About two-and-a-half years ago, Conrad Shang made a career decision that is not common among venture capitalists.
He left his role as an investor at Norwest Venture Partners, a Palo Alto firm where his key investments included Casper and Udemy, and moved to Austin to lead the venture program at one of the largest endowments in the country, the University of Texas Investment Management Company.
Shang, 36, says that he did not think about joining an LP until he heard about the opening at UTIMCO.
“What piqued my interest is that I went to University of Texas at Austin on a full merit scholarship and I was a beneficiary of the endowment a long time ago,” he says. “This was an opportunity to give back to my alma mater. I would not have considered a job at any other LP.”
In fact, many of Shang’s career decisions have links to his days as a Longhorn undergraduate.
While studying at UT, Shang and two fellow business major students started an online textbook and goods auction company that they bootstrapped with the money earned during the summer.
This was right after the dot-com bubble, when hosting a website was expensive and years before backing start-ups run by college students became a thing for investors, Shang explains. The website was operational for several semesters before the three friends burned through all the cash and had to shut down the business.
“The whole thing was very uneventful for everyone other than us,” says Shang, who was one of 40 people in the venture community featured on Venture Capital Journal‘s list of Rising Stars earlier this year. “We learned a lot and all three of us ended up in tech.”
His schoolmate Philip Krim went on to become the co-founder and CEO of Casper and Aron Susman is the VP of finance and one of the first employees at Ro, a rapidly growing healthtech company.
After graduating, Shang took a role as a management consultant with Bain, where he enjoyed working on projects for tech companies the most, he says. That’s where he realized that while he liked the operational side of technology, he was even more drawn to the idea of becoming an investor, which led him to join Bain Capital Ventures in Boston; a couple of years later he joined Norwest in the San Francisco Bay Area.
In late 2013, soon after Shang started with Norwest, Krim was looking to raise a seed round for Casper, a New York startup that sells mattresses directly to consumers.
“Philip is a good friend of mine and I didn’t want it to cloud my judgment,” Shang says. This was before the advent of D2C, when the only well-known company in the category was Warby Parker.
The economics of Casper’s business model seemed attractive, but what ultimately convinced Shang was Krim’s ability to attract high-quality people to join his company. Shang was especially impressed when Krim persuaded Jeff Chapin to leave his well-paying job as a designer at IDEO and join Casper as head of product before a single dollar of funding was raised.
At Norwest, Casper was also one of the first seed-stage investments the firm backed. “This created a precedent for doing more seed rounds,” Shang says. (After lowering its share price, Casper launched its IPO in early February at a valuation of less than $600 million, well below the $1.1 billion it garnered in its last private funding round in early 2019.)
Shang spent over four years with Norwest, focusing on consumer, marketplaces and fintech early-stage and mid-stage companies. He was actively involved with about half a dozen companies that besides Casper included a Series C round into Udemy, an online education platform.
UTIMCO’s co-investment push
When a headhunter contacted Shang about the opportunity at UTIMCO, there were other things about the role – besides growing funding for University of Texas’ and Texas A&M’s educational programs, research and scholarships – that Shang found attractive.
“One of the things that played into my decision to go from Norwest to UTIMCO was to do direct investments,” Shang says. The endowment’s $2.4 billion venture portfolio has been increasingly focusing on co-investments, an area where Shang’s experience as a VC was uniquely valuable.
Shang explains that UTIMCO’s co-investments are aimed at later-stage companies that are looking to scale. “It is particularly difficult to do co-investments in venture. We have to know in advance what opportunities are there, be proactive and meet with the company directly.”
There is a broad mandate to co-invest across sectors and industries. “Our managers are invested in many consumer companies, but I try to be very cognizant about not spending all my time on the area that I know best,” Shang says.
Shang, a native Texan, was also drawn to the opportunity to move back to Austin. He is a big fan of the city and its dynamic, entrenched tech scene. “I see lots of high-quality, senior people moving to Austin to start companies,” he says. “I think it is a sustainable ecosystem that can withstand an economic shock.”
The LP view of venture
After more than two years at UTIMCO, Shang says there are some key differences between how VCs and LPs approach investments.A GP looks at each opportunity individually, and the decision to invest is not predicated on what other companies were backed in the past, but an LP takes a portfolio approach, he says.
“I am always thinking about diversification: geography, theme, stage,” Shang says. “100 percent of our VC portfolio won’t be focused on a particular area. But a lot of newer programs may have the entire portfolio invested in emerging managers because it is easier to access those funds.”
Shang says that UTIMCO’s venture allocation is expected to grow, but he declines to discuss specifics.
“What I tell new managers when we meet is that our portfolio has been very successful,” Shang says. “We are not looking to rebuild it and is hard to say how many managers we will add. But we are adding managers, otherwise we would not be in this meeting.”
Shang is optimistic about the VC asset class. “I see a ton of companies with healthy unit economics and fast growth,” he says, but adds that the competitive nature of many opportunities means some investors, most notably SoftBank, are rushing through the diligence process and making bets on investments they don’t fully understand.
As for Shang’s plans while at UTIMCO, he replies that he tries not to think too rigidly about career trajectories. “I want to work with a very high-quality group of people and do meaningful work,” he says. Managing a giant VC portfolio on behalf of a large public university system certainly fits that criteria.