SPEAKER_00: I think what's happened on the IPO front is that there's such a high bar for IPOs now that it used to be, you can go public with 30, 40 million a quarter of revenue or even less than 25 million a quarter of revenue, 100 million of revenue a year. And now that number is like over half a billion. And so you have to have raised lots of venture capital and scaled globally and be the perfect looking company to go public. And I think the bar has just been set so high. And I think what we need is resetting of what an IPO looks like for in our space. And that's the only way to bring down that that 12 years to something like seven years. Because there's lots of companies with hundreds of millions of revenues, 100 million plus, but not a lot of companies that get the half a billion dollar scale until they're 10 years into the journey. This week in startups is brought

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SPEAKER_08: Visit join gelt.com slash twist. Now. Welcome back to this week's liquidity podcast. This week,

SPEAKER_09: we have quite an all-star cast with us. With me today, I have Mamoun Hamid, managing general partner at Kleiner Perkins, Thomas Scriven, managing director at the University of Pennsylvania Endowment. And of course, none other than Jason Calacanis from the Launch Fund and co-founder of the new liquidity conference, which is coming June 2nd to June 4th, liquiditypod.com. I'm your moderator, David Weisberg, co-founder of 10X Capital. Today, we have three topics on the docket. Middle East and sovereigns are setting their eyes on India. Carta has released their data on the 2018 startup class, and there are some surprises there. And the rise of secondaries as a large asset class. Is it just something in this market? Or is it here to stay? And we'll end with everybody's favorite segment, which is the last three investments from each of our guests. Let's dive right in. TechCrunch is reporting that Abu Dhabi sovereign wealth fund, Adia, is in talks to lead a new investment in India-based PocketFM. This comes on the heel of PocketFM's $100 million funding from Lightspeed. This comes as many investors are writing fewer but larger ticket-sized checks into Indian companies. Mahmoun, you were born in Pakistan and are very familiar with the South Asia ecosystem. Are you bullish on India today?

SPEAKER_00: I am. I love India as sort of the next frontier of investment. And it really, frankly, has been for the last 15 years or so. You know, you've got 1.4 billion people. You've got a burgeoning middle class of, I think, close to 500 million. English is a spoken language that kids learn in primary

SPEAKER_15: school. It's quite the phenomenon. And I think I'm really bullish on India going forward.

SPEAKER_17: What do you think has been the source of a couple false starts? There's so much potential in India. What have been the false starts? You know, the last time I went back to India,

SPEAKER_00: as you mentioned, born in Pakistan. So after 2008, I haven't been back. I would say my reflections were the infrastructure lacked. Roads, bridges, traffic. And I think there's still issues. But my understanding is that there's been tons of infrastructure improvements over the last five years, you go to a city like Hyderabad, and it looks like it could be, you know, Silicon Valley, or it could be New York City. And so I think there's been a lot that's happened on the infrastructure front. And also having, you know, strong leadership matters a lot. And India has had quite a bit of that

SPEAKER_21: over the last decade. Yeah, India is a fascinating country. There seems to be a couple of very

SPEAKER_23: important trends, Mamoun. Population is underestimated, I think, by a lot of people.

SPEAKER_26: They don't realize now India is larger than China, right? 1.4 billion people. And everybody seems to still think, you know, that there's a comparison there. China has negative population growth, right?

SPEAKER_23: Like they're contracting. India still growing. And the really interesting thing, I think, in India, is that the number, the percentage of the population that is now living in cities. So the urban population now, it's getting close to 40% of people are living in cities. So to your point, when this is where infrastructure, a middle class, all start to emerge, in one in six or seven people, one in 6.5 people live in the world in India. So this is the giant market of all giant markets, obviously, they don't have the spending power yet. And a pretty functional democracy, not perfect, but but but functional enough, certainly more functional than say, China, which is, you know, a communist country. So, you know, it has the all the setup there, the education, tremendous English speaking, I think probably the most interesting thing. And I don't know if anybody has the statistics on this is, I've been watching these Android phones in India, and a lot of the the richest guys in India and how it seems like their wealth can be traced back now to this, these affordable Android phones and service. So it used to be people just didn't make enough money to have an Android phone. So instead of the population just making more money, which has been slowly happening, they dropped the price of service down to a couple of dollars a month. And my understanding is it's like a 15 to $25 Android phone is available and with unlimited internet. So you know, you you put a cheap Android

SPEAKER_27: phone in a billion people's hands, it's going to be quite a market and it's going to be wild to see what happens.

SPEAKER_00: Yeah, I mean, I just maybe add to that is India isn't just one homogenous blob. It's, I think, like 20 plus dates, almost like 30 different languages. Even though Hindi is a predominant, there's like the other 50% is other languages. So it's not a modernist place. And I would also add that the the West, and the South is where the action is, and the North and the East is where it's a little bit different. So different, you know, GDP per capita, and economic growth, and especially

SPEAKER_33: through tech.

SPEAKER_27: Yeah, and the large deal size, what do we attribute that to? I'm curious, just people

SPEAKER_26: wanting to make safe bets, I guess, maybe they don't have boots on the ground as much as they would need to, to make earlier stage bets.

SPEAKER_33: Yeah, I think big obvious opportunities in telecommunications, industrials, in education, education, etc.

SPEAKER_17: Mamun, do you see Indian startups fundamentally build around different use cases and different startups? Or is it just kind of the US ecosystem translate into India?

SPEAKER_00: I think the most successful Indian startups have been the ones have addressed the local market. You look at a flip card, and others, it's what we haven't seen as much, although there are examples like Freshworks of companies that have built for global scale, have built products, software products that sell all across the globe, like any American startup that gets going here, take a Slack or Figma, you know, they build for global scale, I would say the first wave of successes has come through companies that have done providing a digitally enabled product service, flip cart, you know, grocery delivery, food delivery, Amazon, etc. That first wave of internet innovation. And, but we're seeing a lot more of companies that are going way beyond just serving

SPEAKER_15: the Indian population and you know, building software for global consumption.

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SPEAKER_09: off your SOC 2. Thomas, you literally just came back from India. What are your views on the ecosystem

SPEAKER_54: today? Yeah, it's really interesting. We've been invested for 15 years on both the public and

SPEAKER_56: private side. And I would have said until recently, it's really been a tale of two stories. We've done

SPEAKER_57: exceedingly well on the public side, where we could take advantage of our duration of capital and the

SPEAKER_56: volatility in the stock markets. And the private side has sort of been a tale of sort of unfulfilled promise. And I would say for the first time, one, I completely agree with Mamoun's comment on infrastructure build-out. You can really feel it as in Mumbai. And they just opened this new highway

SPEAKER_60: along the waterfront that now truly connects southern Mumbai and similar things in Delhi. What gives me sort of hope is, and it has less to do with some recent venture-backed IPOs,

SPEAKER_56: because that's still not enough to back a venture ecosystem. It's really the revenue traction we're seeing in our portfolio companies. I still remember a trip in 2015 to one of our

SPEAKER_60: partners. And frankly, I was quite shocked how little revenue traction there was after all of these years of investing. I think they had two businesses that cracked 100 million net revenue. And then more broadly, in India, even if you hit product market fit, you're sort of plateauing at 20, 30, 50 million of revenue, depending on your business model. Fast forward to today, and that same partner has sort of 40-plus businesses with 100 million net revenue. A third of them are profitable or break-even. And I think it's when you see that sort of change in addressable market, which I think has been one of the big hindrances for India. The last few years change is what gets us excited about taking a bet on the next decade. And our perspective is we'll put more money to work

SPEAKER_21: in India in the next few years. Yeah, it's going to be a little bit of time, I think. I haven't

SPEAKER_23: actually been to India. It's super embarrassing. There's so many places to go in the world. I'm spending a ton of time in the Middle East. But every time I'm in the Middle East, they reference the bridge that, you know, oh, Abu Dhabi, Doha, Dubai, Riyadh, we're very close to India. And if you look at the populations in those countries, the number one population is typically Indians and Pakistanis. And so there's a lot of cross-pollinization going on. And I think a lot of the entrepreneurs are looking at each other's markets, whether it's Egypt and Pakistan, Sri Lanka,

SPEAKER_27: India, and they're and they're kind of thinking of them and the employees as kind of fluid, it's becoming a little bit of a block in that area. And it's been explained that way to me by the capital allocators in the Middle East. So I think that's super interesting. But when you look at the top market cap companies in India right now, it's all, you know, oil, gas, steel banks, the very few, you know, technology companies have hit scale there yet, which is probably the opportunity we'll see. But, you know, Infosys, I guess, is one of the top 15 there. But most of them are banks and

SPEAKER_23: industrial, right. So it'll be interesting to see the education system is the one thing I'm really interested in. I don't know if anybody has insights into the ecosystem for creating entrepreneurs specifically, because it's one thing to create computer scientists, accountants, people who work in business processing. It's another thing, the entrepreneurial spirit that I don't have

SPEAKER_26: enough insight into. And Thomas, I'm curious, what's the entrepreneurial vibes there? Like, if you go to Dubai or Riyadh, you know, they're really like championing entrepreneurship. You go to

SPEAKER_27: Sydney, you go to Melbourne, it's really active entrepreneurial community. What's the entrepreneurial

SPEAKER_69: community like in India? Well, I think top down, the government supports there, and you can see it

SPEAKER_60: in sort of the public market regulations that are trying to make it easier. And I think they would love to see tech companies not represent this 2% of market cap, but a lot larger. So I think you have the support from that side, I think culturally, it's a big change, risk taking, not becoming a doctor is still similar to, you know, the process Europe goes through is still is probably still a hindrance. I think what's really going to help is repeat entrepreneurs, and and people pointing to real wealth creation, coming out out of the tech space. And I think we're starting to see that happen. And the more that happens, that becomes sort of the flywheel that it's it's culturally acceptable to take risks. When you're in your 20s. And there's certainly happened

SPEAKER_27: the moon in Australia with Atlassian, and then Canva, you know, you have now this diaspora, I guess is the right word of, you know, those founding team members going and starting other companies is is

SPEAKER_77: Flipkart the company in India, that's, that's causing other founders or that diaspora founders, I

SPEAKER_00: don't have too much insight into where Flipkart founders have gone on. But but just to give you a sense, I think the, the Indian entrepreneurial spirit is alive and well, I mean, I just looked at almost half of the founders that I work with are of Indian backgrounds, or South Asian backgrounds, whether it's Indian or Pakistani, but predominantly Indian in America, in America. And, but I think if you you asked about the educational system, or just to talk about that, I mean, the success of the IITs, yeah, you know, and that just goes back, not just like the last decade or two, it's we're talking about, like, 4050 years of producing exceptional folks, like going back to, you know, Vinod Khosla,

SPEAKER_83: who graduated from IIT in the 70s, I believe. So these are the institutes of technologies,

David Friedberg: right? Like, this is a category, or is it specifically IIT, IIT, the Institute, like,

SPEAKER_00: Indian Institute of Technology across, I think, seven, eight campuses, maybe more, I don't know exactly, but there are spread across the country. They're probably harder to get into than MIT or Harvard. And they are just exceptional at producing talented people. And I think, turns out, I think most folks like majority, maybe more than 50%, let's say, come to the US for master's PhDs. So just

SPEAKER_85: incredibly talented, folks. Wow, there are 23 Indian institutes of technology. Okay, I didn't realize it

SPEAKER_27: was that big. It's incredible how large it is. I wonder also, you know, since we're on this, if the best entrepreneurs in India, leave to come to the US, because the capitals here, you know, in the in the in the talents here, I wonder if that's going to change over time, because it could

SPEAKER_96: be a little bit of selection bias, my moon, like, yeah, you're working with the ones who are like, hard to make it work in India, bigger opportunity in America. Well, there's always the question,

SPEAKER_15: the brain drain, like, so you have these 23 institutes, where you have these incredible people

SPEAKER_00: leaving their country of birth and coming and building incredible companies here. Great for the US, is it great for India? What I haven't seen as much is folks from here, the founders that I work with saying, Hey, I'm raising my hand, I want to go back to India and build a company there. No boomerangs. So no, not a lot of reverse brain drains. I've seen that more from the Chinese diaspora than from

SPEAKER_27: the Indian diaspora. Yeah. And this is where I think immigration, Thomas, so important for the US to

SPEAKER_104: get right, we're putting aside like politics, it's pretty easy to get in the US if you come illegally.

SPEAKER_23: Try to come legally and start a company. And man, if you could just pay $5,000 to a technology coyote,

SPEAKER_27: who would bring you to the US, that'd be pretty amazing. But instead, you have to like go to

SPEAKER_77: Canada first. And so it's incredibly frustrating, I think, for all of us as capital allocators to not

SPEAKER_106: have the immigration easier and more fluid for these talented people.

SPEAKER_109: That's the I think both my moon and I are glad we found a way to get get to this country. So

SPEAKER_104: we totally agree. All of it. Yeah, it keeps happening to me every time I'm in a group of

SPEAKER_115: four. I'm the only person born here. I'm like seventh or eighth generation Irish. We, we were in the five points in lower Manhattan. So, so you've got the Swiss, the German and David, you're,

SPEAKER_78: you're the what? Russia, Russia, Russia, Russia. Okay. All right. All European passports. Now,

SPEAKER_119: American passports. Welcome to this great country, everybody. Love this next topic. Still a great

SPEAKER_09: country. Speaking of great countries, uh, part of that story was around sovereign wealth funds. And Jason, you alluded to it. They're, they're really coming in a big way. Thomas, in many ways, sovereign wealth funds compete with, with the largest endowments like Penn. How do you look at sovereigns in the space today? And what are they trying to achieve in their strategy? Yeah. And I think

SPEAKER_60: we differentiate quite a bit between the sovereign wealth funds. I mean, I think there's those that have been investing in private markets for a long time and, and, and specifically venture. And then I think there's a lot of new entrants and probably say reflected in the quality of the respective teams and how we think, whether they're sort of an enduring part of the venture ecosystem going forward or not. A lot of them focus a lot more on direct investing into companies. And then there's, there's,

SPEAKER_62: there's some that, that sort of compete with us on, on, on the fund side. Um, and I, I'm not sure competition is actually the right, right word. They're writing a lot larger checks, right? I think one thing, all of these sovereign wealth funds have in common is the sheer size that they have to put a lot of money to work and, and they have probably slightly different cost of capital.

SPEAKER_60: So, so I think for, for, for us, it's probably, we don't think of them any different than other big pools

SPEAKER_62: of capital that have entered the market over the last few years. And if you go back a couple of decades endowments, we're a very, very big part of the venture funding system. And today in absolute terms, quite frankly, we're, we're quite a lot less meaningful. That makes us worry, right? How do you

SPEAKER_60: stay relevant when, when your capital alone is not enough? And we spend a lot of time just saying, how do you be value added in a system like this? How can you differentiate yourself? And, you know, what does that mean in real life? That means when one of our partners is making their first drone investment, they should be introduced to Vijay Kumar, the Dean of Engineering at our school who runs one of the leading drone labs. Like if you, if you're looking at healthcare software, you should know our CRO CTO. And then I, I don't have to tell you guys, you get one or two value added interactions that are beyond capital provision. It's quite differentiating. And I think that that's, in a way, the biggest influence a lot of these pools of capital have had on people like us. We need to redefine ourselves. We can't rely on our historic reputation and just having a lot of capital. We don't have a lot of capital in sort of the modern context.

SPEAKER_26: Um, so we, we worry a lot. And Thomas, they, they are in a way competition because when's the last

SPEAKER_23: time you've added a new manager, right? You have so many great managers on your roster that you very rarely add one and you, what is the minimum check size for, for, for a new fund manager?

SPEAKER_26: So I guess that's like sort of two questions. I'm curious about like, how often do you add a new manager every year, every two years? And then what's the, what's the, the smallest check size you can write given your structure? Yeah. I mean, I think one where series a

SPEAKER_62: anchored philosophically. So I, I think it's less about competition. I think your, your second question and we feel we have good access in, in that space. Um, we don't add managers very often. Some years it could be numerous and next year could be zero. Right. And, and, and it's, we, we, we expect our partners to be conviction investors. Um, we're conviction investors. We find a small group of partners. We trust a lot and, and know incredibly well, and don't have to, quite frankly, measure them on quarterly marks. Um, I think adventure that's especially dangerous. This is a very cyclical business we're in. You, you want to know your partners well enough that in a down cycle, you're comfortable with the strategy and an up cycle, you're comfortable with the strategy and sometimes good returns are luck and sometimes good returns are based on, on, on a strong flow philosophy and the execution thereof. So I, I, I don't know if that answers

SPEAKER_142: your question, but it's sort of, it's an interesting bifurcation. You know, when I'm in the Middle East,

SPEAKER_23: I see all the young new managers, you know, and I don't see the climbers. I don't see sequoia. I don't see, and maybe they're there and I just don't see them, but it, it tends to be like everybody who's on their second, third, fourth fund is in, you know, the, the, the typical cities from Riyadh to Doha, Abu Dhabi, especially in Dubai. And then when I see the existing managers are like, yeah, we, we, we don't even go to that region that often. And that's, I think what's happened just as a function of, and I'm just put this out here. I'm curious. Moon's position as the venture ecosystem has now kind of codified into the legendary brands, the Kleiners, the sequoias, and then the emerging managers in this new class. What I hear from the folks in the region,

SPEAKER_26: family offices in Saudi, you know, and, uh, you know, Doha and Dubai and Abu Dhabi, Oman,

SPEAKER_23: they're like, yeah, we, we didn't have a seat at that table. We weren't able to lock in positions in those funds. So we're, we want to meet the new managers and we're willing to write a five to $25 million check. And they see this as their opportunity. Like one, one very, very, very high

SPEAKER_26: profile person said, this is our opportunity to get the seat at the table. So I'm curious, Moon, how you think about it? Because when you took over Kleiner, like there's a roster of LPs,

SPEAKER_148: you don't have to add LPs, right? Because you're keep the fund size reasonable. You're, you're probably oversubscribed, I would guess.

SPEAKER_00: Yeah. And just on, you know, Middle East capital, and, uh, not only are there sovereign wealth funds, uh, which are massive in scale, which actually have a problem investing in smaller funds because they're so sizable in terms of, you know, we're talking about hundreds of billions, if not trillion dollars. Um, and it's hard for them to invest in a, a new series a fund that's raising, let's say $150 million because just their minimum check size might be a hundred million. So that's not going to happen. Uh, but there are a lot of family offices and, uh, other pools of capital associated with, you know, families, um, that are in power or, um, have built, uh, great companies there. And so I've heard a lot more of those folks who, uh, are building relationships with, uh, some of the more incumbent firms or the ones that have been around for a long time, but also seeding new firms, because a lot of folks have been in the asset class also through their work at other places, let's say like the sovereign wealth funds, there's a high level of sophistication, I would say around our asset class. Right. And this is like, I think you've probably encountered it like on the ground. Uh, but my sense is that, uh, the capital allocators there are very sophisticated and, um, this is not a, uh, in fact, they sort of, when they see someone come over, it's like, well, don't think we're dumb money here. Uh, we see, they explicitly say that you're

SPEAKER_27: absolutely right. They, this is, this is sophisticated capital. They've been, they've all been

SPEAKER_26: educated in the West. They worked at venture firms here. They worked at fund funds here. Right. Totally. It's yeah, they're, they, they've done their tours of duty.

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SPEAKER_09: on the 2018 startup class broken out by the round of funding overall, more than 49% of startups from 2018 are already dead. 45% ongoing 5% acquired, and only 0.2% public. Of course, this is a 2018 vintage ma moon. Does this data surprise you? So just to clarify here. So if you

SPEAKER_00: started at the seed stage, 50% are dead now. Is that how to read it tracking outcomes for 3000

SPEAKER_85: startups incorporated in 2018. So they were incorporated. Got it. Yeah, so they could have

SPEAKER_165: raised a seed or a series a you know, sometimes if it's zero founders, they might have gone right to

SPEAKER_18: it's a it's a funnel of sorts. Yeah, yeah. So it sort of makes sense. Yeah, like, after six years,

SPEAKER_00: uh, if you couldn't go from pre seed to seed and series a, um, I think that probably captures, um, about the right direction of the right way. I mean, I did a quick look, uh, on on our own data, and, um, it's, you know, you'd expect us to be lower, uh, in terms of what's not hasn't worked out, but I would say directionally, that makes sense. Um, and the number that surprises me is the M&A a bit, because there's a lot more M&A that happens, at least it's called M&A. And, uh, it may not have been a great outcome for investors. Uh, so, uh, you know, our own data suggests that the difference between like a company that closed and got aqua hired or acquired for a small amount is probably

SPEAKER_154: about the same, just as many companies get acquired, uh, for small amounts, um, and, uh, and just as many actually, uh, end up, uh, getting shut down. And maybe that's a more reflective of our data where, you know, we have relationships with companies, bigger companies, or other startups that are looking to acquire teams or acquire companies. So, uh, our data may skew a bit more than this.

SPEAKER_21: It's, it's absolutely correct. My moon. I think here it says 5% M&A in year five or six,

SPEAKER_23: that means one in 20. And I think the way they should parse this as meaningful M&A versus, you know, window dressing M&A dark secret in our industry, but you know, and it's, it's not done for, I think nefarious reasons, just sometimes founders like to have like, um, you know, a graceful exit of their startups. So they have a soft landing, they get sold, it gets put into M&A, but it's not like

SPEAKER_27: a big company buying a big company for a big number. It's maybe the investors get back half their money.

SPEAKER_21: Yeah. One X at best. Yeah. So yeah, this, this tracks, we're pre-seed investors, so we expect a

SPEAKER_27: much higher rate, you know, probably half of our, you know, baby turtles don't make it to my moon series A. Right. And then, you know, this is, I think one of the things you have to look at when you're

SPEAKER_23: assessing venture firms. I'm an LPN 24, uh, different far firms from my family office. And you know, if you're series A to series B, that's one statistic, but pre-seed or accelerator to pre-seed to seed to series A, the attrition rate is like 90%. So you just have to understand which cohort you're sort of tracking between here. Yeah. And that's why this data is not super helpful because it'd be really good to see how many, you really want to see how many accelerator companies made it to seed,

SPEAKER_182: how many seed made it to A, how many A made it to B. Right. That would tell a better story. Yeah.

SPEAKER_185: I think this data skews super early, right? So, so I don't think these are particularly surprising numbers. And I think if we, if you set pre-seed to a proper institutional series A,

SPEAKER_60: if you had a graduation rate of 30 to 40%, that'd be pretty good. Um, yeah.

SPEAKER_09: Mamoon, a lot of your peers, uh, some kind of classic ones like founders funds say they don't care as much about loss ratio. They're looking for the next hundred billion dollar company. How much, how important is loss ratio to your portfolio?

SPEAKER_00: Don't dwell on it actually at all. I would say you got to make every investment count, especially if you're writing a, you know, 10 to $15 million series A check. There's no such thing as like, you know, like, yeah, one in three of these companies will work out. I think, uh, every investment that we make, uh, you go in with conviction, uh, you're, you know, you're on a board of a company, you're trying to make it work and you've come at it from, with a prepared mind to actually invest in the company. Um, and, and most of us, when we lead a series A where, you know, we, we know something about something to invest in that company. So if we're talking about three years out, it's a, it's a shutdown. Uh, we really, uh, we've done a few different things when we made the investment. So the graduation rate from where we typically engage with the series A to a B, I would say is almost like, it's gotta be like 90%, uh, if not more and to the series C. So it is way different than this data would suggest. And that's why like our funnel looks a bit different and the mortality rate is just way lower.

SPEAKER_26: Yeah. And our mortality rate is incredibly high. You know, when you, when you run an accelerator or a pre accelerator, like we have half the companies, I would say that go on to raise money

SPEAKER_23: have done a minor or major pivot. So in fact, we came in with a prepared mind. We love the team. We like their product velocity. We like, you know, um, you know, we have 13. Qualificate. We have 13 qualities we look for in early stage companies, the team, if they are a serial team, have they raised money before? Is it world-class design? Are they builder founders product velocity, a bunch of different things. But the truth is half of them pivot, whether it's Y Combinator or launch or founding

SPEAKER_27: universities, people are doing a ton of pivots during that period. Um, what I have learned and fixed in my game as a portfolio manager, I'm interested in hearing Thomas's, uh, view on this as, you know, when you work with managers, like what they learn. And after a couple of three funds and

SPEAKER_23: a couple hundred investments, I realized I had a leak in my game. I always had great affinity for the founders who don't give up and would always like to give them the financial support of that hundred K for their next bridge round or the 50 K. And it was really meaningful for them because they could say, Oh, Jake, I'll put a hundred K and 50 K and he's still supporting us. And what I realized was I could have put that hundred K into another bet. And that would be in the better interest of our fund and our team. And so now I have tightened the reins on that in the last fund. And I just told our team, we do not do bridge rounds. It, we, you know, evaluate, uh, we only invest in the top five of our top performers. And these are the specific qualities we're looking for. If they're not in the top 5%, they don't qualify for that. And we'll have 200 names in this last, this next fund. Um, which means that's 10 companies. And so our job is just, who are the 10 companies out of 200 that are the breakouts and how can we put another million or $2 million and get to 15% ownership in them? And we are now, I don't want to say cutthroat, but we're very clear about the founders coming in. We are not permanent capital. There are other funds and we only invest in the top 5% of our portfolio. So

SPEAKER_69: yeah, I mean, I think the reality is we, the ecosystem is better off as an investor. You're

SPEAKER_60: definitely better off if businesses fail early and capital concentrates and talent concentrates and in the business models that are sustainable. That's of course, a hard thing to convey to, to founders. Um, but probably in reality, it's also better for, for them. Um, if you can't pass the litmus test of convincing third party capital and another set of investors, you should probably ask

SPEAKER_69: yourself some questions. Um, so I, I completely agree with your philosophy.

SPEAKER_199: Yeah. So this is the key. You're, you're actually not helping them if you, because they need to prove

SPEAKER_23: to another set of investors and they need to underwrite the company and put a value on it. When you come to us at constantly for capital, um, you know, that that's really problematic for the founder. They need to prove it with another firm. And, um, yeah, we've become so much better at this. And I look at my first three funds and I'm just like, ah, if I had, you know, just taken, let's say 10 bets away in each fund and put those 10 bets, which don't seem like a lot, right? When you're a seed fund, 50 K, 25 K a hundred K, it's not a lot of money, but if those 10 had gone into Robin hood, calm density, superhuman, you know, Uber, Robin hood, you know, like, oh my Lord, if we had put that money into the series B, instead of being a five X fund for the first fund, we would have been a 15 to 25 X, just if we had made one more bet on the next round of superhuman, calm, et cetera. And and we had liquidation events in some of those companies. So, you know, it's, it's, it's actually real money that could have happened. And I think that's portfolio strategy is the thing that young

SPEAKER_27: fund managers don't, there's not enough emphasis on fund strategy. Mamoon, what is your fund strategy

SPEAKER_15: and your follow on strategy at Kleiner? Yeah, well, it's been pretty clearly articulated to our, uh,

SPEAKER_00: LPs and hopefully Thomas knows about it too. Uh, but we tend to actually invest most of our dollars up front in that first round that we do the series a, and, uh, we, we try to go in with conviction and write a sizable check to get to the ownership we want really, which is what number ideally? Um, you know, it used to be 20%, uh, Jason, you know, it's come down over time and it's, you know, you, you'd be pretty happy if you got to 15% these days on a series day. Right.

SPEAKER_88: And 10 is typical, right? Sometimes 10 is, yeah. Um, it's like, that's the really low end of, uh, where you want to be, but yeah, let's just say 15%.

SPEAKER_00: Yeah. So, and our fall on strategy is, uh, you know, typically it's a good company, it's getting, uh, a lot of interest from other investors and, uh, they raise a really good series B and we actually, in most cases won't do our full pro rata. Um, we're trying to cost, bring our cost basis down on our overall investment, or we decide we love this company so much and we'll actually use our growth fund to double down in the company and make an independent and new decision to invest in that company, uh, with a separate team and making that underwriting. Yeah. Yeah. We're doing a new, it's the same team, but we're doing new underwriting, uh, with a, a second partner on it to help the underwriting so that you're not going native on your own company. Uh, but it isn't a, uh, let's just say, uh, we're not using that to do like pro rata decisions on a fund. Like, you know,

SPEAKER_154: you own 20% of company it's raising a hundred million dollars and your parada is 20 million. Uh, you're not just lazily walking into like, oh, let's just do a parada out of our growth fund. That never happens. It has to be a new decision, uh, that's being underwritten to actually like

SPEAKER_00: lead the round, uh, in a gross growth stage, or even a series B or C stage company, uh, which we, we, we do, uh, very selectively back to your point of concentrating. Um, if you know, you've got something, a winner on your hands, like why would you not concentrate more? Because winners tend to follow the power law and, uh, series B still early, series C still early. Uh, but typically on follow

SPEAKER_154: on investments, just to give you like, you're looking for leverage from outside or new investors. Um, when, you know, it's a good company, you just don't know if it's going to be an absolute home run.

SPEAKER_27: What about like a WhatsApp situation? Have you ever been in a situation where you've done, and I'm curious, Thomas, your thoughts on when you see a fund manager do this,

SPEAKER_26: we did the series a we're going to do the series B because this is so good. And then is there an upper bound to the percentage ownership you think becomes unhealthy?

SPEAKER_00: So Thomas or Mamon, I'm curious, happy to take a quick look, Thomas, but yeah, we've done it quite a few times, uh, with, uh, and that's, uh, just to give you a sense, our growth fund almost half or even more of the dollars end up going into our best early stage companies. So we're constantly

SPEAKER_15: doing the double down and increasing ownership in what we believe are our best companies.

SPEAKER_221: Max ownership. Is there like a point which becomes dysfunctional in your mind?

SPEAKER_00: I think, you know, these days you're not going to get more than 30%. So, uh, yeah, if you're, if you're, we have a bunch of companies that are in the mid mid twenties. Um, and, but I think I

SPEAKER_213: don't, I can't think of any where we're over 30%.

SPEAKER_226: Yeah. What do you think about that strategy, Thomas?

SPEAKER_62: No, I mean, I think there's really two, two ways to create a top desk out of fun. One is you have high ownership really early on and, or you double down correctly. Right. And, and so, from our perspective, we're over diversified. So what we want to see our partners do is develop

SPEAKER_60: conviction, take the closeness they have with these entrepreneurs and the businesses and pick those winners a little bit ahead of the market. And if they can do that, I think that they can, they can outperform. You didn't ask this specific question, but I couldn't care less if a fund is 25% in one single company. That's great. That gives me great look through exposure. And I know my partner is really putting their reputation at stake. That one has to work out. That one has to be an exciting company. So, so from, I think we're very much aligned. And I think the later you go, the more high conviction you have to be there's, you can't talk about loss ratios anymore. So I couldn't agree more. You're seeing these simulations play across multiple

SPEAKER_09: portfolios every year. Do you see a correlation between high ownership and high returns? Are those high ownership percentages significantly more likely to outperform? I'm not sure I can actually run the

SPEAKER_62: numbers on high ownership. I think there's not much correlation on high loss ratios and successful funds. I think ultimately it is, you have to be in big winners. I worry sometimes if you talk too much about ownership, um, there's some selection bias. Um, and you do the deals where you get high ownership. I think business quality and founder quality are the number one through 10 reasons why you should do something and, and ownership, uh, you earn because you you've been there early or you have a reputation in the market and you can't really force that in the, in, in the same way.

SPEAKER_231: Yeah, that's built over decades. So in hundreds of deals, he, I agree. You can't force it.

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SPEAKER_09: the venture market, we have all glossed over exits, M&A and IPO. So, so maybe Thomas, you get an eagle eye view on the industry. Where do you see M&A from regulatory challenges or IPO windows finally opening up?

SPEAKER_239: Well, I sort of, I wish I knew, um, we run fully, we run fully invested and pretty illiquid. Um,

SPEAKER_196: you know, I'd say on the IPO front, it doesn't really look like the most IPO-able companies call it a stripe at Databricks are going to go out anytime soon. And so for me,

SPEAKER_56: the question is, where's the momentum going to come for the broader IPO market? I think we'd be super happy if we had a couple successful big tech IPOs by the end of this year that make 2025 a broader IPO year. I think the backlog is so deep that even that is an upside case. You, you, you know, I think

SPEAKER_60: it's going to take a few years to digest the backlog and the regulatory front. I mean, it's anybody, anybody's guess. Um, there's, there's some good businesses that might, you should have merged and,

SPEAKER_109: and, and, and they're not allowed to, and that's been, I think, painful for, uh, a number of us.

SPEAKER_240: A number of us on the call, some rough ones, man, Lena Khan has just absolutely,

SPEAKER_27: you know, um, thrown a wrench into the, the mechanics of what we're doing here in America, uh, in the Biden administration. Uh, and listen, I voted for Biden. Um, but this is not the way to create a vibrant economic, uh, environment. If you, if the choices are, you know, go public

SPEAKER_23: or stay private longer, it's super unhealthy. We've seen what happens when founders operate these businesses and management teams operate these businesses for too long privately. They, they lose this discipline and there needs to be energy needs to be released and the public needs to be involved and you need to bring in that new class of management. It's just a very stupid approach. We, we need a much clearer regulatory environment where companies can get bought. And if the magnificent seven are too big or the, you know, the top four are too big, well, then maybe we should carve this out and we should come up with a number, you know, Hey, things that are under a hundred billion, maybe those four companies have a set of rules that they operate by, but the mid tier, you know, the Ubers, the Airbnbs, the coin bases, you know, companies that are under 250 billion, maybe they can have a more free-flowing, um, M and a environment. Cause what are we trying to accomplish? M and a, you know, we're trying to keep it competitive, stopping Amazon from buying, you know, a vacuum comp robot. I mean, does this make any sense? Or, you know, obviously the figment discussion, which I don't know to what extent you can talk about it. That seems absurd. Like there's a million different ways to design your app. Figma is not like got some huge walk on the market. Like it's, it's not Amazon buying, it's that door dash

SPEAKER_244: and Uber combining whole foods, right. But I mean, that got through, right. And that was a tiny, what was whole foods? That was a $10 billion or $5 billion, something like that. 13 billion. Yeah. It was tiny, tiny. I don't know. What are your thoughts on this having experienced it

SPEAKER_00: recently? I wouldn't blame it all on Lina Khan. Um, this is, um, way beyond, uh, just the FTC. It's the DOJ. It's the CMA. It's the European, uh, union. Um, in fact, uh, with Figma, it was the CMA in the UK. That was the, the, the reason why, uh, the deal fell apart, you know, as startups, you're trying to, uh, disrupt the incumbents and the behemoths, the, the trillion dollar companies, the, in the case of Adobe, it's a 250 billion dollar company. And so can you set some sort of arbitrary ceilings to what, uh, sort of market cap companies can, can buy what sort of private companies? Um, not sure how that all works out, plays out. Uh, but there is definitely like, everyone's scared to do of their own shadows right now to even acquire something that's completely unrelated to what their core businesses. Um, and to your point around like Amazon and vacuums,

SPEAKER_154: like their core businesses and vacuums, and if their core businesses are cloud services, and they're buying something that even gives them even a further leg up and makes them look more

SPEAKER_00: like a monopoly there than sure. Uh, so that's, that seems quite absurd, but I would say that none of the big companies are active right now, which is a problem for our industry, which, uh, the VC industry that is that over the, the history of time of like, of our industries, let's go back to the seventies. We've always relied on, uh, early M and a for some of our funds to get early liquidity and DPI, um, you know, and that hasn't existed, uh, in the last few years. And that's pretty, pretty problematic. Then you layer on top that you have, uh, IPOs, the average time from a company started today to an IPO or is 12 years. Uh, that used to be seven years, uh, when I got started in the business. And I remember having to do the analysis, uh, at my, my firm, USUP at the time, you know, five, or we're like, Oh, you know, it's like, how long does it take now? Oh, it's seven years. It used to be four years. And, uh, so now I'm going from four to seven to 12 years. How do you provide liquidity back to your LPs? Uh, and because you, you want to keep your companies private because you know, they're going to be great public companies, uh, but at what point do you start to provide some liquidity to your investors? And so I think what's happened on the IPO front is like, there's this such a high bar for IPOs now that it used to be, you know, you can go public with, you know, 30, 40 million, a quarter of revenue, or, you know, or even less than 25 million, a quarter of revenue, a hundred million of revenue a year. And now that that number is like over half a billion. And so you have to have raised lots of venture capital and scaled globally and be the perfect looking company to go public. And I think the bar has just been set so high. And I think what we need is resetting of what an IPO looks like for, in our space. And that's the only way to bring down that, that 12 years to something like seven years, uh, because there's lots of companies with hundreds of millions of revenues, a hundred million plus, but not a lot of companies that get the half a billion dollar scale until they're 10 years into the journey. Yeah. This ties back to the earlier

SPEAKER_185: part of the conversation of some big pools of capital that event to the venture market. I mean,

SPEAKER_69: it'd be interesting to see which path entrepreneurs pick when you have an option. Some of them, I think when you have the option to stay private, because there is capital availability might,

SPEAKER_54: you might not find it so easy to, to, to shorten that, that, uh, zero to IPO timeline.

SPEAKER_23: You mean secondary, right? Like the ability to sell 25 million or 50 million of your shares as the founder, you know, what is your goal as a founder? Well, yeah, you, you want to build your company and yeah, you might want to buy a house. You might want to buy a ski house and pay off your

SPEAKER_26: debt and put your kids tuition away and, you know, maybe get a jet card eventually.

SPEAKER_62: Yeah. And I, I wasn't even, I wasn't even, uh, going down that route. I just think if you can

SPEAKER_56: raise capital in private markets at the scale that you used to need to go to the public markets for, there are just true options in today's world. And I don't think that's going to change.

SPEAKER_142: Yeah. It's a, but I, I mean, you do have secondary. So that's one of the nice things

SPEAKER_23: about being at least at the stage we're in as a seed fund. I think we repeatedly see ourselves investing in companies at, you know, the, the valuation of accelerators is 1.7 million. We do a lot of deals between five and 15 million when they hit 250, 500 million, a billion. We do get opportunities to trim our position and we've taken the philosophy of selling 10% two or three times, uh, before a company, uh, goes public is a really wise decision for us because we can return our entire fund. I mean, we sold 16 million of one company that hit unicorn status as, but one example, uh, we had, I think we had invested 3 million in the company. So we were able to return almost an entire fund, um, just with that one transaction. So, but you can't do that, right? Mamoun, it's just not possible that the valuations

SPEAKER_221: you're coming in at. Yeah. Uh, you, you can, you have the opportunity to sell, but I think,

SPEAKER_00: you know, when you're on the board of a company and you're telling your founders, you're, you're from zero to IPO and beyond it's feels a little weak to come into, you know, I'm gonna sell 10, 10% of my position here, uh, to get some liquidity from my fund. It may happen, uh, but it hasn't happened. The issue remains that liquidity is tight because of lack of MNA and IPOs. And, uh, there is a burgeoning secondaries market right now because of this, uh, and, uh, large funds are being raised to

Chamath Palihapitiya: come in and buy stakes, both in funds and in companies so that, you know, the industry can get

SPEAKER_09: liquidity. Speaking of secondaries with private fundraising down 20% 2023, according to pitch book, one asset class has shown a significant search secondaries. Secondaries are up 65% year over year with $78.3 billion raised across only 72 funds with Blackstone strategic partners fund raising 22.2 billion alone. Thomas, what do you think about the surge in secondaries? Yeah, I mean, I think it's

SPEAKER_56: the natural evolution of a maturing asset class, right? And, and plus some of the dynamics we, we just

SPEAKER_62: discussed. So I, I, I think this is a product that's here to stay. Um, right. Cause the, I think the other question that's usually asked is, is this a counter cyclical product when IPO markets are not available? I, I, I, I, I just think, you know, we have a perpetual capital base where we can stomach, um, illiquidity lumpiness of venture. I think for a lot of investors, the ability to shorten the cash cycle to reduce the J curve, et cetera, is very attractive. And I think that holds true really through the cycle. Uh, and so for me, that's maybe the, the interesting questions will be when we look back, is this a creative new path to liquidity? Um, and at a time when challenging markets are, uh, when there's challenging public markets, or does it end up in review to be a

SPEAKER_60: situation where people sold their best businesses too early on, on, on, on, on the direct side? I think it's very interesting to see what happens with continuation vehicles, um, that are very, very prevalent in the buyout space where they enter the venture space. And if they do, will they be set up in a GPLP friendly way or, or not? So we worry about that. Um, and sort of on the, on the side note, right? This is, this is a, this is actually quite a complicated industry with a lot

SPEAKER_56: of nuance. As you take direct secondaries of, of shares from employees, right? That, that's usually common equity that usually sits behind a big prep stack. Um, it is,

SPEAKER_109: doesn't take much to impair it. Uh, it is very hard to value at that moment in time. So this is, this is, this is quite a nuanced field and sort of what parts are interesting and what are not is, um,

SPEAKER_41: yeah, I think you have to put a lot of thinking into it. And Thomas, your endowment has shied mostly

SPEAKER_196: away from secondary funds. Why is that? Probably because it ultimately competes mostly with, with

SPEAKER_60: late stage venture. And, and we, we're very much sort of series a anchored. Um, and, and we, we've been fortunate enough to have access to what we think are some of the most interesting, um, series a strategies. And so I think if we, if we can do that, we, we will continue to do that. Um, but you know, we, like with any new product that enters the market, we, we spend time thinking about it and, and, and understanding it and see if it could make us a better run portfolio. So it's, um, no way are we, or am I saying would I never spend time on this, but I think for now we, we are

SPEAKER_261: very much just still able to build a series a portfolio. I hope this is like a transition,

SPEAKER_26: everything or becomes a minor part of the industry. Um, and that we have a healthy M and a and IPO market. It is interesting. I've had a couple of people knock on our doors and say, Oh, we can do

SPEAKER_23: a strip here. And you know, we can take your five X fund on paper and you know, your one point, whatever X DPI, we can get you like right to that middle point. And I'm like, well, it's not kind of my job to make that decision as opposed to having you make the decision. I'm closer to the company. So it does feel like bottom feeding a little bit. I'm kind of glad it's there to create more liquidity in the market. It's super important for there to be liquidity in the market, uh, in some ways. But one of the great things about venture, I remember this, you know, and talking to Travis with Uber and Chris Saka is like, the fact that people were locked up is a feature because sometimes humans sell too soon and they really under appreciate the power law. I still have a large percentage of my Uber position. I have all of my Robinhood position. And you know, like, the last triple up in Uber has been more significant than my entire career. And I'm not selling any my Uber,

SPEAKER_27: I think there's gonna be a trillion dollar company. And I'm not selling it in my Robinhood, I think it's gonna be, you know, also, you know, could be a couple 100 billion dollar company. So

SPEAKER_26: you got to be really thoughtful about this. And you know, there's one of the great things about having Sequoia as a mentor and having been, you know, a scout there is watching Moritz and Doug

SPEAKER_264: Leone tell me, Oh, do you know, like, uh, Michael Morris, like the Google shares have appreciated more since they went public than when we did our initial investment, you know, like, it was like, really? And you take out a calculator, like, holy cow, those last double ups really matter.

SPEAKER_23: Um, so I've kind of on a personal basis been trying to understand that as I build my family office of like, if this is a great company, my moon and you under wrote, like, when do you actually get off the train ride? Like some of these companies are never going away, you know, we're not in our lifetime, certainly. So I worry about these bottom feeders coming in. And I think it's a distraction. And I think like, what we do is so pure at its essence, you find that great team that is so passionate about building that product and solving that problem. And then you just try to support the hell out of them. And yeah, 90% in our field, seed stage go to zero. And you just treat those founders as good as you can. And then you get to find in your career, each fund is defined by what two names, three names, and that's a seed stage. Our first fund has 109 names, we have four unicorns, and two of them will be the bulk of the returns. Like, that's it. Like, it's a very strange,

SPEAKER_161: unique business we're in. And moon, it's probably one in two out of 30, right? Names in a fight.

SPEAKER_166: It's it's about the same two to three drive the returns of a fund.

SPEAKER_23: So I wonder what they're coming in and buying with these strips of funds? Are they just buying the strip because they know the two names that are the big ones? And yeah, yeah, typically buying

SPEAKER_00: exactly those two names that it's pretty much that's the base case is if everything else goes to zero,

SPEAKER_220: the two names will generate, let's say a two x return for them.

David Friedberg: Yeah, but would you ever even consider that a cleaner or people knock on a cleaner store to do that?

SPEAKER_00: Uh, no, they're not. Um, and we wouldn't consider it. Uh, but if you're a fund that needs to provide liquidity to raise its next fund,

Chamath Palihapitiya: then, um, I think it's seriously considerate. Yeah, I agree with that. I and I do see a lot of

SPEAKER_26: my contemporaries. We didn't you? I don't know if you have this in the docket, but the statistics on fund one to fund two managers getting from fund one to two is just totally collapsed. And I'm seeing

SPEAKER_27: that in my own. I have two of the, I think I'm in eight different fund managers. And I think,

SPEAKER_26: you know, maybe nine different fundamentals. I think two of them are not raising their next fund.

SPEAKER_115: You know, and I bet on early stage folks, but I was like, Whoa, two out of nine are not going to go to my nine emerging managers are not doing a next fund. That's pretty wild.

SPEAKER_17: One thing to note here is one of the things that allows top VCs like Mamoon to execute their strategy is actually the strength of their LP base. Their LP base are patient capital, and they support the GPs through multiple cycles. They understand the context of the venture asset class within the portfolio. What do you think about that, Thomas? How do you look at venture within

SPEAKER_144: your portfolio? So I think for us, it has been an asset class that if, as long as you can tolerate

SPEAKER_279: the liquidity, it's been the place where we, we've made the best returns. It is a really hard asset

SPEAKER_62: class to keep faith to. You go through these long periods where you just, you wonder and, and I'm sure that was the case. You know, after the dot-com boom, I was a buyout guy in those years, but you know,

SPEAKER_56: I think here again, right, just the scale of the industry, how can it repeat itself? Um, and you,

SPEAKER_60: you really do have to believe in the advancement of innovation and technology, um, for, for the next couple of decades. Um, and it's not a natural thing to do for, for most LPs. I think at least the endowments have the advantage of a long history of, of success. And, and a lot of our scaling has come from, from, from having the courage to be a long-term investor in, in, in venture, but it's maybe, and then flipping the question a little bit. I think it's really important that, um, someone like the moon has investors who actually truly understand venture. Um, it is just not always going to look rosy. Um, and maybe that's actually the most interesting time to be investing. Um, and, and when the pressure is, well, I'm not going to give you money until you have DPI. Um, that, that,

SPEAKER_283: that's, that's not healthy for a franchise, right? It's just peak pessimism. Mamoon in our careers. Do you think putting aside the dot com era, which we both, I think, live through? Yeah, but if we just take it post dot com era post, you know, and including the great financial prices, is this the peak pessimism for venture in your mind? For as a, as a, as a manager. Yeah, not, not for us in our conviction. We're convicted. We're going to work every day, making bets, but just like from the outside LPs, looking at the industry, people looking at the

SPEAKER_23: industry does feel to me like this is the most pessimism. Yeah. Last two years that this industry,

SPEAKER_291: so people feel venture is a broken asset class. I've been told. Yeah, I think the headlines will

SPEAKER_00: make you believe that. And, uh, certainly. So if I only read the headlines, I would believe that, but by talking to our partners and our LPs and folks who are looking to be in the asset class, even deeper in the asset class, uh, I think they see a next decade of this AI tidal wave,

SPEAKER_166: which we've not talked about generate trillions of like GDP to the world. Uh, and, uh, I think you

SPEAKER_77: just can't miss out on that opportunity. I mean, I'm in so much agreement with you. It's, this is the most exciting time I think in our careers. When did you join USVP? Was that 2000?

Chamath Palihapitiya: 2005. I came to Silicon Valley in 1997. So, you know, right out of college and I got to live the

SPEAKER_00: dot com up and down and, uh, yeah, like what it felt like in 1997 is what I feel like today.

SPEAKER_23: Like in terms of it's all in front of us. And the, the enthusiasm of entrepreneurs and their focus level and their dexterity, like their skill level. I we're investing in a hundred startups per year. I'm investing more in, in the last three, two years. I think I've invested more than the first seven, eight, nine years of my career when I was doing one a month, sometimes two investments a month. And I've never seen more focus, more efficient, you know, uh, and they use less capital now, which is, I think like a trend we really need to discuss because I think that's the setup, Thomas, for where people will believe in these companies again. And the asset class is people are so capital efficient. I'm seeing three, four person companies get products to market, get to a million in ARR. I've never seen that in my career, like the level of efficiency. And then if you get a couple of IPOs, these founders have taken the medicine and cut their companies like Elon did at Twitter, like Facebook and Zuckerberg, lesser extent Google, lesser extent

SPEAKER_26: Microsoft. I feel like we're set up for this massively money printing machine companies. I don't know

SPEAKER_302: what you think, Thomas, keeping faith in the, keeping faith in the adventure.

SPEAKER_253: We're keeping faith in, in venture and innovation. I think that's the time to traction on the product

SPEAKER_60: side is very different than 97. I mean, the, the, the ability to be involved with something and take

SPEAKER_69: a view a few years in, whether there's something sustainable here or not, I think it's very different. And it's hard to compare. I mean, that that's 25, 25 years ago. And it was a, it was this niche

SPEAKER_60: industry. I mean, today it's a very big, very big industry and quite different. So my concerns come less from a, are the great companies going to be built? Are the great entrepreneurs? Um, I, I agree

SPEAKER_69: it, the world's probably more capital efficient and, and, and, and, and a lot of areas of venture,

SPEAKER_228: but is it, am I as a, an investor still getting sort of these outsized returns or has something

SPEAKER_60: changed about this, the broader ecosystem, um, the capital in sort of average down the cost of capital for the industry and, and, and, and does that have any negative consequences? But there's no

SPEAKER_51: question, um, uh, in my mind that too big growth area. Thomas, when was the first venture investment

SPEAKER_60: from Penn? It is way predates me. And, um, it's actually before Penn, I think even had a,

SPEAKER_57: a formal office of investment. It was probably something like, you know,

SPEAKER_310: Horsley Bridge or something like that. I can't, yeah. Um, uh, so, so, uh, but it's,

SPEAKER_26: it's probably 25 years ago, roughly. The thing that gives me hope is this chart. I think there were so many venture tourists, it was like to the level of annoying that, you know, there were people coming

SPEAKER_27: into the space who, you know, I could tell weren't in for the long term and I knew they would give up

SPEAKER_106: immediately and look at this first time VC managers that raise a second VC fund as a share of all first

SPEAKER_23: time VC managers, you know, in the 2013 period, it was like 60% made it to their second fund and now 13%, 12%. Like these are non-conviction, you know, folks who were like, I want to start a fund,

SPEAKER_27: you know, like just like they want to start a podcast or a, you know, a blog or a sub stack,

SPEAKER_23: like starting a fund is really hard. Like it's absurdly hard. And the fact that we're washing out people who just, you know, we're trying it on, like the idea of Mamoon people trying on venture

SPEAKER_00: as like a career 10 year funds, you know, remember that, like, you're supposed to manage people's capital for 10 years. At least, at least, right. And that's what they're set up for. So yeah, it became so easy to raise money in five years, six years ago, that it like literally, you left your job at an Uber, he's like, I'm gonna go raise a fund. And it was possible because you had friends at Uber who put some money in and some other people would put some money in. And before you know it, you had $30 million for a first time fund, and you're off to the races. And then you realize, like, oh, man, it's sick, really hard to get up rounds and, and see revenue from your companies. And, and then folks decided, like, you know what, like, it's just ways your life to go start a

SPEAKER_250: company or go work at a company again. Yeah, I think we completely agree. And I think we put a

SPEAKER_69: slightly different lens on it. We, we spent a lot of time talking to our partners about you're an operating company first and pool of capital second. And if you don't think of yourself as

SPEAKER_60: operating company and invest, you might not be hiring hundreds of people, but the people you hire really matter, that your decision making framework really matters. And, and, and I think when when money comes too easy, and you can just treat it as a pool of capital that you're going to spend, you're not going to make the decisions that are needed to really build an institution that deserves

SPEAKER_173: to raise for multiple fun cycles. Yeah, I wonder, I really want to see the attrition level to fund for the amount of effort I've had to put into raising this worth fund is 10x the first three funds

SPEAKER_23: combined. I raised the first three funds, like, at the poker table with an email, just, hey, I'm doing this. And you know, you get your fourth fund. And now you've got a body of work. You know, you've got 21 people in your fund, you've got mistakes, you've got bad strategy, you've got huge wins. And you know, everybody's trying to make sense of like, are you good at this or not? Right. And it is incredibly hard to cross that chasm. I think like funds one and two, people give you the benefit of the doubt, you get to your fourth. Now it's like, Okay, let's open the book. Tell me, why didn't you do your parada here? Tell me about these three losses. And I'm like, Oh, yeah, that person,

SPEAKER_161: we gave them a quarter million dollars. And they never returned our emails. They absconded with the money. It was chaos. You know, like, the stuff that happens in the seed stage and the early stage of venture is very messy. It's like, it's very convoluted. And you only look smart because of the power law. The other stuff you've you look incredibly dumb. And you really takes a certain mindset to understand portfolio management and nobody, there's no person who pulls you aside and says, Hey,

SPEAKER_23: here's portfolio construction and how it works. I've had to like, glean this from just years of talking to other folks on my podcast. And then personally, there were only two schools of thought when we came into the business moon, it was like, five person partnership, do 30 names, or like, there's like this Ron Conway spray and pray thing. That's kind of it, you know, pick one,

SPEAKER_27: and then growth kind of emerged. But you really have to do your first principle thinking of how you architect your portfolio and how you are going to, you know, hit top quartile three, four or five acts cash on cash. And it is hard. So don't don't get into this, folks, if you're listening, unless you really want to suffer. This is not the easy path. Let's end with that. Yeah. I mean,

SPEAKER_23: people seem to think this is the easy path. I can assure you, this is not the easy path. It was

SPEAKER_09: during the peak, but I don't know. So speak, speaking of difficult paths. Let's talk about the last couple's investments that each guest has made. I'll start with you, my moon, and then we'll talk about some fun strategies from Thomas and we'll end up with Jason. Yeah, I'll start with,

SPEAKER_00: we talked about concentrating. First investment or last investment we made was a company called glean, which is an enterprise search and AI assistant. I just had your CEO on. You did this week. Yeah. Oh, he's great. Yeah. Oh, he's awesome. Arvin's amazing. So we actually incumulated the company at our office at KP. And so did the series A and then we actually just co-led this the series D. So we did a double down out of our growth fund into glean incredible product, incredible company. I use it almost daily for all kinds of workflows that I do inside of KP. It helps me be more productive, you know, and just the power of AI really truly at work inside of an enterprise. That's one. Another I can talk about is a company called ambience healthcare, which is a an AI scribe really an operating system for healthcare. It captures the conversation that a doctor has with their patient or a clinician has with the patient, either in person or in a telehealth format, and takes that conversation creates an EMR record, it creates a follow up note, it figures out like the that almost the diagnosis even the the prescriptions actually even parses through the text and figures out what to bill for. So coding. So it's sort of kind of magical. And we've seen practices that adopt ambience companies overnight flip all their clinicians over to the product because it just works. And it works across all these different specialties. So it is has a full understanding of all sorts of specialties. And we actually seeded this company back in 2019. And we, in the spirit of like doubling down on things,

SPEAKER_88: we just doubled down and led the series B, along with open AI, who's a sizable investor here as well.

SPEAKER_250: And you have you run them past our healthcare system feels like there's a conversation we should have

SPEAKER_164: had. Okay, we're gonna make it happen, Thomas. Okay, we have not. And we need to get the value

SPEAKER_00: add live on the podcast. All right. Thank you, Thomas for the offer. So those are two. Third one, company called Harvey. And maybe just to give you a sense on, like our thesis around investing in AI has been, how do you make the most scarce, skilled workforce more productive? These are the people that get paid the most, they're the top of the salary pyramid. And we identified that it was doctors, lawyers, and engineers. So our investment in, in legal, and Harvey works with some very large companies, consulting firms, where their legal teams use it to read contracts for them, create contracts, look at cases, look at prior. Yeah, you know, you know how it goes. I know that in legal. Yeah, it's great. And then finally, a company called codium, which goes to the thesis of super, super, super charging developers. And this is a, we think it's a better version of get up copilot, and more languages. It does not just autocomplete, but also chat and search inside works within your IDE supports more languages than copilot. Amazing team here in the valley. In fact, I believe all four of those companies are based here in Silicon Valley. So maybe the speaks of the the renaissance

SPEAKER_337: of AI in Silicon Valley. Awesome. Yeah, the AI boom is super real. I'll just go real quick here.

SPEAKER_26: Some very early stage startups, we have two programs. Now we have our accelerator launch accelerator,

SPEAKER_23: 125k for 7%. Those tend to be people with products in market, we started this new thing, Foundry University. We have 2000 people apply, we do three times a year now 250 people get accepted, and then we wind up investing in the top 10% of that. So it's still about a 1% investment. This company told is doing and we love these boring SaaS businesses. These are folks who mastered affiliate

SPEAKER_26: marketing at other SaaS companies, and they made it into a platform. Every, you know, affiliate marketing has been around for a long time, but it really works for SaaS. They've got really great early traction and selling into startups is like a great way to test products because startups are resource constrained and they're really tough customers, but they're willing to try new things.

SPEAKER_23: Argyle is a really cool company. They are creating AR for the job site. We've been watching AR and VR for a long time, waiting for people to kind of come up with applications that actually save people time and money. Um, and being able to take the blueprints, the floor plans, and actually put on a headset and be able to see where you're supposed to put the rivets, et cetera, on a job site, or when you're walking through with the client, put this on and show them what this new hotel might look like, uh, and be able

SPEAKER_26: to click the layers on and off. It was like super trippy and, you know, saves a lot of time, reduces errors, uh, and, and will help them, uh, do really well. And then, you know, podcasting space, something I

SPEAKER_23: love a lot. Uh, so we get a lot of, um, folks doing that has become incredibly influential. Nobody's really put together intelligence around this. And so, uh, a lot of brands are trying to track their mentions on podcasts or understand, you know, how, how to interact with this ecosystem.

SPEAKER_27: And so pot engine is doing research and media monitoring inside that space, which is going to be huge. There are many companies that do this already in other verticals and categories. And so we think that this is a, you know, the right timing for this startup. Just three quick ones

SPEAKER_26: that I'm excited about. Thomas, do you want to go over your top three new managers? Sure. So I, you know, we, we, we, we, we're very, the three managers we love.

SPEAKER_112: You know, this is where I'm slightly annoying and I'm going to be very confidential. So I'll talk a

SPEAKER_138: little bit about what, what's gotten us excited, um, and where we've, uh, backed new managers.

SPEAKER_62: Um, one, they've all been early stage focus, all have a concept of sort of capital constraint and

SPEAKER_69: really helping us counteract this pull. We've been experiencing this bigger funds being raised and, and, and product proliferation. Interestingly, half of them have been essentially

SPEAKER_62: are female led life sciences has become way more interesting for us over the last few years, especially sort of capital efficient incubation models. Um, we took out a second relationship in Europe and, uh, we, we backed a us, um, digital health focused fund where sort of deep domain

SPEAKER_60: expertise and very strong strategic networks sort of come together in a really interesting way.

SPEAKER_69: Um, so that, that does give you a little bit of a flavor of where we've been spending our time.

SPEAKER_27: Healthcare is really one of those, um, hard, hard categories to crack. I think it's, do you look at that as like, um, requiring a longer window than 10 years because the sales cycles are so slow. The capital is so intense. The, the players, every time we've had a

SPEAKER_23: health company, if they go direct to the customer, like com.com or fit bot, a fitness application,

SPEAKER_283: they do really well because they have a customer. And then when they try to sell into the healthcare

SPEAKER_69: industry, it really becomes hard. Um, yeah. And I, I think usually we have not gotten comfortable. I think here does the strategic network that comes along with the strategy sort of unlocks and solve some of those problems, or at least that's what we're hoping. And we'll see how

SPEAKER_57: this is a young organization, but we, it's off to a very good start.

SPEAKER_27: Yeah. I think that's, it's really great to hear that you're taking, you know, those kind of like forward thinking risks and Hey, this person's got a network and they can figure it out because that's just education and health just seem like two verticals that are so ripe for disruption, but it's so hard, both of them, but transportation was hard, right? And we saw that get, you know,

SPEAKER_173: disrupted. So it can be done. It's just hard. It's been a great episode. Wrap us up, David.

SPEAKER_17: Well, for Mamoon Hamid, Thomas Scriven, Jason Calacanis, this is your host, David Weisberg. Thanks for listening.