The Exchanges

Q Which two people have had the biggest impact on your professional life?

A So I've got a pair of Davids, and one was close, the other was, you know, sometimes people say just one thing that changes your life, and that one's David Swenson. I took his class as an undergrad, talked to him a lot when I was particularly at Princeton, would email every now and again, and even though he and I weren't close by any stretch, he once said something to me that changed my life. He said, investing is about optimizing discomfort. And then the other person is David Salem, who was the founder of TIFF, and I worked with Salem for seven years. What a great unconventional investor. He had a lot of Swenson DNA as well, but Salem told me something that has stuck with me ever since he says, look, as investors, we don't live in a Newtonian world where force equals mass times acceleration. You make decisions and good decisions have bad outcomes sometimes and bad decisions have good outcomes sometimes. So we exist on the spectrum. There's almost like this bell curve of being right or being wrong. And good investors shift that curve in their favor, but will still be sometimes wrong. Then the choice you can make is, do you want to be with the crowd or you want to be alone? And he says, and the second you decide you want to be alone, you bring into play the risk of being wrong and alone, which sometimes is accompanied by career risk. And he said, when I was joining, he said, I wa…

AI assessment note: “I've got a pair of Davids... that one's David Swenson... other person is David Salem”

Q So in the last couple of years, as this velocity of opportunities with venture capitalists or number of funds has picked up, where have you looked back and felt like you made mistakes?

A Man, I've made so many mistakes, and I think about them every day, and it's funny because I just had my annual meeting of investors the other day, and never confuse brains in a bull market, but it's so easy to look smart right now. A lot of my investors were like, holy smokes, the performance is even exceeding our expectations. I'm so delighted with these funds, but they're like, why then was your meeting so downbeat? And I'm like, because I can't help but think about the things that we could have done better. And so one thing that I failed to appreciate is the impact of individual GPs in the seed stage. We were always looking for teams. That was one of the things that drew me to first round. I felt like they had found a way to punch above their weight class, but there's so many great investors like Steve Anderson or Michael Deering who really kind of changed the game. And then you look at some of these people are calling them solo capitalists now, like Elad Gill or Josh Buckley or those guys who are bringing that kind of sensibility Across leading late stage rounds. I mean, that's wild. The other thing that I failed to appreciate was just how large these outcomes could be. One of the formative experiences of my youth in venture was Equalogic was this company that got acquired by what was then EMC. And it was at that point in like Two firms that invested in it had funds that we…

AI assessment note: “one thing that I failed to appreciate is the impact of individual GPs”

Q So how have you thought about that evolution?

A A big question I have is, in venture, what is it that's durable about a firm? The number of firms that have failed in generational transition outnumbers by orders of magnitude the numbers of firms that have had successful generational transitions. And so I said, look, Josh is a force of nature. Josh is going to die with his first round boots on. But as Rob and Chris started downshifting a little bit to partner from managing partner, they were bringing on new folks. And Finn Barnes is there. But Bill is one of the first hires, and they've brought on since Haley Barna, and then Todd Jackson, and now Mecca Esonye. And what I love about it is there's such a strong culture, because a lot of venture firms are set up as tennis teams, where everybody's playing their own match. Different things work for different firms. What works really well at first round is, Josh, he's not really an investor. He's a fund entrepreneur, and he's run that place as a startup, and now a company that's mature. I mean, there's 75 people working on Platform initiatives, investing, content production, et cetera. And there's a very strong culture because Josh knows that the CEO sets the tone. And even though they're equals as partners, there's still very much this Josh driven things ethos that he brings from his serial entrepreneur career. And so whenever they hire people, they're like culture carriers. And so…

AI assessment note: “The number of firms that have failed in generational transition outnumbers by orders of magnitude”

Q That's great. What was your favorite sports moment as a participant or as a fan?

A I'm gonna give two answers to that question. My first answer is actually being a spectator at a ball game of my sons. So here, here's my son. He's a great ball player, but he doesn't look like a ball player. I'm like, I don't know how many times I have to ask him to tuck his shirt in or tie his shoes or, or what have you. And he's standing at home plate in a tight game, you know, runners on first and third. And this mom was just saying to me, she's like, Could you ask your son to tuck his shirt in, please? And on the very next pitch, he had a double in the gap to, to knock in two runs. Vindication.

AI assessment note: “My first answer is actually being a spectator at a ball game of my sons.”

Q In your time at Princeton, you started with this idea of, hey, this is like managing your own billions of dollars, long time horizon, the team. What resonated there, and what was different from what you thought going in?

A So that's a, that's a really important question, because one thing that Andy Golden, our CIO, said that was really important He said that all of the risk premia have been arbitraged away, except for one. He said, horizon. People just need cash sooner. And by being a long-term liquidity provider, you know, if we can be, he, I think his phrase is BLT investor, if we can be a beyond the long-term investor, then we can capture some risk premia, like, durable risk premia. I was like, whoa, that's actually really interesting, and venture capital is like the perfectly suited asset Class for that. David Salem, uh, you know, our founder at, when I was at TIFF, always did a survey and he asked, you know, CIOs of, you know, the top hundred endowments and foundations, if you could start your career today, like, what size pool of assets would you ideally want to start with? The answer is always four or five billion dollars, because people felt like they were Goldilocks size, right? But you look at, kind of, what Princeton and Yale and, you know, Northwestern's ten billion dollars, Stanford's twenty billion dollars, you know, these guys continue to put up great numbers At very large sizes, we always thought size was the enemy of performance. It's actually one of the reasons why I left Princeton, kind of in retrospect, probably foolishly so.

AI assessment note: “we always thought size was the enemy of performance.”

Q Why was she pushing for co-ed bathrooms?

A Because she's like, you cannot believe how much networking goes on in the men's room. I'm like, I know exactly how much networking goes on. You go in, you do your business, you get out. Boom. Nobody wants to, like, jibber-jabber while you're, you know, you're in there. Um, she's like, no, no, no, you don't understand. You have no idea. So it's Jody's last day, and, uh, and here I am. I'm a big spender. I'm gonna take her across to the Cambridge Side Gallery and buy her lunch at Au Bon Pain to, you know, to, to thank her for being my, my roommate before she, my office mate before she goes off to law school. Last day, you know, celebrate Jody. And we go to the bathroom before, you know, stop in the hallway, and she, Turns right to go to the ladies room. I turn left to go in the men's room, and I walk into the men's room, and there's Mike Porter, who was, you know, the kind of spectral, ephemeral presence at Monitor. Like, nobody ever saw him except, like, during the speech, he, you know, he's one of the firm's founders, and you'd give the speech at Global Orientation, and then you never saw him again. And oh my gosh, I'm at the uterine right next to him. And I'm like, oh, I, now I'm gonna have an idea of how much networking goes on in the men's room. So I go, hey Mike, you playing a lot of golf? Cause I knew he was an all American in golf at Princeton. And he goes, funny that you…

AI assessment note: “Because she's like, you cannot believe how much networking goes on in the men's room.”

Q not necessarily at the same pace, the privates in 20, 22. I'd love to hear what you guys are seeing. Maybe we can go stage by stage, which I think fits nicely. If you go Chris and Beezer and then Joel, what your GPs are seeing in terms of valuation resets compared to what you might've seen two years ago. Chris, why don't you start maybe with the earliest stages?

A Sure. And you know, one thing that's interesting is I actually just saw some data that I think said that seed valuations were up year over year. And anecdotally, that's what I'm hearing as well. And I think that's actually just a data composition issue because the marginal ideas aren't getting funded anymore, which in the marginal ideas would drag down the mean and median. And so we're seeing a lot of quality companies still getting funded And because they're higher quality, it's also keeping prices firm. Somebody asked me, does that mean it's a great time to be investing because there's, you know, great ideas? And I responded, it's always a great time to be investing if you got the right portfolio.

AI assessment note: “seed valuations were up year over year. And anecdotally, that's what I'm hearing”

Q Chris, that feeds right into your wheelhouse. Everybody hates something. How are you thinking about blockchain these days?

A Blockchain cracks me up because, as Joel said, they're, you know, robber barons, and you go on Twitter and you see all these, I'm happy that the, the crypto clowns are gone. You know, the people who would type things like, you know, have fun being poor. But that said, we do have some crypto exposure, not a lot, but there's stuff that's being built that's really important. And I remember hearing Tim Berners-Lee talk about Web three, like a long time ago before people thought about crypto. I hated how Web three and crypto became like conflated because what I think is Really interesting is crypto is a data layer of web three, but then you've got the interaction layer and the compute layer, and we're starting to see all those kind of come together. I've had a particular interest for a long time in the interaction layer, new sensors, right? Like right now we're interacting with the compute world through keyboards and phones and other devices, but I'm so interested in passive sensors that can actually tell us things while we're not looking or while we're not focusing on interacting with them. And there's a whole world of stuff like that. We've got some managers that are really leaning into human computer interaction that really starts to look like web three. And yes, crypto becomes kind of the secure and identity driven data layer of that. And that's what I'm excited about. But I thi…

AI assessment note: “crypto is a data layer of web three, but then you've got the interaction”

Q not necessarily at the same pace, the privates in 20, 22. I'd love to hear what you guys are seeing. Maybe we can go stage by stage, which I think fits nicely. If you go Chris and Beezer and then Joel, what your GPs are seeing in terms of valuation resets compared to what you might've seen two years ago. Chris, why don't you start maybe with the earliest stages?

A Sure. And you know, one thing that's interesting is I actually just saw some data that I think said that seed valuations were up year over year. And anecdotally, that's what I'm hearing as well. And I think that's actually just a data composition issue because the marginal ideas aren't getting funded anymore, which in the marginal ideas would drag down the mean and median. And so we're seeing a lot of quality companies still getting funded And because they're higher quality, it's also keeping prices firm. Somebody asked me, does that mean it's a great time to be investing because there's, you know, great ideas? And I responded, it's always a great time to be investing if you got the right portfolio.

AI assessment note: “seed valuations were up year over year. And anecdotally, that's what I'm hearing”

Q think about pricing? I mean, it's a little bit different because you're investing in funds. You know, you talked a little bit about what happens when funds have success and they charge more. As you're talking to the venture capitalists that you invest with, how much do, is pricing just a function of the supply of capital Chasing venture opportunities, and how discerning, you know, can a venture capitalist be?

A I think in the main, most venture capitalists today are price takers, not price makers. Bill Hellman from Greylock said to me a long, long time ago, he said, you know, we don't feel like there's much of a charm premium left anymore. We, you know, by, you know, with our winning smiles, we can't get, even being one of the best firms, we can't really get great discounts. Sometimes entrepreneurs will take discounts to be in deals, but there's such fear of missing out. You know, FOMO is really driving the market. And by the way, the pendulum of power has really swung toward the entrepreneur. And, you know, the higher a price they get, the less dilution they take. So the pricing environment is really quite tough to my great dismay. It tends to be more rational in the very early stage because risk tends to be so high, and these companies aren't fully formed and don't have as much proof of concept or product market fit, you know, validation, what have you. And so, you know, traction, people are paying crazy prices for when something gets traction, right? And I think part of the problem is that the End buyers, i.e. the acquirers or public markets, haven't, you know, been as forceful with enforcing price discipline, and so you have this inversion where, like, public, private companies are worth much more than they'd be worth in the public markets. Some days I look at my portfolio in the …

AI assessment note: “most venture capitalists today are price takers, not price makers.”

Q Across that 4000 players, you mentioned that a couple of the big brands, you know, Sequoia, Andreessen, Greylock have these seed stage funds. And there is this common belief that there's serial correlation of positive returns with the best venture capitalists. I'm curious in your area of the world and the seed, the early stage, how do you think about the brands deploying capital in a seed stage fund?

A So it's interesting, because as these large funds have started to develop more dedicated seed programs, it's really kind of upended the game, because for a certain kind of entrepreneur, they would like a life cycle manager, somebody who can fund their company from inception to the latest rounds, and that's been historically one of the ways in which these firms have competed for deals against the dedicated Seed guys. And I've often thought that we've got some good lessons of how these initiatives end, because in 2006 and seven, when we saw the first wave of what were then called super angels, you saw a lot of later stage firms or mid stage firms develop these programs. Several firms had them. I won't name some of the firms because one thing that we heard constantly from entrepreneurs in those days is it turns out that the Capital's not the scarce resource. It's the time and the engagement. And so surmounting that engagement hurdle, I think, is one thing that's really challenging, and I think that those efforts collapse under their own almost indifference in those days. Now, I'm not saying any of these new efforts are indifference. You know, Sequoia's been doing stuff with Scouts for a long time. How do I contextualize that? It's interesting because for me, not being an existing investor in those funds because the They don't fit in my strike zone. Those aren't something that were…

AI assessment note: “I feel like it's some optionality on some interesting outcomes.”

Q It sounds very Chuck Prince-ish. You know, the music was playing, and everybody's dancing. Back then, everyone castigated him for saying that, but there is this element of rationality to it, right, even though people felt like things were getting frothy. People continue to invest. How did you think about your participation, each of you, over those last couple years before last year? Chris, why don't you jump in?

A Well, look, I think everybody had a huge case of FOMO, and that, I think, is the genesis of the, you know, when the music's playing, you gotta keep dancing sentiment. But I'll actually say what I think is an unpopular thing, too, or maybe it's unpopular to me internally because it creates a huge amount of cognitive dissonance. I just pulled up the benchmark data for the dot-com bust. We all lived through that, and we would have these funds that it was like water torture. You know, they were just trickling away to, you know, asymptoting to zero it. I mean, how can you be down every quarter, 20% for like eight, nine, 10 quarters? We saw that with even like some of our best funds when I was at Princeton's Endowment. But in the end, those funds, they weren't great, but a lot of them returned money. I think the benchmark actually is like positive, like one point of seven percent or something for the 2000 vintage. So it actually becomes this question of if the secret sauce of venture is that we've got these stale prices and, you know, we, we have this like interim volatility that kind of like Tosses and turns all over the place. But at the end of the day, if you can just hold on long enough, you'll actually potentially get your money back even in a bad scenario. Maybe it won't meet the opportunity cost of equity capital and all that stuff. But maybe the risk premia all arises from th…

AI assessment note: “I think everybody had a huge case of FOMO, and that, I think, is the genesis”

Q So I'd love to hear your thoughts from a manager's perspective. So you have managers coming back into these dynamics. What recommendations are you giving the managers in your portfolio?

A Since 2018, actually, we've aggressively leaned into, quote unquote, grownups in our portfolio. We were doing a lot of emerging managers, really like, rookie capital allocators, which was great, and it was fun, and some of those have done really well for us, but we've been, since 2018, really leaning into people who are well-trained. So like, one example of that is Sunil Nagaraj at Ubiquity. He had really kind of learned a lot at Bessemer before spinning out, and he's a really well-trained investor, while having that great entrepreneur sensibility and a real kind of As he would describe it, you know, kind of nerdiness about them. So I feel like we've got, you know, really thoughtful managers, but I, you know, I don't want to inhale my own smoke on that. What I am telling people is, is at the end of the day, somebody is going to pay you, whether it's an acquirer or the public markets is going to pay a company for creating sustainable unit economics at scale. Like, how do you get to that? And I think today, you know, we've lived through a 12 year period where financing risk was non-existent. And that's really distorted how people think about venture. And I think now that capital is becoming scarce, again, there's going to be a real premium on getting to the sustainable unit economics at scale sooner rather than later. So we're spending a lot of, you know, time talking to our mana…

AI assessment note: “What I am telling people is, is at the end of the day”

Q in time, you know, the returns are high enough. I remember having this exact conversation back then with a friend of mine saying, look, it's rational that venture capital should pay more for deals because there's, yes, we're all trying to generate absolute returns, but there's also, like everything else, a relative performance aspect to it. So how do you think about that? Let's just go right to today's market.

A In normal markets, there's almost like a U-shaped opportunity curve, and with, I guess, the x-axis being stage of investment. So I think that the earliest stages tend to be most interesting because that's where risk is highest, and if you can, if you can mitigate and get paid for those risks, you can, you know, find interesting companies and, you know, make them better, and et cetera, et cetera. I mean, there's a lot of potential return, and historically that's been shown to be true. You know, that raw innovation is the stuff that really gets me jazzed. Then I think you get to the mid-stage where you tend to have more price fluctuations, and, you know, nature and capital markets both abhor a vacuum, and so when there's real opportunity in the mid-stage, you know, later stage folks will come in and price things up, and so people say, are there better risk-adjusted returns in the mid-stage? I go, I don't know how you risk-adjust venture. The risks are so high as to be almost infinite, so you can't risk-adjust it. You can maybe time-adjust it, slash duration-adjust it, but that's nothing. And then I think at the other end, you know, you have high opportunity in the late stage if you've got the timing right, right? And so that tends to be more of a beta market, and there's some people who have been able to be, like, have, like, systemically asymmetric beta in their favor, right? Th…

AI assessment note: “In normal markets, there's almost like a U-shaped opportunity curve”

Q What kind of heuristics do you put on the manager ideas that you share with your peers?

A So one of the things that I love doing is I run a fund and my investors tend to be sophisticated, mid-sized endowments who already have some venture portfolio, but are looking for me to help them build their portfolios. So one thing that I'm really proud of is for every dollar that I've put into a fund through our fund, my investors have come in over the top and put in another 50 cents over the 10 years that we've been doing this. And that's super fulfilling and exciting to me. And what I like doing is Personally, I like finding managers who are on their first institutional fund or their second institutional fund where their first one was, you know, subscale. People who not only have, like I described before, that entrepreneur sensibility, so a little bit of the been there, done that, but also the confidence to be a personal trainer, not a cheerleader, and that investor mentality. So of late and As I think about all the things I've done recently, there is a heavy threat of people who have some investing experience, which I think is less usual. I mean, everybody's got an angel-less track record today, but I'm talking like formal investor training. So I love introducing people like, I mentioned, you know, Ross Fabini, who spent, you know, years with Canaan Ventures, or Sunil Nagaraj, who launched Ubiquity after a ten-year career at Bessemer, because I think having seen the impact…

AI assessment note: “Personally, I like finding managers who are on their first institutional fund”

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A Somebody once said to me that there are three sources of sustainable competitive advantage for a startup. You can either have a particularly large market and attack it well, you can have a great management team, or you can have a technological moat. Different investors actually index differently. Like the Sequoia guys love large market. Other people love great management team, which is certainly not mutually exclusive, but I personally really key on technological moat because there's just so much capital in the market today. If you're behind, you can just weaponize a balance sheet and leapfrog. Paradoxically, I think the thing that's the biggest change in my career is it's gotten both cheaper and more expensive paradoxically to get a startup from inception to exit. Cheaper in the early days because the cost of inputs has gotten so much lower with AWS and you can rent all your infrastructure and all that stuff. You can build in response to growth rather in advance of it, all that stuff. But then in the later days, it's really important to be able to have a A really strong balance sheet to build that unassailable footprint. And we've seen companies win that way. But for me, it's about moat. I'm most interested in things that are on the frontier. So AI and robotics. And I once heard Steve Jurvetson say life is code. So the computational biology stuff. So all the stuff that my guys…

AI assessment note: “I'm most interested in things that are on the frontier. So AI and robotics.”

Q eternal optimists. So we're sitting here in New York and financial markets, active management's been underperforming. Everyone is sort of pessimistic. There was always, you know, to Michael Lewis's phrase, the new, new thing, right? Palm-based computing, and then it was the internet, and the cloud, and personalized healthcare. So as you look in your portfolio of, of the new companies getting formed today, what is the new, new thing?

A Oh my gosh. I almost think of it in a thematic way. And here's how I think about it. A friend of mine says that hardware is getting soft and software is getting hard. And what we mean by that is that, you know, hardware is basically commodity, commoditized, right? And software is, is everywhere. It's, it's driving, you know, driving the hardware in a phone is getting cheaper and cheaper, but it's a software where the value really resides and allows you to do kind of many things. And software's getting hard, like, you know, we're sitting here, we're looking out at midtown Manhattan, and it's, you know, kind of a dark day, because it's a little bit drizzly, which is very foreign to me, being from California, sunny and magical land. But, you know, we've got startups that are working on, you know, kind of reactive glass that kind of tints, you know, with, with the, with the brightness. Somebody once said, life is code, right? DNA, the AGTC sequence, right? Like, that's just code, and we, it's amazing the amount, the advances in computational biology, right? There's this There's this melding that's really kind of portending this amazing future, right? And I think about some of the portfolio companies we've got, we've got, you know, kind of some interesting stuff going on in soft robotics, right? Like, right now, robots can hurt you. Like, they don't really feel that well, you know, …

AI assessment note: “A friend of mine says that hardware is getting soft and software is getting hard.”

Q And I'm curious, why do you write the blog? And what, you know, what purpose does it serve, uh, for you and, and for your investors?

A You know, it's funny, and I have to say beforehand, you know, it's called SuperLP not because I have any aggrandized vision of myself, but rather because I was once in London, and I under-packed, and I went to a meeting, and I re-wore my suit and the shirt, but I, I was gentlemanly enough to change my undershirt, and I was out of white t-shirts, and so I had this red t-shirt that I was gonna work out in, and, and I went to this meeting, and I had the top button open, I didn't have a tie on, and somebody saw my red shirt underneath, and they said, what are those, your SuperLP underoos? And I said, ah, and a nickname was, was born. So, uh, you know, it's funny, you know, blogging, as you'll recall, was huge in like, oh, five, oh, six, oh, you know, it was really on the front end in oh five, but like by oh seven, oh eight was huge. And so, uh, I was talking to Josh Koppelman, and he was like, you know, you've got a lot of interesting stuff to say. He's like, but importantly, like, there's a lot of people saying stuff, and he's like, you're not any smarter than the next guy. Thanks, Josh. He goes, but you're at least 20% funnier. So if you can capture that voice in your writing, he's like, you'll get an audience. And I thought, you know, I did have something to say, because there weren't any people in the LP world blogging, because it's a very kind of quiet business, because nobody…

AI assessment note: “I can talk about different issues, and I can educate people”

Q One of the things that's really confusing me about this environment is there's a ton of dry powder sitting in their hands. How do you think that is going to affect their portfolio companies?

A It's interesting. I have a very complicated set of struggles with the, this dry powder question, because I remember in a one, people talked about the overhang, and that was going to be the cavalry that saved every portfolio company. And then it kind of dried up. A lot of funds gave back capital. I don't see that happening today, but it kind of disappeared. And so I said, oh, you know, am I thinking about this naively? And then I started thinking, well, what's different now than then is the amount of dry powder that's held in so few hands. And I think about some of the really big guys that raised so many funds at such high velocity. And I think there's almost like kind of, it's a tale of two cities. Like what do the mega funds do with their dry powder? And by the way, they're incentivized. Like they have whole business models that are predicated on raising, you know, kind of spinning that black circle over and over and over. Other people's money, OPM , it's a, it's a hell of a drug. And so I think they've got to deploy that capital because it's a gating item to raising the next fund. And whether their investors will be there or not is, is another story. I think this lumpiness of where the capital's held will have some really interesting impacts on how this all unfolds. Do these guys bail out their portfolios?

AI assessment note: “I think this lumpiness of where the capital's held will have some really interesting impacts”

Q Because I know when we did the show four years ago, you were raising the alarm bell for a bubble. And I'd love to just start there, which is, if you looked back at when you were nervous four years ago about valuation, how did you go about participating over those couple of years with this alarm bell ringing in your head that this might all be frothy?

A I often say I've called seven of the last two recessions, so I think there is always money to be made. Even if the market is crazy, there are pockets of opportunity. We've seen that across asset classes, across venture throughout the ages. One of the things that was like a great example to me is August Capital, a longtime manager, well-established Sandhill firm, in what's otherwise a wasteland of 2000 vintages, They put up a monster fund because at the tail end of it, but they had Seagate in there. So there's the take private with a third of their fund, which was amazing. And so I think there's always money to be made. The question is like, how can you make money systemically? And one of the challenges that's really interesting for people in my seat right now is the barriers to raising a fund have gone to zero. And in fact, there are a lot of people who are raising funds almost as a night job. They're still entrepreneurs. Like we, you know, we've seen In the last 15 years, the emergence of the ex-operator as investor in a very profound way. But now we're seeing not ex-operators, but actual operators who have a day job running a company and on the side are investing with AngelList and rolling funds, and you can outsource everything. The number of funds have exploded. So Samir over, he's running his own shop now, but when he was at First Republic, he used to track the number of f…

AI assessment note: “The question is like, how can you make money systemically? And one of the challenges”

Q So just to not repeat the failure of imagination on the upside, I know you do still have this healthy skepticism of what's going on. What might a correction look like?

A I'm feeling so optimistic as to not even recognize myself. But one of the things that worried me a lot is that, you know, you get a downturn and the markets freeze. And that's what we saw in O-one. You know, I remember doing venture in O-one, O-two, early O-three. It was just frozen. And great companies were dying on the vine. I was talking to a cardiologist friend of mine, and he said, you know, every person who's ever died in history has died of the same cause. Blood has stopped flowing to their organs. There are 50 different causes for that, but blood stopped flowing to their major organs. Startups are the same. There are 50 different causes, but they all fail for the same reason. They've run out of cash. And we saw a lot of great companies run out of cash. The optimistic thing I'll say is that the beauty of the fund structure is that capital is sticky. When an idea goes bad in the public market, the capital is destroyed. Jeremy Grantham says that the only true risk is the risk of permanent loss of capital. In the venture world, we've got an incredible overhang of capital. And a lot of new entrants who are here for good, and even if tomorrow the market went down 40%, you still have an incredible amount of dry powder ready to support the best companies. You know, you go back to, like, Good Times RIP, the famous Sequoia presentation at the time of the global financial crisis. …

AI assessment note: “I'm feeling so optimistic as to not even recognize myself.”

Q really like the way you phrase it. Yeah, there's a degree to which in the public markets, and certainly in hedge funds, there are people who are looking for inefficiencies, and you say, the venture world, this is growing, the next great business. So, if you were tasked with having, hey, you've got billions of dollars of your own money, knowing what you know today, what, what would you do?

A Ah, well, so that's a really interesting question. That's a, a very long answer, and I'll probably give the shortest answer. You know, everybody who knows, who's ever done any modern portfolio theory knows about the optimizer, and you've got this, you know, you got, on one axis, you got expected return, on the other axis, you have, you have risk, which is measured by volatility. Now, there's a whole riff I can go on about how that completely is a misspecified measure of, of risk, even in public stuff, but especially in private stuff, not only with stale prices, but like, when I think about the startups that I invest in, not only do we have, like, Product market fit risk, technology risk, execution risk, but we have, like, did Bob, the VP of sales, sleep with Jane, the wife of, you know, Bill, the VP of engineering, and they're both gonna quit on the same day, and the company's gonna zero. There's actually, like, it's amazing how, like, intimate the risks are, right? And I make light of it, but, like, these are, you know, does the VP of sales have a bad month, and, you know, the, the company is, these are that fragile. And so, you know, the optimizer's kind of silly, and so, you know, but you put on, you say, okay, well, we think that domestic equity has this real return, and this volatility, and then this correlation, and then you plug all the stuff in, you know this stuff inti…

AI assessment note: “Venture always ends up on the frontier.”

Q It sounds very Chuck Prince-ish. You know, the music was playing, and everybody's dancing. Back then, everyone castigated him for saying that, but there is this element of rationality to it, right, even though people felt like things were getting frothy. People continue to invest. How did you think about your participation, each of you, over those last couple years before last year? Chris, why don't you jump in?

A Well, look, I think everybody had a huge case of FOMO, and that, I think, is the genesis of the, you know, when the music's playing, you gotta keep dancing sentiment. But I'll actually say what I think is an unpopular thing, too, or maybe it's unpopular to me internally because it creates a huge amount of cognitive dissonance. I just pulled up the benchmark data for the dot-com bust. We all lived through that, and we would have these funds that it was like water torture. You know, they were just trickling away to, you know, asymptoting to zero it. I mean, how can you be down every quarter, 20% for like eight, nine, 10 quarters? We saw that with even like some of our best funds when I was at Princeton's Endowment. But in the end, those funds, they weren't great, but a lot of them returned money. I think the benchmark actually is like positive, like one point of seven percent or something for the 2000 vintage. So it actually becomes this question of if the secret sauce of venture is that we've got these stale prices and, you know, we, we have this like interim volatility that kind of like Tosses and turns all over the place. But at the end of the day, if you can just hold on long enough, you'll actually potentially get your money back even in a bad scenario. Maybe it won't meet the opportunity cost of equity capital and all that stuff. But maybe the risk premia all arises from th…

AI assessment note: “So, you know, off my philosophical course there, I actually think people like started looking back”

Q in later rounds are rich, maybe richer than what the public, you know, that might be a down round to go into the public market. We've seen a version of this before that didn't end well in the early knots. If you fast forward five years from now, What are the two or three different outcomes that we, that you think we might see a few years down the road?

A I think one thing that's really critical is that the venture ecosystem continues to produce companies that fundamentally change the world, right? That's almost cliche, where I'm from, but if you look at it today, you know, the largest transportation company in the world, Uber, you know, doesn't own any transportation assets. The largest, you know, lodging company, Airbnb, by some metrics, Owns no real estate, right? The, the largest retailers own no inventory, right? This is actually a world change, and some of these companies are, are private. Now the question becomes, you know, what are the, you know, what are the valuations? We've, I think, over perceived this stuff. The reality of it is, and, and you ask an interesting question because you say, you know, what conversation are we having two to three years from now? I think I'm going to take the easy way out, and I'll say the, what's the conversation we're having 10 years from now? Conversation we're having 10 years from now is the same as we, War in 99, which is when John Doerr said, in the short term, the internet is overhyped, and in the long term, it's underhyped, right? And I think we've, I think we're at that moment where we're overhyped in some areas, but underhyped in the long term, right? And I look at areas like, you know, robotics and, you know, AI and stuff that are, you know, really hyped up now, but like, long t…

AI assessment note: “I think I'm going to take the easy way out, and I'll say”