Mar 15, 2022 · 1h 53m · acquired
Altimeter (with Brad Gerstner) · Acquired
Brad Gerstner · 1h 16m spoken Ben Gilbert · 14m spoken David Rosenthal · 10m spoken Christina Cacioppo · 1m spoken
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Altimeter Capital founder Brad Gerstner joins Acquired to discuss his transition from entrepreneur to pioneer of crossover investing, dissecting landmark investments in companies like Snowflake and outlining his vision for expanding retail wealth through the Invest America initiative.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ben and David hold 23.8% of the talking time here. How this is scored →
Ben and David as informed peer 3.0 Guest teaching 2.9 Guest disagreement 0.8 Ben and David pushing back 0.1
speaking balance: gold is Ben and David, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 9:58 Brad rejects the notion that venture-backed founders face true personal risk
Brad forcefully dismisses founders who complain about personal risk, arguing that non-recourse VC checks carry zero genuine risk compared to his father losing his home, health, and marriage to bank debt.
Hardest push from Ben and David ▶ 1:12:12 David challenges Brad on competing directly against traditional venture firmsDavid pushes back on Brad's claim that he was not competing with top-tier VC firms like Sequoia, noting that venture incumbents have aggressively encroached into crossover rounds.
Biggest teaching moment ▶ 58:34 Brad explains how the mobile platform shift destroyed the search arbitrage business modelBrad educates the hosts on market architecture, demonstrating why businesses reliant on free search traffic arbitrage became uninvestable once consumer behavior moved to mobile home screen apps.
Ben and David hold their own ▶ 52:58 Ben breaks down enterprise cloud migration and historical data breach patternsBen demonstrates deep domain fluency, citing historical on-premise security breaches to contextualize enterprise cloud adoption alongside Brad's database investment thesis.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ben and David as informed peer | Guest teaching | Guest disagreement | Ben and David pushing back | Why |
|---|---|---|---|---|---|---|
| Pre-Show Audio Check and Acquired Theme | 3 | 0 | 0 | 0 | Ben and David introduce the episode and outline the macro trend of crossover investing and Altimeter's role in pioneering the dual hedge fund and venture capital model. | |
| Sponsor: Vanta's Automated Compliance Platform | 2 | 1 | 0 | 0 | A sponsored interview segment with Vanta CEO Christina Cacioppo discussing automated compliance for early fintech startups. | |
| Community Announcements and Disclaimer | 2 | 4 | 3 | 1 | Brad recounts his father's painful entrepreneurial failure in 1970s Indiana, passionately reframing what constitutes true personal risk versus the downside-protected risk of venture-backed founders. | |
| Indiana Politics and the Pivot to Business School | 2 | 3 | 1 | 0 | Brad describes working for Senator Dick Lugar and becoming Deputy Secretary of State in Indiana, explaining how observing Ross Perot inspired him to avoid a career of political fundraising. | |
| Harvard Business School and Reframing Fundraising | 3 | 3 | 0 | 0 | Brad details getting into HBS and apprenticing with Pete Liegl, explaining how he reframed fund LP asks as fiduciary service for university endowments and charitable foundations. | |
| Early Internet Epiphany and Dot-Com Trading | 3 | 3 | 0 | 0 | Brad recounts trading his grandfather's inheritance to fund his education, discovering the Netscape browser in 1996, and navigating HBS during the dot-com bubble peak. | |
| Founding NLG and Barry Diller's IAC Acquisition | 3 | 3 | 0 | 0 | Brad discusses launching NLG to provide e-commerce infrastructure for online travel, resulting in simultaneous acquisition talks with Expedia and Barry Diller's IAC. | |
| Lessons from the Dot-Com Crash and Burn Discipline | 3 | 4 | 2 | 0 | Brad details the post-dot-com crash discipline and building OpenList, culminating in Rich Barton advising him that his analytical mindset was better suited for investing probabilities than founder possibilities. | |
| Apprenticing at PAR Capital and Concentrated Investing | 3 | 3 | 0 | 0 | Brad shares his apprenticeship under Paul Reeder at PAR Capital, running a concentrated public technology portfolio while leading early venture investments like Zillow's Series B. | |
| Pioneering the Modern Crossover Strategy | 3 | 3 | 1 | 0 | Brad recalls launching Altimeter in November 2008 amid the Great Financial Crisis, managing through extreme market uncertainty and placing his first fund trade in Priceline at $42. | |
| Structuring Separate Funds and Moving to Silicon Valley | 3 | 3 | 0 | 0 | Brad explains why market blowups in 2008 made LPs distrust commingled funds, prompting him to separate public hedge fund capital from a dedicated long-duration venture fund in 2012. | |
| Venture Industrialization and Altimeter's Lean Approach | 3 | 3 | 1 | 0 | Brad and the hosts discuss the industrialization of venture capital, contrasting large-scale service models like a16z with Altimeter's lean, concentrated partnership approach. | |
| The Snowflake Investment and Cloud Database Thesis | 4 | 3 | 0 | 0 | Brad describes leading Snowflake's early funding, building a cloud database thesis, and winning the deal after his partner ran their internal hedge fund data on Snowflake over Christmas and submitted a bug report. | |
| Technological Waves: The Search and Mobile Decades | 4 | 4 | 1 | 0 | Brad breaks down technological architecture shifts, explaining how the decade of search transition to mobile app icons impaired search-reliant businesses like Yelp while creating huge upside in mobile-native platforms like Facebook. | |
| Enterprise Software Shifts and Non-Consensus Bets | 3 | 3 | 1 | 0 | Brad discusses enterprise software shifts and the difficulty of maintaining non-consensus, contrarian convictions in investments like MongoDB and Snowflake when peers pass. | |
| Compounding Post-IPO and Democratizing Market Access | 3 | 4 | 2 | 0 | Brad argues for companies to IPO earlier to provide public market discipline, highlighting how staying private longer transfers hundreds of billions in value creation from retail investors to private crossover funds. | |
| Sponsor: Vouch Specialized Tech Insurance | 2 | 0 | 0 | 0 | A host ad read explaining Errors and Omissions (E&O) insurance coverage for tech startups provided by sponsor Vouch. | |
| Venture Ecosystem Dynamics and Stage Differentiation | 4 | 4 | 2 | 2 | David presses Brad on how competitive venture dynamics evolved since fund one. Brad clarifies his philosophy of respecting early-stage board craft while providing scalable capital at later stages. | |
| Portfolio Concentration and Public Capital Markets Advisory | 3 | 3 | 1 | 0 | Brad discusses portfolio concentration, value-add advising on board building, and creating an internal capital markets advisory unit to demystify traditional IPOs, direct listings, and SPACs. | |
| Sponsor: SoftBank Latin America Fund | 3 | 3 | 0 | 0 | After an ad read for SoftBank Latin America, Brad analyzes lifecycle investing, drawing parallels to private equity consolidation and highlighting founder NPS as Altimeter's primary performance metric. | |
| The Invest America Initiative and Wealth Inclusion | 3 | 4 | 2 | 0 | Brad pitches his Invest America initiative, proposing government-seeded investment accounts at birth to teach compounding, dismantle accredited investor gatekeeping, and grant universal ownership stakes in American capitalism. | |
| Defending Risk-Taking, Modern Capitalism, and Retail Access | 3 | 3 | 1 | 0 | Brad closes by defending risk-taking, modern venture-backed innovation without personal ruin, and opening private market investment access to broad retail participation. |
Statements from this episode (39)
Gilbert: Tiger, Coatue do seed as Sequoia restructures for public holdings
“We are watching hedge funds like Tiger Global and KOTU come all the way down to seed investing, and we're simultaneously seeing classically early stage venture capital firms like Sequoia completely reinvent their structure to hold on to their winners longer Ev…”
Gerstner: VCs, not founders, bear the downside risk in startups
“In venture capital, if you fail, the risk is largely on the venture capitalist. I mean, in Silicon Valley, failure is on the part of the founder, so long as you conduct yourself in a way that's honorable, it's a badge of courage that you gave it a go. And we h…”
Gerstner: I day traded a $25K inheritance to fund grad school
“Now, my grandfather, who I mentioned, left me 25,000 dollars when he passed away. And I day traded that 25,000 dollars to put myself through law school and business school.”
Gerstner: HBS students shunned McKinsey and Goldman interviews in 1999
“And, you know, McKinsey and Goldman couldn't get anybody to show up at their interviews at HBS in 1999.”
Gerstner: USA Networks acquired NLG and Expedia concurrently in 2000–2001
“Between October of 2000 and May of 2001 we put together a deal where USA Networks would be renamed IAC, bought both NLG and Expedia.”
Gerstner: High-burn, negative-unit-economic companies cease to exist when risk premiums shift
“If you are a high burn business with negative unit economics, and you fly into a world where risk premiums change, it doesn't matter how good you are, you cease to exist.”
Gerstner: Tech growth multiples crashed 50% in early 2022
“Just look at what's happened over the course of the last eight weeks, right? Growth multiples are down 50%. Risk premiums have changed dramatically.”
Barton via Gerstner: Entrepreneurs focus on possibility, investors on probability
“Being an entrepreneur is the art of the possible. Right? You have to will things into existence. And he said, you know, you constantly think about what can go wrong. When you're an entrepreneur, oftentimes you have to suspend disbelief and just think about wha…”
Gerstner: Value legends did crossover investing long before the term existed
“Paul Reeder, who started Park Capital, was doing private investments before Brad Gerstner showed up. Seth Klarman at Bellpost was doing private investments, you know, before we coined the term crossover, right? David Abrams in Boston. So I had a lot of legenda…”
Gerstner: PAR invested $20M–$30M into Zillow Series B at ~$200M valuation
“I think, I'm trying to think the check size, we may have put in 20 to thirty million bucks, and if I recall, it was a couple hundred million dollar valuation.”
Gerstner: TCV's crossover vision was ahead of its time
“TCV Had evolved into almost more of a later stage, you know, venture firm. Yeah. Right. That, that held some public positions, but didn't have a hedge fund per se. So I think I had a slightly different view, but credit where credit is due. Their vision for whe…”
Gerstner: Altimeter's first trade in 2008 was buying Priceline at $42
“We launched on November first, 2008. The first trade I made was into Priceline at 42 dollars a share.”
Gerstner: Altimeter held its initial $42 Priceline position to $2,000
“I still owned it when it hit 2000 dollars a share.”
Gerstner: Bill Miller sold his private Zillow shares back in 2008
“Bill Miller of Lake Mason famously invested in Zillow in 2000 and six or 2007, and then in 2008 sold all those shares back to the company because everybody was unwinding their private positions”
Gerstner: Tech companies will stay private longer and scale faster
“The private markets are becoming way deeper, way more liquid. Companies are gonna scale faster because the internet provides a network upon which they can scale, and they're gonna stay private longer because they're deeper pools of private capital. And we've m…”
Gerstner was the largest LP in Altimeter's debut private fund
“I was the biggest LP in that fund. By a long shot, because I wanted to get it, you know, upwards of a hundred million bucks. But that first fund, I think it had six investments.”
Gerstner: Altimeter led Snowflake's round at a ~$175M enterprise value
“I don't remember what the exact share price was. I think the enterprise value at the time was somewhere around a hundred and seventy five million dollars.”
Gerstner: Database software market cap was roughly $1T in 2000
“In 2000, if you aggregate the total enterprise value of companies that were principally driving their revenue from databases, it's about a trillion dollars in market cap in 2000.”
Gerstner: Google desktop search turned negative year-over-year in late 2012
“Google's desktop search, I think, didn't go negative
Until 2012.
Maybe the fall of 2012.
That's when there were fewer people searching on desktop, you know, on a year-over-year basis because people were switching to their mobile devices, okay?”
Gerstner: Facebook became Altimeter's largest position when it hit $7 in 2012
“I remember Facebook became our largest investment in 2012 when it went on the cover of Barron's at seven,”
Gerstner: MongoDB struggled to raise its final private round at $1B
“When David Charia took over, you know, Mongo, I mean, it was famously hard for him to get that last private round of financing done at a billion dollars.”
Gerstner: Developer software tools ramp slowly but become exceptionally sticky
“It takes a long time for those companies to spin up, but when those developer communities get going, they're incredibly sticky.”
Gerstner: Altimeter tested beta Snowflake on its own data before investing
“Over Christmas I'll replace our data warehouse with this, you know, with Snowflake, which was non-GA at the time, right? It was in beta with a couple companies. Wow. And so we did that, and he's like, this is gonna win. Like, this is the winning arc.”
Gerstner (in 2022): Snowflake can reach a $500B valuation by 2029
“I think this company can be worth over five hundred billion dollars over the course of the next five to seven years.”
Gerstner: The belief that companies cannot innovate in public markets is nonsense
“This idea that you can't innovate in the public markets is nonsense, right? Jeff Bezos innovated plenty in the public markets, Facebook in the public markets. You know, look at what Marc Benioff has done in the public markets. And so I think that that the publ…”
Gerstner: Altimeter invested in ByteDance at a $10B valuation
“ByteDance we invested in at ten billion dollars, ok? Today it's marked, you know, somewhere between 350,000,000,500 billion, depending on which crossover fund, you know, you look at.”
Gerstner: Venture capital over-earned, but competition will reduce founder dilution
“I might argue the venture market has over-earned for many years, right? And so the market's gonna become more efficient, it's gonna be more competition, with more competition, that means founders are gonna have better access to capital, they're gonna have more…”
Gerstner: Altimeter deliberately avoids competing to lead Series A rounds
“First, I don't want to compete in that first round of institutional capital.”
Gerstner: Tiger Global did 70 to 80 early-stage rounds in H2 2021
“Tiger did, I don't know, 70 or 80 series A's, and You know, seeds in series A in the back half of last year.”
Gerstner: Early-stage venture requires hands-on craftsmanship on startup boards
“Early stage venture, those first two to three years is craft building, and we like to partner with founders who are wise enough To put around that early board table, people who have been through the trenches, and so that increases our probability of success an…”
Gerstner: Top 10% to 15% of venture captures 80% to 90% of returns
“The top 10, 15% of venture is going to take 80 to 90% of the returns, ok?”
Gerstner: Altimeter anchored Roblox direct list, Confluent IPO, and Grab SPAC
“Last year we participated, we anchored direct lists like Roblox, we anchored IPOs like Confluent, we anchored our own IPO like Grab by way of SPAC.”
Gerstner: Competition in venture capital will compress average returns while concentrating elite gains
“Like, what do I expect that, you know, will happen over the full arc of time in venture, right? We're going to compete away returns. We've already witnessed it over the course of the last couple years, right? But that just means the returns that go to the prem…”
Gerstner: Product-led growth deserves higher multiples than sales-led revenue
“You show me a software company where
The product is flying off the shelves because the people on the other end really need and want the product and love the product, right? That company, even it has lower revenue, deserves a much higher multiple.”
Gerstner: Only 30% of Americans belong to the ownership society
“We only have 30% of people who belong to the ownership society.”
Gerstner: Seeding investment accounts for every newborn would cost under $20B/year
“It doesn't cost a lot of money, right? In the scheme of things like this is less than twenty billion dollars a year for the federal government.”
Gerstner predicts tech ideas over next decade will dwarf past 10 years
“I think when we look back at this system in 10 years, it's gonna be more vibrant, more capital, more access, more ideas, and I think the secular curve around creative destruction and innovation has never been steeper, and the ideas over the course of the next …”
Gerstner: Retail aggregators drive a growing share of crossover fund raises
“And if you look at the retail channel, The accredited investor retail channel, through Goldman, through Morgan Stanley, through these other aggregators, as a percentage of the fundraise for Tiger, for Kotu, for Altimeter, it's going up dramatically relative to…”