Founding Managing Partner, Plexo Capital

Ep #6: Lo Toney

In episode six, we stop in San Francisco. Dhani Jones speaks with Lo Toney, Founding Managing Partner of Plexo Capital. Lo discusses his career from GM of Zynga Poker to CEO of LearnStreet onto GV, where Plexo Capital was born.

Plexo Capital logo
Industry:
Venture Capital
Advisor:
Lo Toney
I think the key thing that we try to instil into our team are around how we want to approach our participation within the ecosystem. And I think first and foremost we're focused on delivering alpha to generate the best returns possible with our market. And then there's this residual that comes out of our model, which is helping kickstart the flywheel of diversity within the ecosystem.
Lo Toney, Founding Managing Partner, Plexo Capital

Lo Toney's experience

Lo Toney

Modern Dealmaker & VC Founder

Lo Toney is the Founding Managing Partner of Plexo Capital, which is an institutional investment firm he incubated and spun out from GV (Google Ventures). Plexo Capital invests in emerging seed-stage VCs led by diverse teams and invests directly into companies sourced from the portfolios of VCs where Plexo Capital has an investment.

  • Advisor & Partner, Google Ventures (GV)
  • Mentor, MuckerLab
  • Partner - CatalystFund, Comcast Ventures
  • CEO, LearnStreet
  • Studio GM, Zynga
  • Advisory Board Member, Mpire/AdXpose
  • VP Product and Marketing, Cake Financial
  • Vice President Marketplace Operations, art.com
  • Director and GM - Collectibles Business Unit, Ebay
  • M.B.A. from University of California - Berkeley, B.S. from Hampton University

Episode highlights

How the game of Poker led to a great opportunity

 

PODCAST TRANSCRIPT:

Lo Toney (00:05):
I was fortunate to be able to get the Comcast Ventures and then from there I was recruited over to Google Ventures now rebranded as GV. And then a funny thing happened at GV. Larry and Sergey were pushing us back in 2015, 2016 to deploy more capital. At that time GV was about $2 billion in assets under management. GV is the early stage investing unit for Alphabet, Google's holding company.

Dhani Jones (00:32):
The Pathfinder podcast is presented to you by Ansarada. Ansarada is the modern deal and virtual data room technology designed to make M&A, capital raising, divestments, restructures in IPOs as simple as possible. Since 2005 Ansarada has been trusted in over 24,000 transactions and powered over $1 trillion worth of deals.

Dhani Jones (00:50):
Ansarada is a secure space that includes workflow tools, AI power data rooms, built in question and answer and integration frameworks. It's the data room trusted by modern deal makers. You can start for free today at ansarada.com. You know I like a winning team. So say it with me, ansarada.com for your next winning outcome.

Intro (01:14):
Welcome to the Pathfinders, the modern deal maker series brought to you by Ansarada. Now here's your host Dhani Jones.

Dhani Jones (01:25):
Welcome back, everybody, to the Pathfinders presented by Ansarada. I'm your host former NFL player, investor, and entrepreneur Dhani Jones. Today I'm speaking with Lo Toney, the founding managing partner at Plexo Capital, an institutional investment firm he incubated and spun out of Google Ventures. Plexo Capital invests in emerging C stage VCs led by diverse teams that invest directly into companies sourced from the portfolios of VCs where Plexo Capital has an investment.

Dhani Jones (01:50):
Lo is here today to discuss a bit about his career, challenges he's overcome and how he and Plexo Capital are trying to change the VC landscape. Did I get everything correct Lo? Did I round it out? Did I basically surmise all the great things you've done in your life right now? Is that what I did?

Lo Toney (02:17):
Absolutely, nailed it. If this whole, the NFL thing is over, but if this aspect of your life doesn't work out, I mean, this goes straight to Hollywood or to radio. You got a radio voice.

Dhani Jones (02:28):
No, I have a face for radio. That's what they said. I have a face for radio, but I'm on the East Coast. You're sitting there in Hollywood yourself. So I think that you need to just go to Hollywood, which is right around the corner from your house-

Lo Toney (02:40):
There you go.

Dhani Jones (02:41):
... and do those types of things. But look, I want to get into Plexo Capital in a second, but for all those that are listening with the Pathfinders, it's really about trailblazers, people that are just doing things that are out of the box and laying the groundwork with so many people to follow behind them. And you've done an amazing job by not only just blazing the trail, but you just have widened the path for so many people. And I think it's important for people to understand where all of that comes from. And so let's just go back to your time as a professional poker player at Zynga and talk a little bit more about your experience there. And are you actually a poker player?

Lo Toney (03:20):
Okay. Here is the greatest thing about that period of my life at Zynga. I was brought in and ran this game that was really more of a simulation game called YoVille. And at one point they decided to do a reshuffling and the person that was running poker went over to run FarmVille, which was the flagship game at the time. And I was asked to come in and run poker.

Lo Toney (03:44):
And so I'll never forget, I sat down, it was Steve Chung and he said, so we're doing a little shuffle and we are going to switch you over and you're going to run poker and you know how to play poker, right? Come on now, who doesn't know how to play poker? Of course, I know how to play poker. Of course, man, I had to go and I immediately left and went and bought poker for dummies, got on the Zynga Poker. My friends were like, man, we'll get you straight. We'll get you straight.

Lo Toney (04:09):
And so I literally had to learn the game of poker. Now here's the best part. There's a poker tournament that happened once a quarter and the person that runs poker for Zynga always hosted. So I to host now. Then there I was like, oh, I can't get exposed. Man, I made it all the way to the last table and I was one of the last four players and I had never played poker in my life.

Dhani Jones (04:29):
Hey, fake until you make it. That tried and true it'll work every single time. But I don't understand why so many people, and this is a question for you, why are so many people afraid to sort of say yes in those moments, right? It's like, oh, you could be the best race car driver in the world if you just jump into the car, I don't know how to drive a car.

Dhani Jones (04:47):
Oh, you could be the best. You can run this whole segment if you know how to play poker, I don't know how to play poker. So many people turn off this notion of I can't do that. I'm not going to try that. I don't know. I feel like some communities in some cultures are a little bit more reticent to say no than others.

Lo Toney (05:05):
100%. Look, this I think also opens up a conversation that we can have about people of color. I think Black people in particular and this notion of imposter syndrome whereas if we think about some of the cultures I think mainly White males in particular, young White males, they're pounding their chest, hey, of course I play poker and it's the same thing. It's just the ability to have that confidence and I think that's something that I have seen across the board for a lot of women and people of color is it seems like I don't know the data, but I suspect there's a higher instance of imposter syndrome within communities of color and on the gender side with females.

Lo Toney (05:48):
Whereas we don't see that with other communities. And look, this is part of the ability, the whole notion of fake it till you make it sometimes can be a charged term. But I think if we go to the core what that really means is the ability to kind of have that confidence. Hey, I know that I'm going to be able to succeed. I know that I'm going to be able to achieve, I just need to be given the opportunity and then I'll do whatever it takes to make it happen.

Dhani Jones (06:14):
I love that. Because if I step onto a tennis court I don't care who it is. Rough in the doubt, I got you. I'm going after you. I'm going to attack your backend, your frontend. I'm going to give you the pro shot. It doesn't matter. You know what I mean?

Lo Toney (06:24):
Right. That's like the Bo Jackson commercial. Bo knows everything.

Dhani Jones (06:28):
Bo knows everything. And I didn't realize that fake it till you make it, I had never thought it had any negative implications, negative connotations.

Lo Toney (06:36):
For some folks it does, not for me. I think it's about confidence and look, the ability to kind of say, hey, you know what, just give me the opportunity because... Put me in coach, put me in.

Dhani Jones (06:46):
Right. And I think that if you have... This is where I've come from. I always believed in this notion of curiosity and if you are always willing to ask the questions then at least if you ask the right questions you'll get to the point where you actually do know what you're doing. But I think a lot of people kind of bump up against this wall of impossibility and they stare it down and they say, you know what, there's no way in the world I can get in around and over this. And if you just say, you know what, what actually is 52? What do those 52 cards do?

Dhani Jones (07:20):
You can ask the question and feel okay with that. What do the hearts mean? And what do the diamonds mean? And what's exactly a full house. And is a straight more than a full house or straight full house? I mean, asking those questions I think gives you a little bit more confidence, but I think people are sometimes are afraid to do that. But you're not afraid to ask those questions and that presented itself in your opportunity. And then you were able to grow Zynga was it 150%?

Lo Toney (07:46):
Yeah. I grew it from, it was $150 million when I took it over and when I ended a little over a year later we grew it to a quarter of a billion. So it was the highest booking unit within Zynga when I left it.

Dhani Jones (08:02):
So as soon as you left it what was the first thing you thought to yourself? Was it if I would've said no, I don't know where I would've been or did you say to yourself, you know what, I can do anything. What did you think to yourself in that one moment?

Lo Toney (08:16):
Yeah. So there were two things that happened in that journey and it was a great journey at Zynga for my career. The first was saying yes to taking over poker. And the second was making a decision to shift the strategy towards mobile and now have to take ourselves all the way back to 2010, 2011 when mobile still hadn't caught on, but it was very, very clear based on the data that that was the direction that everything was going.

Lo Toney (08:43):
At Zynga in particular there had been a rough road with trying to convert FarmVille over to mobile and it was primarily because of the user experience and the fact that it was thought at the time was, hey, let's take this big screen experience of FarmVille and try to replicate that on mobile, the same big screen experience, which the user experience on mobile didn't really provide the right platform to be able to accomplish that from a user experience perspective.

Lo Toney (09:10):
Now, with poker there really wasn't a lot going on. So poker in my opinion, it lent itself to the ability to kind of just transfer without having to do any real tweaks. It was just tiny modifications to the UI. And so I made a bet and at the time the senior leadership was skeptical that we were going to be able to achieve growth by shifting all the resource and focusing on mobile for poker and nothing else, basically a new UI and connecting the back end so people on desktop could play with people on mobile.

Lo Toney (09:43):
But I was willing to take that bet even with the threat of being removed from that position if it didn't work and what it did lead to was, again, growth from $150 million a year to a quarter of a billion a year. And that was primarily driven by mobile. And I like to say, it's not like I was a rocket scientist.

Lo Toney (09:59):
I just looked at the data, I saw the direction mobile was going, I looked at what happened with FarmVille and realized it was really more of a flaw with the user experience and it was confident that we were going to be able to have our resources and drive revenue growth, which we did based on the team's hard work.

Dhani Jones (10:15):
So I wasn't going to ask this, but you just kept saying it. You believed in the data. You took a chance, and you believed in the data, and it reaped amazing rewards for you. And a lot of times kind of just going back to the beginning of our conversation, you put yourself out there then you believed in something that a lot of people didn't believe in, and then you were like, I don't even care.

Dhani Jones (10:41):
How do you cross that threshold? How do you get people to cross the threshold where, you know what, I'm just going to leave it all out there. I'm just betting on myself. What gave you the confidence to bet on yourself? Not just in one instant, I'm talking about even 10 layers up you just pulled the staircase out from underneath you and you said, I'm going to hold onto this rope because I know that there's a golden staircase that's going to replace that one.

Lo Toney (11:03):
Yeah. Look, in hindsight looking in the rear view mirror is pretty obvious. When we think about where we were at that point, we look at the growth kind of the final breakthrough of the iPhone to be able to provide that platform with the developer community and folks focus on building for iPhone, the ability, the ease that the iPhone presented, all of it just seems so easy now.

Lo Toney (11:24):
So the only thing that I really had to go on was just looking at the growth of mobile devices, the usage and kind of just looking at things and just saying, well, if this is happening within mobile, if this is the direction that everyone is moving away from desktops, laptops, and towards mobile devices, the increasing power, the simplicity of poker really wasn't an enormous bet in terms of what we had to do to the user experience. So the thing that I really focused in on was just making the case based on all of the numbers and showing the direction that things were going.

Lo Toney (11:57):
I had this great chart that was just kind of showing that the acceleration of the existing experience that we had on mobile was growing much faster than the desktop. And then if you layer on top of that, just the growth in mobile devices in general, you could easily extrapolate out, but it was really tough because internally, again, seeing the challenges that the FarmVille game played out, that was a little tough. So no one wanted to take that risk in any of the other studios.

Lo Toney (12:26):
But again, I had an easier time because I didn't have to worry about creating a new user experience. I could take that existing experienced. But to your point, yes, I mean, at least I had the data to fall back on. That was my ability to say I have high conviction because the data is telling us this is the direction that it's going. Now, we can question whether or not poker was the right game. I felt it was the right game that proved out, but it was hard to argue with the data around mobile usage and the direction that it was going.

Dhani Jones (13:00):
Well, just imagine all these things that we've lived through in our lifetime that have been ultimately game changers, no pun intended, that have just fundamentally shifted the way that we think, the way that we operate, the way that we do things. But then in 2013 you became a CEO of a company called LearnStreet. What was LearnStreet's mission at that time? And you had stepped away from Zynga now into this role.

Lo Toney (13:24):
Yeah. So the goal of LearnStreet was to be able to provide content for people to learn how to code. It was very simple. And at that time, again, we have to kind of take ourselves back to what was happening, there was this shift that was occurring where it was clear that going to a four-year college was not going to be for everyone. We could kind of see the beginnings of a trend towards people identifying the future and the ability to be able to have a place within the future depended on some level of understanding of technology.

Lo Toney (13:58):
And in particular we saw that there were a lot of people that had been able to teach themselves how to code. I experienced this firsthand at Zynga. A lot of the devs that were on our team they had either dropped out of college or they didn't study computer science. They kind of taught it to themselves and so the thought was look, there's going to be a path in there.

Lo Toney (14:19):
And we also started to see the rise of these kind of brick and mortar institutions that were focused on these trade schools almost that were teaching people how to code. And so the next logical step in our mind was, well, people could probably have a focused course online that could allow them to pick up these skills, better themselves, especially for those folks that either had already completed a college degree and didn't learn computer science or those individuals that maybe wanted to seek out a different path.

Lo Toney (14:48):
And so I was a hired in CEO based off of a referral by Shellye Archambeau, who is the former CEO of multiple companies and is on multiple boards including Verizon, Nordstrom. And she gave me the referral into the Nord Khosla over at Khosla Ventures and that's how it all came together. Great experience. We didn't have an enormous outcome. We found a home for it, but definitely learned a lot about managing, leading as a CEO of a venture back company.

Dhani Jones (15:22):
And then you take these two combined events of both your experiences, Zynga and then also at LearnStreet. And a lot of times people would continue to be that operations leader and a lot of times they'd stay at the business. They'd flip the script to another company, go grow that one, but you kind of took a different path. You ended up sort of making your way down a new sort of venture for yourself. Tell us a little bit about that because I foresee that there's a risk profile that you have that's a lot different than other people and it's a willingness to bet on yourself.

Lo Toney (16:00):
Yeah. Look, and this continues to resurface, this bet on yourself notion. I actually use that term a lot myself. After I left LearnStreet I was fortunate enough to get a role in venture capital Comcast Ventures. And look, here's the thing, when I was in grad school at Cal I knew that I wanted to be in finance around technology. And initially it was thinking I was going to go into investment banking. And at that time I'm old enough to have the gray hair to prove it.

Lo Toney (16:28):
It really was more the domain of what was called the four horseman. It was Hamburg and Quest, Alex Brown, Tom Wiesel, the folks that were not the main street names that we hear now taking companies public and doing the big M&A transactions like the Morgan Stanleys, the Goldman Sachs, the JP Morgans. And when I got to grad school I was fortunate to go to Cal, proximity matters. A lot of venture capitalists came, in talked to the class.

Lo Toney (16:54):
A lot of CEOs of tech companies came in and I discovered this thing called venture capital and I thought it was much more interesting to be on the front end of the process of a company's inception as opposed to the back end, taking a company public or some type of liquidity event. And when I started to probe and talk to all the folks that came in being the eager beaver that I was, I kind of surmise there's really this operator path that seems to make sense for early stage.

Lo Toney (17:22):
And then there's this more financial profile that seems to make sense at the later stage. I gravitated towards the earlier stage because I thought that was most interesting. And when I started to talk with the people they basically laid out what I kind of put together as my path. It was learn product management because in essence the playbook for product management is very similar to the playbook for early stage venture capital. Thinking about a market opportunity or a problem, who has that problem, what's their profile? How many of those people are there to show how big the market is?

Lo Toney (17:54):
How fast is it growing? Who are the competitors? What are the existing solutions people use? What does distribution look like? What does monetization look like? What should the technology look like? All those things that a product manager thinks about are pretty much the exact framework that at an early stage investor looks at in evaluating a company.

Lo Toney (18:12):
So I went to be a product manager. And then the next thing that people said is important is, oh, hey, it's kind of nice to be a CEO and I was like, well, how do I become a CEO? Well, try to identify a place where one can gain experience managing a large P&L. And so that's where Zynga came into play, managing Zynga Poker.

Lo Toney (18:32):
The product piece came in earlier in my career at eBay and then the final piece was LearnStreet as CEO because the feedback that I also got was look, if one has experience as a startup CEO of a venture back company that changes the dynamic sitting across from an entrepreneur because that entrepreneur will know this person has been in my shoes and there'll be this sense of empathy.

Lo Toney (18:53):
And it probably will lead to a deeper conversation or maybe even a deeper relationship. So that was the way that I set out my path, product management, run a big P&L and then become a CEO of a venture back startup. And so then those were all the steps that I put in place to be able to get to the point where I am today. And I was fortunate to be able to get the Comcast Ventures. And then from there I was recruited over to Google Ventures now rebranded as GV. And then a funny thing happened at GV.

Lo Toney (19:27):
Larry and Sergey were pushing us back in 2015, 2016 to deploy more capital. At that time GV was about $2 billion in assets under management. GV is the early stage investing unit for Alphabet Google's holding company. And we had this thesis around Black general partners and their ability through their kind of indirect path into venture to have access to networks to provide differentiated deal flow. And so at GV we made five LP commitments to seed stage funds led by Black GPs.

Lo Toney (19:56):
It worked for us. I looked at it and said, hey, I think there's a model that could be created using a similar strategy and I got the thumbs up to go for it if I wanted to. And just goes back to your point on bet on myself. Now I could have said, well, being a partner at GV is not a bad life. It's kind of Uncle Larry, Uncle Sergey at the time would give us a billion dollars. We didn't really have to go fundraise, didn't have to worry about reporting, didn't have to worry about any of that stuff.

Lo Toney (20:22):
Just had to focus on finding the best entrepreneurs working on game changing technologies and back them, invest in them, support them, and help them grow their businesses. But I decided to make a bet on myself and I used that term. I bet on myself and I said, I think I could lead this to a place that could really make a difference, be different and do something really special. So I decided to make a bet on myself. There was no turning back. If I was going to do it, I had to go all in and I went all in and that's what led me to where I am here today.

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Dhani Jones (21:45):
I know a lot of people talk about they want to invest in minority leaders, they want to invest in minority founders, and they want to invest in minority operators kind of across the board. And I think if I'm going back to the moment where you kind of started it, it was pre-2020.

Lo Toney (22:19):
That's right.

Dhani Jones (22:20):
Right. It was pre-2019.

Lo Toney (22:22):
Correct.

Dhani Jones (22:22):
I remember talking to you about it 2018.

Lo Toney (22:27):
Yeah. That's right. So long ago.

Dhani Jones (22:28):
Seems like a long time ago where it may not have been sort of race consciousness around an opportunity to diversify the landscape of those that we invest in. So how did Larry and Sergey and how did you sit in this middle of this conversation with the two of them obviously some of the greatest entrepreneurs of our time, and have this discussion way beyond way, way before or maybe in a sense right in the middle of when people started sort of peaking an interest?

Lo Toney (22:59):
It was actually before. It was significantly before because we actually had this hypothesis around getting differentiated deal flow back in 2015 based on our observation of Black general partners leading seed stage venture funds and precede. And then we made LP commitments to initially cross culture ventures, which ultimately became Mac that's Marlin. And then the second one that we did was next play capital that that's Ryan Nyse, your former I guess across the line.

Lo Toney (23:29):
And then we did precursor, that's Charles, we did base that's Eric, and then we finally rounded it out with Hulu, that's Miriam. And so in February of 2016 I was with a group of people organized by David Drummond who said, hey, let's see if we can think about ways to increase diversity within the venture ecosystem. And I said, well, hey we're doing this thing at GV and we're investing as a limited partner into these seed stage funds led by Black GPs. I was like, look, the goal for us is to identify deal flow.

Lo Toney (24:03):
But the value proposition that we provide to the general partners is positive signal so when those GPs go out to raise from a prospective LP they can say, oh, hey, prospective LP. By the way we have GV as an LP that would make a prospective LP sit up and pay attention kind of, oh, wow, well, shoot it. GV that's "smart money," which they are smart, but you understand what I'm saying. It's not like we're any smarter than the GPs that we back, it's just that GV was in a different position of prominence.

Lo Toney (24:35):
And so we felt that if we could provide that positive signal for our general partners that we committed to then that would help in their fundraising efforts. And so I think there was something about that that struck me as, wow, this is actually having a positive benefit as well to GPs. And so February of 2016 I said, hey, I think there's something here and I'd like to explore it. I did for six months and then around Thanksgiving of 2016 I decided to go for it.

Lo Toney (25:04):
So I switched over from a partner to an entrepreneur in residence and Plexo Capital was the company that I worked on. And so, yes, this was well before the unfortunate killings of George Floyd, Brianna Taylor, and look, there were many others before them and there's been many others since then, but you're right. That point was the change in the consciousness. So when I was setting out to build Plexo Capital I didn't have the ability to kind of leverage that consciousness that exists today.

Lo Toney (25:33):
So what I did is I focused on the same thing that we focused on at GV, which was we saw the ability to generate superior returns and drive some alpha based on the identification of these companies by these Black GPs because of their access to different networks to get to differentiated deal flow. In addition to their different lens to evaluate both market opportunities that others just might not understand because there is an absence of an abundance of data to be able to prove that these models are working and a different lens to evaluate entrepreneurs.

Lo Toney (26:04):
I always like to say, every entrepreneur does not need to look like a Mark Zuckerberg. And so that was my insight and that was what I had to sell to investors. Fortunately I had the backing of Alphabet, Google's holding company, which was the first domino to tip. And then that led to Intel Capital, Cisco Investments, the Royal Bank of Canada, Hampton University, where I went to school, and then also the Ford Foundation for fund one. Since then, we've added the Home Depot, Hearst, we've added Southern New Hampshire University.

Lo Toney (26:34):
So I think that I'm happy that today it's possible for an investor to say look, I want to have a fund that focuses on investing into underrepresented communities, that I want to invest into companies led by Black and Brown founders, but that wasn't the case when I started.

Lo Toney (26:55):
So I focused in on the financial opportunity to be able to drive returns as well as for those limited partners that we have that also invest downstream the ability to identify companies that might be of interest for them to invest at the Series A, Series B, et cetera. So that was really the focus. I had to really think about it differently than folks think about it today. We were definitely breaking new ground at that point.

Dhani Jones (27:23):
So you're saying it was easy.

Lo Toney (27:26):
Exactly. Come on, man. All easy. Just happens.

Dhani Jones (27:29):
Come on, man. Look, I know it couldn't have been easy. Right. It's always been said sometimes when you're early and you're right, you're still wrong, right? And so sometimes that can be a slam door in your face because now you're out from underneath the massive protection of Google Ventures and Sergey and Larry and now you're out on your own.

Dhani Jones (27:58):
And I'd imagine at that time and mind you when I think about before, minority business in and of itself has evolved so much since the late '70s and it went through its own evolution. And then as we kind of start thinking about technology, it had its own consequential evolution and where I feel right in the middle of it.

Dhani Jones (28:23):
And so sometimes it 10 takes a while even if you have strength behind you in order to kind of generate as much energy. And I'll bring it back to that bet on yourself. How many times did people slam the door in your face and say, even if you were still betting on the same principles of which you already had within Google Ventures, but now you had it unto yourself they said, ah, I'm not necessarily so sure about it. How did you get out of that rut and how did you put down a royal flush and say, you know what, I know how to grow a company and I've done it before and I'm going to continue to do it again.

Lo Toney (28:56):
Yeah. So those are two things that I think are important. The ability to bet on myself again. And then I also think this notion around how to build a company because within the confines, the cozy confines often, of GV there is that level of protection, right? We didn't have to go out and fundraise from institutional investors for limited partners. Alphabet is the sole LP for GV's funds. We didn't have to worry about the having the right legal team or having the right finance team to help form the fund or prepare reports. I mean, all of that was there.

Lo Toney (29:34):
And what I had to do when I spun out with Plexo Capital is really I went back to my more entrepreneurial, more founder, startup CEO roots. I'm exercising way more muscle even though most of it is atrophy. I'm exercising way more entrepreneurial and startup CEO muscle than the type of muscle that I did when I was a partner at GV.

Lo Toney (29:59):
I think about my ability to be able to lead Plexo Capital and the great team that I've been fortunate to assemble and all of the great general partners we've committed to their funds, the entrepreneurs, and all the great LPs that have believed in our vision. I'm operating much more like a data driven startup meets a New York financial firm. And that's the vision that I have long-term is to create something that's new, that's different and that has more characteristics of a startup as opposed to your typical venture firm or your alternative investment manager.

Dhani Jones (30:37):
I like that analogy of atrophy and also the same time building muscle because that keeps you young, right? A lot of people don't realize as you get older you got to keep lifting those weights. A lot of people will stay away.

Lo Toney (30:50):
Hey, man, I'm trying to be like you.

Dhani Jones (30:52):
I don't want to squat 300 pounds though. You better put that on your back. You better lift it, keep your bones strong, keep your muscles strong. But I think that-

Lo Toney (31:00):
No more 315, man. The other day it was 275. That's as hard as I can now.

Dhani Jones (31:05):
Hey, 275 is good for a gentleman like yourself.

Lo Toney (31:08):
He paused because basically what he's saying is for a old ass man like me.

Dhani Jones (31:16):
But in the same way that you can lift those weights it's not just one machine that you're utilizing. And in the same way that you're building a firm, it's not just one company or one LP that you're working with. It's an intricate network.

Lo Toney (31:31):
Oh, absolutely.

Dhani Jones (31:32):
Aside from the obvious, what is so powerful about building that intricate network?

Lo Toney (31:37):
Yeah. Look, and happy to expand on intricate network because when I was looking for a name for our firm, all of the names that I historically wanted as a kid they were gone. So I had to think about it differently and I wanted something around network because I feel like that's what we were building. And Plexo is Portuguese for intricate network. And that's what we've created, this network of Plexo Capital GPs that really gives us two main pillars.

Lo Toney (32:06):
They're building firms allowing them to go out and scour the world to identify the best company by looking at tens of thousands of companies and narrowing it down to that 1% or so that they decide to invest into. So our GP network give us operational leverage. And then the second thing they give us is we have access to over 1300 companies. And over 50 of those are now at unicorn status. So evaluations of a billion or more.

Lo Toney (32:37):
And so we get information constantly from our GPS about how well those companies are performing and it allows us to have a little bit of information arbitrage as well because we're able to get information about these companies that other folks just don't have access to. How well they're performing when they're thinking about going out for a fundraise. And so by allowing us to leverage our Plexo Capital GP network we have the ability to accomplish a couple of things by investing as an LP.

Lo Toney (33:05):
Number one, we establish a base or a floor for our returns because we're offering our LPs in essence a basket of early stage venture capital. And by having that diversified base of GPS with their funds we can target a three to five X floor for which we have about 60% of our funds invested into. And then we layer on top direct investments that we target at the early stage 10X and at the later stage three to five X. And so the combination allows us to have a nice risk adjusted return profile for our limited partners.

Lo Toney (33:41):
And it's a model that we believe in. We have vision for expanding out beyond just our flagship fund with other opportunities to be able to have as many points of access to enter into financing the startup ecosystem. So I think what we're seeing right now with Plexo Capital is the first inning, maybe the second inning, but we've got a long way to go for our vision of what we want to accomplish.

Dhani Jones (34:06):
Well, I want to make sure that one day when you get to the point I want that rally cap. I want to be a part of that seventh inning stretch because it's a long game.

Lo Toney (34:17):
It is a long game.

Dhani Jones (34:18):
And I think the long game is based upon oftentimes a guiding philosophy. And so I wonder what yours is. Some of the greatest firms they all have their guiding philosophies, their guiding principles. What might you characterize your guiding philosophies be about Plexo Capital?

Lo Toney (34:39):
Yeah. I think the key thing that we try to instill into our team are around how we want to approach our participation within the ecosystem. And I think first and foremost we're focused on delivering alpha to generate the best returns possible with our market. And then there's this residual that comes out of our model, which is helping kickstart the flywheel of diversity within the ecosystem.

Lo Toney (35:04):
So that's something that's really important to us because we feel with our model if we can get capital into the hands of general partners that are Black, Brown and female, we know from data they tend to have more diverse portfolios. And so if though capital can then flow into those entrepreneurs the entrepreneurs can execute on their strategies earlier, be able to raise the capital necessary to lead to some type of exit that's going to put the founding team and the early team members down a path of wealth generation.

Lo Toney (35:36):
And for some of those team members it will provide a much needed financial backstop that might allow them to take more risk and bet on themselves whether that be starting a company, becoming an angel investor, becoming a limited partner, or maybe starting their own investment firm. And then also capital will go back to those general partners that made the investment in the first place out of their funds, helping them go down a wealth creation path that they can string along enough of these investments that lead to exits.

Lo Toney (36:04):
And then, of course, the capital goes back to the limited partners like us. And we like to think that our commitment to a fund as a limited partner will help provide some positive signal just like it did at GV. And if we get capital back to not only ourselves, but to other limited partners that come in, hopefully what will happen is they'll say, wow, this is great. This is working. We should double or even triple down on this and kind of really kickstarting that flywheel.

Lo Toney (36:29):
So I think that's an important aspect of our model. And then there's one other piece which is important for our team especially when we look to make direct investments. We're not an impact investor, but we do like it when our investments make an impact. And in particular, we don't like to make investments, we don't do investments that we see or perceive as potentially widening any socioeconomic gaps. So that's a really important principle for us as well.

Dhani Jones (36:58):
Man, I'm just sitting here just watching the dollars go out, but more importantly the dollars cycle back in and I'm watching this, you could call it current, jet stream. There's a reason why summer, spring, fall and winter time come at certain times, the tilts of the earth, sun, but jet stream and everything. I'm a creative type. So sometimes these types of visions come to my head, but also it will bring the economic windfall back to so many people.

Dhani Jones (37:38):
And I think the way that you're approaching it is actually raising people's consciousness around diverse founders and diverse led companies. And just sort of this notion that we can have a diversity of thought. Do you feel that pressure starting to sort of mount and people to respond positively?

Lo Toney (38:03):
I think so. Look, again, going back to the unfortunate murders of Brianna Taylor, George Floyd, those before and after them, that definitely raised a level of consciousness. And what we have seen is a lot of companies have talked, a lot of firms have talked, a lot of them have actually come back and done what they said, they've walked the talk. I think they're starting to see the benefits of it now. And at the end of the day, that's what we want.

Lo Toney (38:28):
Everyone just wants to be treated fairly, treated the same, have the access, have the ability to show what they can do by making the bet on themselves, by faking it till they make it, or whatever the case might be. And so I'm hopeful that we're seeing a positive change that will have legs, and will last, it will persist. I do not believe it's happening as fast as I would like. I don't think any of us think it's happening as fast as we would like.

Lo Toney (38:57):
And sometimes we've seen, hey, we've taken a couple of steps forward, take one back and before we can take more steps forward, but I believe that we're at least directionally moving course correct, but the numbers don't lie. We need to make sure that we see those numbers increase in terms of the dollars that are going to general partners that are Black, Brown, female. We need to see the more dollars going to the entrepreneurs that are Black, Brown, and female.

Lo Toney (39:25):
And then we need to see the exits. We need to see the ability for those individuals leading companies to have access to the capital necessary to execute lead to the exits so that everyone goes down the wealth creation path and then it just becomes commonplace. At some point I would like to think that at least the aspect of the Plexo Capital model specific to general partners that are Black, Brown and female maybe that becomes obsolete one day. I hope.

Lo Toney (39:54):
Unfortunately I don't think it's going to happen before I step out of this seat as leading Plexo Capital, but I like to think long-term at some point, again, going back to the data, the demographics show that we're getting to the point where we're crossing the line in a lot of the states of being a majority minority. And so one would have to think that along with that will continue to see change and hopefully it will accelerate.

Dhani Jones (40:16):
Well, 2040 is not too far away.

Lo Toney (40:20):
That's right.

Dhani Jones (40:20):
And the majority, minority is right around the corner. But I think it's the way that people think that needs to change more than just looking at sort of the diversity of the landscape. We need more people to sort of raise their way that they process information and the way that they collaborate with others.

Dhani Jones (40:38):
And you've done a phenomenal job with that. So we always in the Pathfinders by talking about meals and deals. So I want to know when that fastball approaches and it looks like a gigantic basketball, you got your bat up there and you just crush it and you got that grand slam home run. I want to know where are you going to go celebrate?

Lo Toney (41:00):
Oh, that's easy. Providence in Los Angeles and get a bottle of Screaming Eagle and do the full menu with caviar and champagne to start.

Dhani Jones (41:10):
Woo, he said caviar. Well, I hope I do get a ticket to the event-

Lo Toney (41:20):
Absolutely.

Dhani Jones (41:21):
... as I'd love to be a part of that because I've been rooting for you since the very, very beginning and I'm proud of you brother. I'm proud of all things-

Lo Toney (41:27):
Appreciate it.

Dhani Jones (41:28):
... that you're doing. So, Lo, thanks for joining us here on the Pathfinders.

Lo Toney (41:32):
Thanks for having me. I really appreciate it. Keep up the excellent work.

Dhani Jones (41:35):
Thank you, sir. Thanks so much to Lo for being on the show today and giving us insights into the work he's doing with Plexo Capital to encourage diversity in the investing in VC landscape. If you enjoyed the show and you happen to not be subscribed, make sure to follow us wherever you're listening and check out our other available episodes for more discussions with deal makers. Until next time I'm Dhani Jones, and this has been the Pathfinders presented by Ansarada.

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