The Wisdom Wall

“By the way, from the LP perspective, diversification at the level of the GP makes no sense, because they have multiple GPs, so, so the, the, the, the, the diversification gives nothing to LPs.”

“however, if you, uh, if you are a fund that is more middle of the road and you're not sure how Is it gonna be a raise or not? You're gonna find any excuse to keep the prices up, right? To look good on paper.”

“You know, if, if, if, if the typical, if a partner in a, in a, uh, in a partnership, especially large partnership with some, with politics and all that, uh, they're much more interested in their investments succeeding than anything else because that's their career.”

“In general, I don't think one should be overly price sensitive. Obviously, you know, you have to have some discipline, but the reality is that if you're dealing with companies that are growing at over a hundred percent per year, and you believe it's sustainable, okay, even if you pay up, let's say by 50%, pay more than…”

“So that's another example where I think that You know, a partnership can drive things more towards, uh, mediocrity as opposed to, uh, exceptionalism.”

“When I quote unquote consult with people in a partnership model, I'm also in a persuasion mode or a sale mode because I need to get it approved. So I think just naturally, and I think everyone is like that, you're just less receptive. First of all, you're just a little bit less transparent because you need to persuade…”

“sometimes LPs ask me, how do you do diligence, and I tell them I don't, and I exaggerate a little bit, because sometimes I make a few phone calls, but I'm not exaggerating by much, and usually there is, like, silence. They've never heard it before, and then I explain what I explained before, that if I need to do a lot…”

“the fact that you let them Take money off the table actually brings better alignment. Even a significant amount, even if it's five or ten million, they're much more likely to try to hit for the fences and not take the first couple of hundred million dollar acquisition offer because they just cannot say no to a few tens…”

“In terms of diversification, if I learned anything, is that the diversification doesn't work, because when things turn south like that, then diversification is not going to save you, because everything goes down, and because everything is very correlated.”

“I think many, many partnerships are much more dysfunctional Then you would see from the outside, and there is a lot of, often, tensions between, you would think that partners need to be, you know, you would expect that partners are best friends, and really think very highly of each other. Sometimes it's the case, but…”

“if I know better than them, that's a horrible sign. I should just, I, I, you know, I should write the investment off if I think I know better than the founder.”

“The more operationally complex a business is, the more, um, it's about, uh, distribution. The more it's about, uh, integration with, um, source and with other pieces of software or content in the case of Navan or, or, um, part of the ecosystem, the more, um, Uh, the more it's in a regulated, this is not about Navan,…”

“Um, are not good, um, rail guards from that perspective, because even if they challenge, uh, valuations, they always challenge the wrong things, and they always, it's complete lack of understanding what, you know, because how, why would they know what, you know, what companies can be, it's not, it's not in the numbers…”

“The very fact that after a year or two they don't have signs of product market fit, maybe it means that, you know, it should be worth less than what it was worth at the seed, because at the seed you had the option value of maybe within a year or two you will have it.”

“My advice is take the money. But continue to behave as if you didn't. Um, don't spend money just because you have it. You know, companies can be overfunded, and, ah, it can lead to loss of focus, so if, if the founder's mature enough and strong enough to take the money, Put it in the bank, but spend it based on the…”

“And that's exactly why I don't, I don't tell LPs anything in terms of what I'm going to do, because I feel that if I tell LPs something, I would feel too committed to that specific strategy, which I may have thought it was the right strategy, but then there's a situation that requires being flexible. So I tell LPs I…”

“this is one thing that is, Consistent fallacy within VCs that they think that just because they saw a deal, they necessarily would have been able to do it. Um, no, you know, uh, with all due to anti-portfolio, it doesn't make sense that the same deal appears in 20 different anti-portfolio because it's not as if the 20…”

“If I, if I raise a fund every year and they just are in every fund, they do get the, uh, you know, even if one fund is not what he called vintage diversified, they would be vintage diversified if they care about it. I don't care about it, but if they do, you know, they could just invest in every fund.”

“if you decide to give up a month or two too late, the agony And the lack of dignity. Um, and the pain is like 10 times, you know, when you, when you decide to stop in time, you have enough time to do it in an organized fashion, to make sure that everyone is taken care of, to maybe even have a chance to find soft…”

“So I think that's another, uh, idea that to me, it's never about protecting the ownership. You know, if I, if I put my money in a company again, It doesn't matter if it's a full on or new. It's because I want to put new money, not because I put something in the past and I want to protect some arbitrary number.”

“I do think that the number of, of course, some absolute number, I think that the higher the Probability of success of the underlying, of each individual underlying, uh, investment is the less diversification you need. If you believe that every deal that you do has 50% chance of being a big winner, then you don't need…”

“Uh, something must be wrong in an industry where they take, you know, weeks and sometimes more to make a decision that is like, they knew what the decision was before they started to do, you know, the work and the work has no value whatsoever. It's just that that's how we do things.”

“I think that I have a very, very special rule, which is almost always true, which is the ones that you want to sell, you can't, and the one that you can sell, you don't want to sell.”

“And this is a teachable moment for me because next time, if the risk is that I only make two or three X, quickly, not after five years, then I should have done it. And I'll tell you why, because I totally forgot that I could recycle the money. So in the unfortunate quote unquote event that they would have sold and I…”

“That, you know, that it's all about being the best alternative for the founders. The founders are the customers, not the LPs. And the customer's always right. And we work for the founders.”

“It's much more likely to happen when it's kind of like a space that nobody thinks much about, and the company has an opportunity to Develop quietly for a year or two or three and build real moats and real advantages. And once everyone understands that it's an interesting space or it's an interesting opportunity, it's…”

“if I'm gonna walk away from a deal because it cost me 20% more, then you know what, I shouldn't have done the deal in the first place.”

“Because I think that, generally speaking, the returns, On the reserves are going to be lower than the first time you make an investment, and the reason is the first time you make an investment, you really scrutinize the investment.”

“So there's an inverse correlation I found between how active you are and how good you are.”

“The deals that I like, deals that I was the most successful with are, and the founders that were able to really transform an industry, at least in my case, they were always outsiders to the industry, but they were insiders to the pain.”

“If everyone is doing something, it's a reason not to do it, not a reason to do it, you know?”

“The, the, the one thing maybe you could argue that change, I don't know if it's 24 months or 36 months, is that every investment I have to ask myself, is this company a likely beneficiary of AI or not? The answer is not. Well, if the answer is that they're a victim of AI, obviously it's an easy, easy answer. But even…”

“because the math doesn't change. If you have, uh, if you have a company that, um, can double every year for the next five years, it's gonna be 32 X what it is today, because two to the power of five was 32 before AI and after AI. That has not changed.”

“I prefer a company that's growing two X with very healthy economics and a company that's growing three X with unhealthy economics.”

“If something's not working, something's not working, no need to overly obsess about it, and make the life of the founder miserable more than it has to be, and just be positive, help if you can, but not obsessing, yeah, and just focus on the future.”

“Especially, especially true for the fund, the funds, because they also use, it's because they also need to use the brand names to raise money, uh, for their, for their funds.”

“I think that it's an extremely non-competitive space. Uh, I'm talking about the LPs now, because generally speaking, like, When you're a VC, you're competing for a deal. If you don't move fast enough, if you're not attracted enough to the, for the founders, they'll go with, uh, uh, with, with someone else. When you…”

“It tends to lead you really to groupthink because at the end of the day, most of the VCs are basically very similar. So Obviously, these areas become overfunded, they become overly competitive, and yes, there will be some big winners out of this category of this thesis.”

“You don't win because you pay cheap and you don't lose because you pay expensive. You win because you chose the right team and the right opportunity and the right company.”

“By definition, if it's kind of expected from you, then it stops serving as a positive signal. Because I know that the existing investors would do it regardless of what they think.”

“I think that the people who succeeded being assholes or psychopaths probably succeeded despite that, not necessarily because of that”

“Oftentimes, VCs talk about themselves as partners to the entrepreneurs, and I actually don't like the terminology, because a partner implies that I have a say, he has a say, or she has a say. No, I think I'm more than a partner. I work for them.”

“I think that if you start with very strong technical people, then you have the best DNA from a technology standpoint, an engineering standpoint. And again, it's something that you cannot fix after the fact. And sales and marketing, you can build it three years down the road.”

“When you over diversify, when you engage in what's called spray and pray, then number one, your threshold is much lower. Number two, it's much harder to make any impact on the investments. And number three, you are much less likely to do anything different from materially different from whatever the index is.”

“Look, I think if they're long, if they, if they look weird and they look wrong, then probably there aren't gonna be 15 or 20 or a hundred other startups doing it. So you're probably gonna have two or three years without real competition.”

“In my, in 50% of the time I'm right and 50% I'm wrong, that's actually a great result because a winner is so much more important than the loser. Uh, because you know, as you know, if, if we lose something, we only lose one X our money. If we win, it could be a hundred X our money.”

“if I have a company where maybe the founders are not doing the right things, and I'm, you know, and, ah, they're not reacting to a crisis in the way that I think they should, I don't get too worked up about it, and I, you know, at the end of the day, I just, ah, I'm letting go emotionally. I mean, I'm still gonna show…”

“the assumption that I'm going to sell something, you cannot assume that the buyers are stupid, so they're only going to buy things that they can think they can, they think they can double or triple within the next two or three years.”

“at the end of the day, first of all, the end of the day, the only effective way to increase ownership is to preempt and lead the round. If you sit and wait for someone else to lead it, then at best you're gonna get your program.”

“And I think most people intuition was when this started was it's better to overreact than underreact.”