The Exchanges

Q Do you have like heads of network and network managers and community managers?

A We do not. Um, what we have is, uh, every person, if you've worked at LeadEdge, if you work at LeadEdge, like every person on the investment team has access to all the LPs. And by the way, to be clear, if you're an associate who's worked here for two years, or a year and a half, and you're going to Seattle for a wedding, and you say, hey, I want to stay on Monday, we'll be like, wonderful, you should meet like these four LPs, we'll pay for your plane ticket. Like, we encourage everybody that works at the firm to get to know our LPs, spend time with them, educate them on what's going on in the portfolio, versus if I was like a vice president at, I'll pick on index, but I can pick any firm on the planet. If I was a vice president at index, And I was flying to Seattle to meet a company. I would go meet the company. I'd go meet maybe another prospect company, and then I'd fly home. I wouldn't be spending, you know, six hours meeting four other individuals and like who are LPs in our, who are LPs and index. It's just, it's not their model. It's like these funds are primarily backed by the largest endowments and pension funds in the world. And our model is like, we're going to be 95% backed by individuals and we're going to treat those individuals like gold. And so we're going to communicate with them and yeah.

AI assessment note: “We do not. Um, what we have is, uh, every person”

Q If you were to advise them something on investing managers today, it can be anything. What would you say?

A I believe a great question that people don't ask, that they should ask. Any manager who is around, who's been around 10 plus years, hey, in September of 21, September 30th of 21, how much unlocked stock did you have in your portfolio? And let's say September, that was like the high point of the insanity in the last, you know, Tech run up. How much unlocked public stock did you have in your portfolio? And the next question is, why didn't you distribute it to your LPs? And by the way, a lot of funds can distribute stock too. And like, you could have kept the stock. So like, why didn't you hold? Some people will be like, well, I was on the board. Well, shouldn't you, I mean, like, isn't your goal just to return, like returns to LPs? Isn't that like the whole job of the business? But I don't know.

AI assessment note: “I believe a great question that people don't ask, that they should ask.”

Q Totally get that. Going back to what we were just talking about, you know, we're saying about the casinoization and how crazy it is. You mentioned productivity increases. Are you worried that we will see productivity increases, but with that, less and less consumers having jobs and a weakening of consumer wallets?

A Not really. There were a couple million switchboard operators in 1980. There's been lots of jobs that have been, you know, lost over the years. Think about all the number of, you know, there's been retailers over the years that have gone bust. People innovate, and it's funny, I was just talking to somebody at one of the world's largest banks, a very senior person at one of the world's largest banks this week in London, and his point was, look, we have hundreds of thousands of people in, like, back and middle office. Those people have, we've trained them for Five to 25, 30 years, right? These people are not all gonna, we're not getting rid of them all, we're gonna retrain them. And by the way, the people that don't want to be retrained, We'll be, okay, fine, go work for the government then, because, you know, you can do, like, old school jobs there. But, like, a lot of these, like, companies will retrain people. They'll do different things. It's a, it's remarkable throughout history. There's been, like, lots of technological disruption over the last hundred years, and, like, people find new things. If you're, if everybody's worried about, ah, everybody's gonna lose their job, you got, don't invest in any of these companies, because it's gonna be a, it would be a complete disaster. It's like, I would, I guess I'd tell people, like, if you're worried about China invading Taiwan, y…

AI assessment note: “Not really. There were a couple million switchboard operators in 1980.”

Q We mentioned Workday. We also have seen recently in Workday, Anil Bushu, the founder coming back, not specifically about Workday, but I'm unwaveringly negative on companies where the founder is not the CEO, and we're in this AI transformation. Do you share that non-founder-led companies are inherently disadvantaged?

A I would agree with that partially. I, though I do think there are very good CEOs, you need like a growth mindset, and I believe that there are companies that are run for growth, and there are companies that are run for margins, and I believe in any time you have big technological transformations, that, um, you want the entrepreneur, you want the management team that is run by the company That, that is focused on growth. That are like, they're growing. And by the way, those are oftentimes entrepreneurs. You know, another way to think about it is oftentimes when companies are run for margin, earnings or EBITDA margin, they're oftentimes heavily levered. Where I think the biggest opportunity to disrupt incumbents today is Soft software, tech enabled services, any company, it actually can be a manufacturing company, it doesn't matter, any company with a bunch of leverage on it, because those companies don't have the cash flow to innovate. And by the way, you can look at 99 in 2000 and look what happened. And so we, if we had sat here in 99, we would have debated, are all the traditional retailers going to go bust? And are all these e-commerce companies going to be gigantic? If you look today at the 10 largest e-commerce companies in the United States, You know, six or seven out of 10 of them are traditional retailers. They're people that were on way before 99. Walmart, Target, Home…

AI assessment note: “I would agree with that partially. I, though I do think there are very good CEOs”

Q Final one. What are you most excited for when you think about the next 10 years?

A Actually, what I'm the most excited about is there's gonna be a really bad downturn. It's gonna be, you know, it's different than 99 and 2000, but there's gonna be a really big, big downturn. And like, markets just don't go up forever. Economies just don't go up forever. I think there's a lot of policies in the government, in the world, like right now, that might end really bad. That'll be, and I think it's gonna happen in the next 10 years, that'll be the best time ever to invest. And with combined, like, the productivity booms, like, that you're gonna have with AI. It's like, you avoid the gen one AI companies, just like, you know, if you had avoided the, you know, internet, one point O companies, and then think about all the internet, the, the internet companies that were started in, like, oh, three to, like, oh, six. And I, I think the same thing could happen with AI. Which again, could benefit, like, an Anthrop, like a Thrive or a Andreessen who are raising these new giant funds. And they could potentially invest it during those periods as well.

AI assessment note: “what I'm the most excited about is there's gonna be a really bad downturn”

Q Are you seeing LP sentiment change today around what they care about, do you think?

A Absolutely. I think you've started already seeing it. So we've always cared about DPI, but, um, I think that the, you know, we've, we've always been really disciplined. Two to five X, three to seven years, like hit it, move on. You know, probably a third of our deals have been secondary sales. So people have accused us of being traders. That's fine. Like, I'm, I guess I'm a trader, but you know what? I gave money back to my investors and guess what? The investor like is my client. Like they, they, you know, I have two clients, entrepreneurs And investors. Without investors, I don't have any money. I don't have a business. And so, like, I think people need to remember, like, who pays the bills. Um, and I, and I, and I do think that investors are very, very, very focused on DPI now. And I think if you are, and it is possible with a small early stage fund, As a new relative upcomer in the first couple funds, you can actually generate amazing APIs. It's a game you can play. I don't know if you've ever had, like, Fabrice Grinda on here, or Jose Marin from, like, FG Labs. Those guys are, like, 1015 year LPs of ours friends. Those guys have played the game extremely well. They understand that not every company goes to the moon, takes some chips off the table, give it back to your investors, rinse and repeat.

AI assessment note: “investors are very, very, very focused on DPI now.”

Q Totally get that. Going back to what we were just talking about, you know, we're saying about the casinoization and how crazy it is. You mentioned productivity increases. Are you worried that we will see productivity increases, but with that, less and less consumers having jobs and a weakening of consumer wallets?

A Not really. There were a couple million switchboard operators in 1980. There's been lots of jobs that have been, you know, lost over the years. Think about all the number of, you know, there's been retailers over the years that have gone bust. People innovate, and it's funny, I was just talking to somebody at one of the world's largest banks, a very senior person at one of the world's largest banks this week in London, and his point was, look, we have hundreds of thousands of people in, like, back and middle office. Those people have, we've trained them for Five to 25, 30 years, right? These people are not all gonna, we're not getting rid of them all, we're gonna retrain them. And by the way, the people that don't want to be retrained, We'll be, okay, fine, go work for the government then, because, you know, you can do, like, old school jobs there. But, like, a lot of these, like, companies will retrain people. They'll do different things. It's a, it's remarkable throughout history. There's been, like, lots of technological disruption over the last hundred years, and, like, people find new things. If you're, if everybody's worried about, ah, everybody's gonna lose their job, you got, don't invest in any of these companies, because it's gonna be a, it would be a complete disaster. It's like, I would, I guess I'd tell people, like, if you're worried about China invading Taiwan, y…

AI assessment note: “Not really. There were a couple million switchboard operators in 1980.”

Q Do you worry about being a trader and not being an attractive investor to founders?

A Nope. Because I believe if you, uh, help founders and do what you say you're going to do. Now, a lot of investors don't do that either. I think there's 50, 60% of people in this industry that actually probably add negative value to companies. Um, but if you, I, the simplest lesson I think For entrepreneurs, anybody can learn, and I learned it early in life, it's just, if you say you're gonna do something, actually do it. It's like, the number of people that promise, like, over-promise and, you know, and under-deliver, like, be the reverse. Under-promise, over-deliver. And so, like, if you've been really helpful to an entrepreneur, helped them recruit, helped them, like, you know, uh, helped them recruit, helped them, like, with customers, you sell a 20% of your old, and it's like, who cares? Keep helping them. I mean, we have, we have companies we've sold a hundred percent of that we still help drive customers to. Like, it's like, great. By the way, great. You helped me make like five times my money. Nobody else in the cap table is liquid. We sold all of our stock. I'll keep helping you, please.

AI assessment note: “Nope. Because I believe if you, uh, help founders and do what you say”

Q Penultimate one. When have you questioned yourself most as an investor?

A I think we questioned our existence in 20 and 21 as, like, we were just getting annihilated on prices. We question ourselves now and are like, are we totally wrong on AI and we just don't get it? And like, are there going to be one person companies way sooner than we think? Are all of our software companies going to be completely disrupted and all of them go away? And like, I don't know, like I'm taking a stand that it's they're not. But like, I guess I could be totally wrong. I mean, I think you all, a good, any investor who says they know the answer to something, that's the best way to fail. And like, we just, you know, you got to stay intellectually curious and-

AI assessment note: “I think we questioned our existence in 20 and 21”

Q What is the stupid stuff that we are doing today that not many people are talking about?

A Paying a hundred times revenues for companies. We only like to ask ourselves when we look at businesses. If I invest today, and I grow it for 18 months, and I assume like, it's still growing fast. Am I like kind of in the money? Or do I need to grow for four or five years until I even get in the money? Like if you, if you're growing, like I think in toast, for instance, it was like when we invested in I think it was in seven, no, 1615, 16 time-ish, 17 time frame. It was like 25 of revenue, growing 250% a year. Like, what would that, that would be a billion dollar plus exit, that would be a 1,000,000,001, billion and a half dollar multiple today, valuations today. We paid 20 times revenues. It was like five hundred million dollar valuation, right? That's pretty expensive. And we think about it and we're like, okay, in a year from now, we're in it probably 10, we're in it at like 10 times. Okay, like, for that growth rate, That's, like, saying it's pretty reasonable. Like, I, I think I encourage people to ask, like, okay, I pay this price today, in, in 12 months, am I in it still at, like, 80 times revenues, or 50 times revenues? The prices being paid are totally insane. I also think I'm not enough investors. I've had numerous entrepreneurs tell me, oh, I don't look at gross dollar retention, and that's the only thing that matters. And it's like, oh, really?

AI assessment note: “Paying a hundred times revenues for companies.”

Q And you don't worry that they'll argue back?

A Don't care. It's just like, like, some people do argue back. And by the way, we, ah, this is, this is amazing. We, ah, we passed on an analyst candidate. I mean, I wasn't involved in it at all. He emailed me and said, I am on like the Harvard, you know, varsity team of this and this. You know, they know we like athletes. My rejection box is, is full. I reject your rejection. He got another interview. So, like, he, I was like, this letter is just, like, incredible. He actually, like, most people get rejected, then, like, 99.9% of people get rejected, and you never hear from him again. This guy was like, no, I reject your rejection. Here's the reason why I think I'd be really good. Here are some really interesting companies that I think are interested in. They're like, yeah, this guy sounds pretty damn good. Like, why'd we pass on him? They're like, oh, well, we were, we were kind of full for the year, and, oh, get him back in. Like, let's meet this guy.

AI assessment note: “Don't care. It's just like, like, some people do argue back.”

Q What is the stupid stuff that we are doing today that not many people are talking about?

A Paying a hundred times revenues for companies. We only like to ask ourselves when we look at businesses. If I invest today, and I grow it for 18 months, and I assume like, it's still growing fast. Am I like kind of in the money? Or do I need to grow for four or five years until I even get in the money? Like if you, if you're growing, like I think in toast, for instance, it was like when we invested in I think it was in seven, no, 1615, 16 time-ish, 17 time frame. It was like 25 of revenue, growing 250% a year. Like, what would that, that would be a billion dollar plus exit, that would be a 1,000,000,001, billion and a half dollar multiple today, valuations today. We paid 20 times revenues. It was like five hundred million dollar valuation, right? That's pretty expensive. And we think about it and we're like, okay, in a year from now, we're in it probably 10, we're in it at like 10 times. Okay, like, for that growth rate, That's, like, saying it's pretty reasonable. Like, I, I think I encourage people to ask, like, okay, I pay this price today, in, in 12 months, am I in it still at, like, 80 times revenues, or 50 times revenues? The prices being paid are totally insane. I also think I'm not enough investors. I've had numerous entrepreneurs tell me, oh, I don't look at gross dollar retention, and that's the only thing that matters. And it's like, oh, really?

AI assessment note: “Paying a hundred times revenues for companies.”

Q Is that valuable to do? And what I mean by that respectfully is like exit multiples vary so much over different durations. If we look back at 20, 21, 22, the multiple would have been so much higher versus today so much lower. I don't know.

A I think you need to use like some reasonable, I think for software, again, Revenue multiples of software companies are just shorthand for EBITDA. Like it's not at the end of the day. I think you should assume if you have a five, if you build a software company and you're in it, you know, and it's growing, you should assume an exit of it's growing 15 to 25, 15 to 30% a year, and that should trade somewhere between four to seven times revenues. Like, yes, like we, so we tend to like, I think our bands that we tend to assume most exits at are like, Four to eight times revenues. Like, maybe sometimes 10 times at the absolute highest, if it's like growing 30, 40% a year. By the way, I, I credit the guys at Iconic, like, a huge amount, because of, look, they were underwriting deals in 1516, 17. I think it, like, they, they thought they'd exit stuff 10 to 12 times revenues, and they, they, so they bought the best assets, and, you know, they maybe paid 20% higher to get access The best assets, and then multiples went to, like, 20 to 30 times. The best way, by the way, to four extra money is two extra revenue and two extra multiple. By the way, the reverse happens too. So, you know, that's what's happening to all the stuff in 20, 21 vintage funds. Like, multiples got cut in half, ah, for people. And so, like, you know, if you two extra revenues and half your multiple, that's called a on…

AI assessment note: “I think our bands that we tend to assume most exits at are like, Four to eight times revenues.”

Q Do you worry about being a trader and not being an attractive investor to founders?

A Nope. Because I believe if you, uh, help founders and do what you say you're going to do. Now, a lot of investors don't do that either. I think there's 50, 60% of people in this industry that actually probably add negative value to companies. Um, but if you, I, the simplest lesson I think For entrepreneurs, anybody can learn, and I learned it early in life, it's just, if you say you're gonna do something, actually do it. It's like, the number of people that promise, like, over-promise and, you know, and under-deliver, like, be the reverse. Under-promise, over-deliver. And so, like, if you've been really helpful to an entrepreneur, helped them recruit, helped them, like, you know, uh, helped them recruit, helped them, like, with customers, you sell a 20% of your old, and it's like, who cares? Keep helping them. I mean, we have, we have companies we've sold a hundred percent of that we still help drive customers to. Like, it's like, great. By the way, great. You helped me make like five times my money. Nobody else in the cap table is liquid. We sold all of our stock. I'll keep helping you, please.

AI assessment note: “Nope. Because I believe if you, uh, help founders and do what you say”

Q Well, why? Let me push back on you there. There's nine billion in Thrive's Growth Fund. If they are able to put two, three billion into Cursor or into Databricks, you can very much.

A Yeah, but you're just, you have to run to write like a hundred and fifty billion dollar companies. Like, that's really freaking big. But it's steady state. Companies trade at 10 times earnings. Like, I mean, that's just historically, you know, we can argue is it 12, is it eight? Like, it's steady state when they don't really grow, they trade at 10 times earnings. And you invest in something that's worth, like, it's worth a hundred billion dollars. You're effectively saying to make a double with dilution, it's probably two hundred and fifty billion dollars. Like, that's making the bet it's gonna do twenty-five billion dollars of earnings. There aren't that many companies that do twenty-five billion dollars of earnings. Like, it's freaking hard. Like, it's, um, so I, I, now again, that doesn't mean you can't make a lot of money between then and the steady state, um, you know, if they go out and it's growing 50% a year. But again, I would say there's too much money chasing too few things, but again, AI is gonna create a bunch of great new companies. So like, again, And these guys probably will go find, if anybody's gonna be on the bandwagon to find the next giant company, you know, the social media equivalent in the next five years, it will probably be one of these funds. And so, like, I see, I can see the argument as well.

AI assessment note: “There aren't that many companies that do twenty-five billion dollars of earnings.”

Q Well, why? Let me push back on you there. There's nine billion in Thrive's Growth Fund. If they are able to put two, three billion into Cursor or into Databricks, you can very much.

A Yeah, but you're just, you have to run to write like a hundred and fifty billion dollar companies. Like, that's really freaking big. But it's steady state. Companies trade at 10 times earnings. Like, I mean, that's just historically, you know, we can argue is it 12, is it eight? Like, it's steady state when they don't really grow, they trade at 10 times earnings. And you invest in something that's worth, like, it's worth a hundred billion dollars. You're effectively saying to make a double with dilution, it's probably two hundred and fifty billion dollars. Like, that's making the bet it's gonna do twenty-five billion dollars of earnings. There aren't that many companies that do twenty-five billion dollars of earnings. Like, it's freaking hard. Like, it's, um, so I, I, now again, that doesn't mean you can't make a lot of money between then and the steady state, um, you know, if they go out and it's growing 50% a year. But again, I would say there's too much money chasing too few things, but again, AI is gonna create a bunch of great new companies. So like, again, And these guys probably will go find, if anybody's gonna be on the bandwagon to find the next giant company, you know, the social media equivalent in the next five years, it will probably be one of these funds. And so, like, I see, I can see the argument as well.

AI assessment note: “You're effectively saying to make a double with dilution, it's probably two hundred and fifty billion”

Q Do you not want to buy, do you not want to make that investment? I've, you know, I'm always taught by most people on the show that I've never made money with a good deal.

A See, like, I would strongly disagree with that statement. Like, there are a lot of people that invested in good companies or great companies in twenty-twenty and twenty-twenty-one at really stupid prices and didn't make money. So it's like, it's the intersection of both. It's not like, you're not trying to buy a D asset at an A plus price. That's like zero. But like, if you can buy a B plus company at an A plus price, we have over the last 20 years. You can make, like, amazing risk-adjusted returns. By the way, we also buy A-plus companies, too, and you can buy, like, the, the great thing is, is can you do, like, structured secondaries, or can you do, like, really unique things, like, some of the stuff Larry will do and will do, and can you buy an A-plus company or an A company at, like, a, a B-, a B-, C-plus price? Those are, like, incredible deals. Um, can you get in, like, cheap to buying out old LPs out of an old fund that need liquidity Um, by the way, we're, you know, I joke that we're an NVIDIA earnings miss away from, like, a recession. By the way, if you get that, a bunch of old funds are gonna be like, you know, they have horrible DPIs. You're gonna have all these LPs that are like, you know what, I'll sell an interest in my, this, this, this, this, this, this, this fund and be able to buy stuff, you know, super cheap. But, like, look, um, there are, there are also di…

AI assessment note: “I would strongly disagree with that statement.”

Q a ByteDance, there's many opportunities to sell in a lot of these names, so not taking ByteDance specifically. How do you think about, ah, you know what, we're three X up on where we are, we've been in it for four years, let's take chips off the table. How do you think about sizing positions over time, and have you got any big lessons or advice from me on that?

A Buying is glamorous. Selling is the job. Constantly under, re-underwrite. That is actually what it really is. And we're trying to make two to five X in three to seven years. If you put that in to a, uh, on a curve, that's a 25 IRR curve, put it into a fund, make it two to two and a half X net fund. That's what we're trying to do. Like, that's what we tell our investors. So we're constantly just re-underwriting to saying, like, okay, like, if we were gonna sell a bunch of Uh, ByteDance today at five 50, which is, you know, where it's been reported that, like, General Atlantic is selling a bunch, and there's other people, and we've been offered higher than that, and so I think it's always like, what is the probability it can double? And, and then we, to ByteDance, we look at, like, what fundamental earnings are, and we're like, okay, this is doubling no problem. Now, if somebody came to us today and said, hey, I'll offer you 1.3 trillion dollars, we'd sell a bunch. No, because it's not that I don't think, I think the company will do a hundred billion of earnings in the next five years, And that's, at 20 times, that's worth two trillion dollars, but like, there's a risk. What does it trade out on a multiple basis? What, what, what would we be on our total investment at that price?

AI assessment note: “Selling is the job. Constantly under, re-underwrite.”

Q So should venture investors have more flexible mandates that allow them to adjust to asset classes where there is most opportunity at a given time?

A I think, I think most, um, I think, look, it surprises me that more growth in private equity investors can't do Publix inside their funds. I think these opportunities, but like TCB can, I think Iconic can, um, I think GA probably, so I guess probably these people can. It surprises me that more people don't, but I think, like, early stage venture is extremely different than going to back, going to buy Atlassian right now, or going to buy Workday, or going to buy Salesforce, or going to buy, you know, Toast, or something like that. But what surprises me is that more funds, like, you know, if you were an early investor in Toast, and you're fully out of it, and you love the company, and the stock's down, like, 60%, like, why not go buy it again? Like, it surprises me more people don't do that.

AI assessment note: “it surprises me that more growth in private equity investors can't do Publix”

Q So, you said there about disposition committee. Yeah. And then I want to talk about, like, ventures place in a money manager's book because it's gonna be too interesting. Um, you said there about disposition committee. I'm often told that companies are bought, they're not sold. Do you agree? And how do you reflect on that, bought, not sold, as a sentiment?

A You have to, well, in order to get, look, I've sold a lot, I've had lots of returns generated by selling the companies, by putting them up for an auction and selling the companies. Um, it is a, there are a lot of things a lot of companies don't do that they probably should do. You, it's very hard to get bought if you're competitive, if your strategics don't know who you are. So we encourage all of our founders to get to know the biggest strategics in the space, get to know the private equity funds that, you know, could eventually buy you, Like, you know, by the way, you know, if you think you're gonna do fifty million in revenues this year, up from 30, tell them you're gonna do 40, and then beat the number. Uh, and it's just building relationships and partnerships with people.

AI assessment note: “I've had lots of returns generated by selling the companies, by putting them up for an auction”

Q So, you said there about disposition committee. Yeah. And then I want to talk about, like, ventures place in a money manager's book because it's gonna be too interesting. Um, you said there about disposition committee. I'm often told that companies are bought, they're not sold. Do you agree? And how do you reflect on that, bought, not sold, as a sentiment?

A You have to, well, in order to get, look, I've sold a lot, I've had lots of returns generated by selling the companies, by putting them up for an auction and selling the companies. Um, it is a, there are a lot of things a lot of companies don't do that they probably should do. You, it's very hard to get bought if you're competitive, if your strategics don't know who you are. So we encourage all of our founders to get to know the biggest strategics in the space, get to know the private equity funds that, you know, could eventually buy you, Like, you know, by the way, you know, if you think you're gonna do fifty million in revenues this year, up from 30, tell them you're gonna do 40, and then beat the number. Uh, and it's just building relationships and partnerships with people.

AI assessment note: “it's very hard to get bought if you're competitive, if your strategics don't know”

Q We mentioned Workday. We also have seen recently in Workday, Anil Bushu, the founder coming back, not specifically about Workday, but I'm unwaveringly negative on companies where the founder is not the CEO, and we're in this AI transformation. Do you share that non-founder-led companies are inherently disadvantaged?

A I would agree with that partially. I, though I do think there are very good CEOs, you need like a growth mindset, and I believe that there are companies that are run for growth, and there are companies that are run for margins, and I believe in any time you have big technological transformations, that, um, you want the entrepreneur, you want the management team that is run by the company That, that is focused on growth. That are like, they're growing. And by the way, those are oftentimes entrepreneurs. You know, another way to think about it is oftentimes when companies are run for margin, earnings or EBITDA margin, they're oftentimes heavily levered. Where I think the biggest opportunity to disrupt incumbents today is Soft software, tech enabled services, any company, it actually can be a manufacturing company, it doesn't matter, any company with a bunch of leverage on it, because those companies don't have the cash flow to innovate. And by the way, you can look at 99 in 2000 and look what happened. And so we, if we had sat here in 99, we would have debated, are all the traditional retailers going to go bust? And are all these e-commerce companies going to be gigantic? If you look today at the 10 largest e-commerce companies in the United States, You know, six or seven out of 10 of them are traditional retailers. They're people that were on way before 99. Walmart, Target, Home…

AI assessment note: “I would agree with that partially.”

Q Do you think we will have more or less money in venture in three years' time there?

A Probably less. I don't know. At some point, I don't know if it's three years, or five years, or seven years, for sure. People are gonna wake up in 20, in 2030, in 2032, and realize it's, oh my god, they're still all in this stuff from 20 12 and 20 15. Like, if you weren't selling, when are you gonna sell? That's actually the best advice I would give to, to, to young fund managers, and like, people starting funds, is liquidity windows open and close, And when they are open, take advantage of them. Like, you should be selling, even if you're winners, sell 20%, sell 30%, sell five percent, and like, continue to get, again, your job is to return money. Like, you know, um.

AI assessment note: “Probably less.”

Q So should venture investors have more flexible mandates that allow them to adjust to asset classes where there is most opportunity at a given time?

A I think, I think most, um, I think, look, it surprises me that more growth in private equity investors can't do Publix inside their funds. I think these opportunities, but like TCB can, I think Iconic can, um, I think GA probably, so I guess probably these people can. It surprises me that more people don't, but I think, like, early stage venture is extremely different than going to back, going to buy Atlassian right now, or going to buy Workday, or going to buy Salesforce, or going to buy, you know, Toast, or something like that. But what surprises me is that more funds, like, you know, if you were an early investor in Toast, and you're fully out of it, and you love the company, and the stock's down, like, 60%, like, why not go buy it again? Like, it surprises me more people don't do that.

AI assessment note: “it surprises me that more growth in private equity investors can't do Publix”

Q If you're a Toma Bravo, and you've got your Coopers and your Anaplans, where the companies are kind of growing at best mid-teens, what happens to this generation of growth equity P investors in tech?

A So, I think growth equity And, like, buyouts are very different. I think even buyouts are very, like, I think, like, people like Hellman and Friedman, like, if you want to go to the large cap, people like Hellman and Friedman and, um, people like Primera are probably slightly more growth-oriented, and there are probably, there are other firms that are probably more, like, margin-focused. I think it's probably a function of how much debt they have on their companies. To be honest, I have not looked And spent tons of time, like, studying the financials of Coupa Software, or, you know, Anaplan, and things like that. If I was them, like, I know that all these companies, they drive EBITDA margins from five percent to 40%. The question is, how are they doing it? Which I don't know. Um, I would hope that they've done it mainly through, like, cutting really inefficient go-to-market and sales marketing and GNA. I would hope they haven't taken the engineering sales headcount from 200 to 20. I suspect they have not, but, like, that would worry me. If, if they had done that, but I suspect they have not. Like, by the way, these people are really smart people. Like, and the question is, if, if those companies have been bought with no debt, then they, they would be investing hugely, I'm sure, in AI and stuff like that. They probably already are, but like, for me, that's why, what I said at th…

AI assessment note: “with debt, you're just like hamstrung with how much you can do”

Q Is that valuable to do? And what I mean by that respectfully is like exit multiples vary so much over different durations. If we look back at 20, 21, 22, the multiple would have been so much higher versus today so much lower. I don't know.

A I think you need to use like some reasonable, I think for software, again, Revenue multiples of software companies are just shorthand for EBITDA. Like it's not at the end of the day. I think you should assume if you have a five, if you build a software company and you're in it, you know, and it's growing, you should assume an exit of it's growing 15 to 25, 15 to 30% a year, and that should trade somewhere between four to seven times revenues. Like, yes, like we, so we tend to like, I think our bands that we tend to assume most exits at are like, Four to eight times revenues. Like, maybe sometimes 10 times at the absolute highest, if it's like growing 30, 40% a year. By the way, I, I credit the guys at Iconic, like, a huge amount, because of, look, they were underwriting deals in 1516, 17. I think it, like, they, they thought they'd exit stuff 10 to 12 times revenues, and they, they, so they bought the best assets, and, you know, they maybe paid 20% higher to get access The best assets, and then multiples went to, like, 20 to 30 times. The best way, by the way, to four extra money is two extra revenue and two extra multiple. By the way, the reverse happens too. So, you know, that's what's happening to all the stuff in 20, 21 vintage funds. Like, multiples got cut in half, ah, for people. And so, like, you know, if you two extra revenues and half your multiple, that's called a on…

AI assessment note: “I think our bands that we tend to assume most exits at are like, Four”

Q How do you think about that kind of capital efficiency and future dilution element when investing? You know, as we said earlier, Uber and your Alibaba, these are incredibly cash-consumptive businesses, and now you fund businesses which are incredibly cash-efficient, lean machines.

A Yeah, so Alibaba was very cash efficient, actually, when we invested, it was a billion dollars of profit. Actually, there may be less shares of Alibaba. I credit Josiah and the team at Alibaba has actually, like, done, like, the amount of stock-based comp dilution for a lot of public companies is totally crazy. Most people, including ourselves, over the last 15 years, massively underestimated the amount of stock-based comp dilution and, you know, dilution that we all took. Um, you know, Uber was, Uber was, was totally insane. Um, we tend to You know, over the last few years, we've dramatically increased the amount of, like, we assume, you know, 20, 30% dilution, and if you're investing earlier, it could be a lot more than that. Um, we have this, like, What we call capital efficiency. It's like, you know, Warren Buffett would laugh at us because it sounds kind of stupid, but it works. Are your revenues today greater than your historical cash burn? Cumulatively. Not raised. If you've raised 80, but only burned 20, and you have a forty million dollar revenue business, like that's a great, that's a great business. Um, but we're looking for like a one to one ratio or better. We just think it speaks to, uh, So many, just quality, qualities of the business. Like, we were lucky to be investors in Benchlane. We're still, we're still investors. Um, which, you know, was a, when we investe…

AI assessment note: “we assume, you know, 20, 30% dilution... looking for like a one to one ratio”

Q What should happen? Like, if you're a Snap holder, Evan is running a gifting program right now.

A Yeah. Like, I don't know. It's, look, we're not activist shareholders, and I, um, at all. You would, like, I have a lot of respect for entrepreneurs like Larry Ellison, who effectively did a levered recap of Oracle. You know, he, he basically was like, I have all this, I have all this Get free cash flow. I'm gonna borrow debt and buy back an enormous amount of stock. And what did he do in the process? He didn't sell any of his own, so he just kept making the, he made sure it can't go down, not up. Um, people forget that in companies there's, you know, it's market cap equals number of shares times price of shares. Um, and so like, you know, and to companies that respect, you know, that have discipline on that, I think are powerful.

AI assessment note: “I have a lot of respect for entrepreneurs like Larry Ellison, who effectively did a levered recap”

Q What do you think they do that makes them so good?

A They have a, they have a Count, they're relentless in thinking about how to get liquidity to LPs. So a lot of the stuff they do in the buyout world now is, like, they'll do minority sales. They'll invest in a company two years later, you know, sell 30% of the company to somebody else, get their bait back, so they're sitting on already a one X. Like, they're just, they're just, like, relentless focus on liquidity. Um, I think, look, some of these multi, not even multi-strap funds, like multi, you know, These giant platform funds, the Andreessen's, uh, of the world. There's just so many people at these firms. I have no interest in having, like, hundreds of employees. Like, you know, we have, we have 80 employees, and that's plenty.

AI assessment note: “They're relentless in thinking about how to get liquidity to LPs.”

Q Yeah, but in a de-globalized Trump world, I'm just doing the kind of alternate argument here just to understand. In a de-globalized Trump world, it's not gonna list in the US, is it?

A Zero percent chance it'll list in the US. No, I mean, just to answer it, I have no clue, but no, it'll list in Hong Kong. Like, um, that, that's where, you know, a lot of these, you know, people have been talking for years that they're gonna, like, de-list all these US, these Chinese companies, Baidu, Ctrip, BABA. They never did. Like, um, and Keep in mind, like, Alibaba and Tencent, or Alibaba's stock has, like, doubled off the lows over the last year. So, like, sentiment today on China is a lot better than it was 18 months ago when we were buying, you know, when we were buying, when we were buying ByteDance stock, like, you know, you know, we were, we were buying it at prices, like, sub, you know, around two hundred billion dollars. Like, we, we thought the risk-adjusted reward, given the earnings power, was just, like, incredible. I also think that That, um, don't count China out. I bet they win the AI world. I bet they win it. That win, it's not right, but like, look, the great thing in China is you can build a nuclear power plant in a couple years. You can build power plants. Like, no problem. We, in the US, we are gonna run into major issues around power.

AI assessment note: “Zero percent chance it'll list in the US... it'll list in Hong Kong.”