public markets, what you're really seeing is just more swapping bits of paper, right. It's swapping shares of a company, which is fine, and it is important for the ecosystem as well, inherent in that fact that that part of the ecosystem is where the new ideas and the new, you know, the next gen wave of tech comes from.

You should be investing into it. Right? 

SCS: 

So how are you thinking about it? I mean, are you investing into a particular vertical? I know you mentioned there is this trend of solo GPs, emerging managers, but the dispersion of results could be something to think about. 

What is, again, like the initial hypothesis? Where are you putting your checks for venture? 

Joel Sandhu: 

So if I look at the US. It's the deepest ecosystem. So like Silicon Valley is still kind of, you know, world leading, right? You have the unis, you have that entire venture ecosystem. There are some funds that we've looked at and sort of interacted with in the past who have, I don't wanna say a scattershot approach, but they have a lot of companies in their fund.

Really then you are getting that sort of power law exposure, shall we say. You are effectively playing and investing into the ecosystem, sort of in the US right? I think Europe doesn't have that depth of an ecosystem. It's probably getting there, but it doesn't. 

I really appreciate Hussein from Hoxton Ventures. He's one of those guys who, he'll do a panel and he'll be like, I think there's nothing good in Europe. You know, he'll say something a bit like controversial like that. He's investing only in Europe with that sort of US mindset. And really I think he is a very decent, like stock picker, if I can use that word.

So it's more about there instead of it, because the ecosystem probably doesn't have the sufficient depth, very selective choice is what's going to be your saving grace there. And then if I look at Asia, it's an even less mature ecosystem, but there are some sort of outstanding names who have historically done, done fairly well.

So I think that's also then more about maybe leveraging a brand or something like that would be, would be interesting. 

SCS: 

I wanna challenge you, that you talk a lot about brand, about access into the best names. And those have had the privilege in many ways to build that track record. But of course, you know the work that I do with women and people of color. Not all of them have had that privilege of calling up mom and dad to give me $250,000 or the first few million to start a fund. 

And yet we are starting to see them outperform as well. Those that may not fit the cookie cutter. How would you think about it as an LP in ensuring that, you know, you're just not picking the same names over and over again?

Joel Sandhu: 

Yeah, it depends on what the overlay is like on your investment program. Our investment program, basically, you know, despite what our, maybe our personal philosophical convictions is really just to sort of generate. Great returns from our perspective as an LP, I think it's good to have, you know, there's pressure being put on GPs around diversity, around these types of things.

But fundamentally, if what you're trying to do is maximize returns without taking too much risk on a manager level, and then all the way down to a company level, as annoying as it is, the people who've been doing it the longest have, are more embedded into that ecosystem. 

I would say that my inclination here would be to continue to back the sort of big names that we've been backing, but then it's maybe necessary for LPs to put pressure to make sure that these kinds of issues are solved on that level. 

SCS: 

How would that turn out? I mean, you're an LP today and you've become increasingly vocal right? About where things should be and all that. How do you see your influence and what is your message to GPs here? 

Joel Sandhu: 

I would put that as a disclaimer about the amount of influence I have. We're not a big LP, right? We're not a pensioned funder or a sovereign wealth. These guys, these guys are the ones who have a lot of power. They can have a lot of influence as well. But, you know, on the other hand, I think that that's not an excuse to say nothing either. 

If I look across our portfolio, I think a lot of the managers are doing. Fairly decent efforts, across this, well, all of the Nordic funds that we're in tend to have, it's baked into the DNA I think.

So the teams are fairly equitably, you know, split in terms of gender, I would say, but then also if you look at their portfolios, it's ESG and Impact, or, you know, these kinds of ratings. There are also accents in their portfolio. 

It might not be the main thing that they're after, but I think fundamentally for any of this to work, returns have to be prioritized.

SCS: 

Sure. So what makes a good GP and a bad GP across asset classes? I think there are a lot of parallels there. What have you learned in the last couple of years? 

Joel Sandhu: 

Good returns, bad returns? 

SCS: 

Well, early on in the game, how do you know? 

Joel Sandhu: 

We like to see a track record. To be honest, this industry is full of like extremely smart people who are very good salesmen. My co-founder and I, when we go to one of these conferences, the first day you're, you're in like a Labrador mode. 

You're there, like, you're talking to these people and you're like, wow. Oh wow. They tell you their thesis. You're like, oh, wow. It's like this amazing world of like Willy Wonka's chocolate factory.

And then, you know, after three days of not sleeping and having the same conversation 600 times, you turn into a bit more of a rottweiler. You know, you think everything's rubbish. 

Fundamentally, in emerging managers, it's a bit like investing into a founder, right? You can look at their attributable track record, but you also don't know how important their previous infrastructure was to their performance. I think that's an interesting play. 

If they could leverage a massive infrastructure, maybe that is what helped them with their returns. It's very important to have diversification on that sort of emerging manager level. Hedging against these different personalities is probably super important to creating a pool there. 

But then again, going back to what we do at TTA, we look quite carefully at sort of key man clauses. So you want to invest in, down into smaller companies, you're gonna invest in smaller teams then. So inherently there's going to be a slightly, you're slightly higher up on that sliding scale of key person risk compared to if you invest into CD&R, which you know, they could swap out, you know, it's, there's like a million people who work there. 

SCS: 

So what's your, I guess, profile here? I mean, if you're thinking on parameters and how you're making decisions and bets on managers, just like how you think about investing in a founder, is there like a checklist that you've found true and tested?

Joel Sandhu: 

It's fairly straightforward. I think, you know, there's a lot of like quant analysis that I think that we do. The more activity they've done historically, the better I think. 

But again, there is a limited predictability with data. It's interesting, right? There is like footnotes at the end of every text saying, you mean past performance, something like that.

Something along those lines. I think that's an important piece of it. And then one interesting thing, especially in PE funds is the sort of growth of juniors. It's something that we've been zooming in on because you typically think of it as sort of top guys, top deal makers, hot shots, great hair, nice shoes, you know, and they're out there doing their thing.

But you know, I think if you wanna be a good investor, like the quality of your team and the quality of like how that team will grow, is fundamental to it. If you can't nurture good juniors to move up in the organization, they do so much of the work, right? That you know, all of the modeling, all of the crunching loads of the sourcing, it all comes through that sort of bench.

We're quite interested in talking to, you know, at least one junior per of a fund that we're invested into. Just to understand what the cultural is like. 

SCS: 

Yeah. Building multi-generational firms is tough. You are not so counterpart. But off the same name, Top Tier Capitals, Lisa Edgar, talked a little bit about how Benchmark was able to figure that out with carry economics and things like that, with the younger folks, but have seen a lot more that you basically, you thought it was a Sequoia back in the day.

That doesn't exist even till today. So… 

Joel Sandhu: 

Yeah, that's how it works, right? And I think also, you know, for the new generation, so we have some like very smart juniors that we have in our team and. You realize actually compensation is one part of it. Purpose is I think an extremely important part. Validation and, you know, understanding their growth.

They're very committed to their own sort of personal career growth. Which is actually very cool. It's great to sort of be around those mindset. 

SCS: 

How big is your team today? 

Joel Sandhu: 

We're seven now. 

SCS: 

Seven. You talked a little bit earlier about the exit and liquidity landscape.

What are we thinking here, with where Europe is? 

Joel Sandhu: 

Over the past couple of years you've seen bleeding from sort of private equity, like more buyout funds into growth. You saw that happen, you could call 'em tourists or whatever, but you know, that happens now. What I'm actually seeing a little bit is, growthy kind of funds, almost like rotating into now mid-market. 

They're calling themselves mid-market because it sounds a bit more buyout-y. It's not just marketing either, right? They're actually really focused on profitability on these companies. So I think basically everyone has realized, we don't know when the market will be open for non-profitable IPOs, which is basically been an investment assumption for like the past 10 years.

Even if the rates go down a bit more, they're still much, much, much higher than they have been for a long time. That landscape of being able to just, you know, put Uber on, and then wait however many years it is, until it becomes profitable, maybe that will come, maybe it won't. 

So I think they're very smartly. Growth managers are now saying, okay, profitability matters. It sounds silly to say that, but yeah, profitability matters. What we're probably going to see then is like growth funds being able to exit to private equity funds. Private equity funds are still very well capitalized. There's still trillion of dry powder.

So I can imagine that being a more important exit if they can show some profitability. That could be an interesting route, I think, for growth for managers. If we're talking more about sort of that hypergrowth, high loss. That is for me, an open question. I don't really see how that can be scalable.

It will work for certain star assets, of course, but yeah, I think it remains difficult. It's all about profitability now. And so where you saw that private equity, like dipping their toe into growth, now growth is kind of dipping their toe into private equity. There's some sort of strange ecosystem being built in the middle there 

SCS: 

And talk about strange ecosystems. The other big one is secondaries. What are your thoughts? 

Joel Sandhu: 

Everyone talks about secondaries and sort of LP-led and GP-led. Yeah, which for me is. I understand why they're both called secondaries, but they're not really the same thing at all for me, an LP-led secondary is super interesting as this kind of cash management tool.

I was speaking to these very smart people this week who know far more about it than I do. They can genuinely see discounts, they can genuinely see very interesting flow. And if you slot that into an institutional portfolio, it's an asset that's throwing off cash on day one. It's very interesting and if you have a smart program of being able to sort of recycle often. It becomes a very interesting proposition. 

I think from my perspective as kind of on the LP side, what you typically see if you're on the smaller LP side, like we are. What we are being offered is these GP and LP led, which is actually an interesting product. So basically what that means is, you know, you'll have some of these LP-leds, other LPs in funds or you know, EQT or TA associates, they suddenly want liquidity and they like, they put it up and they put it up for sale.

You know, you can get a little bit of a discount on the value of that. Fine. You buy a bunch of those, those things are typically more mature. So there's cash coming off. So that's part of the portfolio. But when you're buying a LP-led position, so a part of a fund that's already maturing logically, some of that value has already been, you've already paid for that value. There's limited upside in that transaction. 

So what the secondary funds are now doing is they're putting GP-led secondaries into that. So what that effectively means is a GP, he/she wants to keep hold of an asset that they really like, so they put it into another vehicle, they get some external capital, and they keep a hold of it for another three, four years.

For me, that's like basically another primary deal. That's why I think the combination of the two, it is an interesting product, but I think if you're gonna be, if you want to be a bit more pick and choose and creating your own portfolio. A little bit of secondaries and a little bit of GP-led doesn't hurt, but for me, it's kind of two different propositions.

It's kind of a complicated space, but I think that we haven't seen the end of GP-led. I think that's gonna become more and more a very important exit route for GPs. It's always been a dirty word, right? A GP led secondary, a continuation vehicle, they did a continuation vehicle. You know, because previously it was, you put all of your struggling assets into something and you would sell it.

But now it's kind of flipped, right? It's, I don't know if it's because they can't exit their assets or they just want to keep on growing it, right? Like I think GP-led is gonna continue to grow. I think it's gonna become massive. LP-led secondaries is, you know, is always going to be a bit cyclical.

There's always gonna be some interesting demand, but given the sort of dislocation that we had in the past few years, that's why now is super interesting. 

SCS: 

So as an LP looking at GP-led secondaries, do you see that as a bad new story? 

Joel Sandhu: 

So GP-led is not necessarily a discount, though. The philosophical issue with GP-led can be that I invest into fund A, right? And the star performer of fund A, instead of getting sold to one of Blackstone for like a very juicy number. The manager says, okay, no, I'm gonna buy it myself in this, you know, you get an independent third party valuation. 

But I think everyone knows, and you know, GPs have told me this, in dark rooms on a cloudy super return afternoon, that, you know, they could probably get 5%, 10% more in the market for that asset, but they're still doing a good return, you know?

An LP is not really gonna complain about 3, 4X, right? That's the philosophical tension between those two things. Whether that's a massive problem, I don't know. Because if you can also use a GP continuation vehicle to sort of give a bit of liquidity to LPs, I don't think LPs are really complaining about DPI these days. They'll do anything to get DPI. 

SCS: 

Ending with a bit of tension, just the way I like it. Looking ahead, what vertical are you excited by? What are you looking ahead to doing more of? 

Joel Sandhu: 

Mid-market for me. Is also a word that has proven its wonderful elasticity over the past couple years. Everyone is suddenly in the mid-market. Mid-market generally is the roots of private equity. Maybe that's a bit of a bold statement to make, but… 

Yeah, I mean in the sense that the reason why private equity is a good asset class is because of active ownership. Active ownership is good and it's easier to triple a business worth a hundred billion if you're an LP and you need to allocate to something that's gonna generate you return. The suite of mid-market funds, there's some really, really great opportunities out there right now. 

SCS: 

And are you looking at particular verticals or are you looking at a wide swat? 

Joel Sandhu: 

Again, the thesis is really for us about being exposed to everywhere that private equity is active. For example, like industrials have had a bit of a rough run where it's always a bit of a rough run and you know, it's 'cause of the cyclicality of it.

But then the combination of tech now with industrials, I think is a super interesting opportunity. There's loads of automation happening that's actually, I think, gonna be an interesting space. 

SCS: 

You mean AI that you haven't mentioned at all and it's 2025? Kinda shocked by this, Joel. 

Joel Sandhu: 

Yeah, I know. Yeah and whenever someone says the word intelligence, I get nervous.

I mean, AI is actually something that people are rolling out into portfolio companies. It's probably just like a chat GPT wrapper or like co-pilot, right? I'm guessing, like, I don't know. I'm guessing.

But even, I'm saying even that's probably a massive productivity game. I read one statistic about sort of tech funds, right? They're gonna be able to generate 20% more margin just from AI, even in massive companies. That's actually a super interesting piece. 

It's not just about doubling or tripling revenue or opening your time or anything like that. You can just add productivity gains by putting AI there. That's interesting. I mean, it's productivity gains. People are also saying that it's not about firing people, it's about, you know, getting people to do more. 

SCS: 

We've covered a lot of ground, Joel, from private equity opportunities to what LPs and GPs are thinking about. I am now bringing you to billion dollar questions, rapid fire, which might be a bit of a challenge for you.

What makes a leader?

Joel Sandhu: 

Accountability? 

SCS: 

What did investing teach you about yourself? 

Joel Sandhu: 

That I'm dumber than I think I'm.

SCS: 

What did marriage teach you about yourself? 

Joel Sandhu: 

That I'm much dumber than I think I'm. 

SCS: 

I love it. I love it. Some consistency that you're displaying, which is good. 

Fill in the blank. Success is? 

Joel Sandhu: 

Contentment.

SCS: 

Not investment advice, but favorite investing hack or tip?

Joel Sandhu: 

Hire people who are smarter than you. 

SCS: 

Most used app on your phone right now. 

Joel Sandhu: 

Depressingly, I'm sure it's Outlook. 

SCS: 

What? Outlook. Okay. One thing that needs to change in venture. 

Joel Sandhu: 

Probably what you are doing, I think, underfunding of female founders.

SCS: 

Which leads me to the next question. What needs to change for more women-led unicorns to emerge? 

Joel Sandhu: 

It's really a funding issue and you know, that probably starts from increasing the opportunity set of women, like starting companies as well. Being encouraged to do it as well is an ecosystem play.

Going back to that point, I think. 

SCS: 

Favorite book and key takeaway from the book. 

Joel Sandhu: 

It’s Stoner by John Williams. 

SCS: 

Okay. What's the key takeaway there? 

Joel Sandhu: 

Even the most unremarkable life is remarkable. 

SCS: 

And last words, for fund managers tuning in on how to be successful on the global stage. Wise words from Joel Sander.

Joel Sandhu: 

It's a people business. I guess they say that. That's one of the cliches. You always gotta be fundraising if you're a fund manager, if you're a great investor. That's a massive part of it. 

So I think you have to be kind of constantly in people's minds, but really if you get great returns, you're not gonna have any trouble fundraising, so focus on doing what you're good at.

SCS: 

Well, focus on doing what you're good at. Joel Sandhu, thank you so much for your time and we're excited for the billion and dollar moves that you'll be continuing to make in your fund and Top Tier and beyond. 

Joel Sandhu: 

Thanks so much.