How A Mathematical Model Is Redefining Venture Capital With Justin Cohen Of Collinear Capital

A mathematical model may be the key to bringing clarity and predictability to venture capital. Justin Cohen, founder and managing partner of Collinear Capital, shares how his physics background shaped a data-driven framework that uses Monte Carlo simulations and networked LP insights to forecast fund performance. Focused on Enterprise B2B SaaS companies, Collinear Capital applies analytical rigor to accelerate growth and reduce risk. Justin breaks down how logic, alignment, and measurable outcomes can replace instinct with strategy—and redefine what smart investing looks like in today’s venture landscape.

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How A Mathematical Model Is Redefining Venture Capital With Justin Cohen Of Collinear Capital

The Genesis Of Collinear Capital: From Physics To Venture

In this episode, I interviewed Justin Cohen, the Founder and Managing Partner of Collinear Capital. He discusses his venture capital fund which focuses on enterprise, B2B SaaS companies. The fund leverages a community of LPs who are highly connected as technology, implementation, and enterprise sectors to drive returns. He uses a mathematical model and predicts future returns by connecting portfolio companies with their network of LPs who could facilitate introductions and channel partnerships.

The fund targets series and series A investments, co-investing with tier-1 VCs and aims to accelerate the growth of already proven companies. Cohen emphasizes that their approach mitigates risk by investing in companies with established product market fit and a clear path to acquisition to larger acquisition.

I’m excited to introduce Justin Cohen, the Founder and Managing Partner of Collinear Capital. Justin, welcome to the show.

Good to be here, Scott.

Justin, before we get into your fund. Tell us about your background prior to launching the fund.

It’s interesting. Everything in my background, I feel is in many ways leading up to Collinear Capital. I even started using the name. I started out as a Physicist. I’m very mathematically minded and I’ll explain the math term collinear later as to why we did that. Very briefly, I started out as a Physicist. I was in high energy particle physics. That’s accelerator physics. The birth of the web came out of accelerator physics and I saw that it was right there when it happened. I got excited about the technology and the potential of it.

Within a year, I had left physics and started my first company and one thing led to another. I ended up having four technology companies. I believe the last one, we sold to private equity a few years ago and then they just sold it in January as well. As of my background in many ways, besides being a physicist is as an operator. That’s where I’m most comfortable but for the past years, I’ve mostly been doing VC.

I did a stint at Slalom Consulting, the consulting company in their global strategy group, which was just a brilliant job. It was so much fun and introduced me to the world of consulting, which ultimately led to the Collinear Capital. I left to do more VC stuff but I came back to start the venture arm of Slalom Ventures. I founded that and ran it for three years before leaving to do Collinear Capital, which in many ways is picking up on that thesis and expanding on it.

Investment Thesis: Targeting Enterprise B2B SaaS With A Network Advantage

Let’s talk about this thesis. Talk about the types of companies you invest in, what you’re looking for, the stage, check size and things of that nature.

To get the easy stuff out of the way, our first close is $25 million, so our check size is $2 million to $3 million. We’re holding some back for follow-on. We’re investing at series A and series B. We’re not leading any of those, but we’re co-investing with tier-1 VCs. The thesis is very much aligned with this worldview that I learned when I was at Slalom. That is that there are certain people that make enterprise work. Those are consultants on one side that are helping these companies to implement new technologies, to understand best practices around new technologies, etc.

There are their counterparts in the enterprise world. Those people at AT&T, Boeing, and what have you, who are working to improve their companies. This fund is very much for these people. Our LPs are people who work at these enterprises or at these consulting companies. I call them consulting companies but we’re targeting the top 25 technology implementers. Those who understand how technology works with enterprise and can drive returns at the enterprise. Those are the folks.

We’re not like a clubby kind of crowd fund. We’re very much like the math nerds fund. We don’t rely on a keen eye to pick the right founder or something like that. We have an equation that drives returns for the fund. Basically, our community of LPs with their networks and their connections. We know a thousand companies, a thousand enterprise companies.

We can make direct introductions to those companies. We can help set up channel partnerships at these very large technology implementers for our portfolio companies. Therefore, our portfolio companies have to be companies that work like that. They’re enterprise and B2B SaaS type of companies. Often, technology horizontals that can go across a wide range of industry verticals.

The “Math Nerd” Approach: How Physics Informs VC Decisions

I’m glad you mentioned the clubby thing. We did this show on the thesis of not talking to fund managers from Sand Hill Road. I appreciate that feedback. You mentioned math nerds. Tell me how your background as a physicist helps you make portfolio company decisions and how you use that to help your portfolio company post-investment?

Scott, that’s a unique question. I don’t think I’ve ever been asked that before. It is pretty clear. As a physicist, we’ve been trained to solve problems based on first principles. We don’t look up the answer. We figured it out. That training makes you a bit of a skeptic in the world. When someone says, “Here’s what I’m going to do.” Your first question is, “How? Show me how you’re going to do that.” I feel like a lot of funds are all just like, “You trust me. I’ve done this before. I’m in the club.” As you’re talking about.

Honestly, I would never start a VC with that thesis. I’m doing this with a colleague of mine who has a master’s in financial math. She was a mathematics undergrad. We’re very aligned on this whole thing. Basically, we needed to be able to answer a question. When someone asks, “How are you going to outperform? How are you doing to drive fund returns?” We have to have an answer that makes sense at fundamental principles. It’s not like, “I believe I can find a startup with a grid.” That’s hard to pinpoint and do from an analytical perspective.

For us, we vet our LPs. We work with LPs who are highly connected in the community. When we’re looking at our portfolio companies and doing our diligence, one of the things that we do is we bring them to all of our LPs and say, “How many connections do you have that would relate to this?” We build mathematical models. It’s so nerdy. Modeling what returns we would expect and the way that we do it is very straightforward. Again, it’s mathematical.

We know that valuations are directly related to ARR, especially at these stages. Not super early, but in series A and series B, it’s straight, multiple of ARR. The multiple could change a little bit, but it’s pretty much a linear relationship between ARR and valuation. All we need to figure out is, how much ARR can we drive to that portfolio company and we model that. The modeling is fairly straightforward. You look at your community of LPs, the connections that they have, the percentage chance of conversion of a connection into a sale and the average sale price.

These are the kinds of things that you can model. We do these Monte Carlo simulations and we look at these histograms and stuff that are very gaussian, by the way, and get a result. You can pretty much predict what your funds are going to return on average and that’s the key there. We never know individually but if you got a place that’s on the average. I would say that’s how my background impacts the fund.

I have a couple of flashbacks. My first flashback was, I was in junior high and my math teacher asked me to go to the board and solve the problem as opposed to just finding the answer on my calculator. That was flashback number one. Flashback number two, was when I was in grad school. I was a GA.2. The finance professor made me put together a modeling portfolio of the struggle returns of every history of asset classes.

It’s intriguing that in the FOMO world of venture capital, you have a real applicable model to mitigate risk and maximize returns. I appreciate that. I was a math major for all of one semester and I realized that wasn’t my calling. Kudos to you. Justin, tell me how to use this formula to have some success in the portfolio company. Any success stories you can share?

Collinear Alignment: Incentivizing Consultants And Enterprise Technologists

This is the first fund under this name. However, when I was still in the slum, we put together a single SPV to test the model. It was private. It was not related to Slalom, other than having Slalom Consultants as LPs. We did test this out and the results I would say were very encouraging and led to the creation of Collinear. By the way, I alluded to this before. I should go ahead and mention the reason why we’re called Collinear.

That is that, for these kinds of partnerships that happened between the tech platforms and the consulting companies. Everybody is financially incentivized to have this thing work. The consulting company makes revenue from implementations so they want it to work. The tech platform company evaluation goes up if it works because there’s new ARR coming in. Even the employees of the tech platform like our portfolio companies. They’re motivated because they all have stock options. If the valuation of the company goes up, they make more money.

Typically, the folks who are making the partnership work are the consultants of these tech implementation companies like EPAM, KPMG, Cognizant, Infosys, Slalom, and all of those folks. They’re just earning a salary. They never had the opportunity to generate returns based on their hard work of making this new partnership come to fruition. We’ve allowed these consultants and enterprise folks, the folks who do it like technologists, industry leaders. These are the folks that make these portfolio companies successful but they never had any skin in the game.

They never had any reward for their financial returns. They just earn a salary. Now that they could be LPs in a fund that does this at their direct efforts drive returns. It aligns them with everybody else. Everybody else was already aligned except for this group of enterprise books, consultants and their partners on the other side. We’ve aligned that and now everybody is collinear. They’re all along the same line in terms of financial rewards.

I appreciate that feedback. I’ll go back to my other question a second but I want to talk about these consultants for a bit. I would assume and correct me if I’m right or wrong, that it’s called having a vested interest. They’re probably very proactive in the go-to-market strategy with these portfolio companies, which is a venture for them. Would that be the case here?

We have to be super careful about that. The reason why we have to be careful about that is, we want to make sure there’s no conflict of interest. Now, in the real world, we know that salespeople get spits based on what they’re selling and all that stuff. I’m not kidding myself about what’s happening in the real world but our role in these consulting companies is one of awareness and education. If you’re an LP of ours and you’re at a consulting company, we don’t want you to go directly to a customer that you know through the consulting company and make an introduction there.

What we want you to do is raise awareness within the company. Let’s say to the account folks who are running the account for some enterprise company and say, “I am part of a fund that invested in this portfolio company, the startup. I think they would be good for your client. Are you interested in hearing more?” That way, the LP is never the person making a direct recommendation to a customer so that the customer’s information that’s most beneficial to them. You always have someone in between. However, on the enterprise side, we have direct customer connections and things like that, which can drive these returns.

Spotlight On Innovation: A Portfolio Company Revolutionizing Computer Vision

Back to the previous question. Maybe I’ll ask you a little bit differently. Within the Collinear portfolio now and maybe talk about your book a little bit. Who are some of the stars in your portfolio that are either doing great things or have the potential to do great things?

We don’t make our first investment until the end of the year. This is a little bit premature. We’re still fundraising all the way through the year and I’ll talk about that in a second. We have our eye on a company that we’re very excited about. They’re excited to be working with us as well. We know them from our Slalom days as well. It’s a long history.

They are a technology company that uses computer vision and a 3D model of a system to understand where things are at any point in time in an environment. I know that sounds very general, but that’s good for us because it applies. The use cases are across almost every single industry, except for maybe in finance.

Imagine this. Imagine you have a fuel refueling station. Now, the gas stations got to get refueled and they have these big tanker trucks that come and refuel them. Those tanker trucks need to be refueled as well. Generally, those are done by third-party operations, where ExxonMobil or Chevron or whatever, don’t have direct employees there. They don’t have a view of what’s going on and yet the standard operating procedures have to be monitored very carefully or else you can get things like fuel leaks and explosions like very bad things.

First of all, you need to make sure that the operators are wearing proper protection. Secondly, that they’re following these operating procedures down to the letter. They’re connecting the grounding wire first before opening the pump and then they have the vacuum for vapor capture or whatever it is. Chevron can’t see any of that stuff, but there are these cameras there, generally security cameras and they’re not used. They’re only used if something is stolen and they got to go back and roll the tape and see who stole it or whatever.

What this company does and this company is called Worlds, based out of Dallas. They take the feed from these video cameras and they build a very straightforward 3D model, and this is going back to physics. They can build a physics engine to see exactly who’s walking through, what’s happening, where the fueling tanks are, and check for things like, are they wearing a hard hat? Are they connecting the grounding wire first before putting the vapor hood?

If there’s a violation, they can do whatever you want. It could be an email at the end of the day if someone’s not wearing a hard hat, or shutting down the fuel line if the grounding wires are not connected before starting. This is just one example of what they can do with the vision but they’re using the same tool. In Vegas, they have a gaming company that’s watching people bet. It is with a high-resolution camera and again, a 3D model of what’s going on. They can see exactly who’s betting what, when, and so forth.

It’s not necessarily for catching cheating. What it is, it’s for monitoring people’s bets so the pit boss doesn’t have to try, estimate and count who are the high rollers. You tell exactly how much anybody is betting at any given time. They do the same thing for food manufacturing. You’ve got tortilla chips that are going down the line. Sometimes they build up and DOD work as well. Oiling gas work and transportation.

It runs across all of these industries and we love that. We love them because one, our LPs have connections across all these industries. Number two, somebody’s got to build these 3D models and integrate it to the backend systems. Who are those people? Those are the tech implementers of the world. Those are EPAM, the Cognizant, the KPMG, the Slaloms of the world. It plays well with our community and that’s what we’re looking for. That would be a series B investment. They’re doing very well.

You mentioned that you’re fundraising out. Share with the readers. Let’s talk to potential LPs and those that are recommending alternatives to their clients. Talk a little bit about the fund and just the background on the fund itself.

Basically, we have a parallel fund structure. It’s an SCC requirement. We have our accredited investor fund, which we call Our Community Fund. These are LPs that are small dollar amounts. Our minimum investment there is only $25,000. We don’t care how much people invest on that side as long as they have the minimum. The minimum is there so that they have skin in the game. That’s the only reason. Otherwise, we don’t care how much they put in. Those people, we want them because of their brains and their Rolodex. They are highly connected people. They understand exactly how these technologies fit into enterprise. They make our thesis work.

However, they don’t have $20 million to spare. They’re working people. We have a parallel fund, which is our so-called institutional fund. That’s for family offices, consulting companies themselves and so forth, that are providing the capital so that we can have a reasonable stake in these companies. I would say we’re doing a great job on the community LP side because that’s where our focus is. These are our people. We are them and gaining a lot of traction there.

We’re trying to diversify and get all 25 of the top tech implementers. We’re making some great headway there. I’ll be in Houston, and then Seattle. We’re doing a big event there. It’ll be super fun. On the institutional side, we’re starting to talk to family offices and things like that. These folks frankly are interested because they get to leverage the value of our community LPs without having to do the heavy lifting of that.

They don’t have to be highly connected people in enterprise. They’re supplying the capital. Some of them are highly effective in the consulting space because they run consulting companies. That’s great as well, but those are the two sides of our fund. They do their required or SEC requirements to invest pro-rata exactly in the same. We act as one larger fund but underneath the hood, it’s two funds.

Why Collinear Capital Now: A Low-Risk, High-Return Investment Opportunity

I like to ask this question to all the VCs we have on the program because in the vast landscape of venture capital. There’s only a handful of the monolithic funds you hear much about. For our readers that are LPs, potential investors, or managing assets for folks that invest in alternatives like yourself. Why your fund? Why now?

Why funds are easy to me. It’s the only fund I’d invested in I’ll tell you and the reason why and this is the only one I am investing in. The reason why is that the thesis is crisp, clear and makes sense. It makes sense logically and mathematically. You can see how we drive returns. There is no trust in me involved. I’m a big fan of Vanguard, indexed funds and passively managed funds. We’re essentially a passively managed fund in the sense that we’re not picking stocks and startups.

Our startups that we’re investing in already have a proven track record. All the companies that aren’t making it like product market, fit lies, etc., are gone by the time we invest. We do due diligence or investing alongside tier-1 VCs and they’re doing financial diligence. We know they’re going to do well. All we’re doing is accelerating it. We’ve taken a lot of the risk out. If you’re something that makes sense in terms of fund returns and it’s got good fun returns. Our Monte Carlo simulation is 5X return. We don’t know for any individual fund but that’s on average what it looks like for us.

You want to put it in something that is relatively low risk, We have good returns for investing in companies that are already well past. A lot of times, these funds survive because they’re getting a risk discount because they’re going in early. That allows them to get to 25X, 50X or whatever, on an individual investment. We’re not going to do that. I promise you we’re not getting 50X on our investments because our companies all follow a very similar trajectory. Series A, series B, they’re sold to a competitor. They’re sold to a larger organization or whatever.

The modeling on this stuff is relatively clear. If you’re someone who is maybe more of a math person or more of someone who wants to understand exactly how the fund returns are happening. See the models and understand it, that’s the fun for us. That’s not for everybody. Some people want to be in the club. You’re not in the club with us. You’re in the math nerd club I suppose, but that’s who our fund is for.

Why now? We’re the first to do this. There’s no other fund that does this. I was shocked when we came up with this idea. I looked and looked. I thought it’s such a straightforward model. Why hasn’t it been done before? Let’s get it done now and garner the returns that we can get before this market is saturated.

Any final thoughts you want to share to readers, Justin?

Scott, I want to thank you very much for talking with me. I’m super excited about the fund. I got a bunch of travels coming up, which is always a delight because I get to meet so many people who are fired up at the fund. I get to meet a bunch of our LPs. I would just say, if you’re someone who makes enterprise work. Be on a consulting, tech integrator side or in the enterprise side or technology industry. Reach out. We’d love to hear from you. We’re always looking for top tier experienced people who understand how technology fits into enterprise. If you’re a family office and you’re looking for something that makes sense to you, let’s talk.

Where can they learn more about Collinear Capital and get in contact with you?

They can go to our website CollinearCapital.vc or they can shoot me an email at Justin@CollinearCapital.vc.

Justin, again, thanks for being on the show. If you’re reading, make sure you follow, like, and comment on this interview and look out for more on Emerging Managers. Thanks for joining us, Justin.

Thanks, Scott. It’s a pleasure.

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To summarize and give some takeaways from my interview with Collinear Capital. They try to provide a thesis that’s mathematically driven, as we mentioned, focusing on leveraging the highly connected LPs. It’s not just money that these LPs are investing. They’re providing their relationships and that provides a lower risk profile and predictable returns. They want to make sure that the LPs have aligned incentives. Many of them are consultants and enterprise technologists. They are financially incentivized to support these portfolio companies creating the co-linear alignment of interests and the parallel fund structure.

It both has a community fund for accredited investors, the low minimum investment of $25,000 and it is a traditional fund for family offices and large consulting companies providing many people the opportunity to invest alongside Collinear. It’s a target investment. It’s enterprise, B2B SaaS companies and key industry verticals. He continued to emphasize the strong strategic partnerships. This has been a theme again that we’ve had with many of our emerging managers. Opportunity provide more than just capital. It’s introductions, mentorships, and opportunities to generate partnerships.

I love the part where he called this math nerd approach. If any of that, the fund seeks are companies that contributed clear data-driven paths to success aligning with their physics-based, first principal, and problem-solving methodology. Again, another great interview. We’ve got more coming up and continue to read. I’ll see you next time on the show.

Important Links

• Justin Cohen on LinkedIn
• Justin@CollinearCapital.vc
• Collinear Capital
• Slalom Consulting
• EPAM
• KPMG
• Cognizant
• Infosys
• Worlds