The Exchanges

Q Sorry, can you educate me and unpack that? So how does the kind of rate of inflation in a couple of years time, or kind of in subsequent months, impact later stage valuations in your mind?

A Yeah, I think, you know, I think the worry would be that if inflation starts to tick up, then the Federal Reserve may have to take Action on interest rates and start to raise them from zero to combat that sort of what they did, what Volcker would have done at the Fed back in the seventies and eighties. And if that were to happen, if interest rates were to increase, then that would have a big impact on the valuations that I think the public market investors would be ascribing to equities, right? Because all of a sudden now you'd have interest rates that are yielding higher on fixed income assets. And it also by increasing interest rates, you would be increasing the cost of capital, sort of the discount rate, so to speak, that Folks use to discount back cash flows. And so the, as interest rates increase and discounts rate increase, then the valuation multiples decrease, right? And so I think what the worry would be that if interest rates increase, valuation multiples could take a hit in the public markets, and therefore that could filter back into the private markets as well down the road. So I think as people think about what could cause the current valuation environment to lose a bit of steam, I, you know, I think many people I spend time with think a lot about inflation and where interest rates are likely to go down the road, but Fully appreciating, it's, it's impossible to pr…

AI assessment note: “valuation multiples could take a hit... filter back into the private markets as well”

Q with you in terms of kind of the sheer momentum of capital coming into the market in the last few years. What's really interesting is I had Bill Gurley on the show not too long ago, and he said, my biggest challenge, Harry, is the oversupply of capital. I just have to jump on this with you, and it's like, would you agree with him that that's the biggest challenge?

A Yeah, you know, I do. I might add one modifier to make it, you know, undisciplined capital, but yeah, it's, it's, it's a huge challenge. But the reality is that I think there's been an oversupply Supply of capital for, you know, the better part of 10 years now, at least 10 years, really since the Fed took interest rates down to zero coming out of the GFC in 2008, 2009. And so I don't know that that's a particularly new trend. I think, you know, investors of every vintage year over the past 10 years have been bemoaning the fact that there's too much capital and the investing community is too frenzied and competitive, et cetera. So I don't know that it's all that new. I think it gets, it just feels a bit tiring each year that goes by more and more tiring. And so I don't know that it's It's a new phenomenon, but I do agree with him that it's a huge challenge in the market today, and it makes it difficult for entrepreneurs to really make sense of all the different players and all different funds out there that are offering them capital and their own version of value add that goes with it.

AI assessment note: “Yeah, you know, I do. I might add one modifier to make it”

Q Sorry, can you educate me and unpack that? So how does the kind of rate of inflation in a couple of years time, or kind of in subsequent months, impact later stage valuations in your mind?

A Yeah, I think, you know, I think the worry would be that if inflation starts to tick up, then the Federal Reserve may have to take Action on interest rates and start to raise them from zero to combat that sort of what they did, what Volcker would have done at the Fed back in the seventies and eighties. And if that were to happen, if interest rates were to increase, then that would have a big impact on the valuations that I think the public market investors would be ascribing to equities, right? Because all of a sudden now you'd have interest rates that are yielding higher on fixed income assets. And it also by increasing interest rates, you would be increasing the cost of capital, sort of the discount rate, so to speak, that Folks use to discount back cash flows. And so the, as interest rates increase and discounts rate increase, then the valuation multiples decrease, right? And so I think what the worry would be that if interest rates increase, valuation multiples could take a hit in the public markets, and therefore that could filter back into the private markets as well down the road. So I think as people think about what could cause the current valuation environment to lose a bit of steam, I, you know, I think many people I spend time with think a lot about inflation and where interest rates are likely to go down the road, but Fully appreciating, it's, it's impossible to pr…

AI assessment note: “as interest rates increase and discounts rate increase, then the valuation multiples decrease”

Q flip side of the growth funds, like moving down, you know, we have the traditionally earlier stage funds, your Andreessen's and your Felicis's and your Sequoia's. Obviously, there's different kind of quantums of capital across that example base, but, you know, earlier stage funds moving much further up from seed and series A to C, D, E even. How do you evaluate the movement upstack from the traditionally early stage?

A Yeah, you know, I think the, I think it's a smart thing strategically for the early stage funds to do in the sense that it allows them to expand the amount of, um, capital they can manage, and it allows them to double down on their best early stage investments, and so I think I completely understand and appreciate strategic moves for them in that direction, and I think you'll see some of those early stage funds will hire entirely separate teams, and some of them will use the exact same early stage team to prosecute those growth rounds. Of their portfolio. But I think it makes a ton of sense from the GP's perspective for why they'd want to double down and do that with their best investments in the growth rounds. You know, I I'd say it's a little bit more complicated when viewing that evolution from the entrepreneur's perspective, because as you know, as an entrepreneur, it just going back to something I said earlier, it really is important to think carefully about what really motivates the fund and the partner that you're interacting with and why they're going to help you in your business in the, in the growth phase. And so if you think about like how all these funds Make their money, and you'll know this, Harry, but, you know, investment firms tend to make money from two primary sources, right? A two percent management fee charged annually on all the capital that's been raised …

AI assessment note: “I think it's a smart thing strategically for the early stage funds to do”

Q I would love to kick off with a little bit about you, though, because it's super important for me to understand the context. So how did you make your way into the world of investing, and how did you come to be a partner today at Capital G's?

A Yeah, yeah. So I had a very serendipitous path to investing and a capital G. You know, I was actually a history major in college, and during my undergraduate years, I had two big hobbies. One was playing gigs with my band around campus, and the other was working, you know, 30 hours a week in a local student-run business, selling advertisements to local pizza shops and dry cleaners who wanted to target college students. And this was pre-internet days or big-scale platform days, and so this was literally dropping flyers and student mailboxes, that old-school-style advertising. And, you know, I very much enjoyed playing with my band throughout the Boston-Cambridge area, but I also very much enjoyed hustling every week to meet my sales quota, canvassing the neighborhood for local businesses that may want to buy some advertisements. And as I approached my senior year of college, I was initially intent on, to be frank, moving to LA with my band and making a run in the music business. Those plans quickly changed once I got the notice from Harvard showing exactly how much student debt I was graduating with, and so for me it was a good reality check and wake-up call. And so I, I quickly pivoted to my other big hobby, which was, was business. And thought about, you know, what could I do to get into the world of business in a more serious way and actually learn what that world was, was re…

AI assessment note: “I had a very serendipitous path to investing and a capital G.”

Q unbundling. And what stage are we in a Precisely at which moment. And, you know, I think we're seeing kind of the unbundling of a lot of Zoom functionality specific to fitness instructors, specific to education classes, specific to sales teams. When you're making investments, do you think about the bundling versus unbundling? Or bluntly, is it too late in entry for bundling and unbundling to be a thought process?

A I think about it a lot, actually. I think it's a really good observation. And, you know, I say that what you said around bundling, unbundling is true, not just in more consumer-oriented applications and services, but also within the enterprise. I mean, think about, I spent a lot of time in the data stack And you think about where the world was, you know, 20 years ago, it was quite consolidated, right? In terms of, you'd have a platform like an IBM, an SAP, an Oracle, Microsoft, holding, storing data. You'd have, you know, data pipelines from Informatica, or data storage solutions from Teradata, or data analytics from SAS. There's sort of big organizations that kind of own those work streams. And then, so that was sort of, in my view, a consolidated stack within the enterprise environment. And then roll it forward, and then, you know, cloud arrives, and then workloads get fragmented across hybrid environments. You have a whole host of new SaaS solutions generating a whole lot of new data, and you have a whole lot of new users within the enterprise wanting access to that data, and that's led to dramatic fragmentation of that stack. So now you've got all these next-gen disruptors, um, so that while you had Informatica in the old world for data integration, now you've got folks like Matillion, Aluma, Stitch, Talon, Fivetran, you know, all the rest of it. Within data storage, what h…

AI assessment note: “I think about it a lot, actually. I think it's a really good observation.”

Q My word, that's a phenomenally good answer. I think Melissa from the PR team will be so happy with that. Can I, in terms of, like, advice for other, like, emerging board members, and imagine, take yourself back to the start of your career. What advice would you give yourself, or give me, at the start of my career, in terms of being the best board member I can be?

A Yeah, you know, I always thought there was one right way to do things early on in my career, you know, because it felt like, okay, once I learn enough from one person, I'll have landed and I'll know how to do this job perfectly. And I think as time has gone by, and I've seen partners at different investment funds, and I've seen entrepreneurs at different companies, I just come to appreciate that there's no one right way to do things. So I think it's hard to give prescriptive advice, like this is what you should do to be successful. I think some general rules that I picked up along the way that I find valuable, and I still remind myself of, be a really active, good listener for all of your, your portfolio company team. So, and by active listening, I mean, really understand the root cause of the problem, what they're worried about, and then be a good reminder to them of objective facts that you've learned along the way as an investor, both in their company and an investor in other companies, so that you can be another sounding board for them as they kind of think through tough problems and tough So I think it's really about being that objective truth sounding board for them and being a real partner for them with empathy and then being on call 24 seven to help them however you can. You know, the best board member I've come across in my career is this guy, Tony Vince Acquera. And, …

AI assessment note: “be a really active, good listener for all of your, your portfolio company team.”

Q anytime soon. I think, you know, bluntly, the lack of availability of capital kind of deposits where you can actually put your money in and yield anything today is scarce. I think we're going to see this wave and kind of increasing wave further and further into venture for the next three to four years. Do you agree with me or do you think I'm missing something on the macro?

A No, I would agree with that sentiment, Harry, for sure. I mean, I think the, it's hard to see a catalyst that will drive interest rates up and therefore ease a bit of the, of the oversupply of capital that we see today, really crowding every corner of the capital markets. I mean, the, you know, it's funny. I talked to investors who do early stage investing in series A seed rounds and they are a Complaining about valuations. You talk to people who do C and D rounds. They're complaining about valuations being at all time highs. You talk to, you know, late stage private equity players. They're all complaining about valuations being at all time highs. You know, I talked to friends who do credit and they're complaining about how hard it is to make money in credit right now. And so I think every corner of the capital markets are facing this issue of, of just a lot of supply and there's no real alternative to put money anywhere to earn a rate, earn a yield. And so I think this will be with us for a while. You know, I think if there's anything to worry about, I worry a lot about if inflation does pick up down the road, and what that'll do to interest rates, and how that might impact the valuations we're seeing in the growth equity space, particularly. But it's hard to kind of put your finger on if and when that'll happen in the near term.

AI assessment note: “No, I would agree with that sentiment, Harry, for sure.”

Q and that's fantastic. The trouble I have with things like that is, I worry that I'm going to fall victim to confirmation bias, to, I have a view that the market will be this, and then, oh, you fit that thesis too? Great, I'll invest. And actually, I might just be wrong. How do you think about confirmation bias? With regards to the thesis that you create and potential investments.

A Yeah, that's a good question. You know what, the way we approach it is we'll spend a lot of time just talking to as many smart people as we possibly can to start without presupposing we have the answer already. We'll kind of spend time. So for Clibra as an example, that initial idea around data intelligence and data management came from spending time with a number of Google engineers who had regular conversations with folks throughout Google and outside Google who are combating these challenges around data governance and intelligence. And they said, look, there's a real pain point here among the fortune 2000. It's a growing trend. And so you should spend some time thinking about it. And so then we spent the better part of six months going deep on this problem, talking to practitioners, talking to CDOs, CIOs within these fortune 500 accounts, understanding what was their, what was top of mind for them as I thought about the next 12, 24, 36 months and where they needed to spend time and money to improve their own internal processes and going to them and just listening intently to where, what was top of mind for them and then piecing it together across many, many conversations to say, okay, Here's sort of the number one pain point that CIOs or CDOs are feeling today that needs to get solved. Therefore, what companies are best positioned to attack those pain points? And then let's …

AI assessment note: “without presupposing we have the answer already”

Q Tell me, what would you most like to change about the world of Venture?

A You know, I'd like to see the industry chatter be less about individuals and more about teams, to be honest. You know, I'd say no one investor is the be all and end all for any given company's board. No one individual can build a world beating business all on their own. And I think the media around startups and venture often defaults to the story of the individual because it's frankly an easier than it is to tell the story of how a team came together to solve a really tough problem. So for me, I think like opening the aperture for like who's driving success and value creation at these world-class businesses would be a good thing as opposed to Only focusing on one person at the top.

AI assessment note: “I'd like to see the industry chatter be less about individuals and more about teams”

Q flip side of the growth funds, like moving down, you know, we have the traditionally earlier stage funds, your Andreessen's and your Felicis's and your Sequoia's. Obviously, there's different kind of quantums of capital across that example base, but, you know, earlier stage funds moving much further up from seed and series A to C, D, E even. How do you evaluate the movement upstack from the traditionally early stage?

A Yeah, you know, I think the, I think it's a smart thing strategically for the early stage funds to do in the sense that it allows them to expand the amount of, um, capital they can manage, and it allows them to double down on their best early stage investments, and so I think I completely understand and appreciate strategic moves for them in that direction, and I think you'll see some of those early stage funds will hire entirely separate teams, and some of them will use the exact same early stage team to prosecute those growth rounds. Of their portfolio. But I think it makes a ton of sense from the GP's perspective for why they'd want to double down and do that with their best investments in the growth rounds. You know, I I'd say it's a little bit more complicated when viewing that evolution from the entrepreneur's perspective, because as you know, as an entrepreneur, it just going back to something I said earlier, it really is important to think carefully about what really motivates the fund and the partner that you're interacting with and why they're going to help you in your business in the, in the growth phase. And so if you think about like how all these funds Make their money, and you'll know this, Harry, but, you know, investment firms tend to make money from two primary sources, right? A two percent management fee charged annually on all the capital that's been raised …

AI assessment note: “I think it's a smart thing strategically for the early stage funds to do”

Q with you in terms of kind of the sheer momentum of capital coming into the market in the last few years. What's really interesting is I had Bill Gurley on the show not too long ago, and he said, my biggest challenge, Harry, is the oversupply of capital. I just have to jump on this with you, and it's like, would you agree with him that that's the biggest challenge?

A Yeah, you know, I do. I might add one modifier to make it, you know, undisciplined capital, but yeah, it's, it's, it's a huge challenge. But the reality is that I think there's been an oversupply Supply of capital for, you know, the better part of 10 years now, at least 10 years, really since the Fed took interest rates down to zero coming out of the GFC in 2008, 2009. And so I don't know that that's a particularly new trend. I think, you know, investors of every vintage year over the past 10 years have been bemoaning the fact that there's too much capital and the investing community is too frenzied and competitive, et cetera. So I don't know that it's all that new. I think it gets, it just feels a bit tiring each year that goes by more and more tiring. And so I don't know that it's It's a new phenomenon, but I do agree with him that it's a huge challenge in the market today, and it makes it difficult for entrepreneurs to really make sense of all the different players and all different funds out there that are offering them capital and their own version of value add that goes with it.

AI assessment note: “Yeah, you know, I do. I might add one modifier to make it, you know, undisciplined capital”

Q in venture is that the person before you use a Gamber, and the person after you use a growth investor. It's so true. It's like, uh, I always think that, but you mentioned price that, and you know, I've never seen price where they are. And, uh, finally, I think about it a lot. I'm really interested. How do you think about your own relationship price and price sensitivity today?

A Yeah. You know, I think for me, it really comes down to conviction level, right? So the higher prices are for any given business, it just, for me, increases the bar for the amount of conviction I need to have as an investor to lean in and make the bet. And so, you know, I view it as The higher the prices go, the even more work that needs to get done in diligence to really form a perspective that's unique and differentiated that'll let you as an investor pay the market clearing price for that business. And so it's kind of related a bit to, in my mind, the, you know, what we're seeing in the market today with not just pricing levels reaching all-time highs, but also fundraising timelines compressing dramatically. As I'm sure you know, Harry, companies today can raise capital at very high prices at, in very compressed timeframes. And I think what that means in reality is that for investors to make informed judgments On underwriting risks and making investments, you really need to have been doing your, your research and your work and developing your thesis on a category well in advance of a capital event to be competitive. Because in this market environment, there'll always be others in the market chasing a given theme or a given category. They'll have an amount of conviction against that theme or that category, and they're going to be willing to pay, you know, a very high price to…

AI assessment note: “increases the bar for the amount of conviction I need to have as an investor”

Q and that's fantastic. The trouble I have with things like that is, I worry that I'm going to fall victim to confirmation bias, to, I have a view that the market will be this, and then, oh, you fit that thesis too? Great, I'll invest. And actually, I might just be wrong. How do you think about confirmation bias? With regards to the thesis that you create and potential investments.

A Yeah, that's a good question. You know what, the way we approach it is we'll spend a lot of time just talking to as many smart people as we possibly can to start without presupposing we have the answer already. We'll kind of spend time. So for Clibra as an example, that initial idea around data intelligence and data management came from spending time with a number of Google engineers who had regular conversations with folks throughout Google and outside Google who are combating these challenges around data governance and intelligence. And they said, look, there's a real pain point here among the fortune 2000. It's a growing trend. And so you should spend some time thinking about it. And so then we spent the better part of six months going deep on this problem, talking to practitioners, talking to CDOs, CIOs within these fortune 500 accounts, understanding what was their, what was top of mind for them as I thought about the next 12, 24, 36 months and where they needed to spend time and money to improve their own internal processes and going to them and just listening intently to where, what was top of mind for them and then piecing it together across many, many conversations to say, okay, Here's sort of the number one pain point that CIOs or CDOs are feeling today that needs to get solved. Therefore, what companies are best positioned to attack those pain points? And then let's …

AI assessment note: “start without presupposing we have the answer already”

Q anytime soon. I think, you know, bluntly, the lack of availability of capital kind of deposits where you can actually put your money in and yield anything today is scarce. I think we're going to see this wave and kind of increasing wave further and further into venture for the next three to four years. Do you agree with me or do you think I'm missing something on the macro?

A No, I would agree with that sentiment, Harry, for sure. I mean, I think the, it's hard to see a catalyst that will drive interest rates up and therefore ease a bit of the, of the oversupply of capital that we see today, really crowding every corner of the capital markets. I mean, the, you know, it's funny. I talked to investors who do early stage investing in series A seed rounds and they are a Complaining about valuations. You talk to people who do C and D rounds. They're complaining about valuations being at all time highs. You talk to, you know, late stage private equity players. They're all complaining about valuations being at all time highs. You know, I talked to friends who do credit and they're complaining about how hard it is to make money in credit right now. And so I think every corner of the capital markets are facing this issue of, of just a lot of supply and there's no real alternative to put money anywhere to earn a rate, earn a yield. And so I think this will be with us for a while. You know, I think if there's anything to worry about, I worry a lot about if inflation does pick up down the road, and what that'll do to interest rates, and how that might impact the valuations we're seeing in the growth equity space, particularly. But it's hard to kind of put your finger on if and when that'll happen in the near term.

AI assessment note: “No, I would agree with that sentiment, Harry, for sure.”

Q in venture is that the person before you use a Gamber, and the person after you use a growth investor. It's so true. It's like, uh, I always think that, but you mentioned price that, and you know, I've never seen price where they are. And, uh, finally, I think about it a lot. I'm really interested. How do you think about your own relationship price and price sensitivity today?

A Yeah. You know, I think for me, it really comes down to conviction level, right? So the higher prices are for any given business, it just, for me, increases the bar for the amount of conviction I need to have as an investor to lean in and make the bet. And so, you know, I view it as The higher the prices go, the even more work that needs to get done in diligence to really form a perspective that's unique and differentiated that'll let you as an investor pay the market clearing price for that business. And so it's kind of related a bit to, in my mind, the, you know, what we're seeing in the market today with not just pricing levels reaching all-time highs, but also fundraising timelines compressing dramatically. As I'm sure you know, Harry, companies today can raise capital at very high prices at, in very compressed timeframes. And I think what that means in reality is that for investors to make informed judgments On underwriting risks and making investments, you really need to have been doing your, your research and your work and developing your thesis on a category well in advance of a capital event to be competitive. Because in this market environment, there'll always be others in the market chasing a given theme or a given category. They'll have an amount of conviction against that theme or that category, and they're going to be willing to pay, you know, a very high price to…

AI assessment note: “it really comes down to conviction level, right? So the higher prices are”

Q badly against anyone. I'm sure they're great people. It's just fundamentally bad for entrepreneurs. Entrepreneurs in the way that, like, bluntly, as you said, it's a rounding error. They're not going to help, like, a specific, like, Series A focused or C or Series B focused fund would do, and they don't have the expertise to bluntly. Like, do you not think it's bad for the entrepreneurs in those stages?

A Yeah, I agree with you. I mean, I think it's, you know, there's a reason that over the history of the capital markets, there's tended to be different investors for different stages of companies. The early stage companies, the types of problems and help they need are quite different than what a late stage You know, public company needs. And so I agree with you in the sense that, you know, finding that, that fit between investor and company is crucial if you want to maximize your odds of success as an entrepreneur. So if you're very early on, like having access to world-class venture capitalists and growth funds who can help you with land new employees who are super talented to grow your business, to help you land marquee logos, to help grow your, your book of business, can help you think through product strategy and geographic expansion, like those sorts of strategic questions, getting that knowledge and advice From investors who've done that and helped other companies along the way, I think is hugely valuable. And, you know, but I think the reality is there are certain entrepreneurs who, who may prefer in this market environment to take, you know, very fast money at a very high valuation. And so I think, I think it'll kind of depend. I think it's, it's good in the sense that entrepreneurs have that choice, but I, I do agree with you, Harry, that it's, it's, uh, it's worth think…

AI assessment note: “Yeah, I agree with you. I mean, I think it's, you know, there's a reason”

Q unbundling. And what stage are we in a Precisely at which moment. And, you know, I think we're seeing kind of the unbundling of a lot of Zoom functionality specific to fitness instructors, specific to education classes, specific to sales teams. When you're making investments, do you think about the bundling versus unbundling? Or bluntly, is it too late in entry for bundling and unbundling to be a thought process?

A I think about it a lot, actually. I think it's a really good observation. And, you know, I say that what you said around bundling, unbundling is true, not just in more consumer-oriented applications and services, but also within the enterprise. I mean, think about, I spent a lot of time in the data stack And you think about where the world was, you know, 20 years ago, it was quite consolidated, right? In terms of, you'd have a platform like an IBM, an SAP, an Oracle, Microsoft, holding, storing data. You'd have, you know, data pipelines from Informatica, or data storage solutions from Teradata, or data analytics from SAS. There's sort of big organizations that kind of own those work streams. And then, so that was sort of, in my view, a consolidated stack within the enterprise environment. And then roll it forward, and then, you know, cloud arrives, and then workloads get fragmented across hybrid environments. You have a whole host of new SaaS solutions generating a whole lot of new data, and you have a whole lot of new users within the enterprise wanting access to that data, and that's led to dramatic fragmentation of that stack. So now you've got all these next-gen disruptors, um, so that while you had Informatica in the old world for data integration, now you've got folks like Matillion, Aluma, Stitch, Talon, Fivetran, you know, all the rest of it. Within data storage, what h…

AI assessment note: “I think about it a lot, actually. I think it's a really good observation.”

Q I would love to kick off with a little bit about you, though, because it's super important for me to understand the context. So how did you make your way into the world of investing, and how did you come to be a partner today at Capital G's?

A Yeah, yeah. So I had a very serendipitous path to investing and a capital G. You know, I was actually a history major in college, and during my undergraduate years, I had two big hobbies. One was playing gigs with my band around campus, and the other was working, you know, 30 hours a week in a local student-run business, selling advertisements to local pizza shops and dry cleaners who wanted to target college students. And this was pre-internet days or big-scale platform days, and so this was literally dropping flyers and student mailboxes, that old-school-style advertising. And, you know, I very much enjoyed playing with my band throughout the Boston-Cambridge area, but I also very much enjoyed hustling every week to meet my sales quota, canvassing the neighborhood for local businesses that may want to buy some advertisements. And as I approached my senior year of college, I was initially intent on, to be frank, moving to LA with my band and making a run in the music business. Those plans quickly changed once I got the notice from Harvard showing exactly how much student debt I was graduating with, and so for me it was a good reality check and wake-up call. And so I, I quickly pivoted to my other big hobby, which was, was business. And thought about, you know, what could I do to get into the world of business in a more serious way and actually learn what that world was, was re…

AI assessment note: “So I had a very serendipitous path to investing and a capital G.”

Q one area where we're seeing market movements in a very strange and kind of unusual way when I look at it is like we're seeing late stage crossover funds. We're seeing hedge funds. We're seeing a wide variety of different financial vehicles and instruments kind of moving around in stacks where they probably wouldn't have been. What's up with the later stage guys moving down and doing series A's first?

A Yeah. You know, it's a really noisy, complicated time for, for entrepreneurs to navigate given that dynamic, right? To your point, you have all these late stage funds moving super early. You've got a lot of the early stage funds moving later. And so if you're an entrepreneur, it's both good and bad, right? You've got more choice than ever in terms of who you could partner with at the growth phase as an example to get capital to scale your business. But it's bad in the sense that with all those options, it's harder than ever to decipher which firm and which partner would be best for your business. To answer your question directly, you know, obviously I think the later stage, you know, hedge funds, as an example, are going super early because they're trying to get, you know, as much pre-IPO allocation as they possibly can. And instead of doing that with the investment banks during the IPO roadshow, they're working, they're going upstream and saying, hey, let's get, we can spend the same amount of money and get a ton more ownership points and pre-IPO allocation in these stocks well in advance of that by scouting stuff at the, at the A round. And frankly, a lot of these hedge funds manage such enormous pools of capital relative to the size of the traditional VC fund. That for them, you know, writing a 25 or fifty million dollar check into an A or a B round is a rounding error, righ…

AI assessment note: “they're going super early because they're trying to get... pre-IPO allocation”

Q one area where we're seeing market movements in a very strange and kind of unusual way when I look at it is like we're seeing late stage crossover funds. We're seeing hedge funds. We're seeing a wide variety of different financial vehicles and instruments kind of moving around in stacks where they probably wouldn't have been. What's up with the later stage guys moving down and doing series A's first?

A Yeah. You know, it's a really noisy, complicated time for, for entrepreneurs to navigate given that dynamic, right? To your point, you have all these late stage funds moving super early. You've got a lot of the early stage funds moving later. And so if you're an entrepreneur, it's both good and bad, right? You've got more choice than ever in terms of who you could partner with at the growth phase as an example to get capital to scale your business. But it's bad in the sense that with all those options, it's harder than ever to decipher which firm and which partner would be best for your business. To answer your question directly, you know, obviously I think the later stage, you know, hedge funds, as an example, are going super early because they're trying to get, you know, as much pre-IPO allocation as they possibly can. And instead of doing that with the investment banks during the IPO roadshow, they're working, they're going upstream and saying, hey, let's get, we can spend the same amount of money and get a ton more ownership points and pre-IPO allocation in these stocks well in advance of that by scouting stuff at the, at the A round. And frankly, a lot of these hedge funds manage such enormous pools of capital relative to the size of the traditional VC fund. That for them, you know, writing a 25 or fifty million dollar check into an A or a B round is a rounding error, righ…

AI assessment note: “they're trying to get, you know, as much pre-IPO allocation as they possibly can.”

Q badly against anyone. I'm sure they're great people. It's just fundamentally bad for entrepreneurs. Entrepreneurs in the way that, like, bluntly, as you said, it's a rounding error. They're not going to help, like, a specific, like, Series A focused or C or Series B focused fund would do, and they don't have the expertise to bluntly. Like, do you not think it's bad for the entrepreneurs in those stages?

A Yeah, I agree with you. I mean, I think it's, you know, there's a reason that over the history of the capital markets, there's tended to be different investors for different stages of companies. The early stage companies, the types of problems and help they need are quite different than what a late stage You know, public company needs. And so I agree with you in the sense that, you know, finding that, that fit between investor and company is crucial if you want to maximize your odds of success as an entrepreneur. So if you're very early on, like having access to world-class venture capitalists and growth funds who can help you with land new employees who are super talented to grow your business, to help you land marquee logos, to help grow your, your book of business, can help you think through product strategy and geographic expansion, like those sorts of strategic questions, getting that knowledge and advice From investors who've done that and helped other companies along the way, I think is hugely valuable. And, you know, but I think the reality is there are certain entrepreneurs who, who may prefer in this market environment to take, you know, very fast money at a very high valuation. And so I think, I think it'll kind of depend. I think it's, it's good in the sense that entrepreneurs have that choice, but I, I do agree with you, Harry, that it's, it's, uh, it's worth think…

AI assessment note: “Yeah, I agree with you. I mean, I think it's, you know”

Q kind of evolving markets and kind of emerging markets, as you often are, I think a big question for me is, I always say, like, I'm happy to take, you know, a lot of risk in terms of the investments I make. I'm not happy to take market timing risks. How do you think about market timing, specifically when making an investment, and is it a risk that you'll take?

A Yeah, it's a good question. You know, I think the why now is, is a key question, and one of the most important ones we ask ourselves when we're underwriting investments. Because to your point, you know, many good ideas were well ahead of their time, And created a graveyard of poor investments. And so, you know, I feel that that's why I focus a lot on talking to customers first and talking to a lot of potential customers to see what is their big pain point? What, what's top of mind for them? What's the burning need in their platform today that needs solving? And then kind of focus there first and then let that lead you to what companies are best positioned to, to benefit from that. And so I think, you know, you can talk a lot about COVID today too, right? That's creating a whole new set of issues for, for companies around the world. And it's a very interesting time to think hard about what's a one-off behavioral change. And, uh, versus a longer term secular shift in terms of creating new opportunities for new companies to attack. And so I think for, you know, in that, in COVID economy, for some categories, it seems easier to answer. I'd say Zoom is a great example there, right? Pretty obvious example where prior to COVID, people were well aware of video conferencing and had used it to some extent, but COVID was a nice accelerant to driving that trend forward in a material way. B…

AI assessment note: “I think the why now is, is a key question, and one of the most important”

Q than investment partnerships. We like to think together, but I don't give a shit if someone doesn't like it and I like it. I like, I mean, I love the, Purity and need of David with that statement. It places a lot more accountability and responsibility on that individual's shoulders. How do you think about and feel that as kind of one of the key investment partners making the decisions?

A Yeah, it's a good question. You know, I've had a pretty consistent framework over my time in investing, one that I heard from one of my mentors at TBG that I thought was quite helpful. And, you know, his framework for any given investment was this, which is, would you invest your own money in the deal proportionate to your own personal net worth? So if you are evaluating an investment for the fund that would account for five percent of the fund's capital, would you invest five percent of your own net worth in that given investment? Would you go write that check and take money out of that savings account and go do that? And I hold myself to that standard for every investment I underwrite because it really helps make it tangible for me and, uh, and very personal. And it reminds me of the responsibility that I have to, you know, the LPs in a very tangible way with every check that, that I write as an investor. And if I can't look myself in the mirror and say yes to that question, then I know I need to move on, and it's a bad use of time. With the team, full stop. And that is, I view myself as in the, the customer service business. You know, my, the CEOs and executive teams in my portfolio companies are my customers, and I need to work hard every day and be available on call, 24, seven, for whenever they need help from me or from Alphabet more broadly. And so that's my mindset, and…

AI assessment note: “I hold myself to that standard for every investment I underwrite because it really helps”