The Exchanges

Q How have the competitors to those precede to IPO, those few firms with basically unlimited access to capital responded in a competitive environment, say at the early stage?

A Well, it's interesting, right? You know, there's this great article. Actually, Ben, you found originally and sent to me about Tiger called playing different games. And I would say it's been some firms have adapted to it. And some firms have said, we're going to try and play the same game. Like I think Excel is a great example of this. Excel saw what Sequoia was doing by bear hugging their companies and saying, we're going to be a life cycle investor seed IPO. And Excel said, great. We've got a great brand. We've got great portfolio. We've got access to capital. We're going to do the exact same thing. And so you look at them, and they've now got billions and billions under management in their current suite of funds. Then you've got firms that say, you know what, we're going to niche down, and we're going to be known for something really great in what we do specifically. Ben PSL is a perfect example of this, right? Like, you got early stage Seattle, that is what you guys do. But the incubation and the early stage investing, or like True Ventures, another Great, great example of this. They started really as a seed fund. Now I think the current suite of funds is like seven hundred fifty million, maybe a billion, but they're known as like the premier early stage venture investors in a few areas. Like if you're doing connected hardware, like they did Peloton, right? Like at first, li…

AI assessment note: “some firms have adapted to it. And some firms have said, we're going to try and play”

Q Was there anything different in doing that work on the venture capital firms compared to the companies?

A Ooh, you know, actually it was surprisingly similar. Sequoia is a wonderful example. It sort of embodies all of this. I had been such a admirer and tried to read and consume everything that was written about them in my career as a venture capitalist. Cause I wanted, you know, like they've always been the best. Why are they the best? And it turns out there's just like a lot of really obscure stuff out there. Like the university of California at Berkeley did this amazing oral history project of early Silicon Valley. Um, And posted the raw transcripts of, like, the research interviews, one of which being with Don Valentine, and it's 50 pages of Don going on about his history, and nobody's gonna read that. It's buried at the Berkeley Library website, but it's there. You can find it and read it, and similarly on YouTube. So it's surprising just how much is out there. It was very similar to what we do with the company.

AI assessment note: “actually it was surprisingly similar. Sequoia is a wonderful example.”

Q Why don't you go through the lead-up?

A Yeah, the lead up, once people started to realize this, there's one more important implication of what we were talking about a minute ago, which is, I kind of think of it as this concept of shame that has slowly been dwindling in venture capital. Shame about your losers, you know, and it gets back to the stock picking versus options thing. People, even in the industry, but certainly externally to the industry, you know, the web fans, the pets.com, later the fab.com, or some of the other big blowups, you know, Andreessen was in all of them. And it used to be that, like, oh, if you're in a big blow-up, ooh, that's bad. That could be career ending. That could be firm ending. But again, when you're thinking about it as options, there's nothing wrong with it. It's great. I want to be in the big blow-ups because it means I'm chasing volatility, and that means I'm going to get into huge winners as well. So once this shame idea went away, then the shame around raising lots of capital went away too. So Both the existing firms, you know, you see, like, take Sequoia, right? You know, they used to be 253 105 hundred million dollar funds, and those were big. You know, they were like the biggest funds out there. Well, shoot. Now, you know, they've got a twelve billion dollar global growth fund. They went to China. They went to India. They're going to Europe now. The existing firm said, oh, w…

AI assessment note: “the lead up, once people started to realize this”

Q So before we get to the swaths of capital that's coming to late stage, how did this play out in the earliest stages? Because one thing you can't do at the same time is scale your assets and put in, write all these tiny, tiny checks that the old venture capitalists were doing.

A Well, maybe, you know, I think that was another thing that people thought. People thought that when you're investing at the early stage, you got to be hands on. You got to be a board member. You got to really help these companies. They need, they're such young companies. They need help growing. They need advice. They need all the resources your firm can bring. Maybe, you know, and I think that contributed to this moving slowly during this period of the buildup today. Like this didn't happen overnight. It took a decade from 20 10 to 20 20 for this to happen. But this was one of the knocks against Andreessen Horowitz that everybody would say, like, ah, how could they be doing all these companies? How could they help them? You know, et cetera. Well, it turns out there's a whole class of entrepreneurs, a large percentage of them that don't need or want your help. So I would actually push back. I think it actually can scale quite well. Y Combinator's a perfect example of this. They've done thousands and thousands of companies.

AI assessment note: “I would actually push back. I think it actually can scale quite well.”

Q and an awakening. If that's not how you would describe your investment management tech, request a demo at ridgeline.ai. And now back to the show. What's been the place in this ecosystem for all of these technologists that have done incredibly well because they were early at Google or Facebook or Amazon and they have capital and they want to be involved. Where does that fit into the ecosystem today?

A Oh, wow. That is also changing rapidly and a broader menu of options has never been available. Angel investing is alive and well, right? Like I think about angel investing these days as this great analogy that applies to lots of things about when you're filling a jar with rocks. If you want to fill a jar, you need like the big rocks in there to take up the most volume. You know, that's like a lead in around that's a Sequoia. That's an Excel lightspeed bench, you know, anyway, anybody who's leading the round. Then you've got maybe some pebbles, and then you've got the sand that fills in all around. There's lots of sand, and there's lots of opportunity. There's never been more opportunities for sand, but some of those grains of sand become rocks, and we're seeing that. Elad Gil is like a perfect example. Where did Elad's career start? He was early at Twitter, I think, and he started a couple companies, Color Genomics. He was an entrepreneur, early employee, entrepreneur, Silicon Valley operator type. He started doing a lot of angel investing. He started deploying more capital. You know, next thing you know, he's leading rounds. Next thing you know, he's leading large rounds. I don't know the exact figures, but I guess he's probably deployed hundreds of millions, if not billion plus of capital over the last few years, and it's just him.

AI assessment note: “Angel investing is alive and well... There's never been more opportunities for sand”

Q So within that paradigm of crypto, how do you think about brand?

A I think it's more important than ever. On the investor venture capital side of the equation, I think what this has Done thus far and will become even more extreme over time because capital is not as important. But there are so many projects, and there's so much noise out there, even for people who are very steeped in the ecosystem. You need a signal to follow, both as an investor and as a participant in these networks, and so the signals become really, really, really valuable. You're seeing this, no place is this more playing out than in the NFT world right now. NFTs, these are projects that there's huge amounts of value transacting, but To anyone, even an expert, like how do you tell them apart, right? And so the difference is signal. So folks like Kevin Rose over at True Ventures have become real taste makers. When he buys an NFT, when he has an NFT artist on his podcast, people take that as a real signal. And this is happening in all parts of crypto. And then that starts to build density in the network. Solana, the same thing, right? Like there are other L one blockchains out there that purport to offer the same benefits and features as Solana. But Solana has built this incredible brand and following and then they bootstrap up the node network and the validators and applications that are built on Solana and then value bootstraps.

AI assessment note: “I think it's more important than ever.”

Q massive rising tide. More public markets have been receptive. You've had The large pools of capital and late stage, there's always another round for a company that's doing well. So how do you go about differentiating what matters in terms of driving returns? Is it being part of the right company? Is it being part of the right sub sector? Is it having the right strategy as a venture capitalist?

A Oh, that's a good question. I'm reminded of when I was in business school, I was lucky I got to take a class with Andy Ratcliffe, who was one of the co-founders of Benchmark, teaches at State for Business School now, and also founded and is still, I think, the CEO of Wealthfront. He's a true Renaissance man. I sort of asked him at the end of the course, I was like, because I had worked at Madrona before, and I was going back to Madrona afterwards. I was like, young whippersnapper at BC, like, oh, you know, tell me, how do I be successful at BC? I asked this to everybody back in the day. Andy's take on it is like, You got to have a strategy and your strategy has got to be unique to you. And that is your journey is to both as an individual and as a firm is to figure out why a great entrepreneur is going to take your money. And I can't give you the answer, you know? And I think that's the journey a bunch of these firms either have been on or need to go on. And it kind of looks different for everybody. You know, one thing we've seen, which I've seen firsthand, a lot of people are doing is what if You do venture without doing venture. I have a small fund. I'm a podcaster now, but I still, I've never invested more in more companies or more money in my career while I'm a podcaster. You know, Paki McCormick's doing the same thing with not boring. Patrick's doing this with invest like t…

AI assessment note: “You got to have a strategy and your strategy has got to be unique to you.”