The Exchanges

Q Wow, you know how I feel about the new partners and the existing partnership. It's been such a pleasure to have them on the show. But the final one that I have to ask Bill, most recently publicly announced investment that you made, and why you got so excited?

A Yeah, it's a little contrarian. We put some money in a company called Good Eggs that's an online grocer, And there's really, I'll mention two fundamental things that got us excited. One, the CEO Bentley Hall is someone, if you spent an hour with, you would know exactly why we were so compelled. He's a perfect fit for the role. He's got great leadership skills, incredible external presenter and communicator. And then the second reason was, you know, having watched a bunch of different industries evolve. And as we're seeing the restructuring of retailing, we believe that if you're going to do Some type of direct to consumer approach. You have to have the perfect supply chain or the optimal supply chain for doing that. And we think that's a purpose built distribution center designed for direct to consumer, perhaps as an alternative to something like an Instacart where you're picking things out of a store, but it's early. Like we, we do things early, so it's early. We'll see.

AI assessment note: “We put some money in a company called Good Eggs that's an online grocer”

Q start, and I want to dive straight in. I don't want to start on, you know, how you made an intervention. I want to start at the meat of the issue today, which is the environment is crazier than it's ever been, seemingly. So, help me out here. How does it compare to 99 and the dot-com bubble? Straight off, how does it compare? Bill, should we start with you?

A Sure. And by the way, people that have followed my work will definitely call me out and recognize that I am Compared where we were to the dot-com bubble five years ago, and I have a little bit of a chicken little reputation issue here, but things are clearly more like 99 today than they were five years ago, so we can continue with the conversation. The things that I think are the same, kind of rapid speculation, you have this kind of unbridled enthusiasm, and in certain sectors you have valuations that are super tough to support using traditional analytical valuation models. And, you know, that was true then. I think that's true today. The things that I think are different is the speculation's much broader. Even though it was pretty broad then, you have a lot of speculation now where entrepreneurs with lots of cash are attacking incumbents in very traditional industries. The scale is way larger, both in terms of the amount of money being raised by each company and the burn rate. And I would say that's by 10 to 20 X. Larger. Then back then a company would go public early. They go public with a million in revenue, but it wouldn't be burning that much. It'd just be pretty nascent. And so there's just way more money in scale at play today. And then lastly, you know, back then, I think you still had this belief in market cycles. I think right now there's a group of people that have …

AI assessment note: “things are clearly more like 99 today than they were five years ago”

Q start, and I want to dive straight in. I don't want to start on, you know, how you made an intervention. I want to start at the meat of the issue today, which is the environment is crazier than it's ever been, seemingly. So, help me out here. How does it compare to 99 and the dot-com bubble? Straight off, how does it compare? Bill, should we start with you?

A Sure. And by the way, people that have followed my work will definitely call me out and recognize that I am Compared where we were to the dot-com bubble five years ago, and I have a little bit of a chicken little reputation issue here, but things are clearly more like 99 today than they were five years ago, so we can continue with the conversation. The things that I think are the same, kind of rapid speculation, you have this kind of unbridled enthusiasm, and in certain sectors you have valuations that are super tough to support using traditional analytical valuation models. And, you know, that was true then. I think that's true today. The things that I think are different is the speculation's much broader. Even though it was pretty broad then, you have a lot of speculation now where entrepreneurs with lots of cash are attacking incumbents in very traditional industries. The scale is way larger, both in terms of the amount of money being raised by each company and the burn rate. And I would say that's by 10 to 20 X. Larger. Then back then a company would go public early. They go public with a million in revenue, but it wouldn't be burning that much. It'd just be pretty nascent. And so there's just way more money in scale at play today. And then lastly, you know, back then, I think you still had this belief in market cycles. I think right now there's a group of people that have …

AI assessment note: “The things that I think are the same... The things that I think are different”

Q And then this is for both of you, an ultimate one. And what's something that really keeps you up at night continuously these days?

A I'll go first. If anything, I'll be consistent more than anything. In the U.S., I really worry about regulatory capture, Harry, on both sides of the aisle. So, you know, I think a lot of people see the corporate stuff, right? You know, Citizens United, and like, and you see it in our healthcare system. You see it in how the healthcare dollars are being distributed around COVID. You know, you see it in the financial world, like the Fed's trying to push through FedNow, which would be an incredible alternative to ACH. We have three days before you can transfer money here. You guys have faster payments, which the government pushed through 15 years ago. But we can't get our shit together because If you're a senator or congressman with a big bank in your region, you're standing up in front of the finance committee trying to block FedNow every single time. And, you know, Howard mentioned George Floyd, you know, or he's not a gentleman, the idiot that did that shouldn't have been on the force, but the police union protected him. You know, the police unions all over the country have fought reform and protected the bad actors that are in the police force. And I think if, you know, if you're a Democrat, you see the corporate Regulatory capture clearly, but you don't see, you know, everything the California teachers unions doing to ruin education in California. And then on the opposite sid…

AI assessment note: “In the U.S., I really worry about regulatory capture, Harry, on both sides”

Q Not at all, but I would love to kick off with you. So tell me, how did you make your way into the world of venture and come to be your GP at one of the world's most successful funds in the form of Benchmark?

A It's actually an unusual story that I think exposes how much luck is involved in some of these things, as well as just random opportunity, but when I was in business school, I started thinking about venture, and I reached out to a few people, and they said, go work for 20 years, you can't just get into venture, and so part of what had drove me towards it, my sister was employee 63 at Compaq in Houston, certainly one of the first, maybe only, huge venture-backed stars out of Houston, and Kleiner was actually in it, And so I got exposed to what it meant to have options and for a company to explode. And then I ended up working at compact for a while. I started trading stocks. I really liked investing. And I started to realize that tech had all these interesting angles and complexities you could watch or predict as they unfolded. So when I ran into a dead end as a VC, the second best thing that looked interesting to me was to become a sell side analyst. The team at Goldman at the time was quoted in every tech article I could read in the journal or Forbes or Fortune, and they were pontificating about valuation and investing around technology evolution. And so I was lucky enough to beg my way onto a job at Credit Suisse First Boston and was handed coverage of the PC hardware and software industry, which was extremely fortunate and allowed me to build a network with a whole bunch of d…

AI assessment note: “It's actually an unusual story that I think exposes how much luck is involved”

Q I I'm so pleased you said about the board there because very transparently I've just gained my first institutional board and it's, A massive learning process, and one that I'm trying to scale as fast as possible. According to my analysis, you spent over 3200 hours on a board bill, so I did have to ask, how have you seen yourself evolve and develop as a board member over time?

A Oh, it's a good question. You know, my firm had this wonderful dinner with Pierre Lamont, who is still practicing venture at the age of 88 years old, famous Sequoia investor, and in the middle of dinner, he said, actually, just in his In a kind of surprising way, he said, I'm the best board member in Silicon Valley. And I was like, wow. And I said, why? He goes, I'm more prepared than anyone else at the table. I was going to mention two things, but Pierre really made me smile when he said that, because I do think showing up, having read everything, being intimately aware of everything you're supposed to be aware of is super important in the boardroom setting. The second thing that I think is interesting is that all board members learn over time. I think, I think it will just Happened to anyone who's getting an early start. When you're young, you speak too much in the boardroom and you learn to change that behavior over time. And I, I'll tell you the best pattern or the best, the best rule set that I've used to do that is anytime I have an idea that pops into my head during a boardroom, I'll write it down. And then I'll ask myself, does this need to be discussed right now? Is there a benefit of this being discussed with the other board members right now? Or is that something I could put in a note to the CEO after the board meeting to follow up on? And so I'll make a list of 20 t…

AI assessment note: “When you're young, you speak too much in the boardroom and you learn to change that”

Q Okay, so the favorite book and why, what must we be reading?

A Yeah, my favorite book is that it was actually written a long time ago. It's called Complexity by Mitchell Waldrop, and it's about the rise of the Santa Fe Institute, which I've very recently joined the board of, which I'm Super excited about. It's also a board that Bill Miller and Mike Moveson sit on, who you may know of. The book was about complexity theory, and that's what Santa Fe is about. Another way of saying that is multivariable nonlinear systems, and I read it when I was 25, 26, and it just had such a profound impact on how I see different models and systems and economies and opportunities and investments, um, because Most things in life are multivariable nonlinear systems, and it was so, like, shockingly impactful on my brain, like no other book ever has been, and maybe it's because of youth albums that people listen to in that same time frame tend to stick more, but I have a pile of that book in my office. I have ever since I read it, and I give it out all the time.

AI assessment note: “It's called Complexity by Mitchell Waldrop, and it's about the rise of the Santa Fe Institute”

Q Not at all, but I would love to kick off with you. So tell me, how did you make your way into the world of venture and come to be your GP at one of the world's most successful funds in the form of Benchmark?

A It's actually an unusual story that I think exposes how much luck is involved in some of these things, as well as just random opportunity, but when I was in business school, I started thinking about venture, and I reached out to a few people, and they said, go work for 20 years, you can't just get into venture, and so part of what had drove me towards it, my sister was employee 63 at Compaq in Houston, certainly one of the first, maybe only, huge venture-backed stars out of Houston, and Kleiner was actually in it, And so I got exposed to what it meant to have options and for a company to explode. And then I ended up working at compact for a while. I started trading stocks. I really liked investing. And I started to realize that tech had all these interesting angles and complexities you could watch or predict as they unfolded. So when I ran into a dead end as a VC, the second best thing that looked interesting to me was to become a sell side analyst. The team at Goldman at the time was quoted in every tech article I could read in the journal or Forbes or Fortune, and they were pontificating about valuation and investing around technology evolution. And so I was lucky enough to beg my way onto a job at Credit Suisse First Boston and was handed coverage of the PC hardware and software industry, which was extremely fortunate and allowed me to build a network with a whole bunch of d…

AI assessment note: “when I was in business school, I started thinking about venture”

Q old that we all know, and then I also flip to other people who say, Harry, you've got to move to the new normal, you've got to pay up. The best deals are the most expensive, pay up. How do you think about your own price discipline in a world of capital supply like we have today and competition like we have today? And what would you advise me actually?

A Well, part of why I was smiling so much when I said, okay, boomer Harry is like, we can sit here and complain or be worried about a reset or a bubble. And it has absolutely no impact on what's happening out there day to day. And the problem is it's a highly distributed field of players. There are thousands and thousands of VCs and way more of that of entrepreneurs, and we don't get to decide. The market does that via supply and demand, and so you have to play the game on the field. I think I told you this on a previous call, but I had this amazing meeting with Howard Marks where he asked me to explain the venture industry to him, and he, afterwards, he told me, well, that sucks. I said, what do you mean? What's wrong with it? He goes, you're gonna have resets all the time. There's no way to invest across the And I had seen similar or supporting data out of Horsley Bridge, I believe, who's one of the largest fund of funds, where if you looked at, like, a twenty-year window that included the dot-com boom, if you took out 96 to 99, like, you took out the majority of the return. And so, I think you have to invest as a venture capitalist over the cycle, like, over a 20 or thirty-year period, and the biggest mistake you could possibly make is trying to call the top. And so, unfortunately, I think You know, have a little, I call it the Thelma and Louise attitude, where you just push t…

AI assessment note: “you have to play the game on the field”

Q And then this is for both of you, an ultimate one. And what's something that really keeps you up at night continuously these days?

A I'll go first. If anything, I'll be consistent more than anything. In the U.S., I really worry about regulatory capture, Harry, on both sides of the aisle. So, you know, I think a lot of people see the corporate stuff, right? You know, Citizens United, and like, and you see it in our healthcare system. You see it in how the healthcare dollars are being distributed around COVID. You know, you see it in the financial world, like the Fed's trying to push through FedNow, which would be an incredible alternative to ACH. We have three days before you can transfer money here. You guys have faster payments, which the government pushed through 15 years ago. But we can't get our shit together because If you're a senator or congressman with a big bank in your region, you're standing up in front of the finance committee trying to block FedNow every single time. And, you know, Howard mentioned George Floyd, you know, or he's not a gentleman, the idiot that did that shouldn't have been on the force, but the police union protected him. You know, the police unions all over the country have fought reform and protected the bad actors that are in the police force. And I think if, you know, if you're a Democrat, you see the corporate Regulatory capture clearly, but you don't see, you know, everything the California teachers unions doing to ruin education in California. And then on the opposite sid…

AI assessment note: “In the U.S., I really worry about regulatory capture, Harry, on both sides”

Q the show before last time, one of your biggest challenges was the oversupply of capital. When I look at the interest rate environment today and for the next two to three, four years, I don't see it going anywhere, and so my question to you is, given that interest rate environment and the existing oversupply of capital, how do you think that industry shapes out in terms of capital supply?

A I'll tell you how it affects the tech industry, and then I'd love to hear Howard's thoughts on what would cause rates to move in a different direction, but right now, you have remarkable access to capital, and then you have another thing, which is Wall Street Is telling you they care way more about growth than profitability. And we're seeing, you know, not since oh one, we're seeing unprecedented valuations, you know, these SAS companies, 20, 30, 40 times revenue, which hasn't happened since, since 99, 2000. And so when Wall Street's telling you that and capital's quite available, you're going to see more venture capitalists and late stage investors kind of force companies into spend to win kind of mindset. And I see it in our portfolio. Our best companies will be approached two months after we put money in with people trying to put more money in. The co-investors that we're investing with will try and do preemptive rounds like six months after they invested the time before. There's just, entrepreneurs are being told, take the capital, take the capital, take the capital, um, in a way that's, you know, it's pretty insane. Now, some people have figured out models where they can use Capital grow faster, and so you look at some of the SaaS companies, you look at like Snowflake and massive investment in sales growth, you know, delivering to the street the type of metrics that make t…

AI assessment note: “that'll keep going on until there's a change”

Q founders when they're, I like this term being Foie gras in terms of capital supply. How do you advise founders? Because you have, you know, your Reid Hoffman on the one hand, he says, when money's there, take it. And then you also have many, many cases where the oversupply has caused a huge amount of structural problems. How does one advise founders? I'm often struck and challenged by that.

A Well, unfortunately, you are forced to play the game on the field. So if you act conservatively, and your two competitors act aggressively, you will be left behind. And, you know, it's not Fund necessarily if you're conservatively minded and you want, you know, you've been taught, oh, we need to make every unit profitable and all this kind of stuff. Now, the flip side of it is we've seen companies like Amazon who for 10 years were doubted as if they'd ever be profitable, and now they're spitting off massive cash flow. And the bigger you get, the network effects start to play. They added in advertising, right? That's a hundred percent gross margin business, and all of a sudden cash flow is coming out of their ears, right? There is a rational reason to believe, oh, if I can get to massive scale, then I'm going to be able to turn on the cash flow engines. But certainly when the world is rewarding, aggressive growth, don't care about profitability, you're going to have a mix of end results. You're going to have some of the snowflakes in Amazons, and you're going to end up with a lot of, uh, wrecks on the, you know, massive wrecks. You're going to have some of both.

AI assessment note: “unfortunately, you are forced to play the game on the field.”

Q that I've had many different views on the show that some say you've got to spend time with your winners. They return the fund. Others say, you know what? You can't afford to spend time with the losers because you're recovering cents on the dollars. How do you think about time allocation across the portfolio? And have there been some lessons from the incredible decade that you've had at benchmark?

A Yeah, look, it's a conundrum for the reason you said. I mean, There are companies in any venture portfolio, they're going to be delivering a hundred X more return than another one that you might be working on. And so from a purely selfish point of view, and I would say short-term selfish, you would tell yourself only spend time here. And the other thing I would tell you is that the struggling ones, and I don't know what the exact stats are, but like half of venture-backed startups are zero or something like that. You're going to have some of those. They can be quite taxing from a mental standpoint. You know, seeing that entrepreneur's face, going through things like layoffs, which the Valley hasn't seen much of in the past five years, having to do the rah-rah meeting with the, uh, 60% of the head count that's left. Those things are hard. They are really hard and they're mentally taxing. And so that's even more of, I guess, a selfish short-term perspective to want to hang out on the winners. Here's the challenge. You know, if you're going to be a successful venture capitalist, For two or three decades, you're going to have a reputation, and your reputation is going to be a part of what allows you to win or not win investment opportunities in the future, and so you'd be surprised how many founders, when they ask for references, say, hey, let me talk to some of the CEOs that didn'…

AI assessment note: “your reputation might be built on those, both positively and negatively.”

Q the kind of big determinants of that hundred X of fund return is the element of market size. And I chatted to your partner, Sarah Tavel before the episode. And she said, if there's one thing I had to ask Bill, she said it was market sizing. So I am interested. How do you think about an approach market sizing today when assessing new opportunities that come through benchmark store?

A Well, I've developed my own tenant, maybe similar to Peter's on price sensitivity, which is I think venture capital. And once again, both on the price comment and the TAM discussion we're having, keep in mind, benchmark is committed to very early stage investing. So we're frequently meeting with two people on a PowerPoint talking about an industry. So this isn't, I don't think price insensitivity and high late stage investing is a smart idea, for example. And so what Sarah and I have talked about is just that I've come to believe people get into more trouble by over focusing on TAM analysis, especially in these super early stage companies. And the example that probably most profound at this point that I wrote a long blog post about Was Uber, where this NYU professor had done an analysis and said, this company should only be worth five billion. But his baseline was that it's going to get some percentage of the black car and taxi market, which he went out and analyzed, right? And at the moment he wrote it, the size of Uber in San Francisco was already 10 X the taxi and black car market. And my point is not to dwell on him. And in that post, I also mentioned this very famous story where AT&T hired McKinsey to predict the number of cell phones by the year, 2000 in 1980, and they missed by a hundred X. And so all too often what I've seen is if technology brings about an easier, simp…

AI assessment note: “people get into more trouble by over focusing on TAM analysis”

Q says the whole time, and he says that around pricing today, assets are priced as if risk is non-existent. I'm really interested at Peter Fenton, your wonderful partner said on the show, never turn down a deal based on valuation. It's a mental trap. I guess my question subsequently to you is in potentially frothy times and more capital available environments, how do you think about your own price sensitivity?

A Yeah. Well, look, there's a reality in the venture market that you'll hear people talk about, which is there's asymmetric risk and reward. And so it's just using type one and type two errors, right? If I invest in a company that doesn't work, I lose one times my money. So I made an error, right? I thought this was going to work and it didn't. If I decide not to invest in Google, that error in decision-making costs you 10,000 X or whatever, a thousand X, whatever the number was. And so I think Peter's point of saying that, which I think is partially just to provoke the, our partnership is, as we make decisions is tied to that reality. I think the real caveat to it is if this company we're talking about has optionality to be a hundred X or be a fund maker kind of company, then certainly entry price does not matter.

AI assessment note: “then certainly entry price does not matter.”

Q have to ask, you mentioned the varying characters and incredible personalities you have within the partnership. In terms of partner selection, one guest on the show said before, I'd rather be known for being a good partner picker An investment picker. So I was very interested by that, but how do you think about the partners you look to add to benchmarking and really what you look for in them?

A I don't know what guest said that to you, but it's a really interesting comment because it implies from my point of view that whoever said it takes very seriously the career of being a venture capitalist at a venture capital firm, as opposed to just the idea of being a investor on boards, because one of the only things that I think that a firm needs to do properly to be able to have very successful over a very long period of time is to have a way to do generational transition and have a way to bring people in and help them develop into being an incredible venture capitalist. And so it's something we spend a ton of time on. Every single week we're talking about it. I'm going to give you a list of five or six criteria, although I don't know that it's not 10. Youth Is something that I've spoken about quite a bit. I think venture capital bends towards youth. There's a hustle element. There's a curiosity element. There's a lot of these really big outcomes are started by people that are 19 to 21. So there's a, if I'm in the right networks, I'm closer to these people. Some of the things that pop up like a Snapchat, if you're not down in that generational element, you're just going to miss it. And so I think there's a whole bunch of reasons why youth is important. Curiosity is super important. We talk a lot about business judgment. That one's always weird to me because I think we have …

AI assessment note: “I'm going to give you a list of five or six criteria”

Q that I've had many different views on the show that some say you've got to spend time with your winners. They return the fund. Others say, you know what? You can't afford to spend time with the losers because you're recovering cents on the dollars. How do you think about time allocation across the portfolio? And have there been some lessons from the incredible decade that you've had at benchmark?

A Yeah, look, it's a conundrum for the reason you said. I mean, There are companies in any venture portfolio, they're going to be delivering a hundred X more return than another one that you might be working on. And so from a purely selfish point of view, and I would say short-term selfish, you would tell yourself only spend time here. And the other thing I would tell you is that the struggling ones, and I don't know what the exact stats are, but like half of venture-backed startups are zero or something like that. You're going to have some of those. They can be quite taxing from a mental standpoint. You know, seeing that entrepreneur's face, going through things like layoffs, which the Valley hasn't seen much of in the past five years, having to do the rah-rah meeting with the, uh, 60% of the head count that's left. Those things are hard. They are really hard and they're mentally taxing. And so that's even more of, I guess, a selfish short-term perspective to want to hang out on the winners. Here's the challenge. You know, if you're going to be a successful venture capitalist, For two or three decades, you're going to have a reputation, and your reputation is going to be a part of what allows you to win or not win investment opportunities in the future, and so you'd be surprised how many founders, when they ask for references, say, hey, let me talk to some of the CEOs that didn'…

AI assessment note: “your reputation is going to be a part of what allows you to win”

Q Totally can. I hope that day doesn't come for a long time. I do have to ask, you mentioned different forms of liquidity that are secondaries going public. Bill, you've spoken very publicly before about SPACs, and, you know, they've had a challenging last 18 months. I guess my question is, like, will it recover when, how do you analyze it?

A Yeah, so I think that's a bit of a misnomer. I've been very outspoken as a huge proponent of direct listings, because I just think it's the only way you should price it publicly. Security by matching supply and demand, and I've been very negative on the traditional IPO process, which has devolved into something that's very, very disingenuous to Silicon Valley founders and startups. The process is broken, and the outcomes are broken, but it's really sad. SPACs came along, and I think offered something not nearly as good as a DL, but a little better than an IPO, in that it gave the founder and the CEO more control, and SPACs would have only had this moment in the sun because of the significant Can underpricing in the traditional IPO market? You know, everyone says SPACs are expensive, but when your stock pops 50 to 70% in the IPO, that's way more expensive than a SPAC, and so it created this window. I think there have been some, you know, very significant transactions. We just did one with Nextdoor. I think SoFi, you know, has done extremely well. I would expect Grab to do well. So there have been some people that have been able to use it as an IPO alternative, as has happened historically. A lot of people have also used it As a way to take companies public that are pre-revenue, which you would call highly speculative. Being public with no revenue is a Crazy, wild ride. If everyo…

AI assessment note: “SPACs came along, and I think offered something not nearly as good as a DL”

Q Bill, how do you feel on this point?

A Totally agree. It's all about comparative advantage. There is probably no chance we can make a 30 dollar microwave in the U.S., and we, but I'm a hundred percent sure we shouldn't make a 30 dollar microwave in the U.S. Making 30 dollar microwaves. And that raises the standard of living for all the U.S. citizens, because their purchasing power is so much more powerful. And, you know, we didn't make this up like Adam Smith did a long, long time ago. But it's bad, a lack of globalization. I would say one thing that flows more freely than goods is work. And so the fluidity of which jobs, especially these programming jobs that I've been talking about, can move around the globe is, is quite high. We're an investor in Upwork, which is a company that, that, you know, helps facilitate that type of thing, and that's super powerful. Almost every company we back that gets over a hundred employees is looking to move some of their engineering talent pools somewhere else, and so that's pretty powerful that that can happen, and good for the globe. Maybe not good for the U.S., but good for the globe.

AI assessment note: “Totally agree. It's all about comparative advantage.”

Q Bill, how do you feel on this point?

A Totally agree. It's all about comparative advantage. There is probably no chance we can make a 30 dollar microwave in the U.S., and we, but I'm a hundred percent sure we shouldn't make a 30 dollar microwave in the U.S. Making 30 dollar microwaves. And that raises the standard of living for all the U.S. citizens, because their purchasing power is so much more powerful. And, you know, we didn't make this up like Adam Smith did a long, long time ago. But it's bad, a lack of globalization. I would say one thing that flows more freely than goods is work. And so the fluidity of which jobs, especially these programming jobs that I've been talking about, can move around the globe is, is quite high. We're an investor in Upwork, which is a company that, that, you know, helps facilitate that type of thing, and that's super powerful. Almost every company we back that gets over a hundred employees is looking to move some of their engineering talent pools somewhere else, and so that's pretty powerful that that can happen, and good for the globe. Maybe not good for the U.S., but good for the globe.

AI assessment note: “Totally agree. It's all about comparative advantage.”

Q Absolutely. Penultimate one, when you look back at benchmark in the decade, what are you most proud of?

A I think what I would say is the founding partner's Put together this crazy idea of this equal partnership, and also we're structured in a very artisan way. We don't have analysts or associates running around. The partners do all the due diligence themselves. We don't have huge teams of PR people or marketing departments or anything like that, because we just like to maximize the time we spend out on the field, and they put together this structure with this equal partnership, and I don't think any of them, I don't know if they knew at the time, it's amazingly helpful for generational Because it gives you the opportunity to go out and get the very best candidate you possibly can because people, and this happened to me when they approached me, like the overwhelming sense of welcome you get when someone's willing to say, hey, you deserve as much as we do is super powerful. And so I would say the thing I'm most proud of is that we're moving towards our third generation of partners and they're all wonderful. You've had several on your show. And I just love that the model endures. It's also one where team stands out way above the individual, and for the people that come on here, that, that's something that's, that's super meaningful to them as well.

AI assessment note: “the thing I'm most proud of is that we're moving towards our third generation”

Q old that we all know, and then I also flip to other people who say, Harry, you've got to move to the new normal, you've got to pay up. The best deals are the most expensive, pay up. How do you think about your own price discipline in a world of capital supply like we have today and competition like we have today? And what would you advise me actually?

A Well, part of why I was smiling so much when I said, okay, boomer Harry is like, we can sit here and complain or be worried about a reset or a bubble. And it has absolutely no impact on what's happening out there day to day. And the problem is it's a highly distributed field of players. There are thousands and thousands of VCs and way more of that of entrepreneurs, and we don't get to decide. The market does that via supply and demand, and so you have to play the game on the field. I think I told you this on a previous call, but I had this amazing meeting with Howard Marks where he asked me to explain the venture industry to him, and he, afterwards, he told me, well, that sucks. I said, what do you mean? What's wrong with it? He goes, you're gonna have resets all the time. There's no way to invest across the And I had seen similar or supporting data out of Horsley Bridge, I believe, who's one of the largest fund of funds, where if you looked at, like, a twenty-year window that included the dot-com boom, if you took out 96 to 99, like, you took out the majority of the return. And so, I think you have to invest as a venture capitalist over the cycle, like, over a 20 or thirty-year period, and the biggest mistake you could possibly make is trying to call the top. And so, unfortunately, I think You know, have a little, I call it the Thelma and Louise attitude, where you just push t…

AI assessment note: “you just push the gas pedal and run it to the end.”

Q Bill, how do you feel being on the slightly earlier stage of the spectrum and on that end of the market? How do you feel with that quote in mind?

A Well, Harry, when you told us you were going to ask macro questions, I was thrilled to know that Howard would be on the call because he's obviously way more, has way more expertise in these areas. Funny story, about two or three years ago, when interest rates We're heading into unprecedented territory. I told my partners I needed to talk to some macro experts, and I did everything I could to find my way to Howard and Stan Druckenmiller, who I talked to for a while, and I was thrilled to get to meet both of them. I remember Howard asked me a lot about the venture industry, and, and for about 20 minutes, and then he said, oh, that's a really bad business, and I said, why? And he said, he said, it'll be inherently cyclical due to the way the fund flows work, and it struck me. It really landed at four Saying in venture capital that the way to protect yourself against the downside is to enjoy every last bit of the upside, and to Howard's point about adjusting your game, if you were a LP that had been exposed to venture capital for the past 30 years, it'd be interesting, you would notice that some of your biggest gains were the years right prior to the resets in like, oh, one and oh, nine, and so there's no such thing as conservative venture. You don't Take your cards off the table and maximize return. It never works, and so you're forced to, you know, I've used this phrase before, b…

AI assessment note: “there's no such thing as conservative venture. You don't Take your cards off”

Q That seems supremely strange. Can I ask, how does that reveal itself?

A Oh, they might just tell us. And that changed over time. I think, like I said, I think 20 years ago, if anyone had an opportunity to join a top tier firm, they'd jump at it. But I think today, there are people that just have other desires or passions. I will tell you, there's another piece to it that I should mention. I think people on the outside may not realize how much selling goes into venture capital. It's probably the one thing that I didn't realize when I joined that I know innately now. But I could argue you're spending 85 or 90% of your time selling, and so if you don't like selling, it's a bad career choice.

AI assessment note: “Oh, they might just tell us.”

Q Final one before the grapevine. Sorry, I just have to. Is now a good time to be investing in venture as an LP? I speak to a lot of LPs who are entering venture for the first time investing in funds. Is now a good time?

A I think most of the endowments That have radically outperformed have larger venture portfolios, and I think the asset class in the past 18 to 24 months is, as we all know, has done much, much better than anything else they could be in, and it creates a quandary. You know, they're sitting there looking at an asset allocation table, and the thing that's worked is now twice as big than their model wants it to be, and there's plenty of demand for more. I'll call it tiger chase, and so I've seen some signs that Would suggest they're full, actually, partially because of the returns and partially because of, you know, how far do you want to take the risk on morphing your asset allocation model?

AI assessment note: “I've seen some signs that Would suggest they're full, actually”

Q I do. I want to answer. What direction are you going to go in?

A So it relates to where you started this conversation, which is if you have a traditional investor mindset, and you study finance and financial history, and you've read all the Buffett stuff, and you have a conservative analytical approach, Approach to the process of venture investing. I think, you know, some of these moves by some of these companies, some of the types of companies that have worked are outside of your minimum. And so if this continues, like for 10 more years, my mindset is probably not optimized for execution in that world because I would say you might need to modify yours because the world's playing at a different pace. With a different game on the field, and there's all these great stories over the years in on Wall Street where the value investor, you know, is getting his head handed through a boom cycle and then switches to be a growth investor right as everything goes down, and then they lose in both directions, which is always the risk of that, but I'm constantly trying, you know, that great phrase, uh, strong opinions loosely held. I'm constantly asking You know, why did you miss this? Why did that happen? You know, what is your mental model that's preventing you from seeing these types of things? And that, for me, the biggest challenge when you have a boom that lasts this long is precisely that.

AI assessment note: “my mindset is probably not optimized for execution in that world”

Q I do. I want to answer. What direction are you going to go in?

A So it relates to where you started this conversation, which is if you have a traditional investor mindset, and you study finance and financial history, and you've read all the Buffett stuff, and you have a conservative analytical approach, Approach to the process of venture investing. I think, you know, some of these moves by some of these companies, some of the types of companies that have worked are outside of your minimum. And so if this continues, like for 10 more years, my mindset is probably not optimized for execution in that world because I would say you might need to modify yours because the world's playing at a different pace. With a different game on the field, and there's all these great stories over the years in on Wall Street where the value investor, you know, is getting his head handed through a boom cycle and then switches to be a growth investor right as everything goes down, and then they lose in both directions, which is always the risk of that, but I'm constantly trying, you know, that great phrase, uh, strong opinions loosely held. I'm constantly asking You know, why did you miss this? Why did that happen? You know, what is your mental model that's preventing you from seeing these types of things? And that, for me, the biggest challenge when you have a boom that lasts this long is precisely that.

AI assessment note: “I'm constantly trying, you know, that great phrase, uh, strong opinions loosely held.”

Q Final one before the grapevine. Sorry, I just have to. Is now a good time to be investing in venture as an LP? I speak to a lot of LPs who are entering venture for the first time investing in funds. Is now a good time?

A I think most of the endowments That have radically outperformed have larger venture portfolios, and I think the asset class in the past 18 to 24 months is, as we all know, has done much, much better than anything else they could be in, and it creates a quandary. You know, they're sitting there looking at an asset allocation table, and the thing that's worked is now twice as big than their model wants it to be, and there's plenty of demand for more. I'll call it tiger chase, and so I've seen some signs that Would suggest they're full, actually, partially because of the returns and partially because of, you know, how far do you want to take the risk on morphing your asset allocation model?

AI assessment note: “I've seen some signs that Would suggest they're full, actually”