1 00:00:02,279 --> 00:00:05,160 Speaker 1: This week on the podcast, I have an extra special guest. 2 00:00:05,240 --> 00:00:08,480 Speaker 1: His name is Scott Cooper, and he is the managing 3 00:00:08,520 --> 00:00:11,440 Speaker 1: partner and Andres and Horowitz, one of the most storied 4 00:00:11,800 --> 00:00:16,320 Speaker 1: venture capital farms in Silicon Valley. Uh, you know all 5 00:00:16,320 --> 00:00:18,480 Speaker 1: the companies they have invested in. You're not gonna I'm 6 00:00:18,480 --> 00:00:21,079 Speaker 1: not gonna give you a list here. Scott is an 7 00:00:21,160 --> 00:00:24,360 Speaker 1: unusual guy because not only did he go Stanford undergrad 8 00:00:24,560 --> 00:00:30,600 Speaker 1: and law school, so he has that legal um background. 9 00:00:31,000 --> 00:00:35,200 Speaker 1: He understands the both the deal side, the finance side, 10 00:00:35,720 --> 00:00:38,680 Speaker 1: and the tech side. He's really a triple threat, and 11 00:00:38,800 --> 00:00:45,080 Speaker 1: he discusses the things that any entrepreneur or theoretically anybody 12 00:00:45,080 --> 00:00:46,880 Speaker 1: who wants to be a limited partner in a venture 13 00:00:46,920 --> 00:00:50,919 Speaker 1: capital firm should know. If you are all interested in 14 00:00:51,040 --> 00:00:55,600 Speaker 1: technology startups VC funding, you're going to find this conversation 15 00:00:55,680 --> 00:00:59,440 Speaker 1: to be absolutely delightful. So, with no further ado, my 16 00:00:59,640 --> 00:01:05,480 Speaker 1: convert station with Andrews and Harrowitz is Scott Cooper. This 17 00:01:05,920 --> 00:01:10,000 Speaker 1: is Masters in Business with Barry Ridholtz on Bloomberg Radio. 18 00:01:10,440 --> 00:01:14,360 Speaker 1: My special guest today is Scott Cooper. He graduated from 19 00:01:14,400 --> 00:01:18,880 Speaker 1: Stanford undergrad and law school. He was employee number one 20 00:01:19,480 --> 00:01:23,199 Speaker 1: at Andrews and Horowitz, the famed venture capital firm where 21 00:01:23,200 --> 00:01:27,520 Speaker 1: he is currently managing partner. The fund runs seven billion 22 00:01:27,560 --> 00:01:32,480 Speaker 1: dollars and has been early investors in such startups as Facebook, 23 00:01:32,959 --> 00:01:40,640 Speaker 1: Group on Twitter, Airbnb, Slack, Stripe, Skype, and many others. 24 00:01:40,720 --> 00:01:43,520 Speaker 1: His new book is The Secrets of sand Hill Road. 25 00:01:44,000 --> 00:01:46,840 Speaker 1: Scott Cooper, Welcome to Bloomberg. Thank you for having me. 26 00:01:47,240 --> 00:01:50,280 Speaker 1: So I've been looking forward to having this conversation. You 27 00:01:50,360 --> 00:01:56,120 Speaker 1: are the third um Andrewson Harowitz, veteran willing to uh 28 00:01:56,240 --> 00:02:00,520 Speaker 1: suffer my sons and Arrows. Um. Well, it says that 29 00:02:00,560 --> 00:02:05,000 Speaker 1: you're pretty hip. You get podcasts and you understand having 30 00:02:05,240 --> 00:02:09,000 Speaker 1: people ask you interesting questions and coming up with interesting answers. 31 00:02:09,400 --> 00:02:14,120 Speaker 1: So let's start with a little bit about your background professionally. 32 00:02:14,280 --> 00:02:16,919 Speaker 1: You were kind of born right into the bubble. That's 33 00:02:16,919 --> 00:02:19,800 Speaker 1: how you describe yourself in the book You lead the 34 00:02:19,880 --> 00:02:22,480 Speaker 1: I p O for opswere and oh one, what was 35 00:02:22,520 --> 00:02:25,320 Speaker 1: it like going public right in the middle of the collapse? 36 00:02:25,560 --> 00:02:27,839 Speaker 1: It was? It was. It was an amazing, amazing time. 37 00:02:27,880 --> 00:02:30,400 Speaker 1: So you're right. I was actually an investment banker before 38 00:02:30,400 --> 00:02:32,640 Speaker 1: I went to opsware and by the way, ops wars 39 00:02:32,680 --> 00:02:34,520 Speaker 1: actually it was loud Cloud at that time, which was 40 00:02:34,560 --> 00:02:37,440 Speaker 1: the predecessor in two thousand one. So just a little background, 41 00:02:37,600 --> 00:02:42,520 Speaker 1: loud Cloud was set up to be the original cloud 42 00:02:44,080 --> 00:02:48,720 Speaker 1: earlier and then at a certain point that pivoted to you. 43 00:02:48,720 --> 00:02:53,639 Speaker 1: You have developed your own software, operational software, and that's 44 00:02:54,120 --> 00:02:56,560 Speaker 1: said that the other companies are gonna need this. So 45 00:02:56,919 --> 00:03:00,720 Speaker 1: you took an in house technology similar to Amazon is 46 00:03:00,760 --> 00:03:04,639 Speaker 1: doing with loud Cloud with uh a WS, and you 47 00:03:04,760 --> 00:03:07,280 Speaker 1: spun it out as a separate, full, fully separate entity. 48 00:03:07,360 --> 00:03:10,760 Speaker 1: That's exactly right. So Loudcloud started in so it was 49 00:03:10,800 --> 00:03:13,600 Speaker 1: you know, as perfect perfect timing, right, We raised a 50 00:03:13,600 --> 00:03:15,880 Speaker 1: ton of money, we hired a bunch of people, uh 51 00:03:15,919 --> 00:03:18,680 Speaker 1: and then of course the market turned in a different direction. 52 00:03:18,800 --> 00:03:21,160 Speaker 1: So we took it public in two thousand one, actually 53 00:03:21,200 --> 00:03:23,160 Speaker 1: for the very honest reason, which was that was the 54 00:03:23,200 --> 00:03:25,680 Speaker 1: best source of capital at the time. So there was 55 00:03:25,720 --> 00:03:28,880 Speaker 1: no other, you know, viable source or attractive source of capital. 56 00:03:28,960 --> 00:03:30,799 Speaker 1: And I think we were one of actually two I 57 00:03:30,880 --> 00:03:33,000 Speaker 1: p o s that happened that year, you know, one, yeah, not, 58 00:03:33,160 --> 00:03:35,760 Speaker 1: what was that five hundred and two thousand, So there 59 00:03:35,800 --> 00:03:38,400 Speaker 1: was about seven hundred and fifty years so between the 60 00:03:38,440 --> 00:03:41,680 Speaker 1: two years and then basically I think there were two 61 00:03:42,040 --> 00:03:44,200 Speaker 1: in two thousand one US in a company called Storage 62 00:03:44,200 --> 00:03:45,760 Speaker 1: Networks I think was the other one that went out 63 00:03:45,760 --> 00:03:50,240 Speaker 1: that year. So eventually, um, the company gets bought by 64 00:03:50,600 --> 00:03:53,960 Speaker 1: LTD Packer and what was that? So the people who 65 00:03:53,960 --> 00:03:57,720 Speaker 1: are still there as employees, what was that transition? Like? 66 00:03:57,760 --> 00:03:59,520 Speaker 1: What was your role? You're an attorney, what was your 67 00:03:59,600 --> 00:04:02,920 Speaker 1: role in the acquisition? It was fun? So, um, my 68 00:04:03,040 --> 00:04:05,320 Speaker 1: main role was actually to run the integration between the 69 00:04:05,360 --> 00:04:07,840 Speaker 1: two companies. So we kind of had I had there 70 00:04:07,840 --> 00:04:09,320 Speaker 1: was an executive on our side who was me, and 71 00:04:09,360 --> 00:04:11,640 Speaker 1: then there was an executive on the HP side, And 72 00:04:11,720 --> 00:04:14,560 Speaker 1: basically our job was, Okay, we're doing this deal. What 73 00:04:14,680 --> 00:04:16,680 Speaker 1: is this gonna look like as a combined entity. You know, 74 00:04:16,680 --> 00:04:18,640 Speaker 1: who's gonna have jobs in what places? How do we 75 00:04:18,680 --> 00:04:20,919 Speaker 1: get everything from my T systems integrated? How do we 76 00:04:20,960 --> 00:04:22,840 Speaker 1: talk to customers? And it was fun, It was actually 77 00:04:22,880 --> 00:04:25,120 Speaker 1: really fun opportunity and uh, you know, it was just 78 00:04:25,160 --> 00:04:27,120 Speaker 1: a different It was just different from anything I'd ever 79 00:04:27,160 --> 00:04:28,719 Speaker 1: been through, right, So, you know, I'd always been in 80 00:04:28,720 --> 00:04:30,800 Speaker 1: the startup community and then we go into this behemoth 81 00:04:31,240 --> 00:04:34,280 Speaker 1: HP and you know, they've got these playbooks basically about 82 00:04:34,279 --> 00:04:36,560 Speaker 1: how you do this integration. Uh, and you know what 83 00:04:36,560 --> 00:04:38,160 Speaker 1: we tried to help them understand was like, all that 84 00:04:38,160 --> 00:04:40,520 Speaker 1: stuff is important. The most important thing, though, is what 85 00:04:40,560 --> 00:04:42,720 Speaker 1: are you going to tell the employees about who has jobs, 86 00:04:43,040 --> 00:04:44,880 Speaker 1: what those jobs are going to be, you know, where 87 00:04:44,920 --> 00:04:46,560 Speaker 1: they're gonna show up on day one to go to work. 88 00:04:46,600 --> 00:04:48,080 Speaker 1: And so there was kind of a human element of 89 00:04:48,120 --> 00:04:50,400 Speaker 1: it that was, you know, a little bit underserved in 90 00:04:50,400 --> 00:04:52,200 Speaker 1: the HP side. Not was saying the fact that they 91 00:04:52,200 --> 00:04:54,480 Speaker 1: were really good at the systems integration piece. So, but 92 00:04:54,520 --> 00:04:57,320 Speaker 1: the assumption is the opsware employees who may have seen 93 00:04:57,440 --> 00:05:01,719 Speaker 1: their jobs cut, they still have pretty nice stock options. 94 00:05:02,880 --> 00:05:06,400 Speaker 1: So it wasn't okay, I'm I'm cut loose. Now I 95 00:05:06,440 --> 00:05:08,240 Speaker 1: could go do my next gig. That's right. And for 96 00:05:08,279 --> 00:05:10,480 Speaker 1: most people, most people had a job opportunity to go 97 00:05:10,520 --> 00:05:12,520 Speaker 1: to HP because HP was really buying this as a 98 00:05:12,520 --> 00:05:15,040 Speaker 1: growth opportunity. It wasn't like an acquisition where you know, 99 00:05:15,040 --> 00:05:16,800 Speaker 1: they're like, look, let's just chop fifty percent of the 100 00:05:16,800 --> 00:05:19,720 Speaker 1: people and and you know and create some cash. So 101 00:05:19,960 --> 00:05:21,800 Speaker 1: most people, you know, maybe there were probably some people 102 00:05:21,800 --> 00:05:24,520 Speaker 1: in like organizations like finance, where obviously it's hard sometimes 103 00:05:24,560 --> 00:05:27,599 Speaker 1: to have roles they are duplicate between organizations, but anybody 104 00:05:27,600 --> 00:05:30,120 Speaker 1: who was in a product or engineering or sales facing role, 105 00:05:30,360 --> 00:05:32,279 Speaker 1: all those people had the opportunity to stay, and most 106 00:05:32,320 --> 00:05:35,120 Speaker 1: of them did. So you come from a legal background, 107 00:05:35,240 --> 00:05:39,640 Speaker 1: you're running operations at a technology company. How did the 108 00:05:39,680 --> 00:05:44,040 Speaker 1: transition to venture capital come about? Was it just lucky coincidence? 109 00:05:44,080 --> 00:05:46,880 Speaker 1: Who were working with two guys name Andres and Harowitz? Well, 110 00:05:46,880 --> 00:05:48,599 Speaker 1: there were certainly there was certainly an element of that 111 00:05:48,640 --> 00:05:50,880 Speaker 1: for sure. So I've been working, you know with these 112 00:05:50,880 --> 00:05:53,479 Speaker 1: guys now for almost ten years when we started the firm, 113 00:05:53,480 --> 00:05:56,000 Speaker 1: because this year actually will be my year working with 114 00:05:56,040 --> 00:05:58,240 Speaker 1: them really, which is you know, it probably just makes 115 00:05:58,240 --> 00:05:59,880 Speaker 1: me a glutton for punishment. I'm not quite sure what 116 00:06:00,040 --> 00:06:02,960 Speaker 1: to make of that. I've been to your office and 117 00:06:03,000 --> 00:06:05,159 Speaker 1: I have to say that looks like a fun place 118 00:06:05,160 --> 00:06:06,520 Speaker 1: to work. It is a fun place to work. Yet 119 00:06:06,560 --> 00:06:08,279 Speaker 1: now it's been a great place, and uh, you know, 120 00:06:08,279 --> 00:06:10,279 Speaker 1: we've grown it from literally there were literally three of 121 00:06:10,320 --> 00:06:12,440 Speaker 1: us when we started ten years ago. We've now got 122 00:06:12,480 --> 00:06:14,880 Speaker 1: a hundred and seventy employees. So it's been a fun place. 123 00:06:14,880 --> 00:06:16,599 Speaker 1: But yeah, look, I think the answer to your questions, yeah, 124 00:06:16,600 --> 00:06:18,640 Speaker 1: it was a little bit of Mark and Ben and 125 00:06:18,640 --> 00:06:20,720 Speaker 1: I had always just as I had career discussions with 126 00:06:20,760 --> 00:06:22,880 Speaker 1: them when we were at loud Cloud Nos where I'd 127 00:06:22,880 --> 00:06:25,360 Speaker 1: always said, Hey, looks doing something like this someday would 128 00:06:25,360 --> 00:06:27,279 Speaker 1: be fun. I I didn't think about us starting a firm, 129 00:06:27,279 --> 00:06:28,760 Speaker 1: but I said, Gee, that's a kind of business that 130 00:06:28,800 --> 00:06:31,240 Speaker 1: I think could be fun. And what happened was after 131 00:06:31,240 --> 00:06:33,520 Speaker 1: we sold the business, the two of them started doing 132 00:06:33,560 --> 00:06:35,479 Speaker 1: angel investing with their own money. So they were just 133 00:06:35,520 --> 00:06:38,680 Speaker 1: investing out of their own checkbooks, meanings they there's a 134 00:06:38,720 --> 00:06:41,599 Speaker 1: windfall when the company is sold. They weren't billionaires, but 135 00:06:41,640 --> 00:06:44,520 Speaker 1: they certainly made you know, tons of money. Yeah, they were. 136 00:06:45,520 --> 00:06:47,480 Speaker 1: And so the idea of taking I'm gonna pull fifty 137 00:06:47,520 --> 00:06:51,320 Speaker 1: million dollars aside and find you know, a hundred companies 138 00:06:51,360 --> 00:06:53,320 Speaker 1: that could use half a million dollars each. Yeah, it 139 00:06:53,360 --> 00:06:55,440 Speaker 1: was Actually it was even smaller than that though. It 140 00:06:55,480 --> 00:06:57,400 Speaker 1: was literally they were running fifty thousand, excuse me, a 141 00:06:57,480 --> 00:07:00,040 Speaker 1: hundred thousand dollar checks um. So it was very it 142 00:07:00,200 --> 00:07:02,320 Speaker 1: was very kind of small stuff. And you would, by 143 00:07:02,320 --> 00:07:05,479 Speaker 1: the way, you as a lawyer and an operations guy, 144 00:07:05,640 --> 00:07:07,600 Speaker 1: I could see you looking at this and gnashing your 145 00:07:07,600 --> 00:07:11,160 Speaker 1: teeth and saying, where the capital controls how is the structured? 146 00:07:11,600 --> 00:07:14,680 Speaker 1: Where's the paperwork? Like? I barely know you and I 147 00:07:14,720 --> 00:07:17,520 Speaker 1: could tell that set up made you crazy. I feel 148 00:07:17,520 --> 00:07:21,280 Speaker 1: like you're unfairly typecasting me. But am I right? Uh? 149 00:07:21,840 --> 00:07:24,080 Speaker 1: A little bit, a little bit. They did the truth 150 00:07:24,120 --> 00:07:25,880 Speaker 1: be told. Look, they did the angel investing on their own, 151 00:07:25,920 --> 00:07:27,600 Speaker 1: you know. I I kind of came into the picture 152 00:07:27,680 --> 00:07:29,480 Speaker 1: later as we started talking about the fund in the 153 00:07:29,480 --> 00:07:32,680 Speaker 1: firm itself. But you know, I inherited a lot of 154 00:07:32,680 --> 00:07:35,240 Speaker 1: that paperwork. Of course, why did you write this book 155 00:07:35,760 --> 00:07:37,800 Speaker 1: and who is it for? Yeah, so as we talked 156 00:07:37,800 --> 00:07:39,800 Speaker 1: about I've been doing tech stuff for about twenty five 157 00:07:39,880 --> 00:07:42,080 Speaker 1: years now, I was a banker. Actually we never got 158 00:07:42,120 --> 00:07:43,840 Speaker 1: to that, but I was a bank stuff. Is that 159 00:07:43,880 --> 00:07:46,840 Speaker 1: a technical time? Exactly? Tech things in the tech industry? Sorry, 160 00:07:46,840 --> 00:07:49,760 Speaker 1: maybe I can I can be more eloquent mu um 161 00:07:49,840 --> 00:07:51,440 Speaker 1: and uh. But you know, now, having been in this 162 00:07:51,480 --> 00:07:54,080 Speaker 1: business for ten years, I continue to get a series 163 00:07:54,120 --> 00:07:56,960 Speaker 1: of questions from entrepreneurs all the time, same question, Yeah, 164 00:07:56,960 --> 00:07:58,480 Speaker 1: most of which I thought were answered, you know kind 165 00:07:58,480 --> 00:08:00,040 Speaker 1: of you know, stuff like look should I even a 166 00:08:00,160 --> 00:08:02,400 Speaker 1: venture capital? Like how does the how does the business work? 167 00:08:02,440 --> 00:08:04,120 Speaker 1: And a lot of them have this undertone of you 168 00:08:04,160 --> 00:08:05,720 Speaker 1: know to a certain set, how do I avoid getting 169 00:08:05,720 --> 00:08:07,440 Speaker 1: screwed by the caps? I mean, I hate to say 170 00:08:07,440 --> 00:08:09,120 Speaker 1: it that way, but that's kind of that's kind of 171 00:08:09,120 --> 00:08:11,120 Speaker 1: the way it was, as you implying your breath or 172 00:08:11,120 --> 00:08:14,080 Speaker 1: no rapacious out there is that? Is that the implication? No, 173 00:08:14,240 --> 00:08:17,040 Speaker 1: I think the implication is there's just not a level 174 00:08:17,080 --> 00:08:19,600 Speaker 1: playing field from an information perspective, right, So deformation a 175 00:08:19,760 --> 00:08:22,000 Speaker 1: symmetry is a problem, that's right. So look, we'll do 176 00:08:22,120 --> 00:08:23,720 Speaker 1: you know what, We've been doing this for ten years. 177 00:08:24,000 --> 00:08:26,000 Speaker 1: You know, we've done thousands of deals, you know, and 178 00:08:26,160 --> 00:08:29,360 Speaker 1: repeat entrepreneur maybe does this five, six, seven times over 179 00:08:29,400 --> 00:08:31,080 Speaker 1: the course their life. And so there's just stuff that 180 00:08:31,120 --> 00:08:32,600 Speaker 1: we know and we see because we see it an 181 00:08:32,640 --> 00:08:34,760 Speaker 1: everyday basis. And so the purpose of the book in 182 00:08:34,800 --> 00:08:36,679 Speaker 1: my mind was, look, if we could demystify that and 183 00:08:36,720 --> 00:08:39,600 Speaker 1: hopefully level of playing field, then maybe it helps have 184 00:08:39,679 --> 00:08:42,000 Speaker 1: a better relationship between entrepreneurs and vcs and and maybe 185 00:08:42,040 --> 00:08:44,320 Speaker 1: it even helps people who wouldn't have otherwise thought about 186 00:08:44,400 --> 00:08:47,640 Speaker 1: entrepreneurship coming to the business. Interesting, and I have to 187 00:08:47,679 --> 00:08:51,960 Speaker 1: ask for the uninitiated, what is santill road. I've I've 188 00:08:52,000 --> 00:08:56,560 Speaker 1: been there. I understand it as a concept. Yeah, the 189 00:08:56,600 --> 00:08:58,920 Speaker 1: concept is the concept at a high level is like 190 00:08:59,000 --> 00:09:01,320 Speaker 1: you know what Wall Street is to financial services or 191 00:09:01,360 --> 00:09:04,440 Speaker 1: what you know Music Road is to Nashville country music. Right. Uh, 192 00:09:04,480 --> 00:09:07,720 Speaker 1: it's basically it literally is a road. It is a street. Uh. 193 00:09:07,760 --> 00:09:10,800 Speaker 1: It is very unexciting as you've probably seen what you've 194 00:09:10,840 --> 00:09:12,120 Speaker 1: been there as a bunch of kind of you know, 195 00:09:12,200 --> 00:09:15,040 Speaker 1: fairly drabbed two story buildings. You have a very nice 196 00:09:15,080 --> 00:09:18,640 Speaker 1: waterfall that we do have that we are building, so 197 00:09:18,679 --> 00:09:20,559 Speaker 1: we are lucky to have kind of water effect outside 198 00:09:20,559 --> 00:09:23,240 Speaker 1: our building. But but you know, it just happens to 199 00:09:23,280 --> 00:09:25,240 Speaker 1: be the locust where all the venture capitalists have have 200 00:09:25,679 --> 00:09:28,040 Speaker 1: you know, established themselves. And I think it's really the 201 00:09:28,120 --> 00:09:29,960 Speaker 1: really the answer for that is because of its proximity 202 00:09:29,960 --> 00:09:32,240 Speaker 1: of Stanford. So the more important part of sand Hill 203 00:09:32,320 --> 00:09:34,439 Speaker 1: Road is when you go down Sandhill Road east, you 204 00:09:34,480 --> 00:09:35,880 Speaker 1: know about a mile and a half you end up 205 00:09:35,880 --> 00:09:37,920 Speaker 1: on the Stanford campus. And it really does, I think 206 00:09:38,000 --> 00:09:41,120 Speaker 1: illustrate the kind of tight connectedness that's always happened between 207 00:09:41,160 --> 00:09:43,840 Speaker 1: Stanford and the venture in the startup communities. Right. You 208 00:09:43,880 --> 00:09:48,040 Speaker 1: see it in Boston between M I T. And you 209 00:09:48,120 --> 00:09:49,760 Speaker 1: got a kind of square and Cambridge the same kind 210 00:09:49,760 --> 00:09:52,520 Speaker 1: of thing, right, A really interesting concept. So one of 211 00:09:52,559 --> 00:09:56,600 Speaker 1: your chapters is titled the Art of the Pitch. Explain 212 00:09:56,679 --> 00:09:59,760 Speaker 1: what that is? Yeah, so we see lots of pitches, 213 00:10:00,320 --> 00:10:04,719 Speaker 1: as you can imagine, probably about two year Yeah, it's 214 00:10:04,720 --> 00:10:06,760 Speaker 1: a lot. Yeah. So the art of the pitch is 215 00:10:06,800 --> 00:10:09,240 Speaker 1: really about kind of making sure the pitch resonates, is 216 00:10:09,240 --> 00:10:11,079 Speaker 1: going to resonate with the audience. And I think key 217 00:10:11,120 --> 00:10:13,679 Speaker 1: to that is to understanding what is it that venture 218 00:10:13,679 --> 00:10:15,880 Speaker 1: capitalists care about? What is it that they are incentive 219 00:10:15,880 --> 00:10:17,800 Speaker 1: to do, and therefore, how are they going to evaluate you? 220 00:10:18,240 --> 00:10:20,000 Speaker 1: And so I think the first thing to think about 221 00:10:20,200 --> 00:10:22,280 Speaker 1: is the most important thing to think about in this 222 00:10:22,320 --> 00:10:25,080 Speaker 1: business is we are wrong more often than they're we're right, 223 00:10:25,120 --> 00:10:27,280 Speaker 1: which I know is a terrible thing to say. And 224 00:10:27,320 --> 00:10:29,960 Speaker 1: if your kids came home and got you know, on 225 00:10:30,000 --> 00:10:32,320 Speaker 1: their test, you'd be pretty unhappy. If you're doing that 226 00:10:32,360 --> 00:10:34,640 Speaker 1: in venture capital, you're you're still in the game at least. 227 00:10:35,240 --> 00:10:38,079 Speaker 1: And as as long as you bring up um that 228 00:10:38,120 --> 00:10:42,880 Speaker 1: batting average, why does the hit miss ratio not matter 229 00:10:42,960 --> 00:10:46,360 Speaker 1: as much in venture capital as it does elsewhere? Because 230 00:10:47,000 --> 00:10:49,040 Speaker 1: if we do it right, then the reason doesn't matter 231 00:10:49,080 --> 00:10:51,480 Speaker 1: is because ten to twenty percent of the companies. Hopefully 232 00:10:51,480 --> 00:10:54,800 Speaker 1: if we do it right, you're gonna earn hundred times 233 00:10:54,840 --> 00:10:57,120 Speaker 1: your money. And so basically think of it as you know, 234 00:10:57,160 --> 00:11:00,520 Speaker 1: the the significant winners will basically make up for you know, 235 00:11:00,600 --> 00:11:02,520 Speaker 1: kind of that fifty percent of things where you won't 236 00:11:02,559 --> 00:11:05,280 Speaker 1: get your money back and then probably where you get 237 00:11:05,320 --> 00:11:06,840 Speaker 1: a little bit of money back but not enough to 238 00:11:06,840 --> 00:11:09,080 Speaker 1: make the math work. And so if you think about that, 239 00:11:09,120 --> 00:11:11,280 Speaker 1: then what that means is, if I'm going to invest 240 00:11:11,320 --> 00:11:13,120 Speaker 1: in a company today, I've got to at least believe 241 00:11:13,120 --> 00:11:14,679 Speaker 1: it has a chance to be one of those ten 242 00:11:14,760 --> 00:11:17,640 Speaker 1: or winners. Now, you know, we wish we were smart 243 00:11:17,720 --> 00:11:19,280 Speaker 1: enough to know exactly which ones they were, and of 244 00:11:19,280 --> 00:11:22,080 Speaker 1: course we were just invest in those companies, but we 245 00:11:22,120 --> 00:11:24,680 Speaker 1: have to at least believe that the kind of the 246 00:11:24,720 --> 00:11:27,880 Speaker 1: ground rules and the opportunity exists and if and so 247 00:11:28,000 --> 00:11:29,480 Speaker 1: that really kind of leads into the art of the 248 00:11:29,520 --> 00:11:31,320 Speaker 1: pitch about how to frame the pitch in that context. 249 00:11:31,400 --> 00:11:35,240 Speaker 1: So from your perspective, what becomes more important to cast 250 00:11:35,280 --> 00:11:38,000 Speaker 1: a wide net or to be able to do a 251 00:11:38,080 --> 00:11:41,320 Speaker 1: deeper dive into a narrower niche where you feel like 252 00:11:41,320 --> 00:11:44,600 Speaker 1: you have some expertise and some ability to separate the 253 00:11:44,679 --> 00:11:47,120 Speaker 1: good from the great. Yeah, I think it's it's probably 254 00:11:47,200 --> 00:11:49,680 Speaker 1: somewhere in between, which is, you've got to have some 255 00:11:50,000 --> 00:11:52,440 Speaker 1: number of deals just because you're building a portfolio. So 256 00:11:52,520 --> 00:11:54,880 Speaker 1: unless you think you're, you know, gonna bet that bat 257 00:11:54,920 --> 00:11:57,000 Speaker 1: a much higher batting average, you can at least have 258 00:11:57,160 --> 00:12:00,080 Speaker 1: needs some diversification. But that diversigation needs to be in 259 00:12:00,120 --> 00:12:01,960 Speaker 1: domains that you understand. So the way we run our 260 00:12:02,000 --> 00:12:04,760 Speaker 1: business is we've got vertical domains. So we've got kind 261 00:12:04,800 --> 00:12:09,000 Speaker 1: of consumer enterprise, financial services, life sciences. We've got a 262 00:12:09,000 --> 00:12:11,120 Speaker 1: bunch of domains, and we staff them with people who 263 00:12:11,160 --> 00:12:14,080 Speaker 1: are super deep in those domains and so within those areas, 264 00:12:14,160 --> 00:12:16,440 Speaker 1: you know they will go very deep. But then collectively, 265 00:12:16,480 --> 00:12:19,040 Speaker 1: as part of a portfolio, you get the diversification associated 266 00:12:19,040 --> 00:12:22,640 Speaker 1: with uh, you know, the multidimensions. So here's a data 267 00:12:22,720 --> 00:12:25,960 Speaker 1: point from the book that blew my mind. Quote, venture 268 00:12:26,040 --> 00:12:30,160 Speaker 1: capital is not an especially good investment. As of seventeen 269 00:12:30,960 --> 00:12:34,640 Speaker 1: ten year returns pro vincial capital as an in the aggregate, 270 00:12:34,720 --> 00:12:37,680 Speaker 1: not specific funds, but in the aggregate was a hundred 271 00:12:37,720 --> 00:12:41,120 Speaker 1: and sixty basis points below the NASDAC. So for eight bucks, 272 00:12:41,120 --> 00:12:42,719 Speaker 1: I could have gone out and bought the q q 273 00:12:42,920 --> 00:12:47,560 Speaker 1: q s and outperformed the average event vcs. That's amazing. 274 00:12:47,600 --> 00:12:50,040 Speaker 1: It is amazing, and it's it's a weird asset class 275 00:12:50,040 --> 00:12:53,120 Speaker 1: in that regard, which is the variance between good performance 276 00:12:53,200 --> 00:12:55,439 Speaker 1: and bad performance is really high, like sometimes as much 277 00:12:55,480 --> 00:12:58,600 Speaker 1: as you know, almost thirty five four thousand basis points right, 278 00:12:58,800 --> 00:13:02,040 Speaker 1: thirty five to forty return difference. And I think it's 279 00:13:02,040 --> 00:13:04,320 Speaker 1: a function of the fact that most of this business 280 00:13:04,480 --> 00:13:07,679 Speaker 1: is largely a zero sum game. In each round of financing. 281 00:13:07,679 --> 00:13:09,200 Speaker 1: And what I mean by that is if we do 282 00:13:09,280 --> 00:13:11,120 Speaker 1: the A round, which is kind of the first institution 283 00:13:11,120 --> 00:13:13,600 Speaker 1: of around for a deal, generally, that means, you know, 284 00:13:13,720 --> 00:13:15,679 Speaker 1: we're the only ones who do that. There might be 285 00:13:15,720 --> 00:13:18,040 Speaker 1: some other people, but usually one venture firm will be 286 00:13:18,040 --> 00:13:21,600 Speaker 1: the major, major investor there, and once that opportunity is done, 287 00:13:21,640 --> 00:13:24,679 Speaker 1: there will never be another A round in Facebook, for example, right, 288 00:13:24,720 --> 00:13:27,120 Speaker 1: so you know, Excel, who's you know, very good firm 289 00:13:27,280 --> 00:13:30,080 Speaker 1: invest in the A round of Facebook. The next opportunity 290 00:13:30,120 --> 00:13:32,640 Speaker 1: that somebody had to invest was that some multiple evaluations 291 00:13:32,640 --> 00:13:34,520 Speaker 1: to hired in that. So those still turned out to 292 00:13:34,520 --> 00:13:37,040 Speaker 1: be obviously very good investments. But there is this kind 293 00:13:37,040 --> 00:13:40,280 Speaker 1: of nature that you know when a round happens. It 294 00:13:40,320 --> 00:13:43,079 Speaker 1: often accrues to one individual or one firm, and then 295 00:13:43,160 --> 00:13:45,400 Speaker 1: you know kind of things. You know, fundraise every eighteen 296 00:13:45,480 --> 00:13:47,600 Speaker 1: or twenty four months, and so the next investor obviously 297 00:13:47,600 --> 00:13:49,280 Speaker 1: always comes in at a higher price. So when I 298 00:13:49,360 --> 00:13:52,400 Speaker 1: look at the world of stocks for mutual funds, it's 299 00:13:52,440 --> 00:13:56,240 Speaker 1: a sort of Gaussian Bell curve distribution where you know 300 00:13:56,360 --> 00:13:59,319 Speaker 1: the extremes on either and get rid of them, there's 301 00:13:59,320 --> 00:14:03,000 Speaker 1: a big distribution in the middle. What you're describing doesn't 302 00:14:03,040 --> 00:14:04,920 Speaker 1: sound like that, that's exactly right. So you know, the 303 00:14:05,040 --> 00:14:06,600 Speaker 1: term that you may hear people use is kind of 304 00:14:06,640 --> 00:14:08,480 Speaker 1: called a power lock cerve, right, And what a power 305 00:14:08,480 --> 00:14:11,000 Speaker 1: lock cerve is is you've got a very small number 306 00:14:11,040 --> 00:14:13,400 Speaker 1: of that headlong that's exactly right. You've got a few 307 00:14:13,400 --> 00:14:15,040 Speaker 1: things that drive all the return that You've got this 308 00:14:15,080 --> 00:14:17,240 Speaker 1: long tail of a bunch of stuff that quite frankly 309 00:14:17,240 --> 00:14:19,680 Speaker 1: doesn't amount to much from a returns perspective. And we 310 00:14:19,760 --> 00:14:22,640 Speaker 1: see the same thing in private equity and hedge funds 311 00:14:22,680 --> 00:14:24,280 Speaker 1: as well. It is funny though, actually, you know, you 312 00:14:24,280 --> 00:14:26,240 Speaker 1: mentioned kind of the public markets. It's actually interesting. There's 313 00:14:26,240 --> 00:14:27,600 Speaker 1: been a bunch of studies though, have laid on the 314 00:14:27,640 --> 00:14:29,680 Speaker 1: public markets, which is it turns out they actually are 315 00:14:29,760 --> 00:14:32,280 Speaker 1: more power law than I think people understand. I think 316 00:14:32,320 --> 00:14:35,880 Speaker 1: the number is four percent of stocks drive pretty much. 317 00:14:35,920 --> 00:14:39,480 Speaker 1: I think that's exactly the returns out there. It's so 318 00:14:39,520 --> 00:14:42,200 Speaker 1: good luck picking those four if you have a time machine, 319 00:14:42,200 --> 00:14:45,480 Speaker 1: it's really exactly right. Yeah, let's talk a little bit 320 00:14:45,520 --> 00:14:50,200 Speaker 1: about some of the changes that you've witnessed in the industry. 321 00:14:50,280 --> 00:14:53,040 Speaker 1: In the book, you talk about why Combinator and why 322 00:14:53,120 --> 00:14:57,160 Speaker 1: that was so influential and really changed the game for 323 00:14:57,800 --> 00:15:01,240 Speaker 1: um the VC world. Explain into the lay person what 324 00:15:01,320 --> 00:15:05,440 Speaker 1: why combinator is and why why did it matter so much? Yeah, So, 325 00:15:05,440 --> 00:15:08,160 Speaker 1: why combinator is what we call an incubator, which means 326 00:15:08,200 --> 00:15:11,040 Speaker 1: they basically kind of take usually a cohort of companies 327 00:15:11,080 --> 00:15:13,520 Speaker 1: that can be anywhere from thirty fifty sometimes as big 328 00:15:13,520 --> 00:15:16,240 Speaker 1: as a hundred companies, and they kind of they basically 329 00:15:16,280 --> 00:15:18,680 Speaker 1: start their business inside of y combinator. They go that's 330 00:15:18,680 --> 00:15:21,120 Speaker 1: where they go to the work. They work on a project, 331 00:15:21,200 --> 00:15:24,080 Speaker 1: they build, they build a product, they get tutorials and 332 00:15:24,160 --> 00:15:26,000 Speaker 1: kind of you know, kind of tutelage from other people, 333 00:15:26,160 --> 00:15:28,160 Speaker 1: and then they kind of pop out the other end 334 00:15:28,160 --> 00:15:30,280 Speaker 1: and hopefully they're ready to go raise you know, money 335 00:15:30,320 --> 00:15:31,800 Speaker 1: as a result of that. So it's kind of, you know, 336 00:15:32,240 --> 00:15:34,320 Speaker 1: almost a finishing school to a certain extent to kind 337 00:15:34,320 --> 00:15:36,600 Speaker 1: of get this startups ready to kind of be into 338 00:15:36,600 --> 00:15:39,520 Speaker 1: the regular financing world now. Now, and Reeson was an 339 00:15:39,560 --> 00:15:43,080 Speaker 1: investor in White Combinator, or an investor in White Combinator's 340 00:15:43,160 --> 00:15:46,000 Speaker 1: funds in White Commaters companies directly. Actually, so a couple 341 00:15:46,040 --> 00:15:47,880 Speaker 1: of years ago when we first started kind of I 342 00:15:47,880 --> 00:15:50,400 Speaker 1: think from two thousand ten to two thousand twelve, when 343 00:15:50,440 --> 00:15:52,960 Speaker 1: companies would go into Y Combinator, they would get some money. 344 00:15:53,000 --> 00:15:54,560 Speaker 1: We were one of a few firms that used to 345 00:15:54,560 --> 00:15:58,520 Speaker 1: give them some money. So we would invest small amounts dollars, 346 00:15:58,880 --> 00:16:01,040 Speaker 1: but in lots of out we just gotta we didn't 347 00:16:01,040 --> 00:16:02,760 Speaker 1: have discretion at that point in time. It's like, look, 348 00:16:03,000 --> 00:16:05,080 Speaker 1: everybody who comes in, you're entitled to take this money 349 00:16:05,120 --> 00:16:07,160 Speaker 1: if you want it. And then obviously, look if we 350 00:16:07,240 --> 00:16:08,600 Speaker 1: you know, if we really were interested in the company, 351 00:16:08,600 --> 00:16:10,320 Speaker 1: we could put more money in later in a normal 352 00:16:10,360 --> 00:16:14,040 Speaker 1: financing round. So so why did they change the entire 353 00:16:14,400 --> 00:16:17,240 Speaker 1: what did that set of you mentioned earlier? There's an 354 00:16:17,240 --> 00:16:22,320 Speaker 1: information asymmetry between the seasoned vcs and the young kids 355 00:16:22,400 --> 00:16:26,120 Speaker 1: running these startups. How did this level the playing field? 356 00:16:26,160 --> 00:16:28,840 Speaker 1: They just kind of learned the ropes. It's really interesting 357 00:16:28,840 --> 00:16:30,120 Speaker 1: what happened. So I think the way to think about 358 00:16:30,200 --> 00:16:33,280 Speaker 1: VC is the first thirty five forty years a VC 359 00:16:33,320 --> 00:16:35,640 Speaker 1: called it kind of early nineteen seventies to about two 360 00:16:35,680 --> 00:16:38,240 Speaker 1: thousand five, which is when YE kinda started. You know, 361 00:16:38,360 --> 00:16:41,520 Speaker 1: you can think about it as capital was a scarce resource. 362 00:16:42,080 --> 00:16:44,200 Speaker 1: The vcs had it, and there therefore, if you looked 363 00:16:44,200 --> 00:16:45,960 Speaker 1: at the power dynamic, kind of the VC has had 364 00:16:45,960 --> 00:16:48,160 Speaker 1: the power and the entrepreneur's had less. With the gatekeeper 365 00:16:48,200 --> 00:16:51,080 Speaker 1: if the money, you had to go to Sandhill Road 366 00:16:51,080 --> 00:16:52,760 Speaker 1: and you had to go get the money, right, And 367 00:16:52,880 --> 00:16:55,600 Speaker 1: two big things happened. One is y C, which will 368 00:16:55,640 --> 00:16:58,040 Speaker 1: come back. Sorry, that's short for Ye Combinator. Uh. And 369 00:16:58,080 --> 00:17:00,440 Speaker 1: then the second is the amount of money that it 370 00:17:00,520 --> 00:17:03,800 Speaker 1: required to start a business continue to fall pretty precipitously, 371 00:17:03,840 --> 00:17:05,840 Speaker 1: starting in kind of late nineties, and you know, still 372 00:17:05,840 --> 00:17:09,680 Speaker 1: continuing to today. Right. So, so fiber optics, cloud all 373 00:17:09,680 --> 00:17:13,080 Speaker 1: that stuff meant with storage, you didn't need a whole 374 00:17:13,080 --> 00:17:15,560 Speaker 1: team and a joint server farm. You needed two guys 375 00:17:15,560 --> 00:17:17,440 Speaker 1: in a laptop pretty much. And you can go to 376 00:17:17,680 --> 00:17:19,360 Speaker 1: now you can go to Amazon Web Services, of course, 377 00:17:19,400 --> 00:17:21,000 Speaker 1: and get stuff that used to cost you five or 378 00:17:21,040 --> 00:17:23,359 Speaker 1: ten million dollars of capital expenditures years ago. I mean 379 00:17:23,400 --> 00:17:25,480 Speaker 1: when we were in Loudcloud. That's basically what we did. 380 00:17:25,480 --> 00:17:28,080 Speaker 1: We raised money from the venture capitalists and we basically 381 00:17:28,119 --> 00:17:30,840 Speaker 1: then handed it over to companies that nobody remembers any more. 382 00:17:30,880 --> 00:17:34,399 Speaker 1: Sun Microsystems, we misovers from you know, Oracle Databases. Uh, 383 00:17:34,480 --> 00:17:36,119 Speaker 1: you know all that stuff. Now you basically get in 384 00:17:36,160 --> 00:17:39,160 Speaker 1: a box on demand from Amazon for you know, ten 385 00:17:39,160 --> 00:17:42,919 Speaker 1: dollars like yig or whatever the price. So what happened 386 00:17:42,960 --> 00:17:45,320 Speaker 1: was right, that started to happen, which meant you could 387 00:17:45,359 --> 00:17:47,800 Speaker 1: now start companies for a lot less money. And therefore 388 00:17:47,960 --> 00:17:49,800 Speaker 1: a lot of these seed firms that we're now seeing 389 00:17:49,880 --> 00:17:51,720 Speaker 1: kind of came into the mix. So we've seen a 390 00:17:51,760 --> 00:17:54,320 Speaker 1: lot of new seeds. In fact, something like five hundred 391 00:17:54,320 --> 00:17:56,160 Speaker 1: new firms over the last ten years have come into 392 00:17:56,160 --> 00:18:00,359 Speaker 1: the seed market as companies seating startups exactly right, Yes, 393 00:18:00,400 --> 00:18:02,600 Speaker 1: so kind of firms like US firms like Entries and Horrowits, 394 00:18:02,600 --> 00:18:04,280 Speaker 1: but just kind of smaller versions of it. Right, So 395 00:18:04,320 --> 00:18:07,160 Speaker 1: a hundred million dollar funds instead of seven hundred billion 396 00:18:07,240 --> 00:18:10,040 Speaker 1: dollar funds. So you have kind of that phenomenon, right, 397 00:18:10,080 --> 00:18:12,520 Speaker 1: which is the amount of capital goes down. And then 398 00:18:12,560 --> 00:18:14,880 Speaker 1: you have the second phenomenon, which is why Combinator comes 399 00:18:14,880 --> 00:18:17,560 Speaker 1: along and says, hey, we're gonna try to actually really 400 00:18:17,680 --> 00:18:20,480 Speaker 1: quite frankly educate a lot of entrepreneurs about the whole 401 00:18:20,480 --> 00:18:22,800 Speaker 1: startup process. And so take a little bit what was 402 00:18:22,840 --> 00:18:25,000 Speaker 1: a very black box process and hopefully, you know, open 403 00:18:25,040 --> 00:18:27,879 Speaker 1: the kimono a little bit and uh, and that changed 404 00:18:27,880 --> 00:18:30,800 Speaker 1: that information and start to change that information symmetry. And 405 00:18:30,840 --> 00:18:33,320 Speaker 1: so that really changed the competitive dynamics in this business 406 00:18:33,320 --> 00:18:34,919 Speaker 1: because it used to be that if you were a 407 00:18:34,960 --> 00:18:38,280 Speaker 1: traditional two D and fifty million dollar venture capital firm 408 00:18:38,280 --> 00:18:40,680 Speaker 1: in this business, you were the first money in, right, 409 00:18:40,680 --> 00:18:43,120 Speaker 1: so you kind of controlled access to that. Now you're 410 00:18:43,160 --> 00:18:45,679 Speaker 1: living in an environment where capital is plentiful. You know, 411 00:18:45,880 --> 00:18:48,440 Speaker 1: you're no longer the gatekeeper capital. And oh, by the way, 412 00:18:48,440 --> 00:18:50,800 Speaker 1: there's these five hundred new firms that are being started 413 00:18:51,000 --> 00:18:52,960 Speaker 1: that are kind of upstream of you, right, they're building 414 00:18:52,960 --> 00:18:55,400 Speaker 1: a relationship with the entrepreneur before you. And then there's 415 00:18:55,440 --> 00:18:57,840 Speaker 1: this kind of behemoth called Why Combinator that's also kind 416 00:18:57,840 --> 00:19:00,719 Speaker 1: of effectively now becoming a gatekeeper, right, because they are 417 00:19:00,800 --> 00:19:02,199 Speaker 1: kind of a funnel through which a lot of these 418 00:19:02,200 --> 00:19:04,960 Speaker 1: companies flow. And so the net of both of those 419 00:19:05,119 --> 00:19:07,760 Speaker 1: is it really just started to dramatically change the environment 420 00:19:07,760 --> 00:19:10,080 Speaker 1: for venture capital. And that was the opportunity that we 421 00:19:10,119 --> 00:19:12,480 Speaker 1: saw when we started Injurasing Horowitz in two thousand nine, 422 00:19:12,520 --> 00:19:14,600 Speaker 1: was to take advantage of that kind of changing of 423 00:19:14,680 --> 00:19:18,160 Speaker 1: the guard. So are are these seed funds and and 424 00:19:18,160 --> 00:19:23,760 Speaker 1: and y c. Is this changing the quantity of new startups? 425 00:19:23,840 --> 00:19:28,199 Speaker 1: Is it impacting the quality? Are we deluding the talent 426 00:19:28,480 --> 00:19:30,879 Speaker 1: or is it just Nope, it's a fire hose and 427 00:19:30,920 --> 00:19:33,800 Speaker 1: the more the merrier. Yeah, it's so I think for 428 00:19:33,920 --> 00:19:35,879 Speaker 1: right now it's a fire hose and the more the merrier. 429 00:19:35,960 --> 00:19:37,760 Speaker 1: So what it does mean is you can have a 430 00:19:37,800 --> 00:19:40,879 Speaker 1: lot of experimentation happening for very little amounts of money. 431 00:19:41,000 --> 00:19:42,520 Speaker 1: And look, I think that's a great thing. It's a 432 00:19:42,520 --> 00:19:44,880 Speaker 1: great thing for entrepreneurship, it's a great thing for the industry. 433 00:19:45,200 --> 00:19:48,560 Speaker 1: What's interesting, though, is the funnel does narrow, which is 434 00:19:48,600 --> 00:19:50,400 Speaker 1: if you look at kind of seed deals, right we're 435 00:19:50,400 --> 00:19:52,760 Speaker 1: talking about there's been there's a lot of those the moneys, 436 00:19:52,840 --> 00:19:54,560 Speaker 1: you know, there's a lot of money there the number 437 00:19:54,600 --> 00:19:56,560 Speaker 1: of deals has grown a lot. I don't know what 438 00:19:56,560 --> 00:19:58,679 Speaker 1: the exact numbers are, if something something like four or 439 00:19:58,680 --> 00:20:00,520 Speaker 1: five times over the last you know, ten years, in 440 00:20:00,560 --> 00:20:01,920 Speaker 1: terms of kind of you looked at it from point 441 00:20:01,960 --> 00:20:05,720 Speaker 1: A to point B. So there's this vision of VCS 442 00:20:05,880 --> 00:20:09,840 Speaker 1: is kind of a glamorous lifestyle. Uh, you know when 443 00:20:09,920 --> 00:20:14,760 Speaker 1: when we watch movies like The Social Network or my 444 00:20:14,840 --> 00:20:19,360 Speaker 1: favorite show on HBO, Silicon Valley, which full disclosure, one 445 00:20:19,400 --> 00:20:23,680 Speaker 1: of your partners was consulting with them early on. Um, 446 00:20:24,920 --> 00:20:31,640 Speaker 1: there's a certain degree of glamour, wealth riches and just 447 00:20:31,800 --> 00:20:38,800 Speaker 1: cutting edge technology and making decisions that affects how technology develops. 448 00:20:39,240 --> 00:20:42,359 Speaker 1: I get the sense from your book it's a little 449 00:20:42,400 --> 00:20:45,560 Speaker 1: grittier than that. It's a little more hard work and 450 00:20:46,280 --> 00:20:50,679 Speaker 1: long days and late nights and not all fun and games. 451 00:20:51,000 --> 00:20:52,840 Speaker 1: Well look, I think like any job, it's not all 452 00:20:52,920 --> 00:20:55,080 Speaker 1: fun and games. And and let me make sure it'll 453 00:20:55,080 --> 00:20:56,960 Speaker 1: be very clear though, which is nobody should take out 454 00:20:56,960 --> 00:20:59,119 Speaker 1: their little violence for the venture capitalists. Okay, right, I 455 00:20:59,119 --> 00:21:01,399 Speaker 1: mean you know all their kids, you know, have shoes, 456 00:21:01,440 --> 00:21:03,159 Speaker 1: they all go to school, they all get fed, right, 457 00:21:03,240 --> 00:21:06,080 Speaker 1: they do have shoes, you know. It is I certainly 458 00:21:06,480 --> 00:21:08,560 Speaker 1: even if it's not as glamorous has depicted on TV. 459 00:21:08,680 --> 00:21:11,000 Speaker 1: We should be very it's still it's still a pretty 460 00:21:11,000 --> 00:21:12,960 Speaker 1: good place to be. I mean, look, the reality is 461 00:21:13,160 --> 00:21:15,639 Speaker 1: the real heavy lifting gets done on the entrepreneur side, right, 462 00:21:15,640 --> 00:21:18,200 Speaker 1: So we shouldn't kid ourselves in our business, and we 463 00:21:18,280 --> 00:21:20,560 Speaker 1: certainly try not to, which is as much as we 464 00:21:20,600 --> 00:21:22,359 Speaker 1: want to be you know, kind of finance partners and 465 00:21:22,359 --> 00:21:24,480 Speaker 1: then hopefully add value in other ways to these companies. 466 00:21:24,680 --> 00:21:26,959 Speaker 1: The heavy lifting is all being done by the entrepreneurs. 467 00:21:27,440 --> 00:21:29,159 Speaker 1: I think the part maybe that you're talking about, that's, 468 00:21:29,240 --> 00:21:31,160 Speaker 1: you know, the less glamor part is look like any 469 00:21:31,160 --> 00:21:32,960 Speaker 1: other job, it's competitive, right, and you've got to go 470 00:21:33,000 --> 00:21:35,600 Speaker 1: work hard. It's a question of the real question at 471 00:21:35,600 --> 00:21:37,800 Speaker 1: the end of the day is why is an entrepreneur 472 00:21:37,800 --> 00:21:39,639 Speaker 1: gonna pick you versus any of the other firms that 473 00:21:39,680 --> 00:21:41,760 Speaker 1: they can pick And and that's a big sea change 474 00:21:41,760 --> 00:21:43,560 Speaker 1: in the in the business that just didn't exist in 475 00:21:43,560 --> 00:21:45,680 Speaker 1: the same way in the first thirty thirty five years. 476 00:21:45,960 --> 00:21:48,080 Speaker 1: You know, when the vcs had all the capital, they 477 00:21:48,119 --> 00:21:49,720 Speaker 1: had a lot more control and a lot more power. 478 00:21:49,840 --> 00:21:51,679 Speaker 1: And you know, now we're dealing with you know what 479 00:21:51,720 --> 00:21:53,239 Speaker 1: I think is a very healthy kind of you know, 480 00:21:53,400 --> 00:21:56,120 Speaker 1: changing of the garden some respects. But you know, vcs 481 00:21:56,119 --> 00:21:59,040 Speaker 1: don't control boards anymore like they used to, which you know, 482 00:21:59,480 --> 00:22:01,439 Speaker 1: we've you still get a seat on the board if 483 00:22:01,440 --> 00:22:03,040 Speaker 1: you're if you're gonna do an a round and make 484 00:22:03,080 --> 00:22:06,960 Speaker 1: a special investment, I would imagine you want some input 485 00:22:07,040 --> 00:22:10,000 Speaker 1: into the management and some ability to watch how the 486 00:22:10,000 --> 00:22:12,159 Speaker 1: money is being spent. That's exactly right. So yeah, typically 487 00:22:12,160 --> 00:22:14,479 Speaker 1: we will have a board seat, um, and then typically 488 00:22:14,560 --> 00:22:16,040 Speaker 1: we will have kind of a set of rights that 489 00:22:16,080 --> 00:22:17,800 Speaker 1: go along with our stock that says, hey, if you're 490 00:22:17,800 --> 00:22:19,960 Speaker 1: going to raise money, you have to let us vote 491 00:22:19,960 --> 00:22:21,600 Speaker 1: to say yea or a. Or if you're gonna sell 492 00:22:21,640 --> 00:22:23,399 Speaker 1: the company, we have some ability to kind of have 493 00:22:23,440 --> 00:22:25,480 Speaker 1: a say. Uh in the you know, in the old 494 00:22:25,560 --> 00:22:28,119 Speaker 1: days and I was doing air quotes there. Um, you know, 495 00:22:28,359 --> 00:22:30,320 Speaker 1: the venture capitalists in addition to that, used to kind 496 00:22:30,320 --> 00:22:32,399 Speaker 1: of control the board, meaning that there used to be 497 00:22:32,440 --> 00:22:35,200 Speaker 1: more venture capital board seats on the board than there 498 00:22:35,240 --> 00:22:38,200 Speaker 1: were founder seats. And you know that's in some ways 499 00:22:38,200 --> 00:22:40,320 Speaker 1: why I think, you know, some of the reputation that 500 00:22:40,320 --> 00:22:42,560 Speaker 1: the industry had was, hey, some of these guys can 501 00:22:42,600 --> 00:22:45,119 Speaker 1: get trigger happy sometimes on kicking CEOs out of the 502 00:22:45,119 --> 00:22:48,760 Speaker 1: business and kicking founders out. That dynamic has really dramatically 503 00:22:48,800 --> 00:22:51,040 Speaker 1: changed over the last ten years, and we see more 504 00:22:51,040 --> 00:22:54,200 Speaker 1: and more boards where the founders kind of control them 505 00:22:54,200 --> 00:22:56,159 Speaker 1: in the sense that they have more board seats, and 506 00:22:56,160 --> 00:22:58,720 Speaker 1: it does change the dynamic of the working relationship between them. 507 00:22:58,800 --> 00:23:01,280 Speaker 1: So you mentioned that pital used to be scarce and 508 00:23:01,320 --> 00:23:05,760 Speaker 1: now it seems pretty plentiful. So I wanna explore that 509 00:23:05,840 --> 00:23:10,159 Speaker 1: and try and figure out how that has impacted UM 510 00:23:10,359 --> 00:23:13,560 Speaker 1: markets and and startups. What are there now about five 511 00:23:13,640 --> 00:23:18,240 Speaker 1: hundred unicorns private companies that are a billion dollar valuation? 512 00:23:19,240 --> 00:23:23,119 Speaker 1: Is that reflecting plentiful capital. Some people have called it 513 00:23:23,160 --> 00:23:27,240 Speaker 1: a bubble. I'm not sure that's the right description. We 514 00:23:27,760 --> 00:23:29,800 Speaker 1: have not, by the way, So we've been we've been, 515 00:23:29,840 --> 00:23:31,440 Speaker 1: you know, on record at this that I do think 516 00:23:31,680 --> 00:23:34,800 Speaker 1: if you're talking about this compared to the bubble, it's 517 00:23:34,920 --> 00:23:36,400 Speaker 1: very different. You know, you and I were talking about 518 00:23:36,400 --> 00:23:39,000 Speaker 1: this before we started, So give you a perspective. Right, 519 00:23:40,480 --> 00:23:42,080 Speaker 1: seven hundred plus I p o s in the tech 520 00:23:42,080 --> 00:23:45,720 Speaker 1: industry in those two years. The median revenue, which I 521 00:23:45,960 --> 00:23:47,800 Speaker 1: didn't realize until I looked this up to confirm it, 522 00:23:47,920 --> 00:23:50,679 Speaker 1: seventeen million dollars, right, you're talking about companies going public 523 00:23:51,600 --> 00:23:54,000 Speaker 1: seventeen million dollars of revenue right now, you know we 524 00:23:54,080 --> 00:23:56,560 Speaker 1: haven't We haven't done seven hundred. We haven't even done 525 00:23:56,600 --> 00:23:58,479 Speaker 1: four hundred I p o s over the last ten 526 00:23:58,560 --> 00:24:00,119 Speaker 1: years in the last decade, right, I mean, we been 527 00:24:00,119 --> 00:24:02,560 Speaker 1: doing about thirty maybe fifty a year, so we had 528 00:24:02,560 --> 00:24:04,119 Speaker 1: a long way to go. And we look look at 529 00:24:04,160 --> 00:24:09,320 Speaker 1: the revenue it we Works or Uber, it's pretty media number. 530 00:24:09,320 --> 00:24:10,720 Speaker 1: I think the last I look for the last ten 531 00:24:10,800 --> 00:24:14,000 Speaker 1: years is about a hundred and seventy million. But X, yeah, 532 00:24:14,000 --> 00:24:15,680 Speaker 1: it's sent X right. But I think that even really 533 00:24:15,720 --> 00:24:17,639 Speaker 1: understates it, right. I mean you've got companies right like 534 00:24:17,680 --> 00:24:19,320 Speaker 1: Lift and Uber and others right that are you know, 535 00:24:19,320 --> 00:24:21,359 Speaker 1: they're going public with billions of dollars of revenue. So 536 00:24:21,440 --> 00:24:23,760 Speaker 1: it's a very very different world. Um. But to your 537 00:24:23,840 --> 00:24:26,200 Speaker 1: question though about kind of you know, how much capitals 538 00:24:26,200 --> 00:24:28,880 Speaker 1: out there? Uh, it is true. There's a lot of capital. Uh. 539 00:24:28,880 --> 00:24:30,480 Speaker 1: And it's kind of a little bit of a tail 540 00:24:30,560 --> 00:24:32,119 Speaker 1: of two cities, which is you have a lot of 541 00:24:32,160 --> 00:24:34,440 Speaker 1: capital at the seed stage, right, And we talked about 542 00:24:34,480 --> 00:24:36,520 Speaker 1: that a little bit. Now it's it's not a lot 543 00:24:36,600 --> 00:24:38,679 Speaker 1: in the total scheme of things in the sense that 544 00:24:38,720 --> 00:24:41,399 Speaker 1: it's about six five six percent of capital total in 545 00:24:41,440 --> 00:24:43,720 Speaker 1: the venture capital world of seeds. So it's grown a 546 00:24:43,720 --> 00:24:45,200 Speaker 1: lot over the years, but it's not you know, we're 547 00:24:45,200 --> 00:24:48,440 Speaker 1: not talking of the capital. And then you have kind 548 00:24:48,440 --> 00:24:50,200 Speaker 1: of the A and the B rounds have kind of 549 00:24:50,640 --> 00:24:52,399 Speaker 1: not moved that much. They've moved a little bit, but 550 00:24:52,400 --> 00:24:54,000 Speaker 1: there's a little bit more capital. And then you have 551 00:24:54,080 --> 00:24:56,560 Speaker 1: this big influx of capital in the kind of call 552 00:24:56,640 --> 00:24:59,439 Speaker 1: at the C plus rounds like late stage pre I 553 00:24:59,520 --> 00:25:02,359 Speaker 1: p O rounds that maybe twenty years ago would have 554 00:25:02,400 --> 00:25:04,880 Speaker 1: been public instead of a private That's exactly right. So 555 00:25:05,119 --> 00:25:07,119 Speaker 1: the best way to see this is it used to 556 00:25:07,119 --> 00:25:09,040 Speaker 1: be the case that from founding of a company to 557 00:25:09,119 --> 00:25:11,120 Speaker 1: I PO it was about six six and a half 558 00:25:11,200 --> 00:25:13,640 Speaker 1: years is typically what it used to be. Today that's 559 00:25:13,640 --> 00:25:16,000 Speaker 1: about ten to twelve years. So you've pretty much basically 560 00:25:16,040 --> 00:25:18,760 Speaker 1: doubled in the last decade the time it's taking for 561 00:25:18,840 --> 00:25:21,399 Speaker 1: companies go public. And you're exactly right. So what's happening 562 00:25:21,480 --> 00:25:23,720 Speaker 1: is you've got all this capital that used to be 563 00:25:23,760 --> 00:25:25,880 Speaker 1: in the public markets that's now saying, hey, we want 564 00:25:25,920 --> 00:25:28,119 Speaker 1: some of that growth, right, we want these growth companies 565 00:25:28,119 --> 00:25:30,280 Speaker 1: because we're not getting in the public markets, and that 566 00:25:30,359 --> 00:25:32,960 Speaker 1: capital now is coming into the private markets, and that's 567 00:25:32,960 --> 00:25:35,040 Speaker 1: what's driving these very very large rounds you see in 568 00:25:35,040 --> 00:25:38,280 Speaker 1: the private markets. So here's another interesting stat from the book. 569 00:25:38,320 --> 00:25:41,600 Speaker 1: I thought it was fascinating. Fifteen of the biggest twenty 570 00:25:41,600 --> 00:25:45,639 Speaker 1: five I p o s in we're from companies that 571 00:25:45,720 --> 00:25:49,240 Speaker 1: had no profits. So how should we be thinking about 572 00:25:49,960 --> 00:25:55,320 Speaker 1: young companies that basically, you know, are are losing a 573 00:25:55,320 --> 00:25:58,040 Speaker 1: little money. The joke is Uber Ludes loses a little 574 00:25:58,040 --> 00:26:00,560 Speaker 1: money on each ride, but they make it up in right, 575 00:26:00,600 --> 00:26:03,800 Speaker 1: So how do we think about these companies that are 576 00:26:04,000 --> 00:26:08,520 Speaker 1: growing rapidly and have nice revenue but are far away 577 00:26:08,560 --> 00:26:11,040 Speaker 1: from profitability. So I think the way you have to 578 00:26:11,080 --> 00:26:12,359 Speaker 1: think about it and look the way you have if 579 00:26:12,359 --> 00:26:14,239 Speaker 1: you're if you're getting comfortable investing in them. The way 580 00:26:14,240 --> 00:26:15,840 Speaker 1: you have to think about it is you have to 581 00:26:15,880 --> 00:26:18,040 Speaker 1: look at kind of what we call the unit economics, right, 582 00:26:18,080 --> 00:26:20,520 Speaker 1: So in other words, show me kind of at a 583 00:26:20,520 --> 00:26:23,080 Speaker 1: at a unit level, so at a geographic market level 584 00:26:23,280 --> 00:26:25,520 Speaker 1: or at kind of a per ride level, does the 585 00:26:25,560 --> 00:26:28,760 Speaker 1: business work and are we losing money? And aggregate because 586 00:26:28,800 --> 00:26:31,840 Speaker 1: we are now focused on growth in other markets, and 587 00:26:31,920 --> 00:26:34,520 Speaker 1: when those markets are at a level maturity, you know, 588 00:26:34,600 --> 00:26:37,359 Speaker 1: you will see profitability. So, you know, we're a shareholder 589 00:26:37,359 --> 00:26:40,159 Speaker 1: and left right and so competitive competitive move right. So 590 00:26:40,200 --> 00:26:41,800 Speaker 1: and if you look at left right, you know, my 591 00:26:41,880 --> 00:26:43,520 Speaker 1: impression is when they went out on the road, what 592 00:26:43,560 --> 00:26:45,160 Speaker 1: they probably did is they said, hey, look at our 593 00:26:45,200 --> 00:26:47,840 Speaker 1: mature markets. Look at San Francisco or look at you know, 594 00:26:47,960 --> 00:26:50,320 Speaker 1: Boston or whatever that might be. These are markets that 595 00:26:50,320 --> 00:26:52,840 Speaker 1: are mature, and we can demonstibly show you kind of 596 00:26:52,840 --> 00:26:54,960 Speaker 1: the profits that we actually make in those mature markets. 597 00:26:55,160 --> 00:26:56,320 Speaker 1: And oh, by the way, we've got a bunch of 598 00:26:56,359 --> 00:26:59,000 Speaker 1: these immature markets. But if you believe the story right, 599 00:26:59,040 --> 00:27:01,119 Speaker 1: then those immature markets over time will get to the 600 00:27:01,160 --> 00:27:04,240 Speaker 1: same levels of profitability, and then therefore the companies themselves 601 00:27:04,240 --> 00:27:06,200 Speaker 1: are profitable. I think that's the way to think about it, 602 00:27:06,240 --> 00:27:08,040 Speaker 1: and that's what the investors are trying to do. You know, 603 00:27:08,080 --> 00:27:10,240 Speaker 1: it will be incoming obviously upon these companies to actually 604 00:27:10,280 --> 00:27:12,040 Speaker 1: prove that and demonstrate that, you know, kind of the 605 00:27:12,080 --> 00:27:14,760 Speaker 1: story actually matches reality. Here's the question. So we have 606 00:27:14,880 --> 00:27:19,240 Speaker 1: these big, fast, growing, well funded companies that aren't profitable. 607 00:27:20,080 --> 00:27:23,840 Speaker 1: What what happens in the next down cycle? Yeah, well, look, 608 00:27:23,880 --> 00:27:25,399 Speaker 1: I think that's a real question, and I think this 609 00:27:25,480 --> 00:27:27,200 Speaker 1: is why Actually you see in the I p O 610 00:27:27,280 --> 00:27:29,520 Speaker 1: market right now that the I p O s of 611 00:27:29,560 --> 00:27:32,320 Speaker 1: companies are trading differently, I think based upon kind of 612 00:27:32,359 --> 00:27:35,160 Speaker 1: whether they are profitable and or how much cash ultimately 613 00:27:35,160 --> 00:27:37,159 Speaker 1: they are consuming. So if you look at kind of 614 00:27:37,160 --> 00:27:39,399 Speaker 1: the companies that are performed the best, they tend to 615 00:27:39,400 --> 00:27:42,560 Speaker 1: be enterprise software companies like a Zoom for example, or 616 00:27:42,600 --> 00:27:45,240 Speaker 1: you know, we saw lots of sale, right, so they've 617 00:27:45,280 --> 00:27:48,240 Speaker 1: got you know, they're growing fast. They're also profitable businesses, 618 00:27:48,280 --> 00:27:49,960 Speaker 1: and so look in a downturn, you can say, look, 619 00:27:50,000 --> 00:27:52,600 Speaker 1: maybe they don't grow as fast, but they're not. They're 620 00:27:52,600 --> 00:27:54,480 Speaker 1: just not an essential threat to that business, right, so 621 00:27:54,520 --> 00:27:57,399 Speaker 1: people are if you're a CrowdStrike investor, look, people are 622 00:27:57,440 --> 00:27:59,720 Speaker 1: gonna buy security software at some point in time, even 623 00:28:00,000 --> 00:28:02,240 Speaker 1: on turn and so if it slows a little bit 624 00:28:02,320 --> 00:28:03,960 Speaker 1: or if they lose a little bit of money, that's okay, 625 00:28:04,040 --> 00:28:05,679 Speaker 1: not a big deal. And then you know, you do 626 00:28:05,760 --> 00:28:07,840 Speaker 1: see like the Ubers of the world where people say, hey, look, 627 00:28:07,840 --> 00:28:10,600 Speaker 1: you know you're telling us profitability in two thousand twenty three, 628 00:28:11,040 --> 00:28:13,600 Speaker 1: which means you know, you may be reliant on the 629 00:28:13,640 --> 00:28:15,960 Speaker 1: capital markets to raise more capital over that time period. 630 00:28:15,960 --> 00:28:18,320 Speaker 1: I think that's why you tend to see more volatility 631 00:28:18,359 --> 00:28:20,760 Speaker 1: in those kinds of stocks that have this big cash consumption. 632 00:28:21,119 --> 00:28:23,480 Speaker 1: So so we keep I keep coming back to the 633 00:28:23,560 --> 00:28:27,040 Speaker 1: issue of how much capital is slashing around. Let's talk 634 00:28:27,040 --> 00:28:29,680 Speaker 1: a little bit about the Vision funds. What's the Vision 635 00:28:29,720 --> 00:28:33,280 Speaker 1: funds and how is this impacting the landscape out there? Yeah, 636 00:28:33,320 --> 00:28:35,200 Speaker 1: so the Vision Fund is a fund that was raised 637 00:28:35,200 --> 00:28:37,679 Speaker 1: by soft Bank, which is obviously a big Japanese conglomerate, 638 00:28:37,880 --> 00:28:40,320 Speaker 1: and it's huge. It's huge. It's a hundred billion dollars, right, 639 00:28:40,320 --> 00:28:41,800 Speaker 1: and it's it's as far as I know, at least, 640 00:28:41,800 --> 00:28:43,680 Speaker 1: it's certainly the biggest fund that I've heard of that's, 641 00:28:44,040 --> 00:28:46,400 Speaker 1: you know, effectively a fund structure investing in you know, 642 00:28:46,440 --> 00:28:49,200 Speaker 1: private equity and adventure backed companies. Now, I know you 643 00:28:49,440 --> 00:28:52,160 Speaker 1: probably don't want to bash a competitor in your space, 644 00:28:52,680 --> 00:28:56,200 Speaker 1: but I imagine that much money in the hands of 645 00:28:56,280 --> 00:28:59,640 Speaker 1: humans and they're just dolling it out willy nilly and 646 00:28:59,720 --> 00:29:01,840 Speaker 1: over paying for stuff and saying, hey, I got a 647 00:29:01,920 --> 00:29:04,520 Speaker 1: hundred billion dollars to deploy, go out and find some 648 00:29:04,560 --> 00:29:08,800 Speaker 1: more companies. I'm exaggerating a little bit, but is there 649 00:29:08,840 --> 00:29:11,600 Speaker 1: any truth to that. Well, it's interesting. So a couple 650 00:29:11,640 --> 00:29:13,680 Speaker 1: of years ago, SoftBank was kind of a class of one, 651 00:29:13,760 --> 00:29:16,280 Speaker 1: right they were. They were the eight hundred pound guerrilla, right. 652 00:29:16,320 --> 00:29:19,160 Speaker 1: There was nobody else of that scale. And look they 653 00:29:19,160 --> 00:29:22,080 Speaker 1: had they had. You know, look, people people do what 654 00:29:22,120 --> 00:29:23,920 Speaker 1: their incentives are, right, which is so if you worked 655 00:29:23,920 --> 00:29:26,520 Speaker 1: at the SoftBank Vision Fund, clearly your your incentive was 656 00:29:26,560 --> 00:29:29,440 Speaker 1: to go invest money. Now, whether they were overpaying or 657 00:29:29,440 --> 00:29:31,600 Speaker 1: to only an outlook, I mean, time will tell, obviously, 658 00:29:31,720 --> 00:29:33,360 Speaker 1: and you know they did. They do have a different 659 00:29:33,440 --> 00:29:35,720 Speaker 1: kind of cost of capital, right, In other words, they're 660 00:29:35,720 --> 00:29:37,840 Speaker 1: not trying to necessarily get a three x or a 661 00:29:37,880 --> 00:29:39,920 Speaker 1: five x return on a company. Uh, they have a 662 00:29:39,920 --> 00:29:42,080 Speaker 1: lower kind of return hurdle. So in theory, they could 663 00:29:42,080 --> 00:29:44,160 Speaker 1: afford to pay more than maybe somebody like us could 664 00:29:44,200 --> 00:29:46,880 Speaker 1: pay for the same business. Because we have to deliver 665 00:29:46,920 --> 00:29:49,680 Speaker 1: a higher rate of return. You have to be more efficient. 666 00:29:49,800 --> 00:29:53,080 Speaker 1: They have the luxury of not I'm not caring about that. 667 00:29:53,680 --> 00:29:55,680 Speaker 1: It's not that we have to be more efficient, it's 668 00:29:55,720 --> 00:29:58,920 Speaker 1: that we are. Our investors say, look for you to 669 00:29:58,960 --> 00:30:02,200 Speaker 1: stay in business, we want to see three times our 670 00:30:02,240 --> 00:30:05,600 Speaker 1: money being returned in every fun cycle basis for ten 671 00:30:05,680 --> 00:30:09,680 Speaker 1: years right, So give us three times your money, you know, 672 00:30:09,720 --> 00:30:12,600 Speaker 1: which probably means somewhere between twenty five and three, you know, 673 00:30:12,680 --> 00:30:16,360 Speaker 1: kind of I r R S right annualized returns. Uh. Yeah, 674 00:30:16,360 --> 00:30:18,000 Speaker 1: if you do that, look we'll keep giving the money. 675 00:30:18,000 --> 00:30:20,200 Speaker 1: You get to play the game again. I mentioned earlier 676 00:30:20,600 --> 00:30:24,880 Speaker 1: you are my third victim from Andrews and Horowitz. Um. 677 00:30:24,920 --> 00:30:27,280 Speaker 1: Not only did I have a nice time talking to 678 00:30:28,280 --> 00:30:31,840 Speaker 1: um Bennett Evans, who has a wonderful newsletter that comes 679 00:30:31,960 --> 00:30:35,360 Speaker 1: out of your shop as well as is it one 680 00:30:35,440 --> 00:30:38,400 Speaker 1: or two podcasts? I think it's probably too at this 681 00:30:38,400 --> 00:30:41,040 Speaker 1: point time. Um, but I had a great time speaking 682 00:30:41,080 --> 00:30:45,560 Speaker 1: with Mark and Reason in your in the Pitch conference room, 683 00:30:46,080 --> 00:30:48,600 Speaker 1: which was fun. And if you listen to that interview, 684 00:30:48,960 --> 00:30:52,560 Speaker 1: you could hear me bang the table and it's pretty 685 00:30:52,640 --> 00:30:56,160 Speaker 1: hilarious because, uh, it was just one of those like 686 00:30:56,880 --> 00:31:01,040 Speaker 1: surreal locations to have do a podcast. And I had 687 00:31:01,040 --> 00:31:03,560 Speaker 1: a number of people email me and say, you know, 688 00:31:03,600 --> 00:31:06,760 Speaker 1: I normally listen at two times regular speed, but this 689 00:31:06,800 --> 00:31:08,760 Speaker 1: guy's talk so fast I couldn't keep up with it. 690 00:31:08,840 --> 00:31:12,120 Speaker 1: I'm like, have you not heard Mark Andreason speak before? 691 00:31:12,640 --> 00:31:16,360 Speaker 1: He just he's like a New Yorker, He's like he 692 00:31:16,480 --> 00:31:19,680 Speaker 1: is a fast speak, right, and a lot of interesting, 693 00:31:19,720 --> 00:31:22,239 Speaker 1: dense stuff. So I take that as a compliment when 694 00:31:22,280 --> 00:31:26,120 Speaker 1: someone says I had to listen at regular at regular speed, 695 00:31:26,160 --> 00:31:28,200 Speaker 1: you want to miss a word, that's good. We mentioned 696 00:31:28,200 --> 00:31:32,920 Speaker 1: earlier you were employee number one, after Andreason and Horowitz. 697 00:31:33,520 --> 00:31:36,600 Speaker 1: What is your role today? You were you're managing partner. 698 00:31:36,680 --> 00:31:39,959 Speaker 1: What does that mean? What's your day job? Like? Uh so, 699 00:31:40,000 --> 00:31:42,240 Speaker 1: it's a lot of things. Actually, my uh my nickname 700 00:31:42,240 --> 00:31:44,800 Speaker 1: inside the firm is actually called slash like kind of 701 00:31:44,800 --> 00:31:47,440 Speaker 1: the like the cut the class right. Well, no, actually 702 00:31:47,440 --> 00:31:49,720 Speaker 1: not slash like cut cost slash as in, I have 703 00:31:49,760 --> 00:31:52,440 Speaker 1: a lot of jobs, right, So so some days it's 704 00:31:53,680 --> 00:31:55,680 Speaker 1: exactly right. So some days it's go raise money. So 705 00:31:55,720 --> 00:31:57,800 Speaker 1: we just you know, finished a fundraise not too long ago. 706 00:31:58,080 --> 00:32:00,120 Speaker 1: So how much did you guys? We just ray just 707 00:32:00,160 --> 00:32:03,959 Speaker 1: about three billion dollars? Actually, so wait, I've been quoting 708 00:32:04,720 --> 00:32:06,560 Speaker 1: I know seven actually believe it or not? Is even 709 00:32:06,640 --> 00:32:08,520 Speaker 1: is out of date as of you know, literally about 710 00:32:08,520 --> 00:32:11,080 Speaker 1: three days ago. I apologize her. No, not at all. 711 00:32:11,120 --> 00:32:13,200 Speaker 1: It's in the book and it's you know, yeah, yeah, 712 00:32:13,240 --> 00:32:16,720 Speaker 1: we go fix Wikipedia. It's wrong, right, go figure who 713 00:32:16,800 --> 00:32:19,800 Speaker 1: who would have ever guessed something on Wikipedia? Is. Um, 714 00:32:19,840 --> 00:32:23,040 Speaker 1: so yeah, we're over We're just about over ten now, 715 00:32:23,120 --> 00:32:25,440 Speaker 1: ye know, it's been a lot of fun. So yeah, 716 00:32:25,440 --> 00:32:26,960 Speaker 1: so what most of my job. But by the way, 717 00:32:27,000 --> 00:32:29,120 Speaker 1: how how many people get to say, yeah, raised three 718 00:32:29,120 --> 00:32:31,040 Speaker 1: billion dollars. It's been a lot of fun. It's uh, 719 00:32:31,160 --> 00:32:33,160 Speaker 1: you must really love your job. I do love my job. 720 00:32:33,200 --> 00:32:35,600 Speaker 1: It's great. I mean, I love I love the capital 721 00:32:35,640 --> 00:32:37,720 Speaker 1: raising part of it. We have a great limited partner 722 00:32:37,760 --> 00:32:38,840 Speaker 1: base and so it's a lot of fun to do 723 00:32:39,000 --> 00:32:43,680 Speaker 1: and a lot of pensions and endowments, pensions, universities. Um, 724 00:32:43,920 --> 00:32:45,720 Speaker 1: we do have some sommer wealth funds too, so we 725 00:32:45,760 --> 00:32:48,360 Speaker 1: talked about that. It's kind of been one of our segments. Um, 726 00:32:48,640 --> 00:32:50,840 Speaker 1: you know, some family office is not that many. Um. 727 00:32:51,000 --> 00:32:52,840 Speaker 1: And then we've got we're starting to build up more 728 00:32:52,840 --> 00:32:54,760 Speaker 1: of international base now, so kind of most of it 729 00:32:54,800 --> 00:32:58,000 Speaker 1: was North America really basically US, and we're thinking now 730 00:32:58,000 --> 00:33:00,200 Speaker 1: we've kind of suspanded into Europe and then you know, 731 00:33:00,240 --> 00:33:02,160 Speaker 1: some parts of the Middle East and some parts of Asia. 732 00:33:02,280 --> 00:33:04,120 Speaker 1: So it's been a fun opportunity just to kind of 733 00:33:04,200 --> 00:33:07,280 Speaker 1: learn that side of the business. Canna a VC scale 734 00:33:07,640 --> 00:33:10,239 Speaker 1: significantly above where you are. I mean, if you were 735 00:33:10,240 --> 00:33:13,160 Speaker 1: a software company we need to talk about how software 736 00:33:13,200 --> 00:33:15,760 Speaker 1: I hear is eating the world. But but if you were, 737 00:33:15,840 --> 00:33:18,080 Speaker 1: you know, if your software company, you could scale up infinitely. 738 00:33:18,440 --> 00:33:22,120 Speaker 1: You know, Google Docs. Nothing's going to prevent every person 739 00:33:22,120 --> 00:33:25,080 Speaker 1: in the world from having a hundred sheets and docks 740 00:33:25,080 --> 00:33:28,840 Speaker 1: on Google Docs. It just scales infinitely. You literally have 741 00:33:30,000 --> 00:33:32,680 Speaker 1: partners who have to sign off on stuff, associates who 742 00:33:32,720 --> 00:33:34,840 Speaker 1: have to do some of the grunt work. There's a 743 00:33:34,880 --> 00:33:37,320 Speaker 1: lot of decisions to be made. Where where do you 744 00:33:37,360 --> 00:33:39,640 Speaker 1: top out? Yeah, this is this is the real conundrum 745 00:33:39,680 --> 00:33:41,920 Speaker 1: with this business is so that the limitter in scale 746 00:33:42,200 --> 00:33:44,440 Speaker 1: is basically the number of board seats that a general 747 00:33:44,480 --> 00:33:46,760 Speaker 1: partner can sit on, right, and it varies. You know, 748 00:33:47,200 --> 00:33:49,320 Speaker 1: some people top out at ten. We've got some of 749 00:33:49,320 --> 00:33:51,400 Speaker 1: our folks who are doing like fifteen and sixteen who 750 00:33:51,440 --> 00:33:53,480 Speaker 1: think they can go to five. You know, we'll see, 751 00:33:53,480 --> 00:33:55,800 Speaker 1: we'll see if they get there. But but you're right, 752 00:33:55,840 --> 00:33:58,320 Speaker 1: So the kind of limitters are at some point in 753 00:33:58,320 --> 00:34:00,120 Speaker 1: time you tap out your board seats, and then some 754 00:34:00,120 --> 00:34:01,920 Speaker 1: point in time the room gets so big where you 755 00:34:02,040 --> 00:34:04,160 Speaker 1: just have too many people, you know, trying to express 756 00:34:04,160 --> 00:34:06,760 Speaker 1: an opinion. So the way we're trying to solve that 757 00:34:07,000 --> 00:34:10,320 Speaker 1: is we do a little bit more kind of verticalization basically, 758 00:34:10,320 --> 00:34:13,960 Speaker 1: so I mentioned earlier than creates different sleeves. And so 759 00:34:14,000 --> 00:34:15,879 Speaker 1: we've got a consumer team, right, and so we can 760 00:34:15,920 --> 00:34:18,319 Speaker 1: grow that team more because you know, right now there 761 00:34:18,360 --> 00:34:21,120 Speaker 1: are probably what four people on our consumer team, and 762 00:34:21,200 --> 00:34:23,480 Speaker 1: so you could probably continue to grow that as long 763 00:34:23,520 --> 00:34:25,799 Speaker 1: as the deal opportunity set is there and you don't 764 00:34:25,800 --> 00:34:27,880 Speaker 1: have too many people in the room to make a decision. Right, 765 00:34:27,880 --> 00:34:31,400 Speaker 1: our our financial services team is too strong today, you 766 00:34:31,400 --> 00:34:33,600 Speaker 1: could certainly grow that more. So we're trying to say, look, 767 00:34:33,640 --> 00:34:36,520 Speaker 1: let's push the decision making down at the vertical level 768 00:34:36,560 --> 00:34:38,840 Speaker 1: to the teams that have the right domain expertise and 769 00:34:38,840 --> 00:34:41,120 Speaker 1: then above a certain dollar threshold, Hey, if someone wants 770 00:34:41,120 --> 00:34:43,279 Speaker 1: to write a fifty million dollar a hundred million dollar check, 771 00:34:43,640 --> 00:34:45,080 Speaker 1: let's kind of get everybody in the room and make 772 00:34:45,120 --> 00:34:46,680 Speaker 1: sure that nobody's gonna blow a hole in the you know, 773 00:34:46,680 --> 00:34:48,560 Speaker 1: in the side of the ship. Right. So a hundred 774 00:34:48,560 --> 00:34:51,120 Speaker 1: and seventy employees, how many partners out of that group? 775 00:34:51,160 --> 00:34:55,120 Speaker 1: So we have fifteen partners today. Relationship like a law 776 00:34:55,200 --> 00:34:58,400 Speaker 1: firm or similar right, some of the big firms, it 777 00:34:58,560 --> 00:35:00,680 Speaker 1: was seven and one sort of ratio. The other big 778 00:35:00,680 --> 00:35:02,600 Speaker 1: difference though, with our firm, right is a hundred of 779 00:35:02,600 --> 00:35:05,280 Speaker 1: those hundreds, so many people actually work with our company's 780 00:35:05,280 --> 00:35:08,120 Speaker 1: post investment. So we're kind of an odd, odd beast 781 00:35:08,160 --> 00:35:10,520 Speaker 1: in the venture, meaning that they're not going to your 782 00:35:10,680 --> 00:35:13,440 Speaker 1: office each day, they're going to the entrepreneurs. No, no, 783 00:35:13,560 --> 00:35:15,960 Speaker 1: so they actually they're at our office. They work for us, 784 00:35:16,320 --> 00:35:18,879 Speaker 1: but they do things like, hey, can we help you 785 00:35:19,080 --> 00:35:21,960 Speaker 1: get introduced to Bloomberg, to the ce IO or so 786 00:35:22,040 --> 00:35:25,120 Speaker 1: more of what I would traditionally imagine is a partner's 787 00:35:25,440 --> 00:35:28,959 Speaker 1: job description. You're pushing that down to the level of staff. 788 00:35:29,040 --> 00:35:31,040 Speaker 1: That's exactly right. So the whole idea behind the firm 789 00:35:31,200 --> 00:35:34,319 Speaker 1: was kind of this concept of, look, can we disaggregate 790 00:35:34,360 --> 00:35:36,200 Speaker 1: the general partner job and say what are the things 791 00:35:36,239 --> 00:35:39,280 Speaker 1: that we really need the general partners to do? Right? So, 792 00:35:39,280 --> 00:35:42,960 Speaker 1: so good, you're gonna disaggregate, right, how about that? But 793 00:35:43,360 --> 00:35:46,000 Speaker 1: you know what, that's an accurate description. So, yeah, we 794 00:35:46,040 --> 00:35:49,480 Speaker 1: want a general partner to look for great deals, build relationships, 795 00:35:49,760 --> 00:35:52,400 Speaker 1: make investment decisions, and sit on boards and be valuable 796 00:35:52,400 --> 00:35:54,680 Speaker 1: to those companies. Right, But we don't necessarily need a 797 00:35:54,719 --> 00:35:57,680 Speaker 1: general partner who's not an expert in recruiting CFOs to 798 00:35:57,719 --> 00:35:59,200 Speaker 1: know how to do that. So instead we have a 799 00:35:59,200 --> 00:36:01,799 Speaker 1: whole talent team and that's their job is, let's know 800 00:36:02,000 --> 00:36:04,920 Speaker 1: all the top CFOs in the business, let's build relationships 801 00:36:04,920 --> 00:36:06,839 Speaker 1: with them, and then we're appropriate, let's connect them into 802 00:36:06,840 --> 00:36:09,680 Speaker 1: our portfolio companies. Right, And so we do that on talent, 803 00:36:09,840 --> 00:36:12,480 Speaker 1: on both executives as well as engineers. We do that 804 00:36:12,640 --> 00:36:15,360 Speaker 1: on sales and business development prospects. So you know, we 805 00:36:15,400 --> 00:36:17,600 Speaker 1: cover companies like Bloomberg and others and say, who are 806 00:36:17,640 --> 00:36:20,480 Speaker 1: the decision makers that might buy software here or that 807 00:36:20,560 --> 00:36:22,359 Speaker 1: might you know, buy ad time for some of our 808 00:36:22,440 --> 00:36:24,600 Speaker 1: ad based companies, and we ought to know all those 809 00:36:24,640 --> 00:36:26,759 Speaker 1: people and then figure out when can we connect them 810 00:36:26,760 --> 00:36:29,960 Speaker 1: into our companies to help them accelerate their sales. Really intriguing, 811 00:36:30,520 --> 00:36:33,840 Speaker 1: So what are your vertical um specialties? What are the 812 00:36:33,880 --> 00:36:36,319 Speaker 1: different groups? Yeah, so right now there's a couple. So 813 00:36:36,360 --> 00:36:38,680 Speaker 1: basically kind of consumer is one, and think of that 814 00:36:38,760 --> 00:36:42,080 Speaker 1: as you know, that's a Facebook and instat cart, anything 815 00:36:42,160 --> 00:36:48,960 Speaker 1: that the end us essentially exactly that's exactly right. Yeah, 816 00:36:49,000 --> 00:36:51,400 Speaker 1: that's a good way to think about it. Uh, financial services, 817 00:36:51,400 --> 00:36:53,359 Speaker 1: so fintech is one and that kind of has some 818 00:36:53,400 --> 00:36:55,480 Speaker 1: b two C and some B two B elements of it, right, 819 00:36:55,480 --> 00:36:57,799 Speaker 1: So it could be we have a company called a firm, 820 00:36:57,840 --> 00:36:59,960 Speaker 1: which basically is kind of point of sale lending enough, 821 00:37:00,040 --> 00:37:02,200 Speaker 1: you know this, but so if you by a Casper mattress, 822 00:37:02,600 --> 00:37:07,120 Speaker 1: you know financing, right, So that's a the ability to 823 00:37:07,200 --> 00:37:11,000 Speaker 1: make a fairly instantaneous that's exactly right credit that's exactly right, 824 00:37:11,760 --> 00:37:13,960 Speaker 1: credit card, or somewhere between a credit card and a 825 00:37:14,000 --> 00:37:17,640 Speaker 1: bank loan. Right. And then on you know, completely other 826 00:37:17,719 --> 00:37:19,440 Speaker 1: end of the spectrum. We've got a company called Branch 827 00:37:19,480 --> 00:37:24,720 Speaker 1: which basically does lending to sub Saharan African countries. Basically 828 00:37:24,719 --> 00:37:26,520 Speaker 1: a people in those countries, so literally think of it 829 00:37:26,560 --> 00:37:31,120 Speaker 1: as a taxi driver or a local store owner micro lending, right, 830 00:37:31,120 --> 00:37:33,000 Speaker 1: So who doesn't have credit? Right? Basically in a lot 831 00:37:33,000 --> 00:37:35,319 Speaker 1: of these countries, you know, we have these credit bureaus, right, 832 00:37:35,360 --> 00:37:37,120 Speaker 1: so you have kind of you get your credit score 833 00:37:37,200 --> 00:37:38,840 Speaker 1: and then you take that to the lender. In a 834 00:37:38,880 --> 00:37:40,800 Speaker 1: lot of these other countries there is no concept of 835 00:37:40,800 --> 00:37:43,560 Speaker 1: a credit bureau So a company like Branch literally is 836 00:37:43,600 --> 00:37:46,480 Speaker 1: building people's individual credit files by giving them small micro 837 00:37:46,600 --> 00:37:48,960 Speaker 1: loans and that as they pay it back. Obviously they 838 00:37:48,960 --> 00:37:54,200 Speaker 1: started to get higher credit limit. That's fintech. Uh, enterprise. 839 00:37:54,239 --> 00:37:56,560 Speaker 1: So enterprise could be anything from like an application company 840 00:37:56,600 --> 00:37:58,319 Speaker 1: like a slack for example, it would be in that 841 00:37:58,760 --> 00:38:02,040 Speaker 1: to something more s terek, like a security company or 842 00:38:02,080 --> 00:38:04,279 Speaker 1: a company that's doing you know, a database or things 843 00:38:04,320 --> 00:38:07,239 Speaker 1: of that sort. Um, we do crypto, which is an 844 00:38:07,239 --> 00:38:09,319 Speaker 1: interesting area which we can talk about. Sure, let's talk 845 00:38:09,320 --> 00:38:14,080 Speaker 1: a little bit about crypto. So, uh, this crazy Facebook 846 00:38:14,160 --> 00:38:18,440 Speaker 1: libra then, so I walked right into that one. Right, 847 00:38:18,520 --> 00:38:21,439 Speaker 1: Let's let's just talk about this. So Facebook, who has 848 00:38:21,480 --> 00:38:26,200 Speaker 1: helped um undermine democracy as they as they worked hand 849 00:38:26,200 --> 00:38:30,239 Speaker 1: in hand with the Russians to spread fake news, decided 850 00:38:30,280 --> 00:38:33,800 Speaker 1: that they want to replace money. So how could that 851 00:38:34,080 --> 00:38:36,640 Speaker 1: ever go wrong? Yeah, so they're not They don't want 852 00:38:36,640 --> 00:38:39,560 Speaker 1: to replace money. They want to create Internet money, right right, 853 00:38:39,560 --> 00:38:40,960 Speaker 1: So that's the way you think about That's at least 854 00:38:40,960 --> 00:38:46,440 Speaker 1: how we think. So not a h not credit, not venmo, 855 00:38:47,239 --> 00:38:51,080 Speaker 1: which um I use venmo as a verb inappropriately. The 856 00:38:51,160 --> 00:38:53,799 Speaker 1: young guys in my office tell me, so, I when 857 00:38:53,880 --> 00:38:57,759 Speaker 1: I when I owed someone money they bought tickets for something, 858 00:38:57,760 --> 00:39:00,839 Speaker 1: I said, just venmo me And he's like, dude, that's 859 00:39:00,880 --> 00:39:04,480 Speaker 1: just And I'm like, just venmo. I think that's pretty forward. 860 00:39:04,560 --> 00:39:07,240 Speaker 1: So he said, no, no venoment. He goes, I'm gonna 861 00:39:07,360 --> 00:39:12,040 Speaker 1: invoice you. You're gonna vendomo me? Do I really? Okay, 862 00:39:12,080 --> 00:39:16,200 Speaker 1: I'll be more formal, so send me your request and 863 00:39:16,239 --> 00:39:20,000 Speaker 1: I will pay you. Is that better? But anyway, a 864 00:39:20,120 --> 00:39:23,520 Speaker 1: really interesting concept, right. So the concept is again we 865 00:39:23,520 --> 00:39:25,279 Speaker 1: we've been using this term Internet money, right, So if 866 00:39:25,280 --> 00:39:27,640 Speaker 1: you think about it, there are things like, of course 867 00:39:27,640 --> 00:39:29,480 Speaker 1: there are things like PayPal and stuff like that today, 868 00:39:29,480 --> 00:39:31,799 Speaker 1: but they all depend on your right, They depend on 869 00:39:33,440 --> 00:39:36,120 Speaker 1: other stuff right there, and it's expensive. Not everybody has 870 00:39:36,160 --> 00:39:38,719 Speaker 1: access to that, and particularly in countries like you know, 871 00:39:38,880 --> 00:39:41,160 Speaker 1: Venezuela for example, right where you know you've got these 872 00:39:41,200 --> 00:39:44,520 Speaker 1: hyper inflation countries, people want, you know, a stable currency 873 00:39:44,560 --> 00:39:46,160 Speaker 1: that they actually don't have to worry about, you know, 874 00:39:46,160 --> 00:39:49,400 Speaker 1: putting in wheelbarrels every day. And so what basically the 875 00:39:49,440 --> 00:39:52,120 Speaker 1: Facebook consortium that they put together is you know, intending 876 00:39:52,160 --> 00:39:54,120 Speaker 1: to do, is to say, look, could we create this 877 00:39:54,160 --> 00:39:56,680 Speaker 1: concept of Internet money so that you can procure things 878 00:39:56,680 --> 00:39:58,560 Speaker 1: on the Internet. You can even do like micro payments, 879 00:39:58,560 --> 00:40:00,560 Speaker 1: which is very hard to do because of trains action costs. 880 00:40:00,600 --> 00:40:03,000 Speaker 1: So you know, if you wanted to charge people ten 881 00:40:03,040 --> 00:40:05,279 Speaker 1: cents an episode to listen to your podcast. Maybe that's 882 00:40:05,280 --> 00:40:07,640 Speaker 1: a good way to monetize the podcast instead of advertising 883 00:40:07,640 --> 00:40:11,000 Speaker 1: for example. You know, I don't know, I don't know 884 00:40:11,000 --> 00:40:14,120 Speaker 1: if that's the right math. Where do we sign up? Right, 885 00:40:14,400 --> 00:40:16,480 Speaker 1: you've converted me to liberate, But you couldn't You couldn't 886 00:40:16,480 --> 00:40:18,040 Speaker 1: do that today, right because you know, by time you 887 00:40:18,080 --> 00:40:19,880 Speaker 1: took transaction fees and stuff, you would be losing. It 888 00:40:19,880 --> 00:40:21,799 Speaker 1: would be basically paying the credit card company to to 889 00:40:21,880 --> 00:40:24,200 Speaker 1: charge somebody ten cents. So that's the that's the kind 890 00:40:24,239 --> 00:40:25,719 Speaker 1: of big idea of what they're trying to do. Now, look, 891 00:40:25,760 --> 00:40:28,440 Speaker 1: it's you know, uh, it's brand new, it's a consortium. 892 00:40:28,440 --> 00:40:30,520 Speaker 1: It's going to be developed in a crypto framework, which 893 00:40:30,560 --> 00:40:33,600 Speaker 1: means it will be decentralized and governed by all these 894 00:40:33,600 --> 00:40:35,319 Speaker 1: different kind of groups that are being part of it. 895 00:40:35,320 --> 00:40:38,319 Speaker 1: So it's not going to be Facebook actually central centralizing 896 00:40:38,320 --> 00:40:40,560 Speaker 1: it and owning it. And uh, you know, it'll be 897 00:40:40,600 --> 00:40:42,399 Speaker 1: an interesting experiment to see if they can make it work. 898 00:40:42,440 --> 00:40:45,359 Speaker 1: So let me let me ask you a disclosure question. So, 899 00:40:45,719 --> 00:40:48,960 Speaker 1: you guys famously were an early early investor in Facebook. 900 00:40:49,200 --> 00:40:52,920 Speaker 1: It worked out fabulously for for that investment, are you 901 00:40:52,960 --> 00:40:55,839 Speaker 1: still a Facebook holder or is that long since been 902 00:40:55,880 --> 00:40:58,480 Speaker 1: worked out? So as a fund we we don't hold 903 00:40:58,480 --> 00:41:00,440 Speaker 1: Facebook shares anymore. A lot of us into visually do, 904 00:41:00,480 --> 00:41:02,440 Speaker 1: and I will personally disclose I do have. I do 905 00:41:02,520 --> 00:41:04,719 Speaker 1: home Facebook shares, and I don't know if Mark or 906 00:41:04,760 --> 00:41:06,600 Speaker 1: other people still do. I assume Mark does because he's 907 00:41:06,640 --> 00:41:09,000 Speaker 1: on the board. So imagine he gets, you know, some 908 00:41:09,080 --> 00:41:12,239 Speaker 1: kind of granted every every quarter or every year. But 909 00:41:12,239 --> 00:41:14,279 Speaker 1: but in general, kind of the way our business works is, 910 00:41:14,719 --> 00:41:17,200 Speaker 1: you know, our LPs pay us to manage private assets, right, 911 00:41:17,239 --> 00:41:21,759 Speaker 1: and so it's public. Look, you guys, so here's the 912 00:41:21,840 --> 00:41:24,319 Speaker 1: question here. You sell their Facebook shares or do you 913 00:41:24,400 --> 00:41:26,319 Speaker 1: dole that out to the LPs and let them sell. 914 00:41:26,480 --> 00:41:29,360 Speaker 1: Usually what we do is we distribute the shares, and 915 00:41:29,360 --> 00:41:31,319 Speaker 1: then you know, different LPs do different things. Some of 916 00:41:31,360 --> 00:41:33,520 Speaker 1: them actually say, look, every time I get a distribution 917 00:41:33,600 --> 00:41:35,920 Speaker 1: from a venture capitalist, I'm just gonna automatically sell a lot. 918 00:41:35,920 --> 00:41:38,000 Speaker 1: I'm not gonna make an independent judgment. Some of them 919 00:41:38,080 --> 00:41:40,040 Speaker 1: are who are particularly the ones who are more sophisticated, 920 00:41:40,040 --> 00:41:42,279 Speaker 1: say wait a second, you know I like Facebook stock 921 00:41:42,280 --> 00:41:44,040 Speaker 1: and oh, by the way, my one of my public 922 00:41:44,040 --> 00:41:45,960 Speaker 1: managers has it. But I want an overweight position in 923 00:41:46,000 --> 00:41:47,560 Speaker 1: Facebook stocks. So you know what, I'm just gonna hold 924 00:41:47,560 --> 00:41:49,680 Speaker 1: onto this and this has such a low cost basis. 925 00:41:49,840 --> 00:41:53,160 Speaker 1: That's exactly to it for this Although they're really there there, 926 00:41:53,239 --> 00:41:57,000 Speaker 1: they're saying most of them are pretty right, right, they 927 00:41:57,040 --> 00:41:59,480 Speaker 1: have the luxury. If not, I immediately think of cost 928 00:41:59,520 --> 00:42:02,960 Speaker 1: basis and makes a big difference, you know. And then 929 00:42:02,960 --> 00:42:05,720 Speaker 1: there's a whole there's where you're going to locate the assets. 930 00:42:05,719 --> 00:42:10,880 Speaker 1: You these guys, they're all completely taxed. It shouldn't make 931 00:42:10,880 --> 00:42:12,479 Speaker 1: any but that's basically how we think about the business. 932 00:42:12,520 --> 00:42:14,440 Speaker 1: So look in general. Yeah, like if they want to 933 00:42:14,440 --> 00:42:16,399 Speaker 1: buy Facebook stock, they can buy Facebook stock. They don't 934 00:42:16,400 --> 00:42:18,239 Speaker 1: need to pay us to do that. That that makes 935 00:42:18,320 --> 00:42:23,280 Speaker 1: perfect sense. Um, I didn't ask you during our broadcast 936 00:42:23,320 --> 00:42:26,439 Speaker 1: portion the venture capital life cycle, which you talk about 937 00:42:26,440 --> 00:42:29,399 Speaker 1: in the book. Um, let's let's let's get a little 938 00:42:29,400 --> 00:42:31,960 Speaker 1: wonky and talk about life cycles. And then I want 939 00:42:32,000 --> 00:42:35,520 Speaker 1: to talk about persistency and underfitting. So we're really gonna 940 00:42:35,560 --> 00:42:38,440 Speaker 1: walk out. So what's the VC life cycle? Yeah, So basically, 941 00:42:38,480 --> 00:42:41,319 Speaker 1: we raise funds and those funds typically have a tenure life. 942 00:42:41,320 --> 00:42:43,799 Speaker 1: Now if you've talked to any LP but ten years 943 00:42:43,800 --> 00:42:47,000 Speaker 1: I'm gonna interrupt you. Is ten years standard. I kind 944 00:42:47,000 --> 00:42:52,240 Speaker 1: of remember being a little shorter years ago, seven eight years. 945 00:42:52,840 --> 00:42:55,680 Speaker 1: Since I've been in the business, it's been ten. It's 946 00:42:55,680 --> 00:42:57,560 Speaker 1: actually and the opposite is actually true, which is but 947 00:42:57,600 --> 00:42:59,640 Speaker 1: any LP will tell you there's no such thing as 948 00:42:59,640 --> 00:43:02,680 Speaker 1: a ten year fund. These funds go twelve, fifteen years. 949 00:43:02,719 --> 00:43:05,440 Speaker 1: You're always left with stubs that haven't done anything and 950 00:43:05,520 --> 00:43:08,799 Speaker 1: hope the bulk of it. The assumption is, hey, if 951 00:43:08,800 --> 00:43:10,960 Speaker 1: it's not done by ten years, just write it down 952 00:43:10,960 --> 00:43:14,360 Speaker 1: to zero and whatever comes out later that is a bonus. 953 00:43:14,440 --> 00:43:17,120 Speaker 1: So I don't know if stub is the right technical term. 954 00:43:17,200 --> 00:43:19,560 Speaker 1: I think it is a technical term. But but I'm 955 00:43:19,600 --> 00:43:23,560 Speaker 1: under the impression that after a certain point, it either 956 00:43:23,600 --> 00:43:25,520 Speaker 1: works or it doesn't, and it's not going to catch 957 00:43:25,520 --> 00:43:28,360 Speaker 1: fire on the eleventh year, so we just need to 958 00:43:28,360 --> 00:43:31,000 Speaker 1: make it one more year. But remember right, it's taking ten, eleven, 959 00:43:31,040 --> 00:43:33,240 Speaker 1: twelve years where companies go public now, so it's possible 960 00:43:33,280 --> 00:43:35,479 Speaker 1: that it could catch fire. So it depends on whether 961 00:43:35,520 --> 00:43:37,200 Speaker 1: it's on that path or not, I guess. And at 962 00:43:37,239 --> 00:43:39,879 Speaker 1: that point it's certainly easy enough to find somebody who's 963 00:43:39,880 --> 00:43:42,920 Speaker 1: gonna that's come in and take it off your hands. 964 00:43:43,040 --> 00:43:45,080 Speaker 1: So anyways, you've got ten years. Basically, you do most 965 00:43:45,120 --> 00:43:47,120 Speaker 1: of your investing typically in the first three or four 966 00:43:47,200 --> 00:43:49,239 Speaker 1: years is what's more typical, and then kind of in 967 00:43:49,280 --> 00:43:51,560 Speaker 1: those later years you're doing what's called follow on investing, right, 968 00:43:51,560 --> 00:43:54,040 Speaker 1: you're kind of maybe adding to positions that second round, 969 00:43:54,200 --> 00:43:55,960 Speaker 1: the second round or third round or stuff. How does 970 00:43:56,000 --> 00:43:58,759 Speaker 1: the capital calls work? Is it like a hedge fund 971 00:43:58,800 --> 00:44:00,920 Speaker 1: where all the money shows up or is it like 972 00:44:01,000 --> 00:44:04,279 Speaker 1: private equity where you make a commitment, give a small 973 00:44:04,320 --> 00:44:06,120 Speaker 1: amount of money up front, and then they call it 974 00:44:06,160 --> 00:44:08,239 Speaker 1: as needed. Yeah, it's the latter. So basically, when an 975 00:44:08,360 --> 00:44:10,759 Speaker 1: LP invest in our fund, what they're doing is they're saying, okay, like, 976 00:44:10,800 --> 00:44:13,719 Speaker 1: I'm committing to ten million dollars over the life your fund, 977 00:44:14,120 --> 00:44:15,800 Speaker 1: and you know, we'll call it kind of we typically 978 00:44:15,880 --> 00:44:17,960 Speaker 1: call quarterly because you know, we kind of generally know 979 00:44:18,000 --> 00:44:19,960 Speaker 1: what the cadence is. So yeah, I think about it 980 00:44:20,000 --> 00:44:22,279 Speaker 1: as probably seventy percent of your money gets called in 981 00:44:22,320 --> 00:44:24,640 Speaker 1: that first three or four years when you're doing primary investing, 982 00:44:24,640 --> 00:44:27,479 Speaker 1: and then the remainder gets called over years four through 983 00:44:27,719 --> 00:44:29,600 Speaker 1: eight or nine or something, you know, for that follow 984 00:44:29,680 --> 00:44:33,200 Speaker 1: up investing. That that's that's pretty interesting. And so that's 985 00:44:33,239 --> 00:44:36,160 Speaker 1: the life cycle over of a typical fund, that's right, 986 00:44:36,160 --> 00:44:37,399 Speaker 1: And then you know, we'll go raise a new fund 987 00:44:37,440 --> 00:44:39,719 Speaker 1: hopefully so hopefully after three or four years, if we've 988 00:44:39,800 --> 00:44:42,120 Speaker 1: you know, exhausted that fund, if we're doing well enough, 989 00:44:42,480 --> 00:44:44,200 Speaker 1: then our LPs will say great, like, we'll give you 990 00:44:44,200 --> 00:44:45,680 Speaker 1: another shot at it, and you go raise a new fund. 991 00:44:45,760 --> 00:44:49,160 Speaker 1: And each new fund is a new legal entidy with 992 00:44:49,160 --> 00:44:51,960 Speaker 1: with uh. I want to call it a sixteen Z. 993 00:44:52,280 --> 00:44:55,040 Speaker 1: You can, but people are not gonna understand what that is. 994 00:44:55,080 --> 00:44:57,960 Speaker 1: So I have this great blue hat that sits in 995 00:44:58,000 --> 00:45:01,640 Speaker 1: my car, um, and it literally says A six team 996 00:45:01,719 --> 00:45:05,600 Speaker 1: Z dot com and there are sixteen letters between the 997 00:45:05,600 --> 00:45:08,879 Speaker 1: A and injuries and the Z. You got it. I mean, 998 00:45:08,880 --> 00:45:12,800 Speaker 1: it wasn't hey, I cracked that code. It wasn't too difficult. Um. 999 00:45:12,840 --> 00:45:16,480 Speaker 1: But it's really a very interesting idea. And it allows you, 1000 00:45:16,520 --> 00:45:20,680 Speaker 1: guys to come up with a almost random web you 1001 00:45:20,800 --> 00:45:23,640 Speaker 1: r l you're going to get a website. They're all taken. 1002 00:45:23,760 --> 00:45:25,680 Speaker 1: It's it's kind of crazy, and it allows people to 1003 00:45:25,719 --> 00:45:27,160 Speaker 1: actually find it because if you had to spell in 1004 00:45:27,200 --> 00:45:32,759 Speaker 1: recent Horwitz dot I always get exactly. I always get 1005 00:45:32,800 --> 00:45:35,480 Speaker 1: that wrong. So um, persistence was what you mentioned. We 1006 00:45:35,480 --> 00:45:37,479 Speaker 1: didn't talk about you are so sure. Let's just let's 1007 00:45:37,480 --> 00:45:40,759 Speaker 1: talk about so each of these are separate fund You're 1008 00:45:40,800 --> 00:45:43,239 Speaker 1: the fun firm is the GP, and it may or 1009 00:45:43,280 --> 00:45:45,920 Speaker 1: may not be the same LPs in it. And so 1010 00:45:46,080 --> 00:45:48,600 Speaker 1: you just did FUN six, that's right. If you're just 1011 00:45:48,719 --> 00:45:50,919 Speaker 1: raising money for fund six and that was put to bed, 1012 00:45:51,440 --> 00:45:53,960 Speaker 1: Fund seven is a couple of years down, that's probably right. Yeah, 1013 00:45:54,000 --> 00:45:55,600 Speaker 1: we tell our LPs kind of think about it as 1014 00:45:55,719 --> 00:45:57,080 Speaker 1: two and a half three or three and a half 1015 00:45:57,120 --> 00:45:58,759 Speaker 1: your cycles is probably the right right think about. So 1016 00:45:58,840 --> 00:46:01,759 Speaker 1: let's let's talk about assistance, which is kind of interesting. 1017 00:46:02,160 --> 00:46:04,520 Speaker 1: And again, at risk of of I don't want to 1018 00:46:04,520 --> 00:46:08,000 Speaker 1: put words in your mouth and slag a competitor, but 1019 00:46:08,160 --> 00:46:10,440 Speaker 1: let me just talk about some of the talk of 1020 00:46:10,480 --> 00:46:13,400 Speaker 1: the town. So Kleina Perkins, one of the most storied 1021 00:46:14,000 --> 00:46:18,840 Speaker 1: John Door and that whole collection of folks. Um incredible, 1022 00:46:18,880 --> 00:46:22,840 Speaker 1: trans Cisco and Apple and Mike Microsoft, I mean, go 1023 00:46:22,920 --> 00:46:26,799 Speaker 1: down the list. It was insane intel Um they did 1024 00:46:26,840 --> 00:46:30,840 Speaker 1: fabulously in the eighties and the nineties. The latter farm 1025 00:46:31,239 --> 00:46:36,520 Speaker 1: funds seem to have not had the same UM track records. 1026 00:46:36,520 --> 00:46:39,480 Speaker 1: So the question is, was it luck, or did the 1027 00:46:39,560 --> 00:46:43,040 Speaker 1: environment change so much that they failed to adapt? Did 1028 00:46:43,120 --> 00:46:47,120 Speaker 1: that whole sex discrimination case throw them off their game? 1029 00:46:47,800 --> 00:46:49,360 Speaker 1: These are my words, not yours. I don't want to 1030 00:46:49,360 --> 00:46:52,560 Speaker 1: put you have to see these people, and I don't 1031 00:46:52,600 --> 00:46:55,960 Speaker 1: want anybody saying, Hey, Scott, what the hell man? So 1032 00:46:56,080 --> 00:46:59,560 Speaker 1: this is I apologize to John Doran everybody. I'm repeating 1033 00:46:59,560 --> 00:47:02,040 Speaker 1: what I read. I don't know this for a fact. 1034 00:47:02,120 --> 00:47:04,640 Speaker 1: I've never met these folks. You certainly have never said 1035 00:47:04,640 --> 00:47:07,160 Speaker 1: any of this, So I'm giving you giving you some 1036 00:47:07,239 --> 00:47:12,520 Speaker 1: plausible deniability. Um. So, first of all, you're upset. Kliner is, 1037 00:47:13,000 --> 00:47:14,719 Speaker 1: you know, an icon in the industry, there's no question. 1038 00:47:14,920 --> 00:47:18,080 Speaker 1: And their early track record was just yeah. And then 1039 00:47:18,120 --> 00:47:19,640 Speaker 1: you know they also had a whole life sciences part 1040 00:47:19,640 --> 00:47:21,600 Speaker 1: of their business. You know, people like Brook Briers write 1041 00:47:21,600 --> 00:47:23,359 Speaker 1: one of the name partners there have done great things. 1042 00:47:23,719 --> 00:47:25,520 Speaker 1: Um And and actually right now they have a they 1043 00:47:25,520 --> 00:47:27,279 Speaker 1: have a whole new set of a whole new teams. 1044 00:47:27,280 --> 00:47:29,239 Speaker 1: So they've kind of brought on some some new people 1045 00:47:29,280 --> 00:47:31,160 Speaker 1: to kind of build out re kind of build out 1046 00:47:31,200 --> 00:47:34,840 Speaker 1: their software business. And look, they've successfully raised new funds 1047 00:47:34,840 --> 00:47:37,160 Speaker 1: and stuff. So you know, I wouldn't I certainly wouldn't 1048 00:47:37,200 --> 00:47:38,920 Speaker 1: count anybody out of this business. I mean, they're they're 1049 00:47:38,920 --> 00:47:41,120 Speaker 1: an iconic name with an iconic brand, and but that 1050 00:47:41,200 --> 00:47:44,680 Speaker 1: brings us back to the issue of persistency. So the 1051 00:47:44,680 --> 00:47:47,480 Speaker 1: whole concept of fat headlong tail is there's a handful 1052 00:47:47,520 --> 00:47:51,960 Speaker 1: of winners, let's a winner take all distribution, and those 1053 00:47:52,000 --> 00:47:56,440 Speaker 1: winners tend to stay winners. So so it's it's really interesting, right, 1054 00:47:56,440 --> 00:47:57,799 Speaker 1: So if you look at the if you look at 1055 00:47:57,840 --> 00:48:01,040 Speaker 1: all the academic literature around VC, basically, uh, you have 1056 00:48:01,560 --> 00:48:04,120 Speaker 1: a firm that is performed in the top quartile of 1057 00:48:04,160 --> 00:48:08,440 Speaker 1: returns in one cycle, is likely to then continue to 1058 00:48:08,440 --> 00:48:10,359 Speaker 1: be in the top quartile in the next cycle, right 1059 00:48:10,360 --> 00:48:12,439 Speaker 1: in the next fun And I think the theory behind 1060 00:48:12,440 --> 00:48:13,880 Speaker 1: it goes back to a little bit of this kind 1061 00:48:13,880 --> 00:48:15,799 Speaker 1: of idea that we talked about earlier about kind of 1062 00:48:15,880 --> 00:48:18,960 Speaker 1: zero sum and signaling, which is, you know, if you're 1063 00:48:18,960 --> 00:48:21,120 Speaker 1: a firm like Climber Perkins, let's just use them an example. 1064 00:48:21,840 --> 00:48:23,640 Speaker 1: You have a brand and you've you know, you've invested 1065 00:48:23,640 --> 00:48:26,000 Speaker 1: some of these fantastic companies like Cisco and Apple, and 1066 00:48:26,040 --> 00:48:28,160 Speaker 1: so you know, I'm an entrepreneur who is you know, 1067 00:48:28,480 --> 00:48:30,759 Speaker 1: looking to kind of get that brand affiliation to help 1068 00:48:30,800 --> 00:48:33,040 Speaker 1: me with my business. Right, So I want your money 1069 00:48:33,080 --> 00:48:35,759 Speaker 1: because you know you've invested in smart people before, and 1070 00:48:35,800 --> 00:48:38,239 Speaker 1: therefore you must think I'm smart. Their money is more 1071 00:48:38,280 --> 00:48:40,319 Speaker 1: than just money, that's right, right, It goes with the 1072 00:48:40,320 --> 00:48:42,440 Speaker 1: brand and with the success they built over time. Right. 1073 00:48:42,480 --> 00:48:45,120 Speaker 1: And so if I'm trying to recruit employees, you know, 1074 00:48:45,160 --> 00:48:47,160 Speaker 1: I say, hey, well, you know I've got money from 1075 00:48:47,200 --> 00:48:49,920 Speaker 1: these Climber Perkins folks in this case, you know they're smart. 1076 00:48:50,000 --> 00:48:51,879 Speaker 1: Therefore you know you should come work for me, right, 1077 00:48:51,920 --> 00:48:53,719 Speaker 1: do something crazy like quit your job and tell your 1078 00:48:53,760 --> 00:48:55,600 Speaker 1: spouse that you're going to take a fifty cut and 1079 00:48:55,600 --> 00:48:58,040 Speaker 1: pay and come work for me. Or if you're a customer, 1080 00:48:58,280 --> 00:48:59,960 Speaker 1: you know you have kind of the customer kind of 1081 00:49:00,040 --> 00:49:02,040 Speaker 1: gets the brand connotation of Klin of Perkins. They may 1082 00:49:02,040 --> 00:49:04,439 Speaker 1: not know you, but they've heard of John Door, they've 1083 00:49:04,440 --> 00:49:06,520 Speaker 1: heard of you know, that organization. So you get that 1084 00:49:06,600 --> 00:49:09,000 Speaker 1: kind of brand affiliation. So I think that's why there 1085 00:49:09,080 --> 00:49:12,120 Speaker 1: is this persistence. And then therefore, also as we talked about, 1086 00:49:12,440 --> 00:49:15,279 Speaker 1: because these deals are often zero sum, if you've got 1087 00:49:15,360 --> 00:49:17,640 Speaker 1: the brand that gives you an unfair advantage in competing 1088 00:49:17,640 --> 00:49:20,319 Speaker 1: for the new deals. Uh. And when you win that 1089 00:49:20,400 --> 00:49:22,400 Speaker 1: a round the deal. That means nobody else in the 1090 00:49:22,440 --> 00:49:24,920 Speaker 1: industry got to win that deal either, Right, so you 1091 00:49:24,920 --> 00:49:27,279 Speaker 1: you kind of allow that persistence to kind of, you know, 1092 00:49:27,320 --> 00:49:29,880 Speaker 1: take effect and give you competitive advantage. Now, this is 1093 00:49:29,920 --> 00:49:32,600 Speaker 1: the same thing we see in where do you want 1094 00:49:32,600 --> 00:49:36,000 Speaker 1: to go with this hedge fund Ivy League schools? Is 1095 00:49:36,080 --> 00:49:41,839 Speaker 1: Harvard really Harvard? Or are they just coasting on their reputation? Yeah, Look, 1096 00:49:41,880 --> 00:49:44,200 Speaker 1: we we use signaling all the time, right, and it's 1097 00:49:44,239 --> 00:49:46,640 Speaker 1: you're you're right, it's not it's not necessary fair. Look, 1098 00:49:46,640 --> 00:49:49,000 Speaker 1: there's plenty of smart students at other places that don't 1099 00:49:49,040 --> 00:49:51,360 Speaker 1: go to Stanford to Harvard. But you know, an employer 1100 00:49:51,400 --> 00:49:53,200 Speaker 1: looks at that and they say, hey, like, you know, 1101 00:49:53,239 --> 00:49:55,600 Speaker 1: it's probably the case that they've they've screened the student, 1102 00:49:55,640 --> 00:49:57,719 Speaker 1: they've done something, and so you know, I accept that 1103 00:49:57,760 --> 00:50:00,280 Speaker 1: as kind of you know, brand affiliation for that students. 1104 00:50:00,280 --> 00:50:03,040 Speaker 1: But you're absolutely right, it's not fair. But it is, unfortunately, 1105 00:50:03,040 --> 00:50:04,719 Speaker 1: you know, part of the way the world works. So 1106 00:50:04,760 --> 00:50:07,600 Speaker 1: we're not talking about fair. We're talking about if you're 1107 00:50:07,800 --> 00:50:10,640 Speaker 1: a pension funds or if you're an allocator and you 1108 00:50:10,719 --> 00:50:13,799 Speaker 1: have to decide, hey, I'm gonna budget five percent of 1109 00:50:13,840 --> 00:50:18,400 Speaker 1: my my assets to venture capital UM. In the world 1110 00:50:18,400 --> 00:50:21,560 Speaker 1: of hedge funds, if you're not in the top ten percent, 1111 00:50:22,320 --> 00:50:26,520 Speaker 1: you're paying a lot for not great performance. It sounds 1112 00:50:26,560 --> 00:50:29,440 Speaker 1: like the VC world is very, very sick. It's similar. 1113 00:50:29,719 --> 00:50:32,800 Speaker 1: If you're not in the top firms, well then you really, 1114 00:50:33,840 --> 00:50:36,800 Speaker 1: as you pointed out and on aggregate, gonna underperform the 1115 00:50:36,800 --> 00:50:38,560 Speaker 1: public mark. Yeah, this is where I think a lot 1116 00:50:38,600 --> 00:50:41,040 Speaker 1: of the LPs sometimes have kind of made mistakes in 1117 00:50:41,040 --> 00:50:44,120 Speaker 1: their venture portfolio. Is you know they diversify, Yeah, they diverseify. 1118 00:50:44,120 --> 00:50:46,080 Speaker 1: I right, Diversification turns out to be a bad strategy 1119 00:50:46,160 --> 00:50:48,200 Speaker 1: in venture, right, which is if you've got you know, 1120 00:50:48,520 --> 00:50:50,080 Speaker 1: you know, if you are with a great firm who's 1121 00:50:50,080 --> 00:50:52,279 Speaker 1: in the top quarter tril you know, obviously things change 1122 00:50:52,320 --> 00:50:54,520 Speaker 1: and of course maybe all the partners leave or you know, 1123 00:50:54,600 --> 00:50:57,760 Speaker 1: something catastrophic happens, but in general, you want to probably 1124 00:50:57,800 --> 00:51:00,720 Speaker 1: double down your money on those folks as as to actually, 1125 00:51:00,760 --> 00:51:02,840 Speaker 1: you know, kind of diverse buying. So the names I 1126 00:51:02,920 --> 00:51:06,759 Speaker 1: know like Flat Iron Ventures or Benchmark in addition to 1127 00:51:07,239 --> 00:51:09,840 Speaker 1: Climate Prokin's injuries, and I know there are dozens and 1128 00:51:09,920 --> 00:51:14,560 Speaker 1: dozens of others. The well known top tier firms really 1129 00:51:14,760 --> 00:51:18,000 Speaker 1: are well known and top tier for a reason. That's right, yeah, 1130 00:51:18,000 --> 00:51:19,680 Speaker 1: and they're look, those are those are great firms, and 1131 00:51:19,680 --> 00:51:21,880 Speaker 1: so what happens, right is the LPs want to allocate 1132 00:51:21,920 --> 00:51:24,480 Speaker 1: to those firms. And then what what often happens, I 1133 00:51:24,520 --> 00:51:26,960 Speaker 1: think where sometimes the LPs make mistakes as they say, look, 1134 00:51:26,960 --> 00:51:31,400 Speaker 1: I can't get access because you know, benchmarks, right, benchmarks, 1135 00:51:31,440 --> 00:51:33,239 Speaker 1: you know, you know, it's very hard to be a 1136 00:51:33,239 --> 00:51:35,239 Speaker 1: new LP and get access to a benchmark from they're 1137 00:51:35,280 --> 00:51:37,239 Speaker 1: they're so good that right, they haven't really added to 1138 00:51:37,239 --> 00:51:40,200 Speaker 1: their LP base, And so then people sometimes say, okay, 1139 00:51:40,200 --> 00:51:41,520 Speaker 1: well let me go down to the next year or 1140 00:51:41,520 --> 00:51:43,239 Speaker 1: the next year. And then unfortunately, and a lot of 1141 00:51:43,239 --> 00:51:45,120 Speaker 1: times in this business, you know, that means that you 1142 00:51:45,160 --> 00:51:47,120 Speaker 1: now start to get those returns we talked about, which 1143 00:51:47,160 --> 00:51:49,560 Speaker 1: converged to the media as opposed to the top returns. 1144 00:51:49,640 --> 00:51:53,720 Speaker 1: Mean reversion is exactly right, is quite a mean cruel, 1145 00:51:53,840 --> 00:51:57,640 Speaker 1: a cruel mistress. So I I made a reference, but 1146 00:51:57,719 --> 00:52:02,280 Speaker 1: we really didn't get into UM and Reason's piece, software 1147 00:52:02,320 --> 00:52:04,920 Speaker 1: is eating the world? That was two thousand eleven, and 1148 00:52:04,960 --> 00:52:08,400 Speaker 1: that turned out to be a fabulous call. So really 1149 00:52:08,440 --> 00:52:12,880 Speaker 1: the question is um is software still eating the world? 1150 00:52:12,960 --> 00:52:15,920 Speaker 1: And and when does this, you know, get replaced by 1151 00:52:16,040 --> 00:52:19,000 Speaker 1: whatever is going to replace software, or does that just 1152 00:52:19,160 --> 00:52:22,920 Speaker 1: never end it just keeps going. Yeah, I think so. 1153 00:52:23,000 --> 00:52:24,759 Speaker 1: I think software is still eating the world at least 1154 00:52:24,760 --> 00:52:26,600 Speaker 1: where we sit. We think it will continue to eat 1155 00:52:26,640 --> 00:52:28,840 Speaker 1: the world for I don't know what the time period is, 1156 00:52:28,880 --> 00:52:31,799 Speaker 1: but I don't I don't know what fun exactly right. 1157 00:52:31,800 --> 00:52:33,120 Speaker 1: I don't see an end to it at this point 1158 00:52:33,120 --> 00:52:35,480 Speaker 1: in time. And actually, what's interesting now is it's starting 1159 00:52:35,480 --> 00:52:37,680 Speaker 1: to touch a lot of industries that historically it never 1160 00:52:37,719 --> 00:52:40,040 Speaker 1: got to. So now we're starting to see software eating 1161 00:52:40,640 --> 00:52:42,640 Speaker 1: a little bit of education, a little bit of healthcare, 1162 00:52:43,040 --> 00:52:46,600 Speaker 1: government services, um, you know, oil and gas markets, energy markets. 1163 00:52:46,640 --> 00:52:49,160 Speaker 1: So there's these you know, very very markets that for 1164 00:52:49,200 --> 00:52:51,600 Speaker 1: a long time kind of we're you know, largely untouched. 1165 00:52:51,920 --> 00:52:53,520 Speaker 1: And I think we're still at the very very beating 1166 00:52:53,520 --> 00:52:55,520 Speaker 1: phass of it. So it's been our investment thesis for 1167 00:52:55,520 --> 00:52:57,000 Speaker 1: a long time. I think it's gonna be our investment 1168 00:52:57,040 --> 00:52:59,120 Speaker 1: thesis for the foreseable future. So I'm gonna throw a 1169 00:52:59,160 --> 00:53:01,440 Speaker 1: curve booll at you only because you brought it up. 1170 00:53:01,480 --> 00:53:06,359 Speaker 1: So health care. Healthcare is such a fascinating area. You 1171 00:53:06,400 --> 00:53:10,160 Speaker 1: guys have looked at biological science is not not where 1172 00:53:10,360 --> 00:53:12,480 Speaker 1: where you really focus. We we do actually have a 1173 00:53:12,520 --> 00:53:15,600 Speaker 1: bio fund, right, but but the whole there's a huge 1174 00:53:15,640 --> 00:53:20,239 Speaker 1: amount of um genomics and go down the whole list 1175 00:53:20,280 --> 00:53:25,520 Speaker 1: of stuff. You're really more hardcore tech, not not life sciences. 1176 00:53:25,960 --> 00:53:27,680 Speaker 1: But you do as you said, you do that. But 1177 00:53:27,760 --> 00:53:31,399 Speaker 1: when you brought it up, I immediately thought of the 1178 00:53:31,560 --> 00:53:37,480 Speaker 1: Berkshire Hathaway, Amazon, JP, Morgan Chase, the concept of Hey, 1179 00:53:38,000 --> 00:53:40,080 Speaker 1: healthcare in the United States is broken and we want 1180 00:53:40,080 --> 00:53:43,600 Speaker 1: to explore fixing it. When you see something like that, 1181 00:53:43,600 --> 00:53:49,279 Speaker 1: that does your vc um Pavlovian response start to go 1182 00:53:49,360 --> 00:53:52,480 Speaker 1: off and say, yes, it's broken and technology can fix it. 1183 00:53:52,520 --> 00:53:55,680 Speaker 1: In here's a billion dollars, Like, how do you hear? 1184 00:53:56,080 --> 00:53:58,520 Speaker 1: Like when I heard that story, I'm like, damn, that's 1185 00:53:58,560 --> 00:54:03,319 Speaker 1: some serious firepower. Yeah. How is this perceived at a 1186 00:54:03,400 --> 00:54:09,160 Speaker 1: shop where you're looking for the next great disruptive technology? Yeah? Yeah, Um, Look, 1187 00:54:09,560 --> 00:54:11,440 Speaker 1: we all take notice when things like that happened, obviously, 1188 00:54:11,440 --> 00:54:13,920 Speaker 1: particularly with those companies because they're obviously all kind of 1189 00:54:13,960 --> 00:54:17,720 Speaker 1: companies that have tremendous resources. In general, though funding something 1190 00:54:17,760 --> 00:54:19,360 Speaker 1: like that is not really that's just not really our 1191 00:54:19,520 --> 00:54:21,759 Speaker 1: m O. Right, So are are you know, we we 1192 00:54:21,800 --> 00:54:24,319 Speaker 1: may like that idea and we say great, Now, is 1193 00:54:24,360 --> 00:54:26,800 Speaker 1: there a set of you know, entrepreneurs who are starting 1194 00:54:26,800 --> 00:54:28,960 Speaker 1: from scratch with a completely blank slate, and we can 1195 00:54:29,000 --> 00:54:31,359 Speaker 1: you know, invest to three five million dollars in them 1196 00:54:31,600 --> 00:54:33,840 Speaker 1: to go try to build something that could be you know, 1197 00:54:33,920 --> 00:54:36,080 Speaker 1: equivalent in terms of the results that those three companies 1198 00:54:36,160 --> 00:54:37,919 Speaker 1: might deliver, but can do it where it's a tech 1199 00:54:37,960 --> 00:54:40,840 Speaker 1: first company and is really driven kind of bottoms up 1200 00:54:40,840 --> 00:54:42,759 Speaker 1: from the tech side. So it certainly kind of you know, 1201 00:54:42,840 --> 00:54:44,600 Speaker 1: piques our interest, but it's not it's just not in 1202 00:54:44,600 --> 00:54:46,520 Speaker 1: the scope of what we tend to do from funding perspective. 1203 00:54:47,000 --> 00:54:50,000 Speaker 1: And really the last I have a couple of more 1204 00:54:50,080 --> 00:54:52,320 Speaker 1: questions try I don't want to I don't wanna torch 1205 00:54:52,400 --> 00:54:55,480 Speaker 1: you with this um. One is debt versus equity and 1206 00:54:55,520 --> 00:54:59,120 Speaker 1: the other is valuations. You write about, Uh, debt versus 1207 00:54:59,160 --> 00:55:02,000 Speaker 1: equity is a question and that old entrepreneurs should think about, 1208 00:55:02,960 --> 00:55:07,320 Speaker 1: what explain why that's significant and how they should contextualize. 1209 00:55:07,360 --> 00:55:08,520 Speaker 1: So I think there's a couple of issues to think 1210 00:55:08,560 --> 00:55:10,799 Speaker 1: about on debt versus equity. So one is and let's 1211 00:55:10,840 --> 00:55:13,360 Speaker 1: assume we're talking about real debt here, not convertible debt. Right, 1212 00:55:13,400 --> 00:55:15,360 Speaker 1: so debt that actually is going to stay there. The 1213 00:55:15,680 --> 00:55:17,640 Speaker 1: problem with debt is at some point you have to 1214 00:55:17,640 --> 00:55:19,920 Speaker 1: pay it back, right and uh, you know it's not 1215 00:55:19,960 --> 00:55:22,000 Speaker 1: that we want to with equity, you have to pay. 1216 00:55:22,760 --> 00:55:24,799 Speaker 1: But you know, so if you think about it from 1217 00:55:24,800 --> 00:55:26,719 Speaker 1: a starter perspective, right, for you to take debt and 1218 00:55:26,760 --> 00:55:28,880 Speaker 1: then say, okay, three years from now, when hopefully my 1219 00:55:28,920 --> 00:55:31,520 Speaker 1: business is finally starting to hum, now I gotta take 1220 00:55:31,560 --> 00:55:33,240 Speaker 1: money out of you know that I could be plowing 1221 00:55:33,280 --> 00:55:34,919 Speaker 1: into R and D or other stuff, and I gotta 1222 00:55:34,960 --> 00:55:36,920 Speaker 1: go pay it back. Like it's it's what we call 1223 00:55:36,960 --> 00:55:40,080 Speaker 1: it's not permanent capital, right, So it can serve a purpose, 1224 00:55:40,160 --> 00:55:42,200 Speaker 1: but you know, I think for a startup business, it's 1225 00:55:42,200 --> 00:55:43,960 Speaker 1: a dangerous kind of you know, path to get on 1226 00:55:44,040 --> 00:55:47,239 Speaker 1: because you want the permanency of capital that allows you 1227 00:55:47,280 --> 00:55:48,759 Speaker 1: to kind of make the investments into the company that 1228 00:55:48,800 --> 00:55:50,680 Speaker 1: you hopefully want to invest in. So, you know, a 1229 00:55:50,680 --> 00:55:53,120 Speaker 1: lot of our companies do what's called convertible debt sometimes 1230 00:55:53,160 --> 00:55:54,960 Speaker 1: where you know, kind of that debt will start off 1231 00:55:54,960 --> 00:55:57,080 Speaker 1: his debt, but then it turns into equity at some 1232 00:55:57,120 --> 00:55:59,520 Speaker 1: point in time. Uh. And you know, people, what why 1233 00:55:59,600 --> 00:56:03,000 Speaker 1: do that? As opposed to straight equity. Look personally, you know, 1234 00:56:03,040 --> 00:56:05,080 Speaker 1: from our perspective, and we've been public on this, we 1235 00:56:05,080 --> 00:56:08,720 Speaker 1: would rather people do straight equity convertible. That started largely, 1236 00:56:08,760 --> 00:56:11,120 Speaker 1: I think because people said it's cheaper, it's just faster. 1237 00:56:11,680 --> 00:56:13,919 Speaker 1: You don't have to have, you know, hours and hours 1238 00:56:13,920 --> 00:56:16,160 Speaker 1: of lawyers doing this stuff. Uh, and it kind of 1239 00:56:16,200 --> 00:56:18,720 Speaker 1: punts the valuation question, right. We don't have to decide 1240 00:56:18,719 --> 00:56:20,760 Speaker 1: on the valuation today. We say, hey, look in the future, 1241 00:56:21,040 --> 00:56:23,239 Speaker 1: when there's equity round, we'll just convert it at that 1242 00:56:23,280 --> 00:56:24,799 Speaker 1: price or some discount. But we don't need to go 1243 00:56:24,840 --> 00:56:28,680 Speaker 1: fight about evaluation. Um. It's it's grown a lot um. 1244 00:56:28,719 --> 00:56:30,600 Speaker 1: It's problematic for a lot of reasons. I think the 1245 00:56:30,640 --> 00:56:33,960 Speaker 1: most The most place we see problems is founders will 1246 00:56:34,040 --> 00:56:37,359 Speaker 1: kind of do many debt rounds and then they don't 1247 00:56:37,360 --> 00:56:39,919 Speaker 1: really realize until they finally go to raise an equity round. 1248 00:56:40,160 --> 00:56:42,359 Speaker 1: When all that debt converts into equity, they realize, oh, 1249 00:56:42,400 --> 00:56:43,960 Speaker 1: my gosh, I've sold a lot more of the company 1250 00:56:43,960 --> 00:56:46,560 Speaker 1: than realized. Right, because you don't have that tangible Hey, 1251 00:56:46,640 --> 00:56:48,319 Speaker 1: you know, I got five million dollars and I gave 1252 00:56:48,400 --> 00:56:51,279 Speaker 1: up in my company or something like that. The math 1253 00:56:51,360 --> 00:56:55,040 Speaker 1: is easy to try it. And then the last question 1254 00:56:55,080 --> 00:56:58,360 Speaker 1: I have to ask you about is valuation. And I 1255 00:56:58,520 --> 00:57:02,960 Speaker 1: still have in my head marks comment that, Hey, look 1256 00:57:02,960 --> 00:57:05,840 Speaker 1: at all the companies that blew up in two thousand, 1257 00:57:05,840 --> 00:57:12,080 Speaker 1: two thousand two. They've all since The ideas were fine, 1258 00:57:12,080 --> 00:57:14,200 Speaker 1: they were just a little ahead of themselves. The perfect 1259 00:57:14,239 --> 00:57:17,160 Speaker 1: example back then it was pets dot com, and now 1260 00:57:17,240 --> 00:57:20,920 Speaker 1: Chili is just web band, web band and Instacart mirror 1261 00:57:20,960 --> 00:57:24,800 Speaker 1: images of one another. Basic. So and his take was, 1262 00:57:25,880 --> 00:57:29,080 Speaker 1: when we're looking for fifty or a hundred beggars, stop 1263 00:57:29,080 --> 00:57:31,600 Speaker 1: and think about it. If he overeaes. The example he 1264 00:57:31,720 --> 00:57:35,160 Speaker 1: used is I think he was in Facebook at like 1265 00:57:35,200 --> 00:57:38,560 Speaker 1: a twenty million dollar valuation, because well, when what happens 1266 00:57:38,560 --> 00:57:41,560 Speaker 1: if I paid a hundred million doesn't make any difference 1267 00:57:41,600 --> 00:57:44,120 Speaker 1: when it's fifty billion or a hundred billions, Like, it's 1268 00:57:44,120 --> 00:57:47,680 Speaker 1: almost irrelevant at that point. And for an equity for 1269 00:57:47,720 --> 00:57:50,880 Speaker 1: a public equity guy, I'm a guest at that. But 1270 00:57:51,040 --> 00:57:54,680 Speaker 1: intellectually his math makes sense. So it's funny. I'll give 1271 00:57:54,680 --> 00:57:56,320 Speaker 1: you a little bit inside baseball. So this is the 1272 00:57:56,400 --> 00:57:58,080 Speaker 1: number one thing that Mark and I fight about all 1273 00:57:58,080 --> 00:58:01,240 Speaker 1: the time inside the firm. Really, yeah, so I think 1274 00:58:01,480 --> 00:58:03,280 Speaker 1: I think his principle is right. And I've told him 1275 00:58:03,280 --> 00:58:04,840 Speaker 1: this before, so hopefully he won't fire me when he 1276 00:58:04,840 --> 00:58:08,640 Speaker 1: hears this. Um, his principle is, his principle is absolutely right, 1277 00:58:08,640 --> 00:58:10,000 Speaker 1: which is like, you're right if you're going to invest 1278 00:58:10,040 --> 00:58:12,160 Speaker 1: in Facebook, Look the difference between a thirty million or 1279 00:58:12,240 --> 00:58:14,440 Speaker 1: forty million or pigti million valuation? Who cares? Right, it's 1280 00:58:14,440 --> 00:58:18,120 Speaker 1: a hundred billion, you know, went to five. That's one winner. 1281 00:58:18,160 --> 00:58:20,760 Speaker 1: Look at it an aggregate against maybe the companies that weren't. 1282 00:58:20,800 --> 00:58:23,800 Speaker 1: I think that's right. I think I think the problem is, Um, 1283 00:58:23,840 --> 00:58:26,320 Speaker 1: it's very it's it's it's very hard then to know 1284 00:58:26,400 --> 00:58:28,400 Speaker 1: what is the price that which you wouldn't actually make 1285 00:58:28,440 --> 00:58:30,000 Speaker 1: that investment. In other words, so if I would make 1286 00:58:30,000 --> 00:58:31,560 Speaker 1: it at fifty or a hundred, would you pay five 1287 00:58:31,600 --> 00:58:33,760 Speaker 1: hundred for Facebook at that point in time? And look 1288 00:58:33,760 --> 00:58:36,440 Speaker 1: in retrospect it was Facebook, So again you would pay anything. 1289 00:58:36,480 --> 00:58:39,000 Speaker 1: But back at the hindsight bias, a company that we 1290 00:58:39,080 --> 00:58:40,840 Speaker 1: don't know X y Z, we don't know what it's 1291 00:58:40,880 --> 00:58:43,400 Speaker 1: going to be. Where do you draw a line. So 1292 00:58:43,520 --> 00:58:45,800 Speaker 1: what we try to do, right is we try to say, okay, 1293 00:58:45,960 --> 00:58:48,960 Speaker 1: let's assume everything works out. Okay, so what could this 1294 00:58:49,040 --> 00:58:51,840 Speaker 1: company be at scale? Right? So how big can it get? 1295 00:58:51,920 --> 00:58:54,320 Speaker 1: What's the market size? All those things? And then we say, okay, 1296 00:58:54,320 --> 00:58:56,800 Speaker 1: look if you you know, believe that it can actually 1297 00:58:56,840 --> 00:58:58,920 Speaker 1: get to a ten twenty billion dollar company, and you're right, 1298 00:58:58,920 --> 00:59:02,400 Speaker 1: you're trying to optimize for times your money. There's at 1299 00:59:02,480 --> 00:59:04,760 Speaker 1: least a range of prices, and it's it's you're right. 1300 00:59:04,800 --> 00:59:06,720 Speaker 1: If you loved it at thirty million, you probably are 1301 00:59:06,760 --> 00:59:09,160 Speaker 1: still loving it at forty million. But maybe the answer is, look, 1302 00:59:09,160 --> 00:59:11,040 Speaker 1: you don't love it a hundred million. The other piece 1303 00:59:11,080 --> 00:59:12,480 Speaker 1: to think about it is it's not just the entry 1304 00:59:12,520 --> 00:59:15,240 Speaker 1: valuation that matters for that purpose. That's the next round. 1305 00:59:15,240 --> 00:59:17,160 Speaker 1: That's exactly That's what I say, which is you know, 1306 00:59:17,200 --> 00:59:19,360 Speaker 1: at some point in time, leave yourself a little up. 1307 00:59:19,360 --> 00:59:21,480 Speaker 1: So that's exactly right. And so that's the other risk 1308 00:59:21,560 --> 00:59:23,120 Speaker 1: I think that you can get into if you don't 1309 00:59:23,120 --> 00:59:26,080 Speaker 1: at least think critically about valuation. Is you may be happy, 1310 00:59:26,120 --> 00:59:28,120 Speaker 1: but then look, these guys are gonna go raise you know, 1311 00:59:28,200 --> 00:59:31,479 Speaker 1: another two, three, four rounds and if every round every 1312 00:59:31,520 --> 00:59:34,040 Speaker 1: investor feels like they're getting pushed, it doesn't work. Now, 1313 00:59:34,120 --> 00:59:36,640 Speaker 1: there are examples where that works, you know, Uh, we 1314 00:59:36,760 --> 00:59:40,320 Speaker 1: famously you know, didn't invest in Square, which, um, that's 1315 00:59:40,280 --> 00:59:42,400 Speaker 1: to be great. And you know, at every round, you know, 1316 00:59:42,480 --> 00:59:44,480 Speaker 1: it always felt like you were paying ahead of what 1317 00:59:44,560 --> 00:59:47,080 Speaker 1: the what the actual intrinsic value the business was. But 1318 00:59:47,520 --> 00:59:48,960 Speaker 1: you know the reality is that's the way a lot 1319 00:59:48,960 --> 00:59:51,160 Speaker 1: of these things look. So I think his principle is right, 1320 00:59:51,560 --> 00:59:53,360 Speaker 1: and but I think you just have to say, okay, 1321 00:59:53,360 --> 00:59:55,400 Speaker 1: Look there is some limited which we say, okay, the 1322 00:59:55,520 --> 00:59:58,280 Speaker 1: risk of next round financing and you know, kind of 1323 00:59:58,320 --> 01:00:01,480 Speaker 1: the the real upside opportunity. He is somewhat constrained by valuation. 1324 01:00:01,560 --> 01:00:05,680 Speaker 1: So let's take an example, Uber, a giant by any measures, 1325 01:00:05,720 --> 01:00:10,080 Speaker 1: successful startup company. I think if you were, if you 1326 01:00:10,120 --> 01:00:14,440 Speaker 1: were a private investor, of the private investors are underwater 1327 01:00:14,520 --> 01:00:18,200 Speaker 1: based on where the training today. Right, Yeah, that may 1328 01:00:18,200 --> 01:00:19,880 Speaker 1: be right, but you know most of the look there 1329 01:00:19,880 --> 01:00:22,160 Speaker 1: are also people like Benchmark and lots of other firms 1330 01:00:22,200 --> 01:00:25,600 Speaker 1: who are certainly not right. Yeah exactly. Yeah, Look, I 1331 01:00:25,600 --> 01:00:26,880 Speaker 1: mean I would say, I guess a couple of things 1332 01:00:27,360 --> 01:00:29,440 Speaker 1: were left investors. So you know, you can take this 1333 01:00:29,480 --> 01:00:31,800 Speaker 1: with a big grain of salt um you need there 1334 01:00:31,920 --> 01:00:35,080 Speaker 1: you always I disagree with my friends got Galloway and 1335 01:00:35,080 --> 01:00:38,320 Speaker 1: then Stern who thinks Lift is toast is only gonna 1336 01:00:38,360 --> 01:00:41,120 Speaker 1: be one winner here. Hey, what name of field where 1337 01:00:41,120 --> 01:00:43,760 Speaker 1: there isn't a PEPSI to the code? I think that's what. Yeah, 1338 01:00:43,840 --> 01:00:45,960 Speaker 1: I don't think. I don't think that's the game. I mean, obviously, look, 1339 01:00:46,000 --> 01:00:48,280 Speaker 1: we we bet that way and we believe that. Um, 1340 01:00:48,320 --> 01:00:49,800 Speaker 1: you know. The the only other thing I'd say about 1341 01:00:49,840 --> 01:00:51,960 Speaker 1: Uber and I'd say it's about Lift two, which is, look, yes, 1342 01:00:52,000 --> 01:00:55,440 Speaker 1: they're underwater today. Judging these companies though, I think based 1343 01:00:55,480 --> 01:00:57,640 Speaker 1: on three, four or five weeks of stock price for 1344 01:00:57,720 --> 01:01:00,920 Speaker 1: it's a little bit unfair. That's totally look face book right, Facebook, 1345 01:01:00,920 --> 01:01:03,120 Speaker 1: you know went to fourteen dollars. They had a crappy 1346 01:01:03,200 --> 01:01:05,640 Speaker 1: I p O before. And so look, at some point 1347 01:01:05,640 --> 01:01:07,960 Speaker 1: in time, yes, these companies will all trade on some 1348 01:01:08,080 --> 01:01:09,919 Speaker 1: like multiple of cash flow at some point in time, 1349 01:01:10,280 --> 01:01:12,440 Speaker 1: and then we'll real be able to judge, quite frankly, 1350 01:01:12,520 --> 01:01:14,720 Speaker 1: you know, whether they're overvalued or not. And my last 1351 01:01:14,800 --> 01:01:18,240 Speaker 1: question before I get to my favorite uh speed round questions, 1352 01:01:19,040 --> 01:01:22,600 Speaker 1: we work seems to be just off the charts where 1353 01:01:22,640 --> 01:01:24,960 Speaker 1: a floor in a WE works building is worth more 1354 01:01:25,000 --> 01:01:28,360 Speaker 1: than the building itself. Does any of this make any sense? Yeah? 1355 01:01:28,360 --> 01:01:30,440 Speaker 1: So we're not investors, and we worked, Um, so you 1356 01:01:30,520 --> 01:01:32,080 Speaker 1: can tell us the straight well, look, and I so 1357 01:01:32,120 --> 01:01:33,480 Speaker 1: I don't know the numbers, but I do think there 1358 01:01:33,560 --> 01:01:36,120 Speaker 1: is this big question which is fundamentally, is it a 1359 01:01:36,120 --> 01:01:38,160 Speaker 1: technology company or is it a you know, a very 1360 01:01:38,200 --> 01:01:41,000 Speaker 1: successful real estate business? Right? And look, if it's the latter, 1361 01:01:41,120 --> 01:01:42,680 Speaker 1: we know that those things will trade on some cap 1362 01:01:42,760 --> 01:01:45,120 Speaker 1: right at some point in time. Uh, And all about 1363 01:01:45,120 --> 01:01:47,080 Speaker 1: I are are relative to the clost I think that's 1364 01:01:47,080 --> 01:01:49,040 Speaker 1: a question. Look, And I don't know since I'm an investor. Look, 1365 01:01:49,080 --> 01:01:50,840 Speaker 1: maybe they have some story which is look, maybe there's 1366 01:01:50,840 --> 01:01:52,960 Speaker 1: technology or something else which means they should trade at 1367 01:01:52,960 --> 01:01:56,080 Speaker 1: a premium to a to read basically because of you know, 1368 01:01:56,400 --> 01:01:58,480 Speaker 1: better margins or something like that. I don't know, but 1369 01:01:58,520 --> 01:02:00,720 Speaker 1: I think, look, that is the fundamental question them And 1370 01:02:00,720 --> 01:02:02,400 Speaker 1: and I think that's what you know, if if they 1371 01:02:02,400 --> 01:02:04,200 Speaker 1: go public, as at least it's rumored that they might 1372 01:02:04,200 --> 01:02:06,440 Speaker 1: go soon, I think, you know, we'll have the public 1373 01:02:06,480 --> 01:02:08,960 Speaker 1: markets ability to weigh in on that pretty soon. So 1374 01:02:09,000 --> 01:02:11,400 Speaker 1: I only have you here for a finite time, they're 1375 01:02:11,400 --> 01:02:14,800 Speaker 1: telling me. So let's jump to our favorite questions that 1376 01:02:14,960 --> 01:02:17,160 Speaker 1: I ask all my guests. Feel free to go as 1377 01:02:17,240 --> 01:02:20,480 Speaker 1: longer short with these as you like. Um, your first 1378 01:02:20,520 --> 01:02:23,760 Speaker 1: car make earin model. My first car was actually a 1379 01:02:23,800 --> 01:02:26,560 Speaker 1: Pugio five oh five s time it was. It was 1380 01:02:26,560 --> 01:02:28,040 Speaker 1: an old one and actual I'll tell you though, I 1381 01:02:28,080 --> 01:02:30,479 Speaker 1: loved it for the time it wasn't in the shop 1382 01:02:30,520 --> 01:02:32,480 Speaker 1: based it was literally you know, in the shop and 1383 01:02:32,520 --> 01:02:34,280 Speaker 1: every other day. But boy, when it wasn't, it was 1384 01:02:34,320 --> 01:02:36,400 Speaker 1: a fun car to drive, to say the least, that 1385 01:02:36,520 --> 01:02:40,000 Speaker 1: is fun car. What's the most important thing that people 1386 01:02:40,080 --> 01:02:43,120 Speaker 1: don't know about Scott Cooper? Uh? Well, I tell a 1387 01:02:43,160 --> 01:02:46,120 Speaker 1: little bit of the book, but I am well, maybe 1388 01:02:46,120 --> 01:02:48,280 Speaker 1: the most important thing is. Look, I'm a I'm the 1389 01:02:48,320 --> 01:02:50,480 Speaker 1: most introverted person probably you will ever meet, which I 1390 01:02:50,520 --> 01:02:55,840 Speaker 1: know sounds funny. I can, I can? I right, I 1391 01:02:55,880 --> 01:02:59,200 Speaker 1: play I play an extrovert on TV. But you are 1392 01:02:59,240 --> 01:03:01,080 Speaker 1: not the only uson who What I like to do 1393 01:03:01,160 --> 01:03:02,560 Speaker 1: is I like to go home and read a book 1394 01:03:02,600 --> 01:03:05,800 Speaker 1: and sit on my couch and watch Netflix. And right, 1395 01:03:06,480 --> 01:03:08,600 Speaker 1: I am right there with you. Who are some of 1396 01:03:08,640 --> 01:03:14,320 Speaker 1: your early mentors. I was actually mentored by a family friend, 1397 01:03:14,320 --> 01:03:16,880 Speaker 1: a guy named Armand Weinberg is his name, and Houston 1398 01:03:17,400 --> 01:03:20,920 Speaker 1: uh and he ran um at the MD Anderson Hospital, 1399 01:03:20,960 --> 01:03:22,960 Speaker 1: which is a very famous kind of you know, cancer hospital. 1400 01:03:23,120 --> 01:03:25,360 Speaker 1: He ran a bunch of studies around you know, kind 1401 01:03:25,360 --> 01:03:27,680 Speaker 1: of early cancer prevention, and so we did some research 1402 01:03:27,760 --> 01:03:29,880 Speaker 1: on you know, how do you detect and prevent breast 1403 01:03:29,920 --> 01:03:31,960 Speaker 1: cancer or prostate cancer? Thinks that sort, and it kind 1404 01:03:32,000 --> 01:03:34,160 Speaker 1: of got me into My initial love was kind of 1405 01:03:34,160 --> 01:03:36,520 Speaker 1: health policy and things of that sort. And uh, you know, 1406 01:03:36,600 --> 01:03:38,400 Speaker 1: he gave me jobs over the summer and did all 1407 01:03:38,440 --> 01:03:39,800 Speaker 1: kinds of stuff that helped me kind of get into 1408 01:03:39,880 --> 01:03:43,680 Speaker 1: that field. There's a lot of fun. Uh, let's talk 1409 01:03:43,720 --> 01:03:46,479 Speaker 1: about your favorite books. What are some of your favorite books, 1410 01:03:46,520 --> 01:03:51,040 Speaker 1: be they fiction, non fiction, um, investing related whatever you 1411 01:03:51,160 --> 01:03:53,760 Speaker 1: enjoy reading? You mentioned, but yeah, I love Uh I 1412 01:03:53,800 --> 01:03:56,840 Speaker 1: only read non fiction now. Uh isn't that terrible? I'm 1413 01:03:56,880 --> 01:03:59,840 Speaker 1: the same way and I miss fiction from my child too. 1414 01:04:00,080 --> 01:04:01,960 Speaker 1: You know, it's funny. I never was a big fiction 1415 01:04:02,080 --> 01:04:06,720 Speaker 1: reader growing up. I never, yeah, never got into that, 1416 01:04:06,920 --> 01:04:08,320 Speaker 1: not really. I mean, I you know, I read a 1417 01:04:08,320 --> 01:04:10,840 Speaker 1: few of them here and there, but into nothing, no, 1418 01:04:11,040 --> 01:04:13,320 Speaker 1: I I you know, look, truth be told. This is 1419 01:04:13,400 --> 01:04:16,160 Speaker 1: terrible to say, uh publicly, but I was I was 1420 01:04:16,200 --> 01:04:18,320 Speaker 1: not a reader growing up at all. I hated reading 1421 01:04:18,520 --> 01:04:22,200 Speaker 1: and in fact, I'll never forget this. Um, hopefully my college, 1422 01:04:22,440 --> 01:04:25,360 Speaker 1: Uh teachers aren't listening. But when I was applying to college, 1423 01:04:25,360 --> 01:04:27,440 Speaker 1: you know, after my junior year of high school, I 1424 01:04:27,440 --> 01:04:29,520 Speaker 1: got the applications and I was applying. Actually, Harvard was 1425 01:04:29,560 --> 01:04:30,800 Speaker 1: one of the schools I applied to. I did not 1426 01:04:30,840 --> 01:04:33,200 Speaker 1: get in, by the way. Um. And you know it said, 1427 01:04:33,240 --> 01:04:35,120 Speaker 1: tell us about the last three books you've read, And 1428 01:04:35,160 --> 01:04:37,280 Speaker 1: you know that's one of the questions. Well, no, it wasn't. 1429 01:04:37,280 --> 01:04:38,720 Speaker 1: I said, Oh my god, I've got to go read 1430 01:04:38,720 --> 01:04:40,560 Speaker 1: three books. I read three books that summer. It was 1431 01:04:40,600 --> 01:04:43,920 Speaker 1: the only three books I read, and I really, oh god, 1432 01:04:44,000 --> 01:04:47,560 Speaker 1: between Vonnegut and books were great and high school and 1433 01:04:47,560 --> 01:04:50,240 Speaker 1: then college. The problem with colleges they want you to 1434 01:04:50,280 --> 01:04:53,360 Speaker 1: read books that for a purpose as opposed for pleasures. 1435 01:04:53,360 --> 01:04:55,960 Speaker 1: So so I love I love nonfiction stuff. So like 1436 01:04:55,960 --> 01:04:57,560 Speaker 1: one of my favorite books is Master of the Senate, 1437 01:04:57,560 --> 01:04:59,560 Speaker 1: which is, you know, the book about Lennon Johnson. I 1438 01:04:59,600 --> 01:05:04,480 Speaker 1: think that's really cool. He's got that whole series. I 1439 01:05:04,480 --> 01:05:07,560 Speaker 1: think I've I've read all that. Apparently apparently he's got 1440 01:05:07,600 --> 01:05:10,960 Speaker 1: one more coming out about how he does his work, prices. 1441 01:05:11,040 --> 01:05:14,880 Speaker 1: It's it's supposed to be fabulous, But I was gonna 1442 01:05:14,920 --> 01:05:17,160 Speaker 1: say it's gonna nine our pages and you know, and uh, 1443 01:05:17,200 --> 01:05:19,000 Speaker 1: you know, obviously he's you know, he's not a young 1444 01:05:19,120 --> 01:05:21,080 Speaker 1: chicken anymore, and so he's got to get it done before. 1445 01:05:22,120 --> 01:05:24,200 Speaker 1: But his work is quite brilliant. He's great. Yeah, I'm 1446 01:05:24,240 --> 01:05:26,240 Speaker 1: reading a book right now. I'm gonna blank on the 1447 01:05:26,240 --> 01:05:29,720 Speaker 1: title about financial bubbles and speculation, which is really interesting. 1448 01:05:30,080 --> 01:05:33,320 Speaker 1: It's called it's called Devil Take the hindmost is. Yeah, 1449 01:05:33,320 --> 01:05:35,800 Speaker 1: it's an older book. It's actually I hadn't I couldn't 1450 01:05:35,800 --> 01:05:38,680 Speaker 1: believe I hadn't read it, and I ran across it somewhere. Um, 1451 01:05:38,760 --> 01:05:41,280 Speaker 1: and that's interesting. Um. And I'll, you know, I'll pick 1452 01:05:41,360 --> 01:05:44,200 Speaker 1: up some you know, lighter stuff every now and then, 1453 01:05:44,240 --> 01:05:48,640 Speaker 1: but I generally tend to try Edward Chancellor. Yes, yeah, 1454 01:05:48,640 --> 01:05:50,800 Speaker 1: this is a pretty pretty famous book. Yeah, it's a 1455 01:05:50,800 --> 01:05:54,000 Speaker 1: good book. It's very good. Give us one more, one more? 1456 01:05:54,120 --> 01:05:57,600 Speaker 1: That is exciting. Right now? What am I reading? Um? 1457 01:05:57,640 --> 01:06:00,440 Speaker 1: The guy who runs the AI Institute, I'm forgetting his name. 1458 01:06:01,400 --> 01:06:05,160 Speaker 1: He has a book out. It's actually called Love or 1459 01:06:05,200 --> 01:06:07,160 Speaker 1: Love Yourself or something like that. It's a very interesting 1460 01:06:07,280 --> 01:06:09,320 Speaker 1: book about kind of you know, it's a it's a 1461 01:06:09,320 --> 01:06:11,880 Speaker 1: book about modern politics, and about how, you know, kind 1462 01:06:11,880 --> 01:06:14,880 Speaker 1: of bifurcated. Obviously we've all become and this concept of 1463 01:06:14,920 --> 01:06:16,840 Speaker 1: you know, his general view is, look, you know, it's 1464 01:06:16,880 --> 01:06:19,320 Speaker 1: a lot of this his breakdown of human relationships. So 1465 01:06:19,360 --> 01:06:20,760 Speaker 1: I got a copy of that. Have you read it 1466 01:06:20,840 --> 01:06:23,720 Speaker 1: yet or I'm kind of I'm kind of like alright, 1467 01:06:23,800 --> 01:06:26,280 Speaker 1: So I got a review copy of it, and I 1468 01:06:26,320 --> 01:06:30,919 Speaker 1: recognize his name and the pitches we need to love 1469 01:06:30,960 --> 01:06:33,000 Speaker 1: each other more and we need to be more involved. 1470 01:06:33,160 --> 01:06:36,360 Speaker 1: And I'm thinking, wait a second, AI, you're the guys 1471 01:06:36,360 --> 01:06:39,320 Speaker 1: who said the poors cord of the crisis, this was 1472 01:06:39,400 --> 01:06:42,640 Speaker 1: all the fault of you know, first we did anti 1473 01:06:42,720 --> 01:06:46,280 Speaker 1: redlining and that and this whole thing about it was 1474 01:06:46,360 --> 01:06:49,440 Speaker 1: the black and brown people's fault. Wait, now you're pivoting 1475 01:06:49,440 --> 01:06:52,280 Speaker 1: to maybe this is his swan song. So the story 1476 01:06:52,520 --> 01:06:55,240 Speaker 1: I know, right is he's quitting AI after that. I 1477 01:06:55,280 --> 01:06:58,080 Speaker 1: didn't know. So, yeah, he's he's been there ten years. 1478 01:06:58,160 --> 01:07:00,160 Speaker 1: It's terrible. I can't remember his name. I apologize, I'll 1479 01:07:00,200 --> 01:07:04,120 Speaker 1: find you. Probably, so he is leaving AI after ten years. 1480 01:07:04,160 --> 01:07:07,680 Speaker 1: In fact, he had really interesting Arthur Brooks. Arthur Brooks. So, 1481 01:07:07,680 --> 01:07:10,760 Speaker 1: so when I got this from my editors, here I said, 1482 01:07:10,920 --> 01:07:13,520 Speaker 1: you don't mind if I, you know, remove these guys 1483 01:07:13,520 --> 01:07:16,480 Speaker 1: this guy's intestines and jump rope with it, because that's 1484 01:07:16,600 --> 01:07:20,800 Speaker 1: after after how divisive. So there's a whole another thing 1485 01:07:20,920 --> 01:07:23,480 Speaker 1: that in the old days, think tanks used to be 1486 01:07:23,960 --> 01:07:27,880 Speaker 1: think tanks, and now they've become these partisan idea shops 1487 01:07:27,960 --> 01:07:32,400 Speaker 1: and policy shops. So like, wait, after two decades of 1488 01:07:33,480 --> 01:07:36,960 Speaker 1: sheer partisan rancor, you're gonna tell me you now want 1489 01:07:36,960 --> 01:07:41,240 Speaker 1: everybody to hold hands and seeing kumbaya? Right, And I 1490 01:07:41,280 --> 01:07:42,920 Speaker 1: can't say what I want to say in the radio. 1491 01:07:43,040 --> 01:07:45,840 Speaker 1: But so I have not read it. But if you 1492 01:07:45,960 --> 01:07:47,680 Speaker 1: read it, I want and you like it, I want to. 1493 01:07:49,680 --> 01:07:52,840 Speaker 1: So I'm glad somebody I'll give you the review because, 1494 01:07:52,960 --> 01:07:54,720 Speaker 1: to be told, the reason I have it is because 1495 01:07:54,760 --> 01:07:56,520 Speaker 1: it was it was a free b at a conference 1496 01:07:56,560 --> 01:07:58,800 Speaker 1: I was at, so I might not have seen it otherwise, 1497 01:07:58,840 --> 01:08:02,160 Speaker 1: but that's saw him spec See, I'm more concerned about 1498 01:08:02,160 --> 01:08:04,439 Speaker 1: the than the cost of the book than my time 1499 01:08:04,480 --> 01:08:07,520 Speaker 1: commitment to read it, because it's ten or twelve hours 1500 01:08:07,520 --> 01:08:10,600 Speaker 1: that you'll like. And I've learned my my, I'm gonna 1501 01:08:10,600 --> 01:08:13,080 Speaker 1: share one thing with you. I've learned that when you 1502 01:08:13,120 --> 01:08:16,320 Speaker 1: start a book and you don't like it. You know, 1503 01:08:16,360 --> 01:08:19,080 Speaker 1: I was just gonna say that. That is somebody actually 1504 01:08:19,080 --> 01:08:21,040 Speaker 1: took a long time tots and one of my partners 1505 01:08:21,080 --> 01:08:22,760 Speaker 1: told me that, and boy, that's the most liberating thing 1506 01:08:22,760 --> 01:08:24,320 Speaker 1: I've ever heard. I agree. I never would do that. 1507 01:08:24,320 --> 01:08:26,040 Speaker 1: I would I would do the fourth March through the 1508 01:08:27,080 --> 01:08:29,559 Speaker 1: Baton Death March through the last hand. It is so 1509 01:08:29,680 --> 01:08:31,840 Speaker 1: liberating to say, Okay, look like I think I got it, 1510 01:08:31,920 --> 01:08:33,439 Speaker 1: and I think I understand the point, and you know, 1511 01:08:33,680 --> 01:08:35,200 Speaker 1: or you know, let me skip a couple of pages 1512 01:08:35,200 --> 01:08:37,519 Speaker 1: here and there. Nobody nobody should skip my book. Of course, 1513 01:08:37,560 --> 01:08:40,479 Speaker 1: I gotta go eat every word from start to finish. 1514 01:08:40,479 --> 01:08:42,639 Speaker 1: You gotta plow you a way right through it. Um. 1515 01:08:42,840 --> 01:08:48,080 Speaker 1: So what VC influenced your approach to venture investing? Yeah, 1516 01:08:48,080 --> 01:08:50,479 Speaker 1: so we've had UM. Probably one of the most interesting 1517 01:08:50,479 --> 01:08:52,360 Speaker 1: ones was a guy named Andy Ratcliffe, who was actually 1518 01:08:52,360 --> 01:08:55,000 Speaker 1: one of the founders of Benchmark. You know, I don't 1519 01:08:55,000 --> 01:08:58,280 Speaker 1: know him, And he was at a firm called Merrill 1520 01:08:58,360 --> 01:09:00,679 Speaker 1: Pickard actually, which is where a bunch to the Benchmark 1521 01:09:00,800 --> 01:09:02,880 Speaker 1: team spun out and and he was a little bit 1522 01:09:02,880 --> 01:09:04,639 Speaker 1: more on the enterprise side, so he did a bunch 1523 01:09:04,640 --> 01:09:08,080 Speaker 1: of their enterprise investing. But he was actually, um, he 1524 01:09:08,120 --> 01:09:10,200 Speaker 1: was the original investor in loud Cloud and opswere and 1525 01:09:10,240 --> 01:09:11,799 Speaker 1: so I just got to know him through that process. 1526 01:09:11,840 --> 01:09:13,639 Speaker 1: And uh and I have a few references to him 1527 01:09:13,840 --> 01:09:15,880 Speaker 1: in the book in the book there, but uh, you 1528 01:09:15,920 --> 01:09:18,160 Speaker 1: know he's he's his His famous thing that he talked 1529 01:09:18,160 --> 01:09:21,479 Speaker 1: about it Benchmark was this concept of markets versus teams, 1530 01:09:22,000 --> 01:09:24,639 Speaker 1: and uh, you know, basically he's got you know, his views. Look, 1531 01:09:25,240 --> 01:09:27,799 Speaker 1: which I think is true is you know, good markets 1532 01:09:28,000 --> 01:09:31,400 Speaker 1: always beat good teams, or I should say bad markets. Sorry, 1533 01:09:31,400 --> 01:09:34,759 Speaker 1: bad markets always be good teams. But you know, obviously 1534 01:09:34,840 --> 01:09:36,920 Speaker 1: you know, good teams can you know they can survive 1535 01:09:36,960 --> 01:09:38,840 Speaker 1: in a bad market, but will never likely you know, 1536 01:09:39,000 --> 01:09:40,559 Speaker 1: never likely kind of get there. All right, now we're 1537 01:09:40,560 --> 01:09:42,800 Speaker 1: gonna do the speed round because they need to take 1538 01:09:42,840 --> 01:09:45,040 Speaker 1: you to where of you going next. Tell us about 1539 01:09:45,080 --> 01:09:47,760 Speaker 1: the time you failed and what you learned from the experience. Yeah, 1540 01:09:47,800 --> 01:09:51,720 Speaker 1: Probably my most high profile failure was actually when I 1541 01:09:51,760 --> 01:09:55,800 Speaker 1: was applying to schools. I desperately wanted to go to Stanford, uh, 1542 01:09:55,880 --> 01:09:58,599 Speaker 1: coming out of school and was flatly rejected as I 1543 01:09:58,640 --> 01:10:01,040 Speaker 1: was at Harvard, as I mentioned, but you ended up going. 1544 01:10:01,240 --> 01:10:02,519 Speaker 1: I did end up going, So I went to pen 1545 01:10:02,600 --> 01:10:05,559 Speaker 1: actually for one year out here on the East Coast transferred. Yeah, 1546 01:10:05,600 --> 01:10:10,400 Speaker 1: but it was a you know, this little persistence persistence. Um. 1547 01:10:10,439 --> 01:10:11,760 Speaker 1: What do you do for fun when you're not in 1548 01:10:11,800 --> 01:10:14,920 Speaker 1: the office or home reading books? Yeah? I like to run. 1549 01:10:14,920 --> 01:10:16,879 Speaker 1: I've always liked to run. I used to be a marathoner, 1550 01:10:16,920 --> 01:10:18,400 Speaker 1: but kind of had to hang up, hang up that 1551 01:10:18,479 --> 01:10:21,280 Speaker 1: those shoes before. But STIPs, uncles, what is it? You 1552 01:10:21,360 --> 01:10:24,559 Speaker 1: name it? All those things? You know? Uh? And then 1553 01:10:24,600 --> 01:10:28,760 Speaker 1: I I like guitar, playing guitar. I'm not very good 1554 01:10:28,800 --> 01:10:30,280 Speaker 1: at it, but I'm always I've been a country music 1555 01:10:30,280 --> 01:10:33,040 Speaker 1: fan for a long time. So interesting, um our final 1556 01:10:33,080 --> 01:10:35,920 Speaker 1: two questions. A young millennial comes to you and says 1557 01:10:35,960 --> 01:10:40,240 Speaker 1: they're interested in a career in either venture capital or technology. 1558 01:10:40,600 --> 01:10:42,519 Speaker 1: What sort of advice would you give them? Yeah, my 1559 01:10:42,520 --> 01:10:45,479 Speaker 1: best advice is go into a startup company. You don't 1560 01:10:45,520 --> 01:10:47,719 Speaker 1: have to start your own company, but learn the company 1561 01:10:47,720 --> 01:10:50,280 Speaker 1: building process. Don't don't go to venture you know you 1562 01:10:50,520 --> 01:10:53,240 Speaker 1: will be a much venture better venture capitalist having understood 1563 01:10:53,280 --> 01:10:56,560 Speaker 1: the company building process. And my final question, what is 1564 01:10:56,600 --> 01:10:58,920 Speaker 1: it that you know about the world of investing today 1565 01:10:59,080 --> 01:11:02,519 Speaker 1: that you wish you new twenty plus years ago? Yeah? 1566 01:11:02,520 --> 01:11:04,679 Speaker 1: The biggest thing for me is I always I would 1567 01:11:04,680 --> 01:11:06,640 Speaker 1: have thought that most of the failure cases would be 1568 01:11:06,640 --> 01:11:10,519 Speaker 1: product or market failures, and and look that happens sometimes. 1569 01:11:10,560 --> 01:11:12,759 Speaker 1: Look sometimes the product just doesn't take or the market changes. 1570 01:11:13,040 --> 01:11:14,800 Speaker 1: The biggest thing that I found over the years we've 1571 01:11:14,800 --> 01:11:16,920 Speaker 1: been doing this is it's all about the team. And 1572 01:11:17,200 --> 01:11:18,920 Speaker 1: I know that sounds almost you know, kind of you know, 1573 01:11:18,960 --> 01:11:21,280 Speaker 1: comical to say, but I thought you're gonna say execution. 1574 01:11:21,840 --> 01:11:24,439 Speaker 1: I mean also embedded in that is execution, right, you know, 1575 01:11:25,160 --> 01:11:27,000 Speaker 1: are you hiring people at the right time, are you 1576 01:11:27,000 --> 01:11:28,840 Speaker 1: thinking about your go to market the right way? Do 1577 01:11:28,880 --> 01:11:31,240 Speaker 1: you have the right cultural dynamic in the company. Those 1578 01:11:31,240 --> 01:11:32,360 Speaker 1: are the things, you know, when we look at the 1579 01:11:32,400 --> 01:11:35,160 Speaker 1: companies that go awry in a good market, it's almost 1580 01:11:35,200 --> 01:11:39,640 Speaker 1: always something like that. Huh, quite quite fascinating. We have 1581 01:11:39,760 --> 01:11:42,759 Speaker 1: been speaking with Scott Cooper. He is the managing partner 1582 01:11:42,840 --> 01:11:47,680 Speaker 1: at Andres and Horowitz, now running ten billion dollars. If 1583 01:11:47,720 --> 01:11:50,120 Speaker 1: you enjoy this conversation, we'll be sure and come back 1584 01:11:50,160 --> 01:11:53,800 Speaker 1: and check out all our previous such conversations. You can 1585 01:11:53,800 --> 01:11:56,160 Speaker 1: look up an inch or down an inch on Apple, 1586 01:11:56,200 --> 01:11:59,960 Speaker 1: iTunes or wherever your finder podcasts are sold and see 1587 01:12:00,080 --> 01:12:05,160 Speaker 1: any of our previous two hundred and fifty such conversations. 1588 01:12:05,520 --> 01:12:08,439 Speaker 1: We love your comments, feedback and suggestions. Be sure to 1589 01:12:08,479 --> 01:12:11,479 Speaker 1: write to us at m IB podcast at Bloomberg dot net. 1590 01:12:12,120 --> 01:12:15,360 Speaker 1: Uh leave a review for us on Apple iTunes. You 1591 01:12:15,400 --> 01:12:18,080 Speaker 1: can check out my daily column on Bloomberg dot com 1592 01:12:18,120 --> 01:12:21,840 Speaker 1: slash Opinion or follow me on Twitter at Rid Halts. 1593 01:12:21,920 --> 01:12:24,000 Speaker 1: I would be remiss if I did not thank the 1594 01:12:24,040 --> 01:12:27,360 Speaker 1: crack staff that helps put this together each week. Michael 1595 01:12:27,360 --> 01:12:31,080 Speaker 1: Boyle is my producer, slash booker. Attica val Brand is 1596 01:12:31,080 --> 01:12:34,320 Speaker 1: our project manager. Michael bat Nick is my head of research. 1597 01:12:35,040 --> 01:12:37,840 Speaker 1: I'm Barry Ri Halts. You've been listening to Masters in 1598 01:12:37,880 --> 01:12:39,840 Speaker 1: Business on Bloomberg Radio