SPEAKER_00: i was watching uh gary vander chuck gary vee and he said every now and then he opens up his email from brian chesky at airbnb and just stares at the fact that he didn't even reply and he just stares at it and when i introduced 21 people to uber i remember mark souster was in the room and he did he couldn't get there and he missed the investment and to this day mark and i are in a couple deals together he just shakes his head sometimes oh man how did i miss it it was a four

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SPEAKER_12: welcome back to this week's liquidity podcast with me today i have david clark from vencap next we have tamash tungas from theory ventures and of course jcal from the launch fund i'm your moderator david weisberg co-founder of 10x capital today we have two great topics on the docket there's a new yc class and the data is out on the new class and there's already several breakouts and we discuss startup valuations for q1 2024 which are fresh off the press we'll end with the latest three investments from each of our guests let's dive right in yc had its demo day last week and the vc community is abuzz under gary tan's leadership the winter class showed a significantly smaller batch size an acceptance rate of less than one percent from 27 000 applicants several vcs have expressed excitement about the new class especially around several ai companies which seem to have dominated the headlines one company leia an ai assistant for lawyers has already raised a series a from benchmark gary tan and a text to blogger eric newcomer highlighted practical ai as a major theme playing out in the current

SPEAKER_14: baths tamash what are the opportunities today in ai how do you think about the differences between copilot's assistance and agents acting on behalf of users yeah so we we see two different kinds of

SPEAKER_17: opportunities in ai the first one were copilot copilots those those are the systems that autocomplete

SPEAKER_19: sentences what we've seen with those is 50 to 75 improvements in productivity microsoft and service now both reported that they work pretty well in the legal contexts too and then the second category we see are agents which are robots or computer programs acting almost entirely on behalf of users and their full sale development rep replacements is one security operations analysis is another clarna cut two-thirds of their customer support team with agents and so for any jobs that are broke or require processing lots of data and customizing the output they're really good if the productivity gains are anything close to mechanical robots we would expect that these ai agents actually replace something

SPEAKER_14: like two and a half workers on average you saw gary tan talk about practical ai is it too early for practical ai should should investors be thinking much bigger than the verticalization of ai no i think

SPEAKER_23: that's the right place to start main reason is i mean we talk about ai startups had negative time to

SPEAKER_19: launch what do i mean by that really the big companies who got a big jump on it microsoft and google and others because they had the vast majority of phds they had all the data and the key unlock within this llm wave was just scale so the response that by startups to pursue vertical ai makes a lot of sense if you you can't compete with microsoft and word or powerpoint or any of their core markets you have to compete in areas where they're not paying attention or the data sets are unique so it makes a lot of sense that we would see it vertically another account example would be like rpa right ui path 10 billion dollar company doing robotic process automation it's fairly straightforward to deploy a basic version of a large language model or ai enabled robot and so you can't compete or it's very challenging to compete with a direct assault on on some of these big companies you have to go and pick a workflow you have

SPEAKER_14: to go and pick a data set that those companies don't have jason you've funded quite a few ai startups what

SPEAKER_00: are you seeing in terms of your early breakouts yeah uh just on gary tan's comment i like the comment that um practically i guess that's like saying useful ai um or you can use this ai it's practical to use it i think that's a bit of a um reaction to the last class which was um considered rappers and like oh is everything going to be done natively in claude or chat gpt 4 or gemini slash bard microsoft's copilot so that that is still an important discussion i think to have which is verticalized ai versus generalized ai and practical i think is a way of saying verticalize and wrapper is a derogatory way of sort of dismissing what would be transient startups that don't make it now of course 80 90 of startups in the incubator space go to zero you have to let the founders figure this out and that's the phase we're still in it's pretty obvious who's going to win the hardware stack not going to be a startup right nvidia intel amd risk i mean there's just so many players there it's so capital intensive i i don't see some startups you know breaking in um in all likelihood and taking that market share it's possible i just i would say possible and probable are how i tend to think of the world um and that feels improbable then you get to large language models i think we're already starting to see those come apart uh with gustafa going to microsoft and you know some of these large language models uh getting overtaken um and open source models doing really well so you know there's there's kind of i think it'd be some problems there with a lot of these becoming commoditized and indistinguishable i'm sure thomas you're seeing this in some of your companies where they just switch they're on claude they're on chat gpt4 they take the same prompts they move around which makes me think that some of these language models might actually be not worth what they're worth um and that you know meta and apple and the open source community releasing these things is is going to be um right where the startups go remember startups are super efficient by necessity like you know they're they're already behind the curve and trying to catch up here and they're also resource constrained so they're going to go for the cheapest solution and the cheapest solution might turn out to be open source we'll see uh but that means just massive pressure pushing down um what people can charge for their api so then what does that leave that leaves verticalized applications and i think that's where ai is but one component of it you know multiplayer mode when you're using uh pick any verticalized tool zendesk grammarly etc you know multiplayer mode your history the features squarespace constantly releasing new features it kind of makes these things super sticky um and so i think that's what's happening here we're starting to see startups um get traction and people really enjoying their products so i'd say this is like the sampling era enterprises are sampling these products and the the really hard part is going to be are they accurate and useful enough not are they like intriguing intriguing is easy to cancel and i think we're kind of like this is where founders have to work really hard from intriguing to essential you know some things can be intriguing and you try them you put in your credit card i put oculus like you know vr into this like i say it's like try oh my goodbye people try every holiday season these oculus the latest version they're like oh my god this is incredible and then it goes into draw and nobody ever sees it again and i i really have this fear about ai right now that there's a lot of sampling it's intriguing but are people actually using it i think we're going into the what do they call it the trial of disillusionment and then we'll actually come back so it's going to be a very interesting couple of years one percent is you know what yc always kind of accepts that's kind of what we accept to just under one percent how many people were in the class does anybody know the exact number 260. that's pretty big yeah that's

SPEAKER_42: still pretty big so they're still doing 500 a year yeah shout out to uh dave mcclure 500 startup so

SPEAKER_00: i'm starting to see a lot of sampling and we'll see if people can make these tools so good that enterprises renew for years two and three and they expand it beyond pilot so it's pilot season

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SPEAKER_14: tomas when you're going after a market like ai that's changing so much are you still focused on

SPEAKER_12: backing the best founders are you more focused on the application and the market i think it all comes

SPEAKER_17: down to the team i mean what jason said resonates with me which is this market changes so fast it

SPEAKER_18: reminds me of the crypto market two years ago where you go to sleep and you wake up and there'd be two

SPEAKER_19: or three new research papers on how to do something in a better way so whether it's a new machine learning

SPEAKER_18: model or a new technique for analyzing the data and the performance characteristics are significantly better and so we're looking for our founders who understand what the current state of the art is and are planning for that state of the art to change rapidly because you know like the cost structure

SPEAKER_19: will change i mean if you look at the current gpt4 model and you pick the fastest and the fanciest one costs about 60 million dollars 60 for about a million tokens and if you take the version just before it's 120 times less expensive and so there's pretty huge difference in pricing power from those models tell you they commoditize super fast in this ecosystem i think the companies that will win with ai they have two two attributes the first is they're the companies who can respond to technology changes really fast and don't have a dogmatic view on how to solve the problem all of a sudden the transformer which is a key innovation in the current wave of ai is no longer really the right thing should be willing to abandon it for the next version of ai whether it's multimodal or any of these other

SPEAKER_18: techniques the thing that really matters and what's what i think will sustain is distribution that's what we realized in the software wave was acquiring a customer is actually more expensive each year

SPEAKER_19: over the last five years there's been a 60 increase in the cost to acquire a customer across software companies broadly and so the founders that we really get excited about are the ones who

SPEAKER_18: look at the technology and say i can build a product and as a result of building that product

SPEAKER_19: in a very particular way i have a customer acquisition advantage and so i can acquire those customers less than my competition can ergo i can grow much faster on less capital and so that combination of finding a technology advantage that is produced as a go-to-market benefit is that that's what we're

SPEAKER_14: really after dave as a fund of fun you have a lot of your gps going after the ai companies and this new wave are you happy does it make you concerned that so many of your managers are going all in on this

SPEAKER_62: trend i think it's it's really interesting and just interesting to listen to the discussion between

SPEAKER_64: jason and tomash as well because i think one of the things i'm hearing there is that we're still so early in in this shift that that it's it's almost impossible to to get a sense of you know where the value is actually going to accrue you know who the long-term winners are going to be and and to some extent it reminds me a lot of the the dot-com boom back in the late 90s where there was a lot of excitement early on there were some really interesting experiments that were that were underway but ultimately you know very few of those companies that emerged during that time went on to build sustainable businesses and and i know you know jason's stat about you know 80 to 90 of of these companies ultimately aren't probably going to make it is is something that you know we wouldn't be surprised to see but i think the flip side is that you know just as we saw a handful of companies emerge out of the dot-com era to build you know really significant businesses i think the expectation that we would have is we'd see something similar from from this paradigm shift on the technology stage so our expectation is that there are going to be some huge franchises that are built out of the ai space and and you have to make your bets and so you know we would be very disappointed if we weren't seeing our managers being very active in this space what i think you will see is is over time it will be the best managers who can really differentiate themselves and i think you know just as we saw during the dot-com period we saw during the mobile period as well and and you know perhaps with crypto i'm sure there'll be a new breed of managers that emerge that are you know ai native that really start to emerge from that pack so from from our perspective i think it's it's always really interesting you know during these sorts of times because you will see huge amounts of disruption at the company level but also at the venture firm level as well and i just hope that you know the bets that we've made with our existing managers you know ultimately prove out they've been able to navigate you know a number of these technology shifts before um and and just looking at some of the early bets they've made in

SPEAKER_66: this space you know we're hopeful they'll be able to do that again yeah that resonates with me a lot

SPEAKER_00: which is you know it's kind of our jobs as gps to figure out where the opportunity is um and to pick the best teams to pursue those opportunities but at the end of the day the founders are on the front line their talk you know it's it's kind of like if you if you think of it like a war you know there's people on the front and when you're on the front and you're seeing what's happening hand-to-hand combat how people are using it they have really good information there they're going to be able to pivot and find the opportunities and you know we're kind of like generals moving back and then there's like the lp class which is enabling the generals to then enable the troops and there's some metaphor here that works but we're abstracted a little bit you know for and distance from the work and there's advantages to be distance right you know dave can look at thomas myself and others and kind of think about how we're thinking about how the front line is you know engaging in this war to see who's going to win it um and it's very early we're very early in this and you know we look for great teams that are technical that have multiple co-founders that have product velocity and that really understand their customers and are talking to their customers constantly and what i found in my career is the people who are very close to the customer base who have product velocity who are aggressive and have you know really good builders and are close to the customers they find the opportunity right quick right this may take a couple of pivots they could be major pivots they can be minor pivots and that's the mode we're in right now going to be a lot of zeros and and that really is the name of the game if you think about y combinator launch found university tech stars any of these programs that are really early you know what we're doing is experiments and then i think tomas you're you're writing these 500k to 2 million dollar checks in the seed stage mostly now a little

SPEAKER_74: a little bit later it's typically like two to three to about 20. oh okay so yeah you've moved on

SPEAKER_00: you've moved down uh the funnel so you're putting in two or three million you're looking for teams that have a product and market and some customers already and then where we sit in that pre-seed you know we're we're looking for teams with velocity and one customer you know maybe two and you know they're figuring it out tomas you maybe you could describe what you're looking for when you make your decision

SPEAKER_77: um because we we're really betting experiments you're betting on a little bit more proof yeah yeah

SPEAKER_23: we are we we run a really concentrated portfolio and so the way that we work is we'll research a space

SPEAKER_18: for six or nine or 12 months and we have about 100 we call them theorists who help us understand those markets and who are buyers so they can be heads of data like major software companies or inside of

SPEAKER_19: big banks and we just talk to them and try to understand like i mean one of the major problems in selling ai software to every major enterprise right now is security everybody's afraid that i'll give you i'll give you an example a friend of mine runs a company one of his engineers deployed large language model inside of the company opened up a chat bot one of the employees asked what is david's social security number and david's social security number came out uh and so there are all these kinds of new questions right like there's a there's another question which is okay there are these agents that are acting on behalf of people how do we onboard them into a company do we onboard them through like classic hr processes permission them and give them permissions like that do we give them performance evaluations like a human and then we offer them when they're not performing and i you know it's a little bit tongue-in-cheek but like i think there are there are lots of questions that um that we're looking to to answer and once we have that information then we try to exactly what jason said we're looking for really strong teams they might have a handful of different users we try to introduce some of those startups to some of those buyers see whether or not we can help them close some business and if there's good signal product market fit then our goal is to invest

SPEAKER_12: moving on carta just released very fresh data from its q1 2024 startup valuations round sizes at the seed and late stage are significantly up with the late stage experiencing an increase in valuation tomash if exit valuations continue to be depressed due to the ipo market being closed and regulatory issues around large mna what does that mean for venture

SPEAKER_18: venture yeah this is a big question so we had this era the last 10 years zero interest rate

SPEAKER_19: environment where you had forward multiples which is the way that we value publicly traded software companies go from about 5x to about 15x during that period and venture was amazing it grew from an 8 billion dollar asset class to about a 300 billion dollar asset class had the best exit market ever in venture and now we've gotten to a place where rates are at five five and a half percent larry summer said today that he thinks the fed will actually increase rates uh and so that that sort of depresses exit valuations now the question is okay well the exit valuations are depressed but the entry prices are going up basically at the rate of inflation three four percent will returns be squeezed and you know i mean the reality is when we make an investment on average it takes about seven to eight years for it to be sold if it will be an mna and it'll take about 12 years to go public so the current valuation environment not necessarily representative of where it is on the other hand you do have a lot of regulatory pressure so if we look at what the the antitrust against google and facebook or meta microsoft and apple if you look at the top five or six companies who are historically been the big acquirers and you look at the ai entry valuations and assume that those those companies are out of the market right like even the strategic investments that some of amazon is making into some of these lm companies or microsoft is making an open ai are now suddenly subject to regulatory scrutiny if you take those five or six companies and assume that they're out of the m a market that's about 70 percent of dollars and 75 percent of market cap and so your your largest a trillion dollar scale acquirers are basically out of the m a game until there's a change in the regulatory regime washington so that's probably a short-term issue rather than a long-term issue but it i think it is an important consideration when you're looking at entry valuations and the what we've seen particularly for the hottest ai companies is they're being priced the way that they were companies startups were being priced in 2021 at the height of the zero interest rate environment where a company at 2 million in arr is being traded like two to four hundred million we saw one ai company 250k in arr raising 50 million at north of 250 million dollar valuation and the idea the excitement from the investor side there's some rationality which is this is a power law business one or two of these companies in a portfolio can make a portfolio uh super performant but you really have to pick your spots because the entry prices are big which means that check sizes are big so if they don't perform but the loss to the to the venture firm can be significant yeah and i just thought i'd bring up

SPEAKER_00: as a proof point to what tomas is saying is you look at this reuters story here about the microsoft deal to buy inflection they didn't buy it but they did some sort of 650 million dollar licensing deal took the top talent this kind of feels like an acquisition to me they gutted the fish they took like the prime parts of it they took the tuna belly what's left there's some carcass that was thrown back in the ocean and this feels to me like you know what capitalism does when you try to constrain it

SPEAKER_96: you try to constrain something like capitalism in a democracy like america people get real creative and you know microsoft pretty creative organization and they just stole this company um i i don't know how this works on a tax basis i don't know what this does to the uh venture firms that invested in this company uh and the lps who backed those vcs to do this but you

SPEAKER_00: know they they took mustafa and they they took you know karen and all these people away from inflection they left some carcass uh and you know but inflection ai had raised like a billion dollars so what is happening in this and i think this one you know it seems like trump has a you know whatever 55 45 60 40 chance of doing of you know winning this election and then lena khan is going to be out and then what does mna look like in this next cycle if you know and listen i'm no fan of trump i've said it here before people know my feelings on him but i do think getting back to a more healthy mna environment would be better for our industry and for innovation writ large and so we've got to figure something out because these kind of weird deals going on or remember microsoft just saying oh we'll just take the whole open ai team they'll all just come over like this is a direct result and then there was apple with them with the watch team they they just raided that company didn't give any money to them gotten a big patent dispute so weird stuff is happening when you try to put your thumb on the scale of capitalism and so we got to figure this out um entry price does matter to the card of data we're talking about here entry price matters and when tomas and i were starting seed deals were five series a's were 12 to 20. now seed is 12 series a's are 30 40 and so you know it's it's arguably 3x and i don't know that the exits are going to maybe the exits are bigger you know if the exits are big enough fine but you know there's very few decacorns and you know that ever get created and i think the way the portfolio architecture work and dave you would know more about this than us because you've

SPEAKER_96: done all this data but what does a three or four hundred million dollar firm need to do in order to

SPEAKER_00: have one uh of their companies pay for the fund or or double the funding and get you at least to a two and a half x for the fund how do you think about that portfolio mass given the exit strategies

SPEAKER_64: yeah it's an interesting one um and and i think you know for us it's a real challenge because i i think when we look at what firms are doing on an individual basis it kind of makes sense because you know particularly for early stage firms that the bigger mission you can make is is not going after that top one percent company because the valuation's a little bit too rich you know we've seen it time and time again where if you get the selection right in a way the valuation is much less important at the early stage and so i think you know as an individual firm those firms are acting are acting logically and rationally it's when you combine all of that activity that it starts to look a little bit crazy because you know that there's only a limited number of those top one percent firms by definition that are going to generate the value um that they need to do in order to justify the the price and to generate those sort of returns specifically to to your comment though jason you know if you're looking at a sort of four to five hundred million dollar early stage fund you know if you if you own ten percent of a business you know that needs to be a five a five billion dollar business um for that for that company to return your funds if entry prices rather are starting to rise significantly then either you're going to have to write much bigger checks um so you've got less shots on goal from that 500 million dollar fund or you're going to have to reduce your ownership and if you reduce your ownership that means that your exit size is going to have to increase in order for you to get that to a fund the fund returner level to return that 500 million dollars so i think you know we've seen in the past you know several things like that happen um there have been a couple of funds that we've invested in that have kind of gone from having you know 30 early stage deals to just over 20 and they did that because they wanted to maintain their ownerships but they didn't want to increase their fund size so there you're putting real pressure on your ability to select that one company that can go on to be that fund returner and you know you could argue that if you're doing you know a third less deals that's giving you a third less chance of finding that that one company that could go on and really drive your performance so i remember chris dubos i think it was who said that venture works best when um capital is scarce and time is plentiful um and and i would definitely buy into that so you know it is it is something that that that does that does give us time you know pause for concern the challenge is what can you do about it because you know there's going to be some of those key companies that that will emerge over this period so you don't want to step out of the market and and and fail to participate i think the best thing we've seen is for firms to remain reasonably disciplined to make sure that they're still operating over a three-year investment period and not get carried away with all the fear of missing out and the excitement that they put funds to work in in 18 months and it may be that forces them to raise the bar in terms of what they're willing to do in order to get to that three-year investment period that's i think that's the key thing that we would say you know when we're talking to vcs in this sort of area it's keep that time diversification in your portfolio because you know as we saw with the deals that were done in 2021 it doesn't take very long for that environment to change in those deals and those prices to look very

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SPEAKER_00: take the full 36 months to do that primary deployment not shorten it to 18 to 24 months and you got to take your time and yeah that's a little scary to think that some folks went from 30 to 20 a third less shots on goal while prices are going up because they want to maintain their ownership but man it's it's really hard to find an outlier and they still need to if you're a 500 million dollar fund you still need to find a decacorn decacorns are hard to find it's like robin hood or

SPEAKER_96: better right we're not even in the you know uber 100 million exit exits are hard uh valuations seem to

SPEAKER_114: be plentiful it's it's kind of you know i don't know tomas how do you think about it how many shots on goal you can have in this fund and what fund are you on we're on fund one we'll probably have 15

SPEAKER_18: shots on goal so we have a very concentrated portfolio wow and uh and we're we're really focused on ownership so i think we're uh there we ran a bunch of simulation on historical venture data that kind of come up with our portfolio construction and when you said 15 15 15. that might be the lowest

SPEAKER_00: i've ever heard when i wrote my book on angel investing i asked you know everybody i could find how many angel investments you think you need and it's early stage seed stage do you think you need

SPEAKER_51: to hit an outlier and the most common answer was 30 or 40. so yeah yeah so that's what we're running i

SPEAKER_19: think that there's two dominant strategies that kind of come out one is um broad index with a later stage concentration vehicle i think that's that's one model that comes out of the analysis and the other is is a highly concentrated fund where you have significant ownership of the companies and

SPEAKER_58: you model what you think the exit valuation will be primarily for m a it's hard to bet on ipo the

SPEAKER_51: ipo market's been closed for what did you do before the fund were you doing just syndicates or

SPEAKER_18: seed no i was at redpoint for about almost 15 years and um with the managing director there about hey yeah that's in a bunch of companies when did you raise this fund i raised it we closed in march of 23. oh wow it's hard time to close huh it was it was a tough fundraising environment i remember

SPEAKER_19: this was when all of a sudden the stock market was tanking and rates were going up quite a lot that most of the lp population was simply just trying to understand like how much of my book is in public markets how much of my book is in private markets and the public markets have obviously corrected a ton but the private valuations haven't been written down yet so everybody thought that they were

SPEAKER_113: massively over allocated how big was the fund and how many meetings did you have to do we raised about

SPEAKER_136: 238 million and uh we had a lot of meetings hundreds that sounds like 200 meeting yeah how many 12 months

SPEAKER_23: 18 months on the road a little less we were able to raise in just under like four four and a half months

SPEAKER_114: how was it during the silicon valley bank implosion were you caught up in that yeah good memory so the

SPEAKER_92: day we were supposed to have our first capital close was the day that was being imploded and so all of

SPEAKER_19: as you can imagine all the lps in the fund called and said we're not wiring uh because we have silicon valley bank account and we don't know where our money is we don't know if the website's not loading

SPEAKER_23: so then it took us actually it was really hard to get a bank account i know that sounds ridiculous

SPEAKER_88: but we couldn't get a business bank account the the gsip the global strategic investment banks um

SPEAKER_19: they wouldn't take us like uh jd morgan would take us uh and wells fargo wouldn't take us because it

SPEAKER_18: turns out venture capital firms are terrible customers yeah we raise lots of money but we don't actually maintain very large balances in our bank accounts just in and out capital in and out yeah yeah and so the big bank said we needed to have a billion in a um before they would consider taking us as a customer crazy and i called a friend of mine at one of the banks and he was able to

SPEAKER_19: get us the banking out but it was six weeks later and anyway it was we were finally able to execute the capital call but it was a wild time david clark you you were talking before about how many funds were in

SPEAKER_01: market you may have seen a stat and it was kind of unbelievable to even think about but you know you've

SPEAKER_00: been in this for 30 20 30 30 years i think as a gp i mean is it are we how many venture firms are out there how many are hitting you up and what how sustainable is the number of firms right now yeah

SPEAKER_62: so i i just very quickly saw a stat that that that was on a post on linkedin that i saw that um that was referencing um data from prequin and and they said in january this year i'm sure the number was six and a

SPEAKER_64: half thousand vc funds were looking to raise capital which to me seems incredible i didn't know there were six and a half thousand uh vc firms although i think i've probably had cold emails from half of them since i was last on your podcast jake also just so people know i'm not in the terrific 12

SPEAKER_157: yet i'm still trying to convince david but you're you're very selective i mean it's just yeah crazy how many

SPEAKER_158: funds there are and then how many aren't even making it to their second fund the venture tourism

SPEAKER_64: is like a real thing i mean yeah that's that's the big that's the big challenge that we've seen you know we we've had the misfortune of being in last you know the final funds that that a manager has raised and and and it's never it's never ended well um so i i think you know if you were investor in that fund one and and the manager is unlikely to raise a fund two then that's a pretty precarious position for you to be in as an lp you know and i think one of the things that you really need to get confidence in as an lp is you know is that manager going to be around for the duration is is this what they're going to dedicate the next 20 years of their life to because you know thomas said it it's taking you know 10 12 years for companies to go public uh it takes 15 to 20 years for a venture fund to to be fully realized so this is a this is a long-term business and you absolutely have to

SPEAKER_66: have to to have that confidence that that the firm is going to be around to manage that out i'm just

SPEAKER_01: reading from pitch book here uh dave more than 247 first-time manager who managers who close funds between 2019 and 2021 will not be able to raise sophomore funds according to pitch book estimates

SPEAKER_167: so there's going to be a lot of those uh funds and it has got to be a bummer if you were an lp in those

SPEAKER_01: because you took all that time to build that relationship and then the person can't sustain it for the next fund and i mean i guess it's good for the survivors but it does feel like this is

SPEAKER_171: going to be a survivor's game yeah no i think so i think that's absolutely right there's definitely

SPEAKER_30: too many people i mean tomas can you pronounce your how you pronounce tomas so i can make sure i'm doing it right with an sh at the end i knew i was doing it wrong and you my dyslexia is going crazy tomas with the sh on i'm curious you know when you're co-investing are you seeing because you're doing so

SPEAKER_00: few companies and are you seeing a lot of co-investors kind of go dark or disappear on the cap tables and how do you have you had that happen where board members are like yeah you know we're out of business and so do they stay on the boards and and i'm wondering what happens to those 250 funds that

SPEAKER_18: pitchbooks identified yeah it's a good question i i mean we definitely see some board members change

SPEAKER_19: but a lot of the times that's senior partners who are deciding it's their last fund and they're calling a career a career i think you know in the case where your company raises fund one or a firm raises a fund one has a board seat and then isn't able to raise fund two go do something else they

SPEAKER_18: still have a response i mean they would have a view here but like they still have a responsibility to see out that that portfolio or sell it and liquidate it that you know the strip sales in like the secondary part of the market where venture investors are selling their stakes to somebody else is still pretty small part everybody thought i think in the last 18 months that there would be way much many more

SPEAKER_19: secondary sales than there have been so but if you raise a fund you're committed to it you sign a document this is the limited partner agreement that says i will continue to see out this fund as long as i um and all the positions as long as i'm capable and so yeah i haven't seen a ton of it but i think i

SPEAKER_18: think you're you're and i think the other dynamic there is a lot of those first-time funds are probably they're not they're typically not lead investors and so they're not typically taking the board seat

SPEAKER_19: uh and so there's just there's less supervision that they might have to oversee the portfolio and understand what's going on within the companies all right everybody welcome back to the program

SPEAKER_176: steven estes is with us again he's a principal at cla they're a professional services provider they

SPEAKER_47: specialize in cpa tax consulting and wealth advisory his areas of expertise lie in vc-backed startups vc funds high growth startups with complex tax issues in multi-state and international filings welcome back to the program steven hey thanks jason appreciate it all right give us an overview of how cla works with startups what kinds of companies do you like to work with is there like a specific zone

SPEAKER_180: where you like to engage with startups one of the great things about cla is that we're nimble enough to work with two startups right so whether that's a seed round or series a company but then on the flip side we're large enough that we really have the depth of expertise that's needed to help companies when they become you know multinational entities with a lot of tax complexity or audited financial statements consolidated corporations you know mna due diligence whatever it is right so we can truly take them from incubator all the way to ipo and then really kind of come alongside some of the founders with our wealth management platform also like after the exit so i think cla is really unique in that regard like there's not a lot of firms out in the us that really operate with that sort of breadth and scale helping companies that early stage and also being able to help partner with them as they become really large and complex all right you need a trusted advisor taxes accounting you

SPEAKER_47: don't want to play games with this stuff get it right get a great partner like cla go to cla connect dot com slash tech and let them know your boy jake al sent you once again cla connect dot com slash tech

SPEAKER_01: dave clark i got a front row seat to this because i started inviting i asked my team you know we're

SPEAKER_00: doing this liquidity conference in napa we used to call it the angel summit but since we became more of a fund than an angel and syndicate we rebranded at this liquidity conference the summit and we had a list of like vcs who we refer our founders to so we just decided we'd email them and they did it from my email address all of a sudden i get all of these responders i'm no longer with this firm i'm no longer

SPEAKER_185: with this firm this person's no longer at this firm and i was like whoa that's a lot of people

SPEAKER_00: no longer with firms i don't know if either of the davids are seeing a lot of vcs like move to venture partners or move out as the because you know the the usually the management fees go from whatever two

SPEAKER_77: and a half down to two and a quarter to 1.51 it's just not going to be the money to pay these gps right

SPEAKER_188: yeah i think we've seen you know a small number of you know what i would kind of call sort of senior

SPEAKER_64: partners you know decide that you know now's the time for them to kind of step to one side a little bit um and you know don't want to be doing this um you know for the the next sort of fun cycle um and and if that's managed well and and there's an organization behind them and a team behind them then then that's fine you know i think one of the things that that that vc generally doesn't handle properly is succession so um you know to see some of the senior partners you know take a decision that they want to move sideways and you know still be involved in some capacity but but not be the kind of you know one of the male d one of the main deal doers i think i think makes sense um the other thing that we've seen is a little bit of attrition at the junior levels as well um where you know people actually realize that vc is not just about going and giving you know writing checks to your friends um and being everyone's favorite person it's it's about you know really grafting and working hard and um and and oftentimes you know having to deliver bad news um so you know i think i think that you know we are we are seeing you know some people that got into the industry as a first job or a second job over the last few years decide that actually this is not what they want to do long term um for their

SPEAKER_27: career it is definitely you have to have a certain personality type i find to do this job well you

SPEAKER_00: have to be super positive and optimistic uh and you know really uh be able to deal with challenges and at the same time like you're saying deliver bad news hey we're not doing the next round hey we're we're not we don't do bridge rounds or hey you know we need to talk about you know replacing you as ceo or firing your co-founder or whatever hard discussions are going on at the board level and just i find one of the when we hire researchers and uh and analysts i have a program what i call raas researcher analyst associate i don't hire associates anymore i only hire researchers get them to 500 uh first meetings then when i make them an analyst after a thousand meetings then they qualify as an associate which means you're doing four meetings a day three meetings a day you know call it 15 20 meetings a week you know you can get there in a year no problem

SPEAKER_96: um or two but just saying no to good companies waiting for a great one i find some people can't

SPEAKER_00: handle that it's just two and i have to sit them down and have like a talk with them hey our job is to meet with 200 companies and pick one like that means 199 and by the way you sorted through half of them you didn't even take the meetings so you sorted through 400 you met with 200 we invested in one that's like a hard that's hard personality that's like going on 400 dates to pick one person like to

SPEAKER_196: marry but that's probably a good idea you know yeah and there's a 90 chance that the one that you pick

SPEAKER_185: isn't going to work out as well yeah yeah there's your reward congratulations you did 4 000 meetings to make 10 bets or 2 000 meetings to make 10 bets and one worked and the rest is sadness i'm literally

SPEAKER_01: this past year i cannot tell you how many companies i just had to talk with the founders about the wind down and man i feel like your whole reputation in this business is determined by how you uh do hospice

SPEAKER_114: care like i had to somebody was selling a company was going to be like very poor of returns for everybody and i just said listen you got you got a return let's you know do your time at this acquirer

SPEAKER_34: do a great job and let's focus on your next company in two years when you get your own out

SPEAKER_01: but man i don't know tamash what do you what is your take on the uh on the personality type and your

SPEAKER_34: own personality in relation to what works in venture yeah i i think there's probably two different

SPEAKER_18: archetypes one is like like you said an optimistic grinder right where you're just meeting lots and lots of companies you have basically infinite patience because feedback cycles are decades and and then i think

SPEAKER_19: there's another type which is a person who like comes out of industry and has a really strong network and as they said like bets on all their friends and actually turned out to be pretty

SPEAKER_207: spectacular um so i think i mean there are many others but those are sort of the two dominant types

SPEAKER_14: tomash when when you started at redpoint were you advised to take a bunch of meetings before you make

SPEAKER_119: a decision it took me two and a half years to make my first investment it was a really long time i

SPEAKER_19: candidly i i had no idea what i was getting myself into i was i was a product manager at google before

SPEAKER_18: and i had this uh didn't even know venture capital was a career before i came to california and uh just

SPEAKER_19: could probably fell in love with the idea that you could learn about new technologies every day but we all know there's there's a lot more to the business than that and uh it took me a really long time to understand um you know and it was at a time when the firm was investing in many different things i remember our first day first company was a commercial led company the second company was a clean tech business and the third was non-prem software company so like the number of spaces we needed to cover or just get up to speed to have a strong point of view or much broader and you can

SPEAKER_00: be right this is the most frustrating thing i think about this career is you could be right about your

SPEAKER_96: thesis hey we know ai plus you know professional services legal tax whatever is going to be big hey we know mobile photos and sharing is going to be big and you pick color instead of instagram you pick some video site you know you pick sidecar instead of lyft instead of uber and that is i think could be soul crushing you know you figure out where the future is but you you place the wrong bet and you

SPEAKER_00: came so close to it somebody um i was watching uh gary vander chuck gary v and he said every now and then he opens up his email from brian chesky at airbnb and just stares at the fact that he didn't even reply you know and he just stares at it and when i introduced 21 people to uber i remember mark souster was in the room and he didn't he couldn't get there and he missed the investment and to this day mark and i are in a couple deals together he just shakes his head sometimes oh man how did i miss it

SPEAKER_01: this is a four and a half million dollar round of uber he missed and then there's other people you know i i find another interesting thing about the psychology of all this you know you hit some

SPEAKER_00: giant win like some of the facebook investors it's very hard to get out of bed again no and betting on companies knowing there's a very unlikely chance you're going to hit another facebook you're just statistically you you hit one of the top five companies of all time you know they're they're they're it's it's in the fang it is the fang it's the first letter of the fang right um and

SPEAKER_213: you just you're not going to do it again that's got to be hard that's like i won a championship i'm never going to win another one can you imagine you're lebron and you're like there's no chance of me winning so i got to get up and suit up for basketball every day hard to do yeah even a typical

SPEAKER_18: sales person like a really good sales person will close one in five deals mediocre sales person michael is one in ten or one in twenty and then adventure like we said right it's like one in two

David Friedberg: hundred one in four hundred yeah if you're listening to this and you're a young person don't take this

SPEAKER_00: job it really is like a survivorship bias people look at the people who made it work and got to their second decade and they're like oh i want to be like them they just don't see all the people who did it for six months six years and quit and we're like i'm never going to get those years back you know i should have just started a company the world needs less venture capitalists less capital and more entrepreneurs and more talented people on the management teams for some reason this job got super popular over the last decade it shouldn't be as popular as it is i don't think i don't know

SPEAKER_162: what you think babe it's too many vcs too yeah i think it it certainly feels like that um i i at the

SPEAKER_192: same time you know you you look at you look at the sectors where technology is is having a major

SPEAKER_64: impact now and it's just the opportunity set is so large you know so much broader and so much deeper than it than it ever has been and so you know clearly the amount of capital that the industry can can sensibly consume is is is bigger than it was 10 20 years ago um and then the number of firms it can sustain is is larger than it was 10 20 years ago but it certainly feels that over the last two or three years we've we've kind of overshot the the the out of where we should be and so i think it's it's inevitable that we'll see some kind of reversion to the mean over the next the next couple of years

SPEAKER_12: i think there is an efficiency in the market you shouldn't have 6500 managers and i think that's highly

SPEAKER_14: correlated with the fact that so many of them are not able to do another round i do think we need at least as many vcs we should just be investing much more earlier stage a lot of the talent

SPEAKER_12: has now gone upstream it used to be that the large funds that seed fund seed seed checks now they do series a checks and as those multi-stage funds continue to grow they're going to be concentrating their talent in the later stage so i do think having a healthy early stage ecosystem from the emerging manager standpoint is very healthy both for the ecosystem but also for new startups uh think about all these companies uh jason i know you you helped calm uh when they were almost almost gonna die and if you hadn't been there if they didn't have the incremental seed investor they may not be the behemoth that they are today so i think having a lot of capital almost by definition having enough angels and early stage capital is something that's really positive for the ecosystem i think that's like

SPEAKER_00: tomash is like kind of proof that like a concentrated portfolio is like um an easier thing to manage because you're picking people with a greater chance of success with more of the questions answered than at the level gary tan's doing or i'm doing or you know other folks and then between us is probably pair of vc or you know 500 startups or 500 global tech stars whatever and it really is hard at that early stage to deal with the number of companies going out of business so i've had to come up with a methodology or maybe even a philosophy a life philosophy of how i talk to the founders right and um i just tell them like listen if you lose 125k that we gave you for seven percent it's okay with me i just want you to promise me that when you do your next company we get to be the first investor and i have that conversation over and over again with them and you know what when raul did superhuman he came to me and said hey you know you did report of um you know you put 50k and we gave you back 250 or something and you had said hey let me know when you do your next one

David Friedberg: and he came back to darmesh from hubspot and myself and we were the first two investors in superhuman

SPEAKER_00: and i think he says like darmesh he tells darmesh he was first and he tells me i'm first

SPEAKER_01: well he's pretty good about that but you know you you have to be built for it you have to be built for

SPEAKER_30: you know whatever the amount of you know zeros there are and man i can tell you as a high stakes

SPEAKER_00: poker player as well that's what's taught me a lot about this when you lose a hand that you're supposed to win you know you're a 70 80 favorite but the 20 comes in you have to get your brain chemistry used to this possibility i think it's why a lot of people when trump beat hillary clinton not to bring up trump twice in an episode of liquidity but when he beat them people were like got mad at 5 38 or whatever and they were like how did you get these statistics wrong and they're like no we told you it's a 36 chance of winning it's a one in three you just didn't believe us and you don't understand basic statistics so you i think you have to learn how to take losing uh and zeros um and and really like get comfortable with it and it's taken me a decade i have to say like i used to get very tweaked by losing even to this day i get really upset about it sometimes and it's really something i have to manage my own psychology managing your own psychology and gambling which is what we do we're placing bets let's be honest about what it is um you know david's placing bets on gps gps are placing bets on founders founders are placing bets on markets and customers we're all placing educated bets and this is why poker is so popular amongst investors and so important because you have to learn to lose and when you win when you're not supposed to win you get lucky or when you lose when you're supposed to win you get unlucky understanding this taking it to heart but then still being able to

SPEAKER_01: improve your process because that's all you have and you know dave when you were on the episode we talked about your terrific 12 and i think that's what it's right terrific 12 i dubbed them yeah yeah like your discipline that was what i took away from your discipline of adding these managers very slowly very thoughtfully and and like maybe you could unpack that here and just explain how you pick managers and how thoughtful you are about it because i do think the psychology of how you pick managers and saying no to them uh you know i don't think you're in tomash's or my fund i don't know you could be in tomash's i don't know maybe you picked him over me but you're not adding that many so i don't take it personal that you're not in my fund um you you just like i don't think a founder can take it personal that i'm not in their startup right but we already said 199 we don't go into yeah i think i think

SPEAKER_64: it's really interesting because and and and you know tomash what you were saying about the scenarios that you that you ran and and you know where you ended up in terms of you know what you thought the best parts of the market to play in the the you know the the focused early stage or or slightly broader kind of growth stage in a way we've we've sort of done that done something similar um not through running a series of models but through actually investing over a 30-year period um and and i think part of it as well is aligning with where we are as individuals and this and the level of risk and the level of uncertainty that we're happy to take and the types of risks and types of uncertainty that we're happy to take because i think one of the characteristics of venture is there's there's still a high degree of randomness and and the earlier you get the higher the higher that degree of randomness is in in each individual decision that you take whether that's as a a gp or whether it's as an lp and i think for us we found we found a level where we're comfortable with the risks and it allows us to consistently produce the sort of returns we need to do in order to add value for our investors and so i think finding that where where psychologically you're comfortable but where you're still able to perform at a high level is is really important and for us it just comes down to you know we know ventures are power low industry we know it's the top one percent of companies that deliver the majority of the exit value and so you know we have a very simple screen which is every time we look at a manager we ask ourselves you know how many top one percent companies have they backed what was their role in in in in doing those deals you know were they were they invited in were they a bystander or were they actively leading that deal um you know have they been able to do that multiple times and the more times that we see them invest in those top one percent companies the more confidence we have that they'll be able to repeat that and david your

SPEAKER_12: model allows for a bad vintage from time to time or a sub average knowing that it's probabilistic in

SPEAKER_62: nature yeah absolutely you know there's you're always going to have good managers who as as you said

SPEAKER_64: before you know they had the choice over company a company b they got the macro thesis right they just chose the wrong company for whatever reason and and that's always going to happen and so i think for us you know understanding that that just because you have a bad fund doesn't make you a bad manager is is really important now you know we want to make sure that the manager has has has really examined the reasons behind that bad fund you know was it just a case of choosing company a over company b or were there structural reasons behind the fact that that that that fund hasn't performed in some instances you know you do find there are underlying structural reasons and then you want to have that conversation and make sure that they're addressing them but even the very best firms go through periods um of you know that where where things don't always work you know you look at you know some of the challenges that sakai has faced um over the last sort of 18 24 months you know are are they performing as well as they've performed historically you know you could argue you know perhaps they're not but you know would you argue that they've got the people there that are going to fix that and and you know would i bet on them to you know to be in a much better position in 24 months time you know absolutely i think they absolutely will so i think you have to recognize that the you know the path of a venture firm isn't isn't isn't always like that it's there are you know significant ups and downs um and it's how they navigate those challenging times that ultimately i think leads to to the the the really

SPEAKER_165: sustainable franchises developing i couldn't agree more you know it's really like thinking about

SPEAKER_00: how you make decisions like really examining how you make decisions is like a very meta concept homage i'm curious how you examine your own betting and your own thinking about betting and your own thinking about portfolio management like how often do you examine it and think am i doing the right thing is 15 the right number or should it be 25 or should it be 10 or should i you know how do you think about thinking and you're getting your betting strategy and your portfolio strategy yeah well we

SPEAKER_23: evaluate the portfolio construction every time we raise a fund and update the priors that's really

SPEAKER_19: important and then in terms of the decision making process we run the firm with six different roadmaps and one of those roadmaps is actually improving the investment process itself so we capture structured votes we have um quantitative research on companies that we do and then every quarter because we're so concentrated we need to update our reserves so we run probabilistic scenarios for each of those companies to determine where we think future dollars will go and i think you know

SPEAKER_18: big driver we maintain a lot in reserves so if we uh typical series a firm might have a 60 40 initial

SPEAKER_19: dollars invested 40 reserve split so if you it it becomes really important to think about those reserves because basically half the fund uh and there's a bunch of research out there coming from uh out of stanford on uh portfolio management it turns out you can actually move a fund from top quartile to top decile with active reserves management so that that's a really important part of how we think about driving great returns is so you're looking at those 15 and saying of those 15 which

David Friedberg: two or three 10 20 deserve the finals 50 of the dollars yeah it will change on i mean as a function of

SPEAKER_23: what's happening within the underlying portfolio but the idea is we have to be actively managing those

SPEAKER_19: for service because that's what will drive because it's basically half the fun two follow-up questions

SPEAKER_00: how do you communicate that to the 15 founders and founding teams that they are or aren't in that group right um and then do have you done preemptive where you say hey i i know this is a winner i think this is our uber i think this is our coinbase whatever it happens to be and then say to them like sequoia did with whatsapp hey would you like more money and preempt them from doing around so you take

SPEAKER_57: that in either order yeah so i i've worked with a bunch of companies where we've preempted like

SPEAKER_18: one company granted the c cram to the a in fact all more close to 60 to 70 percent of investments we've made so far preemptions um wow yeah and that's because we do all that research we prepare and then we try to put ourselves in the position where we can invest before the company goes out to

SPEAKER_265: market um so you spend more time studying your existing portfolio than new deals is that no no equal um the preemptions are in net new companies rather than existing companies so we're only a year

SPEAKER_121: in so we're not yet in the position to be able to to preempt a lot of the internal portfolio but but

SPEAKER_19: the idea is the same i used to build a big big body of research then how do you think about

SPEAKER_258: communicating that to founders or do you communicate it to founders yet like hey we have reserves but

SPEAKER_23: here's how you qualify for them yeah we're really clear we're really clear on milestones we set up

SPEAKER_19: internal plans for those portfolio companies where we expect them to be and um as you said before jason like the the way that you communicate and articulate the candor is your reputation industry

SPEAKER_01: yeah david clark how do you think how do your terrific 12 think about reserves and think about communicating to their portfolio do you get that deep in the weeds with them yeah certainly on the

SPEAKER_188: reserve side i i i think you know it it's the reserve equation has changed i think over the last 10

SPEAKER_192: years as more of those firms have have raised separate growth vehicles um and so i to some extent we've seen reserves in early stage funds reduce because they kind of see the growth funders

SPEAKER_71: as filling that um filling why is that and is that the right way to do it or should it just be in

SPEAKER_192: one fund for simplicity um how did we get here i'm curious yeah i i think we i think we got here because

SPEAKER_64: companies are staying private for longer um and i think there's a difference a different return profile that can be built by investing in later stage um businesses that can still deliver on aggregate um attractive risk-adjusted returns but it's a different risk return profile than what you would expect from um from early stage so i would i would say that you know the if you look at the variability of outcomes for a growth fund it's it's it's a much tighter band than you would get for an early stage fund um that's not to say you know the best performing fund we've invested in over the last 15

SPEAKER_280: years has been a growth fund which is doing 15x um they hit something what did they hit

SPEAKER_96: they must have hit something that's like hitting a royal flush or something right would they yeah

SPEAKER_62: yeah yeah they they it's probably the um the most valuable private company um in the world right

SPEAKER_103: today strap they hit stripe okay got it uh not necessarily in the us oh okay wait wait wait who's

SPEAKER_41: the uh oh adyen would be adyen then yeah contemporary maybe is that the top two private senator david you

SPEAKER_288: would know the other david uh i think saudi aramco but i'm i'm guessing they didn't invest into that

SPEAKER_290: yeah no i don't think they got into lvmh for saudi aramco no no so i i you know i think going

SPEAKER_64: back to the reserves question you know for us it's it you know being able to deploy that capital sensibly um is is really important and when we look at our data what we find is the best managers um can actually reduce their exposure to the loss making companies and increase their exposure to the the the 5x 10x fund returning companies and if you're able to do that successfully um then you know you are having an impact on on the initial bets that you made so i i i do think being able to to manage your reserve strategy effectively is is one of the areas of of being a a really successful vc that perhaps doesn't get spoken about as much and and i know i've had conversations with a number of um emerging managers and seed funds who don't want to do any reserves at all and and see it as diluting the initial check and and you know interesting to match that you you know talking about some research that that you've seen there that can you know can push funds into the the top decile if they do it properly that that's certainly the sense that that we've had um when we look

SPEAKER_192: back at the data from from the 500 plus vc firms we've invested in is there a magic number david have

SPEAKER_14: you have you segmented by reserve strategy and tvpi no no we haven't got that level of granularity

SPEAKER_293: well what's your what's your intuition tell you what's the i think certainly yeah i mean certainly

SPEAKER_64: you know we've seen you know something around a 50 50 40 60 60 40 that that sort of thing is is historically what we've seen um i think there are firms that have done well more recently where if you know they've been 70 30 even 80 20 but where they have that growth vehicle and the growth vehicle just to be clear you know the growth vehicle will do the best companies from the early stage funds but it will also do net new companies as well so it's not necessarily just looking at at

SPEAKER_27: making those follow-on investments yeah i'm going 50 50. you know when i looked at my first fund which

SPEAKER_01: was you know 5x on paper we've turned 1x already and we had robin hood superhuman calm and density in there density.io and three out of those four we knew were definitive winners and we didn't have

SPEAKER_00: reserves to double down on them we didn't just consider it wasn't considered you just like you get 10 million dollar fund you make 100 100k bets or something in that range and now i'm just like you know what 50 million dollar fund 25 million into you know 100k 250k bets get whatever number of names that is and you know 200 names and then the last 25 million into the top 5 of that and then we've had to communicate that we are not we don't do bridge rounds we don't do our pro rata unless it's in the top 5 of our portfolio performers and we'll just tell founders like listen you're you're not the one in 20. your here's where you stack rank and in for for us to be involved we would just need to see a little bit more and it's a competition for those dollars so i just tell people it's a very small amount a very small number of people are going to get those reserves and it's a competition for them that's it you know not everybody gets a max contract in the nba either not everybody gets the 40 million

SPEAKER_01: dollar super max contract a year uh in the nba so and that's okay it doesn't mean you're not going

SPEAKER_00: to be successful but man i find that a lot of vc firms are not clear with their portfolio companies how they do reserves and i've seen this really send founders into a tizzy perhaps rightfully so perhaps you know perhaps all is fair in investing but you know they just think oh well this vc fought for this deal and then when things get hard the vc is going to do their bridge round and they're like yeah we i mean i remember chamov from social capital just had a rule we don't do bridge round we only do price rounds so if you do a bridge round that's fine we're just not participating in it but when you get a price round and somebody's leading it then we'll consider our pro rata and i thought that

SPEAKER_303: was like very crisp and clean language he gave to some of our portfolio companies let's move on to

SPEAKER_12: our lightning round where we'll dive into the top three investments from each of our guests tamash you're

SPEAKER_18: up yeah there's three companies i'd love to mention one is a company called mother duck which is the next generation database company founded by the tech lead from google bigquery involved in the seed and um and the a uh and that uh the big open source traction completely different architecture in the in one of the biggest software markets which is the analytical database space and the really offices

SPEAKER_19: are full of rubber ducks so if anyone ever gets a chance to go visit it's a fun branding yeah they've done a really nice job um the second company i'll mention is a business called omni and i was lucky enough to be on the board of a company called looker that google bought for about 2.6 billion and they were building vi tools this is a part of the core team from looker who's going about it a second time and taking some of the control mechanisms from looker and the administration and balancing with the flexibility of tableau so it was involved in the seed in the a and just

SPEAKER_18: involved in the next round too and uh and then the third one just real quick is a business called arbitrum which is a web 3 company uh founded by a team from princeton that wrote many of the

SPEAKER_19: core papers under uh underneath crypto and uh reasonably worth about 20 billion and they process more transactions in both count and dollars and ethereum he's another actually on top of this year

SPEAKER_01: fantastic really interesting choices i notice you know really seasoned teams there huh really yeah you're right actually that's that's a theme yeah across these three very seasoned yeah you know we'll uh i'll give you some fun ones here so we you know we've made some of these 25k bets um in our founder university and we like to make these small bets on odd weird ideas and knowing that maybe they'll make it to the next stage again um this one newcomer is is pretty funny guy obsessed with video games teaching language in uh video games i don't think i have the sound on here but you can see as you play this game you you know it's like uh duolingo except you're playing a game and it you instead of doing uh you know choices in your native language you you learn how to say farmer in spanish or you know uh greek or whatever you're you're doing it in and uh you know people seem to love it uh and it's getting some nice traction uh this one i thought was very interesting uh called recall browser extension everything you browse you know reminded me of delicious or other bookmarking

SPEAKER_00: tools and as you bookmark um things you're interesting in whether it's a pdf or a document that was sent to you in your email or a web page or a youtube video a podcast puts it into your knowledge repository and then you can start asking questions of it more you use it more knowledge so it's like your personal llm and we'll see where they take it but you can take any of these pages that you meet and the one feature i said was can i just automatically turn this on they'd be like it'd be very expensive and i was like yeah you make a a version for whales where it's 500 bucks a year every web page i do is indexed um and then pod engine you know i'm obsessed with podcasts um you know trying to track all the discussions going on really hard to do right um and you know that we've had some interesting conversations here about very granular topics and so if your company was mentioned or a topic you know getting that intelligence out of podcasts summarized and into your email box or into a boardroom meeting very hard to do and so this pod engine is basically indexing the world's podcasts

SPEAKER_01: and letting you track things and search them and so this is something where people will pay a lot of money for this and so we're very excited about those three um and they're fun and interesting consumers hard but you know when you do hit on consumer some of my biggest hits rom hood com

SPEAKER_114: and uber obviously thumbtack a lot of consumers in there and david i know you don't share manager names

SPEAKER_192: but you had a couple uh recent investments yeah so we're just about to close on a on a couple of funds um from a pretty large brand name firm um so that's covering early stage and growth and and we've been investors with them since 2012. um i think we started with fund three um with those guys the last ones we've actually closed on was at the end of last year um again that was an early stage and a growth fund so i think it was fund eight was the early stage fund five was the growth one from

SPEAKER_64: another established manager this manager was um they were one of the early investors and one of the big social media companies in the in the kind of 2000s um have done some really interesting sort of hardware deals that have that have ended up as fund returners um and again we we first did them at fund three and have been investors there since 2010 and then the one before that was an early stage fund from like one of the top three or four uh global bc brands um and funnily enough we were with them from fund three but that was back in 1994. um so that's a 30-year relationship we've uh we've had

SPEAKER_12: with those guys so sorry i can't mention specific names but david how does someone become your 13th fund

SPEAKER_37: i'm going for 15 i don't want to be 13th or 14th i'm going for 15. fun five i'll see you in two years

SPEAKER_64: with some good data we are yeah we we we are you know there's a couple that we're looking at adding um and and and and i think it's it you know just goes back to what i was saying earlier it's it's about you know wanting to make sure that we we're seeing firms that have got that history of being able to you know identify those top one percent companies access them you know win the deals add value and and be able to structure exits around it and and also we do think that venture is is a team sport um and so you know we like to we like to see a depth in the team um and and you know where you know there there are some fantastic you know solo gps individual vcs out there but but i think again from from our kind of risk profile you know we like to see that we want to back a team and so you know we're looking at the sort of depth of the team there can be strong individuals within that team that's fine um but i think we you know we want to get comfortable that there's a group of people there that are you know that are working well together that are feeding off each other and and where the you know the sum of the the sum of the parts is greater than the you

SPEAKER_323: know the individual bits that's great information what a great episode right get us out of here

SPEAKER_12: david it's been another fascinating episode with two brilliant guests on the liquidity podcast for tomas tangas david clark jason calicanis this is your host david weisberg thanks for listening