In this week’s episode of the Tipping Point Series, Joanna Drake, RAISE co-founder and Managing Director of Magnify. vc interviews Mike Green, Principal at Polar Venture Partners on his journey from operator to limited partner and his perspective on creating a competitive advantage as an investor.

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‍This interview has been edited for length and clarity.

Joanna: Today, we're delighted to shine a spotlight on Michael Green from Polar Venture Partners, an early-stage venture fund launched two years ago from Polar Asset Management, a Toronto-based multi-strategy alternative asset manager.

Since its inception, Mike has led the practice, backing enterprise software marketplace and fintech funds—many from the RAISE community itself. He has also been an enthusiastic and engaged participant at RAISE Summits, and this year we were delighted that he agreed to join our selection committee, particularly as we are continuously working to expand our perspectives and networks outside of Silicon Valley.

So Mike, let's start with a bit of background. For those in our community who might not yet be familiar with Polar Venture Partners, tell us about the firm. Who are you, what do you do, and why?

Mike: Joanna, thanks for having me. Polar’s partners have been investing their personal capital in ventures for the past 10 years, as a way to stay close to the community and emerging technologies and get an early look at what sorts of businesses might later play a role in the public markets.

About two years ago, we recognized that there was an opportunity to invest directly in companies. Our long history and extensive experience have allowed us to build a very good network, and we’ve found that this network can be leveraged particularly effectively with early-stage companies to help them get to what I would consider their ideal customer profile. Best-case scenario, maybe they get a customer, but in all scenarios, these connections help them to iterate on their company and idea more quickly. And that's a role that we wanted to play.

So with Polar Venture Partners, we put a pool of capital together and essentially went out to our community and said, “When there are interesting seed or series A opportunities, we'd like to meet the companies, get close to the founders and then participate with that pool of capital.”

Joanna: How many emerging fund managers have you backed to date? How many more do you anticipate backing in the next call in 12 months or so?

Mike: Since the start of 2021, we've done about seven investments. We’re particularly active today, with around 18 managers spread throughout Canada and the United States. We've reserved several slots to invest after the RAISE conference this year. The selection committee can be busy going through 45 decks in a short time. And based on what we've seen so far, we’re excited to add some more managers to that growing cohort.

Joanna: That's fantastic. We welcome LPs who attend with a checkbook in hand every year!

Mike, I'm always fascinated by an individual's career progression to becoming a limited partner. I would love you to tell us how you came to join Polar Venture Partners originally, and then more recently how you came to design and launch a fund of funds.

Mike: My journey with Polar started in 2015. As well as fund investments, the partners at Polar have invested directly in private companies. I joined in 2015 as an operator to one of those private businesses, a company that sold fresh item management software to grocery stores globally and is now known as Invafresh. We helped grocery stores figure out how much fresh produce to have on the shelves—from how many rotisserie chickens to bake in-store to loaves of bread, cut steaks, and so forth—and in the process gained deep operating experience in that line of business.

The co-CEO of that business was a Polar team member that had joined to lead the company, and I was chief of staff. In the six years that I was with the business, we had great success and grew exponentially from about $3 million in top-line when we joined to just over 40 when we exited in 2019.

Along the way, we realized that being affiliated with Polar helped the business. When we wanted to go and meet a certain executive, the Polar name opened a lot of doors for us.

So, when we exited that business, we asked ourselves, “How might we apply the same operational rigor, network, and experience that allowed us to succeed at Invafresh to some of the early-stage investments that our partners and other venture funds are making?”

That was our first thought. And we tested our thesis by talking to the partners that we'd been investors with for a decade-plus—all of whom resoundingly said, “Yeah, if you can help portfolio companies grow, that sounds like a great fit.”

Next, we did two things:

• We put together a pool of capital for direct investments, which was funded by partners of Polar and our GP’s balance sheet. 
• We also put together a pool of capital, again from our emerging managers, to invest and double down on that management strategy.
  

For us, we see it on two fronts: 

• We can successfully grow a venture business inside of Polar; and 
• The connectivity at a grassroots level to the venture community has proven to be so helpful for us as a business.
  

SPAC (Special Purpose Acquisition Company) is a huge part of our business, and there's been a pretty big convergence with venture capital over the past few years. We’re playing in the IPO and public markets and the ability for us to make connections between the two communities has proven valuable.

Joanna: Having gone through the entrepreneurial cycles yourself must make you that much more of a valued investor and backer when working with funds. What are the most important criteria to consider when evaluating whether to back an emerging manager in your portfolio?

Mike: For us, it's about finding managers that are passionate about what they're doing and have skin in the game. In many cases, they’ve left a lucrative or promising career to start a new chapter in a smaller venture fund, which as we all know can be challenging and high-risk. 

Our view is that if that individual had an opportunity cost in starting this business, then they're going to care about this a lot. We're aligned with them and the success of that business. The rewards of being successful are rarely immediate and often take a long time to build up, so having a long-term view is hugely important.

Other factors we look for include:

• Getting to know companies at their earliest stage - think, pre-seed and seed in particular. That’s number one. 
  

• Knowing that the manager has experience in the proposed pond and has successfully fished in it. We want to know that they have connections in that network, either as an operator or a venture investor, because that’s a real reason why founders would want to partner with them in particular. 
  

• Gearing towards areas we spend time in—enterprise software, marketplaces, and fintech, and a bit on the consumer side.
  
• Having a good alignment of values and culture. We have our own initiatives and goals that we'd like to achieve with this business, and we expect that any manager we partner with is going to help us with that. 
  

Joanna: Where does geographic specialization fit into this?

Mike: Geographically, we tend to focus on Canada and the United States. We’re starting to spend more time on non-coastal VCs to find businesses and founders that may have been overlooked because they don’t have the attention and hype that you’d see in SF, LA, or NY, but might even be working harder to raise capital and get noticed.

Joanna: How do you feel about emerging fund managers that don't have a proven track record yet? What advice would you give to managers who can't substantiate this in their first meeting with you?

Mike: For me, presenting track record details right out of the gate is important. However, it also comes down to approach and what the ask is.

If it’s a $10 million fund writing supporting checks in a niche space with reputable investors, I think you're going to be a lot more comfortable investing in someone with no track record than you would if it was a $50 million fund aiming to write lead checks and lead term sheet.

Whatever their track record is, there’s value in the manager talking through what they’ve done, whether focusing on the wins or also talking through losses and deals that perhaps they could or would have done differently.

With niche strategies, I think it's important that the manager shares the ideas they have and why they think they’re compelling. How do they justify their decision-making? That goes some way toward building trust and confidence even if they don’t have experience in the area.  So, it's circumstantial.

Joanna: And just to test, how many first-time fund managers have you backed to date?
Mike: Well, that is a hot-button question. As of today, there's one in particular in our portfolio. Events like the RAISE conference and other operator programs are great for introducing us to first-time managers with big ideas. It’s a newer phenomenon that we’re seeing, but we're open to it.

Joanna: Let's talk a bit about the process and due diligence over the years.

As I've interviewed all the LPs coming through Raise,  it seems to me that there usually ends up being somewhere between four and eight meetings before a GP and experienced LP will decide to back an emerging fund manager who’s newly introduced to their portfolio.

Tell us about your process and what our community members can expect when they engage with you.

Mike: For us, it's all about spending real time with the manager. Before any investment is made, six to eight meetings or touchpoints have usually happened, but we don’t think about it in that type of structure.

Instead, we try to establish the following right away: 

• What we're both trying to achieve. We want to be able to understand their business, and we want them to understand ours. 
• Finding a deal to talk about. What we always say to them is, “Let's mutually take that back and find a deal to talk about. Let's have more conversations with some follow-up thoughts that we've had from this discussion.”
  

Beyond this, if we haven't met one of the partners in the GP partnership, we'd love to spend time with them. We also look to bring in multiple stakeholders from our organization to meet the GPs and talk through our business.

Once that happens, it becomes clear on both sides that there’s mutual understanding, trust, and, most importantly, excitement about working together. Sometimes this can be established in less time because there’s a close reference and network connections, but those three criteria need to be fulfilled before we make an initial decision.

Joanna: What advice would you give to a first-time fund manager pitching you, whether live or via the LP portal? We’d love to hear what you’re looking for out of the gate.

Mike: I think it's important for the GP to think long and hard about why they're doing what they're doing.

By the end of your interaction with them, you need to make a case for why they'd be crazy not to invest with you. 

• Ask yourself what makes your opportunity so compelling versus the thousands of other venture investments that could be made.
  
• Sell them on your partnership by speaking to why they want to work with you and what other value and insight they will get out of that investment that perhaps they won't get with others. 

At Polar, one of the things that we value most about emerging manager investing is the interaction between the GP and the decision-maker. So many don’t take advantage of this, but you can just pick up the phone and say, “Hey, what do you think of this deal?” Or, “What are you looking at?  You guys just invested in X company, that's fascinating.”

Above and beyond anything else, GPs should make sure that they capitalize on their strengths as much as possible.

Joanna: From your perspective, what do you see too much of, and what would you like to see more of? I’m curious.

Mike: It's a tricky question. On the generalist side,  we're seeing a lot of funds talking about founder relationships. While that is a key component in venture investing, funds need to go a layer deeper. It's important to be founder-friendly, it's important to have great founder advisors, and it's important to see great deals through a founder network. 

One of the areas we do not see enough of are funds that talk about what could be helpful for a specific company in a particular industry. That's something we’d like to see a lot more of.

Joanna: That's where your background in grocery supply chain software comes in handy!

Funny enough, we had an exciting conversation among our selection committee members today.  The quality of the GPs in our pool this year is remarkably high, but one area that they’re weaker on is in demonstrating competitive advantage. 

Can you share your perspective on competitive advantage with us? And if you have a conceptual example of a fund you've worked with that has a real edge in that area, what might it be?

Mike: It’s an interesting question.

When we think about competitive advantage, we often overcomplicate it. Frankly, it boils down to why you're winning allocation in a deal. 

If you're talking to prospective investors, I think you want to point to what you did for the company, how it was helpful, what deals it led to, and what outcomes it enabled. Examples like that are so beneficial in building conviction around a manager and clarifying why we would want to invest.

To give an example, here’s a case study of a GP that we've been investors with for quite a while. 

Here's how he’s done it:

• He has a very clear network from two things: 1) his alma mater, where he went to school, and 2) where he used to work.
  
• He’s established a competitive advantage by fishing in that pond, finding great companies from those two areas, and taking the time with the founder to be that person on their cap table to understand the business model.
  
• I've observed in multiple companies that the best managers dig through different ways of thinking about margin, product positioning, capital raising, and go-to-market strategy with the founder themselves. 
  

For early-stage founders specifically, having that amount of targeted time, attention, and support with managers is invaluable. In addition, being recommended to peers within the startup ecosystem as someone you should bring on your cap table for a pre-seed or seed deal is a natural consequence.

Joanna: Let's switch gears. I have one more question for you. When you think about your due diligence efforts, how important are co-investors? I want to take that question in two directions: 

• The co-investors that the GPs tend to be collaborating with as part of their direct investments. 
• The co-investors that are joining the LP syndicate.
  

Mike: Again, an excellent question. Starting with the co-investors in actual deals, that’s super contextual.

It’s one thing to talk about co-investors that have invested with you and put logos on a slide. Still, it’s an entirely different thing to be able to signal and show that in specific deals, well-established venture funds followed suit shortly after you got involved. If that’s true, I think you need to highlight it. The same is true if established fund managers and funds call you to participate in deals that might be too early or too small for them to enter into. 

These relationships are vital because they show the thought leadership that the GP has. 

Within the LP syndicate, we have a network within this community that we collaborate with frequently, and we value the co-investors that are already there. If we’ve had success in collaboration with an investor who’s also investing in a new fund, then it's something we take a deeper look at. Venture capital is a team sport, and I don’t think it’s any different on the investor side when investing directly in companies.

Joanna: Terrific. For those that are wanting to get to know you, I want to give a little tip-off that you will be co-hosting our in-person gathering on October 19th in New York with some of your colleagues. I’m hoping that this will give you the chance to network with emerging fund managers from the RAISE community that you may not have met yet, as well as connecting with co-investors from an LP perspective.

Thank you in advance for co-hosting and I hope that will be a wonderful gathering. In the meantime, thank you for sitting in the spotlight today and for joining us and backing so many great emerging fund managers coming out of the RAISE community. We value your partnership.

Interested in meeting the next generation of venture capitalists? Request a Limited Partner invitation to attend the RAISE Global Summit on October 19 & 20.

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Disclaimer:

The Tipping Point Series (“Tipping Point”) is a collection of interviews with fund managers who (a) have previously raised a venture capital fund and (b) are providing advice and insights into the formation and management of venture capital funds (the “Presentations”).  Tipping Point is not an offer to sell or a solicitation of an offer to buy any security issued by any venture capital fund, including without limitation, any venture capital fund managed by Tipping Point’s speakers, presenters, or producers. 

The Presentations do not (a) provide investment advice with respect to any security or (b) make any claim as to the past, current, or future performance of any security or venture capital fund, and Tipping Point expressly disclaims the use of the Presentations for such purposes.  The Presentations are not intended to constitute legal, tax, accounting, or other advice or an investment recommendation. Prospective fund managers should consult their own advisors about such matters with regard to their venture capital funds.  Raising a venture capital fund involves significant risk of loss of income and capital, including loss of the full amount raised and invested, which may occur as a result of identified or unidentified risks.

Tipping Point is produced by Raise Conferences, LLC (“Raise”).  Raise is a private invite-only venture capital conference, which provides a forum for venture capital funds to network with and present to potential venture capital investors.  Although Raise produces Tipping Point, the Presentations are independent of Raise’s conference and do not provide any forum for the Tipping Point speakers, presenters, or producers to solicit the sale of any securities. 

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