David Friedberg: ah all right everybody how are you doing david doing well how are you doing how about those knicks man a long-suffering nick fan we got a little brief moment of joy during the carmelo era and uh before that it was obviously patrick ewing and the charles spree royal allen houston oak mace all that great time period in the 90s this is my favorite nick team since the ewing era it's right up there because the heart they play with the grit none of them were a top 15 pick we're taking apart the mvp of philadelphia but i just want to say to the people of philadelphia you're the sixth borough

Chamath Palihapitiya: now we own you and uh that's it it's our town now i'm joking did you did you make it to any of the

David Friedberg: games yeah so um i don't go to any knicks games during the year as i've seen tickets so i kind of treat myself because when they get to the playoffs i save up all my knicks ticket budget for the playoffs and uh i made friends with a guy named david adelman who's a really really gentleman and uh fun guy we met actually remember the party we had at uh eye connections conference in miami

SPEAKER_10: yeah he was at that party which was a pretty cool party i mean don't tell don't say where that party

David Friedberg: was but in terms of elite attendees that was pretty crazy yeah and so my friend antonio gracias from valor introduced me to him you know we've been texting back and forth about the knicks in philly we had a dinner bet a dinner bet two of us uh one pays for dinner then he asked me am i coming to the game and i talked to my wife and i was like you know i just got invited to the game you know i'm kind of making this new bromance and so sure enough she gives me the the pass to go uh my knicks hall pass as it were and i zip zip zip to philly and there are and i'm gonna buy a courtside seat for myself but there were four seats behind the next bench that's my favorite seat in the world like when i go to the warriors game i love the seats right on the warriors bench because i i'm into the game i like to see them draw the plays you want to smell the sweat yeah i just want to be i want to be like i'm the coach you know or an owner someday and so i'm there and it was game four was unbelievable after like games one two and three being unbelievable and then i went to the garden for game five and i

SPEAKER_18: watched that four-point play and that whole thing and then i was gonna go but i had to get back to my kids and i was gonna go to the game last night but i think it's taken about four years off my life but man that was one of the best series i've ever seen in my life and i just think that that kid maxi is

SPEAKER_10: is an all-star man there's a lot upside there and joelle's a warrior i mean i don't like some of the dirty players if i'm being honest but what a serious did you do you watch the series hey you

SPEAKER_22: guys i did and now it's nick's uh nick spacers pacers are my team so you talk about the 90s that's my childhood well i didn't realize that that's the highlight of my childhood yeah oh it's

SPEAKER_23: reggie miller on the base uh so anyway i mean we were we were gonna sweep the pacers obviously

SPEAKER_10: uh but i'll talk to my i'll talk to brunson on the um on the group chat and i'll just let him know we'll do the gentleman suite we'll let you split a game okay when we go to your arena we'll

SPEAKER_26: let you win one and then we'll just do the fire well we'll we'll let the games do the talking oh

SPEAKER_28: do you want to make a dinner bet david would you like to get it on the action because i have looked up the odds okay so straight up dinner bet max per person is one thousand dollars okay per person so

SPEAKER_31: it's basically like a two dime bet but that's not the better with david by the way it's just we're like gonna do philly cheesesteaks or new york pizza but you want to make that nobu you want to make the

SPEAKER_18: the homokase bet you feeling bold david straight up let's do it let's do it okay there it is homokase bet homokase bet and you know listen that can get dangerous all right let's can we start the show

SPEAKER_35: here we've got so much to talk about big big big let's get started this week in startups is brought

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SPEAKER_26: to get 15 off your first year welcome back to this week's liquidity podcast with me today i have joshua berkowitz of berk corp of family office lp and to some of the top vcs next we have donald stalter partner at global founders capital and of course we have jason calacanis from the launch fund i'm your moderator david weisberg co-founder of 10x capital today we have a really exciting show we have several interesting topics on the docket we have elon uh your friend jason his open ai competitor has raised six billion dollars now we have data suggesting that vc emerging managers managers in the first three fund three vintages of their fund are outperforming established managers and we'll end of course with everyone's three latest investments let's dive right in elon musk's ai competitor to open ai xai has reportedly increased its round size to six billion dollars for their upcoming race jason you and the besties uh discussed suck scorched strategy scorched earth strategy on the all-in podcast what do you

SPEAKER_43: think about elon's aim with xai well i don't have any inside information disclaimer disclaimer disclaimer

SPEAKER_44: here um just zooming out a bit um i think what we're realizing is um a lot of these llms are going to

Chamath Palihapitiya: be commoditized right and they're going to do an equally good job at whatever your task is so we've seen this with meta releasing their open source project we saw it when claude leapfrogged you know

David Friedberg: chat gpt 3.5 so what i see from startups is they're willing to swap these things in and out so then what's left i think you know having a unique data set say twitter reddit gmail if you're allowed to use gmail

SPEAKER_18: i'm not sure uh youtube i'm not sure what their terms of service allows them to do so being able to have a unique data set combined with that it gives you the ability to make a unique product in the world um but there's a big gap between how much money is being spent and the amount of revenue being generated right now so these some of these companies are losing very large amounts of money because it's so capital intensive and it's going to be a war of attrition and i think that's what we're starting to see here is who can raise the biggest war chest who can build the biggest cluster who could have the biggest data set and it looks like you know licensing data sets is becoming something that open ai is starting to get better at i saw this week they did ft obviously they're at war with the new york times who could probably win an injunction against them i think um given how debt to rights

David Friedberg: to have them so you put you put all that together um there's going to be three or four at scale players

SPEAKER_18: here and then there's going to be a bunch of open source verticalized ones i'm happy to leave those giant opportunities to the giant players sovereign wealth funds it's not a venture game this is like this is a game for amazon elon tim cook you know sundar this is not a game for vcs and and most lps there's a rarefied era of lps specifically sovereigns you know maybe on the margin some high net worth individuals like let's say a larry ellison who likes to make bold bets but most

David Friedberg: high net worth individuals that they don't like to make billion dollar bets and so it's going to take a lot of money uh it's going to take a lot of time and i think what everybody's playing for is you know some version of agi and a generalized intelligence and so i i i've told people before

SPEAKER_18: never underestimate since we've been friends for close to three decades now not the person you want to underestimate he will be the number one two or three player in this and if you make this bet and this is not investment advice uh you will have that in the number you'll have you'll you i think by default if you back elon you'll you'll win the gold the silver or the bronze and if you look at his companies he got the goal with tesla got the goal with spacex so and i think you know neural link

Chamath Palihapitiya: is a little bit young right now i think there's no no the metals haven't been given out yet a pretty

SPEAKER_18: good track record of winning the gold so if you're going to place a bet that's probably the best possible

SPEAKER_10: individual you could place a bet on and i'm not just saying that because we're besties but it's just the objective fact right and i'm interested what our panel thinks yeah i think i mean i think the

SPEAKER_58: difference between this one and his other companies is this one he's coming from behind with tesla it was effectively the first electric car company with spacex it was the first private rocket rocket company i think the same goes for the boring company neural link too he's got a big a big lead to come back from here and his competitors are also super well funded so not saying you can't do it it's it's always scary to bet against elon but i think the starting position is very different here

SPEAKER_60: than in the past that's a great point yeah yeah i'd agree with um josh on that at the same time it's interesting elon's got this network of tesla twitter neural link boring company and all these others who he's umbilically connected with and so he's got this proprietary data set especially from x you know where he's able to kind of build out crock he's got sort of this open source platform you know um good luck mistral i feel like you know he's going to be able to leverage a lot of his network to you know come at it from a completely different angle i think um you know he's a sci-fi fan obviously and thinking about neural link and its connection uh you know to this new technology is uh exciting if not a little bit scary um so you know i think there's a massive vision behind this that we're probably all not that familiar with but you know if you google it if you read online about it

SPEAKER_63: you know there's definitely something exciting ahead juggling multiple devices and apps to run your

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SPEAKER_44: trial and get 20 off in terms of coming from behind you know he was the co-founder of open ai so in a way

Chamath Palihapitiya: he kind of was first to the party again it just got a little weird with this opens with this uh open source turning closed source etc you know another major issue here is what's going to win the day open source or proprietary data you can look at a lot of different categories and say open source uh wins but there's a lot of categories where we're being closed with wins you know you look at google search that's a closed you know black box of a system um same with tick tock same with facebook so a lot of these consumer products are closed black boxes then you look at the tech stacks you know it's obvious that like you know a lot of the open source projects just demolish everybody and and we're seeing

David Friedberg: that in corporate america now so we do have to think about if you're in corporate america and you

SPEAKER_67: want to compete pick a company lvmh i don't know walmart any company and they need ai they going to

David Friedberg: use a proprietary uh platform where they're going to just get charged more and more or they're going to be locked in and they're you know could get rug pulled or i think it's gonna say screw it i'm forking whatever's on the open source deck right and i think in decade three of corporate america embracing open source and man i remember the early days where the it departments laughed at it we'll never use that blah blah blah and then all of a sudden it was like hey um uh you know for this small project we use this mysql open source we use wordpress for this publisher but hey we tried this thing over here uh this linux thing hey we're using some open source storage cluster we got this hadoop thing going and uh you know they use it for some small project like what did it cost and it's

SPEAKER_18: like it's open source it's free but where's the license bill like no no we're hosting it on our servers it's basically free and they're like oh can we get some support for that they're like yeah

SPEAKER_10: there's a couple companies i can support us but or we just hire two people from the open source project here's a list of the people working and contributing on it and they're like oh yeah hire

SPEAKER_18: two people so now corporate america knows this movie and they know it's actually safer in a lot of instances to go open source so i am fascinated to see if that plays out here i'm interested in what you

SPEAKER_22: think david one way to look at this that's really drew my eye is sequoia is leading a six billion dollar round at an 18 billion dollar valuation essentially for for an early stage pre-revenue business and you kind of step back and think about why it why is sequoia doing that and the first thing that you really have to come to grips with is this is not a venture investment this is a traditional growth equity investment so something a very different dynamic with a venture investment you're trying to get the 100x you're trying to return the entire fund with a power law outcome with a growth equity investment you're trying to get more of a three to five x with downside protection but then you look at it and it looks absurd because how do you price in downside protection into a pre-revenue and early stage company and then you have to really look at elon's track record jason you mentioned space spacex tesla he's also had basically since paypal none of his projects have actually failed if you look at solar city boring company neural link even open ai so i think uh sequoia is really making a bet that this cannot go down to zero there is going to be terminal value and downside protection of course they're investing on a preferred share but it is interesting to look at elon how he's able to attract this amount of capital for a pre-revenue company and the next war is obviously going to be can he win the war for talent if he's able to win the war for talent against anthropic and against open ai he will be able to catch up very quickly if he's not i think he is going to have trouble here probably you know

SPEAKER_44: it's a dogfight out there for talent but people want to work with elon and the artist working people want to work for elon and the people who are phoning it in are not going to last working for him so he's got a really interesting approach which is like you're all in or you're out right i think um

Chamath Palihapitiya: might be one way to say it and uh you know he has committed as he is and you know his commitment level is second to none i mean he's just a samurai in that regard and so and you know back to my analogy of gold silver bronze like he if he's if he gets the sense he's in second or third he's going to go into beast mode to get that gold and you know i don't know you could say that about a corporation with a hired gun ceo right they don't have founder authority they don't have to drive so i like your assessment david you know there's some downside protection here the track record

SPEAKER_58: i think also on the fundraising side he's sort of done you know elon's like two two hype cycles in one with this right there's the whole llm hype cycle where funds of family offices and institutions suddenly feel like they need an allocation to one of the big llm companies and that's sort of pushing capital into the space to almost all of the companies that are raising here and then you have elon himself who is a known quantity lots of people want to back all over the world and you put those two things together and you create and invite like a situation where there's so many pools of capital all over the world that want into this thing um and i've spoken to lots of lots of big family offices that i would never expect to be interested in something like this but because it's elon because it's lms you put them together they feel like this is something they want to be a part of um because it's just sort of so of of the culture and of what's hot right now rightly or wrong

SPEAKER_60: way yeah i i was also going to say i think it's downside protected given its connection with the tesla is the massive public company that has you know huge balance sheets so ostensibly you know a strategic investment or whatever you know could be in the cards elon can make decisions that no one

SPEAKER_77: else can as part of this business so um i feel like there's just a really interesting very powerful

SPEAKER_42: sort of virtuous cycle what do you think donald you're on more cap tables than than 99 of silicon

SPEAKER_22: valley what do you think about sequoia being an open ai and then backing its main competitor x ai how

SPEAKER_60: do you look at that look i mean i think that sequoia is in the business of making money for its lps and i think you know sort of cut and dry they've been very very successful with musk over time they've made money as you said and i think um they probably also believe that they're going to make significant money on open ai open ai is connected with microsoft on another level sam's a force in nature so i just view it as an economic decision more than anything else moving on pitchbook just released

SPEAKER_26: the report titled establishing a case for emerging managers in it pitchbook presented compelling economic case for investing into emerging managers which are managers in their first second and third vintage empirically showing emerging managers have outperformed established managers between both the top and bottom quartile joshua i know you're very active in the emerging manager space why not just invest into the large multi-stage firms and tell me a little bit about your strategy

SPEAKER_58: yeah so first i would put this report in a category of reports that like this let's run a correlation report the results of the correlation and then make a whole bunch of inferences from that and so from like the gp standpoint it would be like hey there's a bunch of successful founders from stanford so let's only invest in stanford founders or mit founders or waterloo founders or pick your whatever um and so yeah there's a lot of really successful emerging managers of course there is um does the fact that there's a positive correlation means you should only do one or only the other i mean i think it's just sort of a really big oversimplification it's interesting data but i think it's it's you know one of many many data points that should sort of help you figure out what who you should back and why so i just sort of start there and then you go what what other or you know what other data points are super big influences to this well we know venture is a power law outcome we know we know that the best venture capital funds tend to persistently outperform year over year we know that most of the returns fall to the top 10 of venture capital funds and so each of those different correlations tends to push you to a different category of from to back and which of those categories you want to back depends on your situation and status and who you have access to right and so if i had access to sequoia yeah it would probably make sense for me to put a ton of money into the big large mega cat or you know mega vc fun like sequoia i don't and most lps don't and so you end up playing a different game trying to find really talented emerging managers to back and luckily those can they can perform really well too and how do you know a lot of people know about

SPEAKER_26: vc's portfolio construction as as an lp how do you construct your portfolio of managers i tend to think

SPEAKER_82: the right mental model for an lp is you're you're investing in the underlying companies and you're using

SPEAKER_58: the gps to do that and paying them 20 to 30 of the profits for the privilege if you believe that venture follows a true power law outcome then what's unique about a power law distribution is that the more n you have the bigger your sample size other words the more investments you make the higher your mean return very counterintuitive doesn't work that way so as long as you can invest in great companies you think you can invest you should invest in more of them rather than less and so on balance i try to have a very diversified portfolio as long as i can invest and find top gps who i think are investing in top companies that's sort of subject to you know administrative headaches and the relationships i can maintain and what have you but i sort of believe more is better subject to

SPEAKER_89: those types of constraints and so that for me ends up being about 10 to 15 funds a year all right let's

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SPEAKER_95: funds yourself as an lp what's your breakdown of emerging versus established managers yeah i've been

SPEAKER_44: two of the high profile highest profile mega funds as a friend of the fund you know you when

Chamath Palihapitiya: you're when you're a gp who can provide deal flow you can get some kind of unique access to those

SPEAKER_10: ones that are like the classic large ones and then the rest is a long tail of 25 to 250k checks

SPEAKER_44: and the reason i do it is i like to build those relationships and understand how emerging

David Friedberg: managers are looking at the space in other words it's really not even for deal flow because we have our deal flow is second only to y combinators we're getting 20 000 applications for funding now so we're getting so many applications for funding as a 21 person firm that my team has said please stop tweeting that we have meetings open next week because we we want our response time to be reasonable

Chamath Palihapitiya: we've now gotten it to 200 applications to one investment yc is investing in one percent we're now

SPEAKER_18: into 0.5 and the reason i did that was after a long heartfelt discussion with ruloff at sequoia and he told me what i was doing was you know he's been mentoring me for a long time on this i was obviously the first sequoia scout and moritz and doug leone and getting to watch you know jim getz and all all this this group and obviously bill girly um as you increase the deal flow and i i say this thing all the time to new fund managers i tell them deal flow is destiny it's like deal flow is destiny

David Friedberg: or deal flow is your denominator and the more you can look at and the more you say no to the ones you

Chamath Palihapitiya: do say yes to have just more elite criteria and so the other goal i've had is to is to get up the number

David Friedberg: of meetings and you know i i do learn some things from emerging managers about their approach but what i found recently is you know i'm kind of doing it to pay it forward because the lessons i'm getting are are not um you know they're neophytes in a lot of cases they're figuring it out so i'm getting less

SPEAKER_18: and less of like the knowledge exchange and so therefore i add one per year one new manager per year i get probably three or four hundred people contact me it's nice to look at the deck my team meets with ten percent of those we meet with maybe 30 a year and we pick our favorite um and so you know i i i don't want it to be a distraction for me i don't do the meetings my team does them and it's an intelligence wisdom generating effort for us it's a way for us to just participate we have a saying that michael moritz told me very early on maybe 20 years ago no conflict no interest and so you know if you have some conflicts right and you're both competing for deals and i'm an lp like that messiness from the outside is actually a way of building a really deep web and not missing deals so you know when somebody's like i'm like oh who's investing like oh this person this person's i'm like oh i already have shares in your company from these two funds that's really powerful right so now i'm already on the cap table i can have a really thoughtful uh discussion um i also think these emerging fund managers today are scrappier and more resilient and i would tell you it was the opposite for the last five years or five years before i i'll put everything as silicon valley bank uh bankruptcy like b svb a svb right that i i use that as my like before and after christ before well yeah you know uh svb went down you know there's a lot of folks who were playing the role of venture capital it was almost like cosplay you know they're like sending me these updates and you know i'm like i forward to my one of my managing directors and i'm like oh are we an lp in this and then i'm like no i'm like oh i tell the person hey you know you sent me this update he accidentally put me on the distribution he's like oh no no no i have like 300 people on it who

David Friedberg: aren't our lps i'm like why you're you're giving this data out or whatever and he's like yeah and they were up seven you know they were seven x on paper like year over year because of some crypto investment i was like if you're seven x sell half that position ppi three and a half lock in the wind he's like oh yeah no our tokens are locked up like for how long five years i'm like how much can you sell can you put it into an svb how do you sell some of course that went to zero so you know the

Chamath Palihapitiya: lessons after 400 investments i'm on my fourth fund plus the sequoia funds or i would put the first three together so i'm kind of on my third fund just i'm just leaving emerging i'm like kind of on the you know the doorstep of being established versus emerging and um i like the ones phrasing money now if you can raise 5 million 10 million now sophia amarosa comes to mind other folks are out there

SPEAKER_60: grinding love those grinders yeah i mean i agree with you we've invested in maybe 20 25 funds emerging managers and the ones prior to the market crash uh we're definitely more of the hand wavy type they weren't as hungry as dogs um you know as we see right now we've got all these just hard fighting emerging managers who are kind of bashing down doors to get into deals uh you know learning about all the new industries that are emerging so rapidly and just getting their clutches onto the under the best opportunities and you know they're already inside companies like stripe talking to people on the engineering team figuring out who's going to spin out they're already inside of open ai so some of those emerging managers are really really good the ones that have kind of you know come out over the past three four months i find that you know there's been a pretty big generational shift with some of the larger venture funds the multi-stage funds where you know maybe they're not as hungry maybe they're you know looking at sort of fewer opportunities and doing a lot more portfolio management so from a deal flow source standpoint you know the new breed of emerging managers um has been fantastic i've found and you know i think philosophically uh you know the piece that pitchbook put together uh you know would align with that uh from a statistical standpoint you know it's probably

SPEAKER_116: just a you know small portion of emerging managers who really that scrappy who are really that good

Chamath Palihapitiya: yeah when you see carta pitchbook all these folks putting out data they all have partial data

SPEAKER_120: i i i i would not it's no dick to either of those companies survivorship bias yeah there's the data is

Chamath Palihapitiya: incomplete so you know they do their pitch book they do the best they can but i'm more like talking to gps and then you'll get a better sense of this what i'm seeing because we have a list of 11 000 investors in the syndicate.com our syndicate investment club 4 000 have done an investment and then we have a list of 2 000 um venture capitalists from the top funds in a google sheet that we just give to our founders when they're in our accelerator or found universe when after we invest in we give them that sheet and we have a fundraising process mentorship process that we talked to them about i invited all those to liquidity summit and we just did an email i i was

David Friedberg: shocked at the number of people whose email addresses were no longer working or i'm no longer at this firm the i think there's probably been an attrition of between 10 and 20 percent of managers at funds and

Chamath Palihapitiya: then there's probably another 20 to go that are kind of window seating or babysitting and just living off the trickles and of the of the management fees and they're basically zombie funds i think we're going

SPEAKER_18: to identify the zombie funds pretty quick because we as a fund when we introduce people to them we say we look for their last investment it's a little trick right if we're going to forward somebody to another fund we just try to figure out what their last investment was and the date of it i think just

SPEAKER_58: also understanding how the ecosystem worked in 2021 it was very easy to raise a fund tons of people did it venture capital became a very cool thing to do and a lot of it was also enabled by all the liquidity in the growth stage and that you had wealthy executives and early employees that were happy to plow the money back into the ecosystem and often the way they do it they did it was through emerging managers that were sort of tourists in the ecosystem i think all of those folks if they haven't washed out already are going to wash out in the next few years and while it will be sad it'll probably be much healthier for the ecosystem to get back to the people that you know that really really do want to do this they're committed for the for the long term um and quite frankly there were probably too many venture capitalists uh just a bit just that there were too many startups for a while uh and so it's always painful to transition but it's probably going to be good for the long

SPEAKER_60: term health of the ecosystem yeah and what's been interesting is these you know multi-stage funds who are sort of dormant uh raising their subsequent funds right now through big investment banks or through you know sort of other parties whereas like you know that they're really not deploying all that much capital you know that's something that we've had our eyes on and and why we've enjoyed investing in really scrappy emerging managers and just i think we focus kind of primarily on that

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SPEAKER_44: matters i think it's we need to talk about that as well i have the ability to raise decent amounts of

Chamath Palihapitiya: money i have the ability to merge our fund with some like very large multi-stage funds and i i looked at the economics as a solo on a solo gp anymore i have a partner now actually thanks if you know but as as somebody who's traditionally been a solo gp and now a bunch of managing directors and a very large investment team for a 50 million dollar fund because i don't need the management fees right like i've

David Friedberg: already um you know had some big wins so i am focused on i think i'm never going to raise a fund above 50 million because i think it keeps you more focused to put 25 million into 200 names

Chamath Palihapitiya: find the best ones you know it might be 40 companies coming out of there give them you know 250k 500k each we talked about my portfolio management strategy before and then find the top three and then just give you know put another two or three million into each of those i was speaking with uh with a really

SPEAKER_58: well-known uh sort of seed investor just just just this week his journey was kind of the classic seed investor journey where he started off by raising i think that 10 or 50 million dollar fund writing 150k checks into into early stage startups with all his friends raised a bigger fund after seeing some success doing 300 400k checks and then raised say 60 million dollar fund writing i think one to 1.5 million dollar checks and leading deals and that transition from this sort of fund two collaborative checks to fund three where effectively you're not competing with all your friends meant that he couldn't work with his friends meant that his deal flow dried up a lot um meant that he had much bigger obligations to all of the founders and at a time where he he thought he should have you know been feeling successful and like like a winner because now he was leaving deals he just started hating the job and so three years after raising that fund he just like you know what i'm done i don't want to do this anymore i want to go back to basics i want to go back to the collaborative checks sort of rebranded his firm what have you and and is now loving loving life and working with his friends again writing the small collaborative checks at the early stage um and it was like a really really interesting lesson is because because what what the vc that guys tells you to do is raise bigger funds go from collaborative collaborating to leading and i i just don't think that's the right approach for so many

SPEAKER_60: people you're so right donald what do you think i agree with that i mean i think that um you know it's really about the energy of the investor and making sure that you know you're doing it because you love it that'll help you get those economic returns you have to make rational decisions around you know whether you're going to uh do a secondary at some point in time call it an investment you make in the early days or um you know whether you're going to kind of maybe double down on the next round like you do jason in some cases but like if you if you hate your life um you know you're never going

SPEAKER_77: to be successful so i think you know in this particular case you know with this manager you

SPEAKER_44: know i wholeheartedly agree that he should retrench it's nice to have a hurdle that you can hit and

Chamath Palihapitiya: get into the bonus for everybody your team etc and you know and also i find with the management fees it gets a little pernicious when you know you start layering them on top of each other and it starts increasing and then you're like oh there's a bunch of money sitting here should i hire another person or i can put it in my pocket oh you know it's like okay um i i'm coming out of pocket for a million dollars in salaries a year because i have such a great success with the media side of the business that's very profitable i just underwrite like a million dollars a year in extra salaries

David Friedberg: because i'm like you know what i'm gonna hit you know more unicorns hopefully more decacorns and

Chamath Palihapitiya: then someday i'll get another 100 billion dollar company and this time when i do i'll own 10 or 15 percent of it not you know basis points and so it's very easy for me to do the math to contribute

SPEAKER_18: you know essentially a million dollars a year to my funds because i know the value that can come out of this and that's where i find when a manager figures out like their economics and what they love donald to your point you kind of get very dialed in and you don't need these external virtue not virtue signaling but status signaling moments like i i don't care about a tombstone that says we raised 300. like what i care about is how many bets did we place and who are just get me the 20 breakouts and get them you know in uh get them to our jam session i want to spend two hours with them i want to hear about the business i want to meet the management team and so now it's like back to your point donald you have to love doing this because it's too hard and painful and arduous as people are

David Friedberg: learning and it's too stressful if you don't actually love it you're going to do a bad job

SPEAKER_18: about it i wake up every day can't wait to see that week which five companies my team thinks are the best out of the you know we're up to 70 first meetings a week and i'm like give me the top three four five and they get me them with a little summary a little mini deal memo we decide who goes to the

Chamath Palihapitiya: next round you know of um meetings man it's so enjoyable um and and and that is a critical critical part of life and specifically the life of a venture capitalist there's so many things are out of your

SPEAKER_18: control um so you have to focus on process the things you can control how many meetings you take how thoughtful your decision making is how hard you work for the company and then how thoughtful you

SPEAKER_100: are about doubling down and um you know it's it's it's not that difficult of a business if you keep

SPEAKER_18: it simple do a lot of meetings give a lot of nose and when you do invest just bust your ass to get them to pull through to the next round of funding and that's literally you know every time we talk to him i tell you what i'm working on the thing i'm working right now on is pull through um which is what a lot of venture firms will look at they'll put tech stars y comedy or launch you know other accelerators next to each other and say how many of them get their startup to the next round of funding it's very low you know 10 or 20 percent made it to that next round of funding how many make it to series a now you're at five percent how many series b one percent and then for you know seed stage firms how many make it to series a you know whatever 30 40 um for series a firms how many make it to series b okay 50 whatever it is and so you know you have to get good at each of those functions

SPEAKER_143: and process is what it's about yeah i'd also kind of add that you know philosophically

SPEAKER_60: you know back to the kind of the happiness point if you're happy if you're enjoying what you're doing with your fund then that's going to trickle down to your founders and you're going to be a great champion for your founders you're going to bring that energy to your founders and it might sound kind of uh superficial but i think it's a contrarian view and it has been over the past couple years at least where people are pulling out their caliper and their surgical knives telling founders you know we need to cut back on our burn and do all kinds of other things whereas like if you're you know um you know you're the you're the fan in the uh in in the stadium when the knicks playing and you're clapping and you've got you know a whole bunch of other folks clapping maybe the next will win so you know let's be you know let's be great champions of our founders and you know let's help them push through i think that's sort of you know a really key thing to take

SPEAKER_77: into account as an investor and just having kind of a well-rounded approach will enable people to do

SPEAKER_22: that yeah absolutely i think one of the biggest signals it's it's the most basic but it is the most powerful is gp commit you mentioned jason you're you're putting in essentially five percent and that's five times more than the average person actually it's a 50 million dollar fund yeah so if

Chamath Palihapitiya: i over four years i'm putting a million in cash and then a million each year in like salary so it's probably five it's like ten i like what homebrew did you know over time you know as um you know and i have like a family like when i say i have a family office i i'm kind of running my own money myself and it's like family office concept and you know i've been working on that with my wife and like what our goals are you know over the next 25 years 30 years that i got left of me to work and we're like you know what every time we look at investments the best place to put it is my fund so why would we do anything else and give management fees and carry it anybody else when i think i'm pretty darn good at this so let's get more of our money into this and that's i think you know i think that happened at sequoia as well the partner started putting in very large chunks

SPEAKER_58: of the funds i know i've been a benchmark very famously as a huge amount of their lp capital that

Chamath Palihapitiya: is their former gps i mean if you're gonna bet on somebody and you do this for it's just interesting like people are like oh you know i have this great i get contacted by you know wealth managers all the

SPEAKER_18: time like when when you become a vc you get like an endless stream of founders emailing you lp's emailing

SPEAKER_100: you and then two other groups private aviation they email you constantly and wealth managers and these wealth managers are calling me and i'm just like you want me to give you my money to do this by the way on the other side of your business your wealth managers are calling me to try to get access for their high net worth individuals in our funds like you're not going to do a better job than me at getting to 3x returns you know i'm trying to beat the market here three to five x sorry i'm not giving you my money to play with if i was going to give my money to anybody it's going to be real estate i

SPEAKER_153: can enjoy with my family or venture capital that i have like you know a really big edge on right like

SPEAKER_154: michael jordan playing baseball like what are we doing here you know like well there's even like

SPEAKER_22: some extreme situations uh several funds like sv angel you can't invest that early stage fund that's just ron conway's money uh roger ehrenberg one of the greatest early stage investors i think he's hit multiple 10x funds he's like screw this i'm just taking my money and just investing my money so when he invests in a company now through ebert capital that's just his own capital so i i think there's a lot of rationale unfortunately for gps and lps that's not the common thing right and you have gps not aligned with lps and they're investing sometimes in other people's funds more money than their own funds which itself is a is a pretty disturbing signal i think like private equity is

SPEAKER_58: is really far more mature than venture capital in this specific arena and there's like two parts of it one it's expected that gps and in private equity invest significant amounts of their personal net worth in their funds and there's a preferred return and in venture capital you have none of those you have people at best committing their their management fees and there's no preferred return and you put those two things together and you end up with some really bad behavior so i say the preferred return because in venture capital you can have a 10 10 year fund you can make 2x which is you know just slightly more than effectively the 10 year treasury rate and still collect a significant amount of profits even though you've done nothing and so you have these sort of two factors in

SPEAKER_22: venture capital i think that that really uh mess up the incentives well let's do the math i mean you take a hundred million dollar fund you get a 3x net return which by most measures is top quartiles

SPEAKER_156: sometimes topped us on some industries that 3x return you get back 40 million dollars and carry at some point over 12 sometimes 14 years you raise a 300 million dollar fund you have a guaranteed 60

SPEAKER_22: million dollar fund in day zero so much so that you saw during the last bull market platforms like pipe actually borrowing you your management fees in year year five year six back to you so sometimes

SPEAKER_156: incentives can uh corrupt and that that's something that unfortunately that we've seen across the industry yeah i i really hope that this downturn in vc will help us fix some of those things

SPEAKER_58: but i haven't seen anything yet that makes me think it really needs to be led by the institutions to demand better of of like these structures in the lpas and i haven't seen any evidence

SPEAKER_60: they're doing that yeah i mean for me that the way that that's been reflected in a number of circumstances is that the you know partners um where you know who are less committed to their funds don't monitor and don't work with their portfolio founders as much during challenging you know market conditions they don't get in the weeds with them because you know it's water off a duck's back if it doesn't work out whereas folks who've committed you know more of their net worth end up working much more closely with those founders are much more passionate about you know

SPEAKER_116: getting exits and ensuring success um they keep their eye on the ball so i think it's a good insurance

SPEAKER_100: policy as well david what's going on with this um svb's venture workflow i saw a headline i haven't

SPEAKER_22: gotten caught up on yeah absolutely so the fire sale for silicon valley bank uh is nearing completion it

SPEAKER_156: took 14 months after the the collapse that we talked about earlier in the episode and this you know uh svb capital a lot of people don't know that they had one of the very top fund of funds really in the market it was top decile for certain vintages and they ended up you know it was basically dragged down with some of the you know it's it's a good part of their book and um it's now been uh been acquired by brookfield and sequoia heritage pending bankruptcy approval but it's it's something that's been ongoing i know a lot of people had a lot of interest in that asset i'm not sure how the process went but it's uh it's it's basically coming to an end anybody else uh hearing back channel about this

SPEAKER_58: josh donald well i i know it took a long time to get this deal done and uh speaking to to folks at svb not in this part of the business but the other part of the business there's a big exodus of talent from this group during that one year period because everyone was stuck in limbo so i think one question i would have if i was an lp in any of their funds and on one hand the sale feels like a rescue for the platform but on the other hand the question is is it really the same team are they still going to have the same access they had before um because i you know keeping a business and effectively in bankruptcy and limbo isn't usually the best way to attract and retain

SPEAKER_44: talent i remember when svb was looking at our funds and part of their process was we want to have access

Chamath Palihapitiya: to all of your investments in real time so that they could i guess establish banking relationships whatever so it's a very interesting approach again back to no conflict no interest i'm not saying

SPEAKER_18: there's anything wrong with this but you know you got a banking business you got somebody who's early stage okay you know i'm watching you know these early stage stage funds series a funds in real time man i think it gave them like perfect visibility into the banking side of the business and then on the banking side of the business yeah yeah i'm not saying anything's nefarious here but they're they're wiring their their clients are wiring money their venture clients are wiring money to companies i gotta think they're seeing that as well and i don't think they're calling up saying i saw sequoia or founders fund sent you 10 million dollars can we get a meeting but if they saw like 10 million dollars go from founders fund to a company and they research that company online and they're like oh you know what we nobody's actually contacted this company was in tech crunch three years ago i guess fair game right i think it also worked the other way right because if your

SPEAKER_58: founders fund and you have a company that um you know wants a lot of wants a line or wants some venture debt they're an lp in your fund you give them a call and say i have this amazing company we're we're all in we want we want to back it please you know please please uh take a look and give us your you know sharpen your pencil and give us the best deal possible so i think i think it

SPEAKER_60: really everyone won from this you know little insiders game it would seem that a variety of people from svb capital could spin out because they've got ridiculous lp relationships and start their own funds that's something that i'm kind of keeping my eye on and um you know they're kind of plenty of folks uh who are very very senior who'd been doing it for call it 15 20 years there even longer um you know who are you know definitely be on the horizon on that front whether it be early stage

SPEAKER_22: investing or late one thing that's interesting and you've seen some of these large asset managers

SPEAKER_156: go public and they're almost always valued on their management fees a lot of them end up being regret it regret uh going public because the the public markets don't really value the carry seems like that was probably uh the case here in terms of valuing it on this portfolio today josh you brought it up about you know some of the some of the talent leaving but the way that it looks like it's structured uh to this new entity which is pine grove is a cash up front of 340 million and significant earnouts if they're able to start new funds and launch new funds so i think they are going to go out and hire staff and perhaps try to go back and hire some of the people that left as well but uh it sounds it seems like it's been structured in a thoughtful way one thing i wonder is you know svb got

SPEAKER_58: access just because there is a lot of a lot of great reason to give them access if you're a top silicon valley venture fund i'm curious how sequoia's competitors will feel you know with with svb now being owned by sequoia heritage but does andreason want to give want to give an lp allocation to sequoia that you know do the other top funds because because now there's a bit of competition here i know they sort of compete sort of collaborate and i really would love to know what what they're

SPEAKER_44: talking about having seen that maybe they're just buying the asset to manage it because they're like almost like a strip sale and they're not going to have this be an ongoing entity i wonder they do that

SPEAKER_22: pine grove does do a lot of these continuation vehicles we talked about it jason four or five episodes

SPEAKER_156: ago how you know the gps are semi-retiring and there's no one to continue the vehicle but there there are earnouts here that that incentivize them to continue the franchise so so it'll be interesting but it'll be another uh case study on what happens when markets go under and there's still assets there's good assets that that go along with bad assets and how how bankruptcy courts are able to navigate that

SPEAKER_166: all right should we talk about our last three investments we'll start with you donald

SPEAKER_167: uh last three investments invested in a business called slope that does b2b payments uh alongside

SPEAKER_60: sam altman and a variety of other folks usb um you know it's an exciting one i think you know sam altman had this quote back in the day hire for slope not the y-intercept so you know hire for people who can learn really really quickly and accelerate and the founders are super young building an explosively growing business um you know we think it's the next stripe uh if not much much larger um and open ai is sort of you know deeply involved in the business i'll go on to number two um permit flow founder is very mission driven uh looking to help solve the housing crisis effectively you know software for developers builders contractors he kind of calls himself like the turbo tax of the space uh you can do prep submission tracking across a whole bunch of municipalities across the country it was really exciting actually in december you know he was contemplating going out for a series a and literally the day he contemplated it kleiner perkins came in and gave him 20 million dollars at 100 post and then because felices didn't get a look at the series a the next day they came in and they gave him a note at a different valuation put it that way so it was a really really exciting funding round and you know he's seriously off to the races i think this is one to track um and then field guide is my third um you know they do uh trust and auditing software the founder uh came up with the idea at atrium if you remember justin khan startup um and it's you know ai for advisory you know attacking call it walters kluers or a portion of thompson reuters uh it grown extremely quickly um you know i was in the seed i've invested you know several times uh and it's built for and by practitioners it's evolved into a whole variety of verticals uh samir at bessemer who did uh you know he's the ceo of sendgrid previously uh led the series b so he's deeply involved in the business and we're very excited we think you know this could occupy you know a 500 i don't even know plus billion dollar market

SPEAKER_58: awesome josh well why don't i start with that the company i helped start last year dexa uh dexa.ai it's a it's a search and answer engine for podcasts so in the back end we're uh transcribing and embedding uh audio from from all your favorite podcasts this one all in the huberman lab barris and many more we're making it possible to quickly search and discover information uh without having to listen to you know the hours of podcasts so if you're if you're frustrated with uh having to miss miss some you don't have enough time in the day to keep up with all your favorite podcasters uh use dexa to search find summaries and generally uh get get all the amazing information that's that's trapped in

SPEAKER_10: audio and video what's the relationship joshua with the uh podcasters because um i am i know a couple

SPEAKER_58: yeah so we are uh we are currently powering a german labs uh uh search on his website um we have formal partnerships with some of them um we'd love to partner with with more of them but on balance we're sending a lot of traffic back to uh every podcaster so by and large almost everyone once they learn about what we're doing it's sort of really happy to be featured on here any downstream concept of

SPEAKER_174: what you'll do with them in terms of revenue or that kind of stuff or i think the most important part

SPEAKER_82: is first to get millions of users um this doesn't really matter unless unless we build a platform

SPEAKER_58: people want to use every day uh and i think there's a bunch of options to monetize with uh you know subscriptions or or or special products for the podcasters themselves yeah it's a it's a great

SPEAKER_176: idea we're getting flooded with concepts in and around this right i'd love to talk to you about it

Chamath Palihapitiya: offline well it's clips there's transcripts there's summaries of transcripts it's just kind of everywhere and you know my philosophy is like okay yeah um sure as long as you send traffic back and then i'm like wait a second my archives worth something uh are you gonna pay me a licensing fee for this and so i'm i'm like i have 2 000 episodes of this week in startups almost and 177 of all in i'm like should this be something where we get paid or there's a revenue share or we license it to but one company so you know i'm i'm super curious as how this will um how this will hash out we'd love to explore

SPEAKER_182: with you i think all of those could make sense yeah cool stuff oh this is genius in terms of the

SPEAKER_116: dissemination of knowledge i mean uh you know no longer is uh is is wikipedia our only friend this

SPEAKER_58: is going to be massive yeah expense jumping to the other two yeah uh so so the second is a funder or person i just recently backed casey caruso um her fund is called topology uh she was formally she dropped out of harvard she's uh she's a machine learning wonder kind true force of nature she was working at google while moodlining at bessemer then she was the fifth fifth investing partner of paradigm she spun out recently to back um deeply technical founders you know she could easily be one i think almost everyone she backs wants to hire her uh she finds you know the the incredible talent really early um and and really gets that and then she herself is sort of a force of nature and the kind of person that you absolutely want back uh the third is that is a group called powerset uh powerset uh arms top technical founders with their own mini funds to invest out of oh i heard about this yeah so this is jake zeller he he started doing this uh back at angel lists about 10 years ago um he related also to spearhead um after that and so now he's out on his own group called powerset uh with a really interesting model again honoring top technical founders to sort of invest in their friends um and and and back you know great emerging companies sequoia scouts

SPEAKER_18: program right and then it was like scouts and then i think naval at angel listed spearhead where they

SPEAKER_139: gave like a little micro budget it's such a great idea and it lets people try on venture you know for

SPEAKER_58: 50k 100k bullets and and many of their original sort of scouts i've actually gone on to become exceptional solo gps in their own right i think yuri segalob got his start with an angel list fund josh buckley did

Chamath Palihapitiya: um i was the first syndicated there you go there you go i've done 301 of them now so i think you know if you were um i was just talking to an intern we had and we don't do internships but one of our lps asked us to do them a favor and i was like that's a favor that you're going to have to pay back three actually sure you want to do that conflict no interest and they were like uh what do you mean by that it

SPEAKER_18: means i said literally if i we don't do internships i hate internships if i take this person for three

Chamath Palihapitiya: months you owe me three equivalent favors and they were like oh okay and i was like okay it's your choice because i don't like internships i was in a meeting with this intern and he wanted to be a venture and he says well what do i do next and he had like this is really good like hustler and i said don't join venture so wait that's what my dream and i said go work at three startups one to two years each when you're 27 or 28 years old you will have scar tissue and then you'll easily be

SPEAKER_18: able to work in venture capital and then this is just like a great little onboarding i do wonder

SPEAKER_31: how these are set up if they're one llc you know kind of fun they're actually angelus funds in the

SPEAKER_58: back end so so sort of structurally it looks like a fund of funds yeah and each of those individuals if they want can contribute their own capital alongside power sets capital right as a fully separate

SPEAKER_18: entity got it so that's even better because now they're lending learning about fund management so you're not abstracting all the pain of raising a fund josh right you gotta you gotta grow up at a certain point and learn how audits work and all this stuff and maybe a million dollar fund doesn't

SPEAKER_105: have an audit but yeah this is a lot of um yeah it's gonna be a lot of work so i i love this idea

SPEAKER_75: uh training program a great way to you know make money simultaneously yeah and luckily you've been doing it for a decade too so he sort of knows what to look for and which factors are more selective to be

SPEAKER_126: successful who did you say was the the the principal there what's his name jake seller he's also my partner jonathan swanson who's the founder of uh thumbtack and athena oh jonathan i was the uh one

Chamath Palihapitiya: of my best friends yeah i didn't realize this was his name nice guy i played poker with him a couple

SPEAKER_26: of times i was the first investor in thumbtack who won um different outcomes i did okay i did pretty well

SPEAKER_203: and i just so good at poker last night i can't even talk about it um jason i'm going to play with

SPEAKER_23: you for the first time oh yeah at the liquidity summit that's right i'm excited shout out liquidity

SPEAKER_18: uh this podcast has a uh event that i'm doing every year in june used to be called angel summit this is your six it's called liquidity summit liquiditypod.com summit it's uh 125 people about 25 of them are speakers i think it's right now 60 gps high net worth individuals and about 30 or 40 lps so it's just my way to hang out with the cool people you hear on this podcast uh there's about 10 paid tickets

Chamath Palihapitiya: uh we let you at this point be my guest so if you're an lp and you've invested in a fund in the

SPEAKER_100: last year ping me and i'll try to get you a squeeze in with a free ticket complimentary ticket but

SPEAKER_206: david's going to be there in the speaker list is bonkers and a lot of the besties you know are

SPEAKER_100: coming including two literal besties three bird and shama is it my turn did you three it's your turn

David Friedberg: gosh you're up oh i'm up okay all right um ai super important there's a lot of data out there and we love using ai to take all the data out there and make sense of it in the world right um because data sets that were too expensive um to do manually you know you can just kind of discover things seeing

Chamath Palihapitiya: with protein folding all kinds of stuff so here's home score um it goes out it figures out uh through a bunch of proprietary machine learning etc if a home is a good investment or not that's it home square

SPEAKER_100: dot co uh it is basically like carfax uh for homes it's that simple folks you don't have to overthink this stuff sometimes jenna jenny ai is a company we um incubated and they have been in the ai space since chat gpt 2.5 or 2. i know this because they were like hey you know sam altman can you get us

David Friedberg: into this beta you know we and and it was the early days of all this if you've used grammarly

SPEAKER_18: before to help with writing you know you know about having like a sidekick this is that for people who are writing professional papers so here you see if you're watching on the screen if you're not

SPEAKER_10: going to youtube.com and search for liquidity or go to liquiditypod.com and here you see like um being

SPEAKER_100: able to navigate through making actual professional paper in academia and put citations in it and

SPEAKER_18: yeah stanford pen oxford it's really amazing um and you can go check it out at jenny ai for my final

Chamath Palihapitiya: one um which one should i go with yeah actually i'm going to go with uh spark plug this is a really

SPEAKER_18: interesting company that went through our accelerator a couple years ago and one of our jobs that we're getting better at as fun as a fund is knowing the winners in our own portfolio man is it hard to keep track of all these companies and we've really got a handle on that because we built a platform to do it and you know one of our associates is like hey jake al you're gonna need to look at spark plug because the the charts up into the right it turns out um one of the big problems retail has and the people who put their products in retail is incentivizing and um engaging and educating uh people who work in retail so they created a platform uh for let's say you made a i don't know uh an electronic device or you know any any complicated a coffee machine that would be at uh you know um williams sonoma etc they figure out a way to educate and then give credit to the people who sell more jurors of coffee

David Friedberg: machines or you know terra cafe tko2 and it's very simple they give them a dashboard if you measure it you can manage it they educate them and then they unlock rewards it seemed to me like an interesting business to make a small bet on and then we just kept increasing our position and i am just super delighted with their progress if you're in retail and you want to have a better staff and have them be more motivated they're now powering 2500 retailers and 500 brands so zip zip and as you

Chamath Palihapitiya: can see here it increases sell through and it retains employees it incentivizes sales and it's easy to

David Friedberg: install i hate to be a proponent for this but you know sometimes things seem very small when we see them in the accelerator or founder university it just feels like a you know it gets dismissed as a feature and then we watch that little feature be a wedge and then these smart founders they just keep banging that wedge into this giant stump and it cracks open and man boom all the money and engagement and customer love pours out so i just sparkplug.app is my third choice jenna.ai my second and home score

SPEAKER_10: my first i'm not putting in that order but i just homescore.com i really want to make sure you check

SPEAKER_18: these out and if you're listening the number one thing you can do for a founder is just go check out their website and their company and if you know somebody who could benefit from it just email it to three people who could benefit from it so if you know somebody in retail or in products in retail

David Friedberg: just please uh help them out here or somebody who is buying homes this is a good panel nicely done david you're you david you're learning to be a great moderator under my tutelage every week you get

SPEAKER_26: better but you know life life hack uh put yourself in a room where you don't deserve to be in and surround yourself with with great people and uh you're humble about it not immediately every episode

SPEAKER_09: david say how did i do can i do better here and i give a little note every three episodes i don't

SPEAKER_100: try to give him too many notes but your superpower david is you are a connector you're a connector um and uh you're just so great at booking these amazing um guests and um if you want to read a good story i never shared this before when i was a young pup in new york there was a magazine called the new yorker uh and in 1999 this magazine wrote a story about me larissa mcpark and uh it was called the

Chamath Palihapitiya: connector it's so long ago look at that young guy with the bulldog there that's my bulldog toro i wrote this story about me called the connector um and the backstory on it it's a pretty funny story larissa's like hey uh i want to interview you you know you're like this larger than my figure here in silicon valley silicon alley in new york you know with this magazine silicon i reporter about startups and uh she says meet me at this cafe we both lived in west chelsea and we meet over there on 13th and 9th avenue 10th avenue she's like i'm gonna bring my friend malcolm i said okay sure bring

SPEAKER_140: friend malcolm shows up this kid with crazy hair and i'm like what's your story and he's like oh i'm malcolm gladwell and um you my friend are what's called a connector this is before he'd written you

David Friedberg: know any of the books what was that first book he wrote tipping point tipping point and the tipping

SPEAKER_140: place like there's a thing called the dunbar number and the dunbar number there are connectors you tell them the name john and then a group of people if they know joshua or donald they'll know 27 on average and the average person knows four you're a connector so they named it the connector

David Friedberg: and then he came out with the book and then david what i'm telling you is you you have that seal as well you you just know a disproportionate number of people with the first if i used to list everybody you knew with the name joshua or david or john you would just you would rattle up 20 it's like a really

SPEAKER_26: good superpower to have i appreciate that uh well it's it's been another great episode uh incredible

SPEAKER_22: for everybody on the panel uh for joshua berkovitz donald stalter jason calicanis this is your host david weisberg thanks for listening