The Exchanges

Q Yeah, Joelle, one of the things related to that There is that concept of, okay, we're just going to deploy the same amount every year, but over the last couple years you had funds coming back faster and larger, and then you have it on the other side where you have funds that you are raising. How did that play out over the last couple years?

A It was very frustrating because, and this is not just for us, I think this is for every institutional allocator. Everybody has a model of deployment, and when the cycle goes from the promise two to three years to one year, your model gets completely shot. Not only did that happen, but also the funds got bigger, and then there was massive product proliferation, so everybody had an opportunity fund, a growth fund, or Different sector funds where they were specializing, and I hesitate to use that illegal term, pay to play, but I think we all know that, you know, there was some implicit understanding that in order to preserve your allocation, you really needed to participate broadly, so it wasn't just firms coming back to market so quickly, but firms having multiple products. I mean, it was a dizzying pace of commitments, and so it's very difficult to explain to Prospective LPs while you're coming back to market with our funds, you know, two years sooner than we had originally articulated through no fault of our own because we wanted to maintain the ability to support our managers as they raise subsequent funds.

AI assessment note: “when the cycle goes from the promise two to three years to one year”

Q You know, you go through periods like this, and you get the proverbial tide going out, and a Warren Buffett line about who's swimming naked. I'd love to hear your thoughts on who seemed to be the tourists in this last cycle that may not be the ones who are looking so good today. And Joelle, why don't you start?

A I think it's the same people who were the tourists Previously, it's people who don't do this a 110% of the time. So there were a lot of hedge funds. There were a lot of late stage capital. Those people are gone. You know, they're licking their wounds. They've spent a lot of money. And, um, and so the people that I think the three of us invest in are still there working harder than ever to try and generate the returns and work with their portfolio companies that they're so passionate about. And so, um, You know, crossover investors, hedge funds, late stage monies. We can pick, you know, SoftBank just said they're not making any new investments. So they were probably the most guilty. So, you know, start at the top of the stack and move down.

AI assessment note: “There were a lot of hedge funds. There were a lot of late stage capital.”

Q You start at that auspicious time right at the peak of the bubble. What was it like going through that as a startup business?

A So I think because I had a capital market lens, I've always been a public market person in terms of the discipline that I think the public market imposes. And I knew a lot of people who were in the private equity business, and they had been telling me about what was going on in the bond market. And so I was watching how nothing could get financed. And so it was clear that we were nearing the end of this cycle. But you know, you can't do anything about it because you've made commitments to venture funds. And so you're sitting there knowing you're about to watch a train wreck and there's very little you can do. That was a moment of serious reflection to try and think with the capital that we still had available to commit, what kind of course corrections could we make to try and earn our way into some sort of reasonable return over the next several years. Venture at the time funded everything that was going to fund WorldCom, and MCI, and all these next generation, what were called Celex, Competitive Local Exchanges, and so they all needed lots of infrastructure, and it cost fifty million dollars just to start one, and I think It became clear that all those companies were going bankrupt, literally bankrupt, and they would not be buying any equipment, and all the firms at a semi along the way of building that infrastructure that was necessary for those carriers had no business, and …

AI assessment note: “sitting there knowing you're about to watch a train wreck and there's very little”

Q So as you look back, what are some of the misses of funds that you were right there and for whatever reason decided to pass on?

A Oh gosh, there's so many. The first one that comes to mind, because it's so painful, is Emergence. We had the opportunity to invest in Emergence too, and I think because we knew so much about software when they said that they were a SaaS-focused fund and they had put two million dollars into Salesforce, we were like, well, that's not that unique, partially because we had this growth equity portfolio that was focused on software, and so we had seen that evolution, and we just Totally missed the opportunity to invest in that fund. I think they've had spectacular returns over multiple fund cycles, and That's particularly painful, because we knew them well, and we had the opportunity to invest, and we just, frankly, it's not we, it's me. I missed it. No one else did. Me. I'll take, it's on me. I don't know that there are other examples that are that apparent, that obvious, but we've missed many funds that have gone on to do exceptionally well.

AI assessment note: “The first one that comes to mind, because it's so painful, is Emergence.”

Q I'd love to chat a little bit about blockchain. You have a new-ish vehicle last couple years investing just in that space. How do you decide when to dive in for a new area like that to create a new fund?

A Well, first of all, let me be clear. I give a hundred percent credit to my team on blockchain. So, My partners have done an absolutely spectacular job of being very early five years ago in doing a deep dive. We have the luxury of time because we don't really do that many things and blockchain really is an outgrowth of what we saw happening in the venture community. I would credit Chris Dixon and Andreessen and the team at Notation Capital Small Fund in Brooklyn that really had an early lens on that this was going to be an important fundamental technology. To pay attention to. And my team picked up on that and was all in. And so at the time that they engaged, there weren't that many managers that were maybe 25 to 50, and so they could spend the time talking to people who had lots of time to talk to us because there was very little institutional interest in what they were doing. And so when we thought about it, we thought about it two ways. One, we thought about it offensively in the sense that we thought this was a sector where Our limited partners could make a lot of money, but we also thought about it defensively, that if this was in fact a fundamental technology, which we think it is, that it was highly disruptive to a lot of industries, not the least of which would be the venture capital industry, and therefore it would behoove us to become knowledgeable about it. And we jus…

AI assessment note: “One, we thought about it offensively... but we also thought about it defensively”

Q But Joel, you mentioned on the re-ups of some of those that you've been with for a while, a significant increase in size being one of the kill criteria. Curious, what are some of the other things in some of the relationships you've chosen not to continue with managers relative to some of the other ones where you have?

A Yeah, so, you know, a couple things. One, firms doing what we didn't think they were going to do, i.e. you were going to be investing at a certain point in the cycle, and you've completely changed that, rationalizing that because of the environment, you were, quote, disciplined, and you invested early, but at crazy high valuation. So, like, that makes no sense. Also, you know, when funds get bigger, the team gets bigger. So, like, if you're betting on three people to do the investing, and suddenly it's 10 people, and most of those people don't have investment backgrounds, Or long track records. It's just not the same team. And, you know, for people to say they're going to learn, I just don't want them learning on my LP's money.

AI assessment note: “One, firms doing what we didn't think they were going to do”

Q I'd love to turn to clicking down on this for each of you of how you're responding. And maybe it's easiest to break that up into what you're doing in your portfolios with re-ups and what you're doing when you're seeing new funds or how you're treating new funds. And Joel, why don't you kick that off?

A Sure. With respect to re-ups, we're doing a complete re-underwrite of each manager, which, by the way, is what we've done historically. We just didn't have a lot of time to do it in the height of the frenzy of the 21, particularly 21 period. And I think we've made some painful decisions to transition away from managers that we've had, in some cases, you know, a longstanding relationship with, in some cases, maybe only been an investor for a couple of funds. Um, some of it has to do with massive expansion of fund size. I mean, when funds triple over four years, it's not what we thought we were going to be investing in when we first committed to a smaller team that had a great thesis and a great opportunity to outperform. We don't tend to like larger funds, and we don't like later stage investing, largely because we think that is an area that is sort of more correlated to the public markets, you know, and an arbitrage opportunity, and so at a period of Massive, great inflation. That's the area that's going to prove to be most susceptible to correction. We're always open for business, for new funds, and, you know, we, we as a fund of funds, like anyone else, we offer access, and we offer historically the opportunity to identify funds earlier on in our, our, their evolution before they become institutionally well-known, and, you know, we've just continued to do that. We're actually…

AI assessment note: “With respect to re-ups, we're doing a complete re-underwrite of each manager”

Q Yeah, Joelle, one of the things related to that There is that concept of, okay, we're just going to deploy the same amount every year, but over the last couple years you had funds coming back faster and larger, and then you have it on the other side where you have funds that you are raising. How did that play out over the last couple years?

A It was very frustrating because, and this is not just for us, I think this is for every institutional allocator. Everybody has a model of deployment, and when the cycle goes from the promise two to three years to one year, your model gets completely shot. Not only did that happen, but also the funds got bigger, and then there was massive product proliferation, so everybody had an opportunity fund, a growth fund, or Different sector funds where they were specializing, and I hesitate to use that illegal term, pay to play, but I think we all know that, you know, there was some implicit understanding that in order to preserve your allocation, you really needed to participate broadly, so it wasn't just firms coming back to market so quickly, but firms having multiple products. I mean, it was a dizzying pace of commitments, and so it's very difficult to explain to Prospective LPs while you're coming back to market with our funds, you know, two years sooner than we had originally articulated through no fault of our own because we wanted to maintain the ability to support our managers as they raise subsequent funds.

AI assessment note: “when the cycle goes from the promise two to three years to one year”

Q You know, you go through periods like this, and you get the proverbial tide going out, and a Warren Buffett line about who's swimming naked. I'd love to hear your thoughts on who seemed to be the tourists in this last cycle that may not be the ones who are looking so good today. And Joelle, why don't you start?

A I think it's the same people who were the tourists Previously, it's people who don't do this a 110% of the time. So there were a lot of hedge funds. There were a lot of late stage capital. Those people are gone. You know, they're licking their wounds. They've spent a lot of money. And, um, and so the people that I think the three of us invest in are still there working harder than ever to try and generate the returns and work with their portfolio companies that they're so passionate about. And so, um, You know, crossover investors, hedge funds, late stage monies. We can pick, you know, SoftBank just said they're not making any new investments. So they were probably the most guilty. So, you know, start at the top of the stack and move down.

AI assessment note: “crossover investors, hedge funds, late stage monies. We can pick, you know, SoftBank”

Q I'd love to turn to clicking down on this for each of you of how you're responding. And maybe it's easiest to break that up into what you're doing in your portfolios with re-ups and what you're doing when you're seeing new funds or how you're treating new funds. And Joel, why don't you kick that off?

A Sure. With respect to re-ups, we're doing a complete re-underwrite of each manager, which, by the way, is what we've done historically. We just didn't have a lot of time to do it in the height of the frenzy of the 21, particularly 21 period. And I think we've made some painful decisions to transition away from managers that we've had, in some cases, you know, a longstanding relationship with, in some cases, maybe only been an investor for a couple of funds. Um, some of it has to do with massive expansion of fund size. I mean, when funds triple over four years, it's not what we thought we were going to be investing in when we first committed to a smaller team that had a great thesis and a great opportunity to outperform. We don't tend to like larger funds, and we don't like later stage investing, largely because we think that is an area that is sort of more correlated to the public markets, you know, and an arbitrage opportunity, and so at a period of Massive, great inflation. That's the area that's going to prove to be most susceptible to correction. We're always open for business, for new funds, and, you know, we, we as a fund of funds, like anyone else, we offer access, and we offer historically the opportunity to identify funds earlier on in our, our, their evolution before they become institutionally well-known, and, you know, we've just continued to do that. We're actually…

AI assessment note: “With respect to re-ups, we're doing a complete re-underwrite of each manager”

Q What do you think happens with the scale players that really grossed up? So they're not the tourists, but what Andreessen's done over the last decade, Sequoia with the one fund, some of these players that have really, as you mentioned earlier, Chris, the reason why you had to be bigger than first round was to play with these big boys. What's going to happen with those models?

A So one word we haven't mentioned in this whole conversation is liquidity. Like show me the money. And, you know, when you've raised multiple funds, and there's no money coming back, and that's sort of part of your model, I think what's going to happen is there's going to be Less money to go around to people who had built models on scaling pretty aggressively, and so maybe you pick a couple of funds, and maybe you get penalized for picking a couple of funds because you just don't have the capacity to all those funds. I was talking to a leading endowment yesterday that said that 75% of their venture allocation was to three managers. That's a problem. Well, it's to three managers, each of whom has eight underlying products, and I can tell you, Mathematically, that not all of those funds is going to be an outperformer, and that's part of the problem is you've historically had to do this pay-to-play thing, and that's not going to work going forward because people don't have as much capital to do that, and so unless, I know everybody's jetting to the Middle East, but I don't think those people are that, uh, stupid or promiscuous, but that's what we hear. Oh, if we can't raise it here, we're going to Dubai.

AI assessment note: “there's going to be Less money to go around to people who had built models”

Q So you mentioned portfolio construction a few times. What is your axe on what makes a good venture portfolio construction?

A Yeah, so, well, particularly in venture, as you know, particularly if you're investing at the earliest stages of company formation, Owning a lot of a company that ends up being a category defining company or a fun returning company. Is so critically important, and that's hard to do. That implies that you are a highly valued individual to gain that right to have that kind of ownership on the cap table. It's very hard in this environment where there's so much capital to buy up ownership as things progress, and so that's why I think increasingly you're seeing every large firm raise a seed fund because they want to get in sooner to get that ownership and be able to write that big check and preempt the series A. Very competitive market. But, but that's what's really important is also having sufficient reserves to be able to put additional capital into your winners. And the corollary to that would be for those companies that seem to be struggling, either find a reasonable exit path for them, or maybe not fund those companies. But, but really understanding that, because in venture, it's missing the upside, not protecting the downside that's going to lead to not have a successful fund. The most important thing is being in those right companies and owning enough of them.

AI assessment note: “having sufficient reserves to be able to put additional capital into your winners”

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

A Oh, that's an easy one. I would say, you know, first and foremost, Russ Carson, who's the founder of Welsh Carson Anderson and Stowe, believed in me very early on in my career, and I had the fortune to work very closely with that firm during my tenure at Alex Brown, where we were privileged to underwrite many of their companies, particularly in the healthcare sector. And in addition, and probably more importantly, is Russ is an extremely philanthropic and generous individual who now has devoted himself to It's a myriad of activities where he's made such an amazing difference and really wants no credit for it. He at Accolade is our true north, because sometimes I say to the team, what would Russ Carson do in this situation? And it's a pretty easy answer to figure out that that's the right thing. And then I would say the other person is, this goes back very early on in my life when the head of admissions at Stanford Business School took a risk on one of the more untraditional candidates and admitted me for some reason that I still to this day don't understand because, you know, I had absolutely no business being there, but I'm eternally grateful because obviously it changed the direction of my career and also, um, Gave me access to a community of incredible people in my classmates and in alums going forward that I'm eternally grateful for that opportunity.

AI assessment note: “first and foremost, Russ Carson... the other person is... head of admissions at Stanford”

Q So let's go through domain expertise. Are there sectors that are more important than others where that domain expertise sits is more impactful as a venture capitalist?

A Yeah, although they get discovered pretty quickly, right? The generalist firms have moved very aggressively into fintech. 10 years ago, it was Ribbit and QED. QED mostly is a family office, but still very active in fintech because fintech wasn't a thing. But then last year, I think I saw data suggesting that Fintech was the biggest category in venture capital in terms of accruing dollars, which means that it's not just specialist firms, it just becomes well known. And then generalist firms perhaps have an individual partner or a number of partners that end up focusing on those areas. So information travels very quickly in the venture community. So they have to be big sectors of the economy. And things that are changing for some reason. And so I think we all understand that COVID really catalyzed changes in terms of how we interact with financial institutions and accelerated the change in that behavior by people will say a decade. That's also true of healthcare where telemedicine had been something been talked about forever. And all of a sudden overnight, It catalyzed a massive change in consumer behavior, and it's not going to go back the other way going forward. And so companies that may have languished then all of a sudden gotten huge tailwinds. And so sometimes it's the confluence of domain expertise and some very important tailwinds that makes you look like you've been a ge…

AI assessment note: “Yeah, although they get discovered pretty quickly, right? The generalist firms have moved”

Q So what happened with the progression of the business when you went through a bear market?

A I did not raise fund one, fund two, and fund three in rapid succession. So we were able to, in 2005, we were able to raise our second fund, which was a hundred and fifty million, and somehow or another, I had the good fortune to find a capital partner that gave me fifty million dollars, and we were able to raise a hundred million dollars. In that fund, we articulated that 50% of what we did was going to be early stage venture And 50% was going to be growth equity, which is not what we hear about in the growth stage today, but more firms which we backed, like Toma Bravo in their first software-focused fund, Excel KKR in their second fund, which was really their first software-focused fund. Firms like that.

AI assessment note: “in 2005, we were able to raise our second fund, which was a hundred and fifty million”

Q So what did you do in your business?

A Well, it was a pretty dark time. Remember, I started the firm in 2000. 2001 was nine 11. So we go from the collapse of the internet bubble in 2000 to nine 11, which was a horrendous time. For our nation and the ensuing years were pretty bleak. We were a hundred and fourteen million dollar fund of funds. When it was presented to investors, it was presented as an early stage focused venture fund of funds. We took, as I mentioned, these slots that we had with managers that we had funded previously and said we would be funding those managers, but at a reasonable size given our pool of capital was a hundred and fourteen million dollars. And then when the internet bubble burst, and it became clear that continuing to fund early stage venture capital in the face of a nuclear winter was probably not a great idea, we slowly migrated to funding some firms like Golden Gate that were investing in cash flow positive businesses.

AI assessment note: “we slowly migrated to funding some firms like Golden Gate”

Q So given the inability to predict this, as you look through the managers to their underlying portfolios, curious what you're excited about in terms of those potential outliers, what types of companies, what types of industries still have you very excited?

A We skew very heavily towards enterprise versus consumer because we think it's easier to predict success when someone's writing a check versus how individuals respond to a product or to a new social media engagement, etc. You know, every time I listen to one of these conference calls of public companies, I hear digital transformation is still in its early inning, so I'm going to go with that one. The enterprise, you know, security, the amount of data, the way we do business, The fundamental disruption that's happened as a result of COVID in terms of how we live and how we work and what we expect and how we interact with technology. And I think, you know, the pace of change is only accelerating and the amount of data is accelerating.

AI assessment note: “We skew very heavily towards enterprise versus consumer”

Q So if the seed valuations are mostly holding up, but in some of the later rounds, we're seeing that contraction. Somewhere in that stage of growth of a company, they're going to have that flat round, or some of the fundamental metrics have to catch up with that earlier valuation that hasn't really budged. Where are you seeing that across funding rounds?

A Everybody did the Green, yellow, red of their portfolio, and how much cash does each portfolio company have, and you're on the right side of the angels if you have 24 months of cash, because you got to realize you got to start fundraising at 18 months, not at month 24. The other thing we've seen is for companies that managers deem to be doing well, a lot of inside rounds sort of giving more runway to those companies, so I don't think we've seen the down round and all the difficulties that are going to happen for those companies where, to Beezer's point, there's just not enough evidence of progress and not enough capital to support the zillions of companies that have been created over the last cycle. So we haven't seen that yet. I philosophically think that debt on any venture company is a disastrous idea, particularly in times like this, because the banks are not going to be patient.

AI assessment note: “I don't think we've seen the down round... So we haven't seen that yet.”

Q So if the seed valuations are mostly holding up, but in some of the later rounds, we're seeing that contraction. Somewhere in that stage of growth of a company, they're going to have that flat round, or some of the fundamental metrics have to catch up with that earlier valuation that hasn't really budged. Where are you seeing that across funding rounds?

A Everybody did the Green, yellow, red of their portfolio, and how much cash does each portfolio company have, and you're on the right side of the angels if you have 24 months of cash, because you got to realize you got to start fundraising at 18 months, not at month 24. The other thing we've seen is for companies that managers deem to be doing well, a lot of inside rounds sort of giving more runway to those companies, so I don't think we've seen the down round and all the difficulties that are going to happen for those companies where, to Beezer's point, there's just not enough evidence of progress and not enough capital to support the zillions of companies that have been created over the last cycle. So we haven't seen that yet. I philosophically think that debt on any venture company is a disastrous idea, particularly in times like this, because the banks are not going to be patient.

AI assessment note: “I don't think we've seen the down round... So we haven't seen that yet.”

Q And let's talk a bit about brand. Everyone thinks about venture being a serially correlated business where the benchmarks or the Excels or the Sequoias have access that others don't. What do you see when you look through the companies in the portfolios of the managers you invest in about that story and whether it plays out in practice?

A Yeah, I think venture capitalists will tell you that the team that you back matters the most, and there are extraordinary numbers of very talented teams coming out of large, successful technology companies, whether they're Stripe, or Facebook, or Google. And so, because they've been associated with those companies, they can pick those people out when they exit those companies and get to know them early on. And I think founders will tell you that while they do pick firms, they really pick the individual partner. So if you're a marketplace consumer facing company, your number one draft pick is Jeff Jordan at Andreessen Horwitz, and you get a lot of ancillary services from Andreessen, but you really want Jeff on your board. So I think part of it is reputation that's been built over time in terms of their level of sophistication and knowledge of how to shepherd these companies to the IPO market or to a trade sale if that ends up being the route that they pursue. So I think that that is true, and I think it's more a function of the domain expertise to the individual partners, and then the support that they get from the partnership as a whole, and that sort of feeds on itself where I think people do have a sense of, I always call them the 10 top five venture funds, because everybody has a different list, and it does move around a little bit, and it's a little bit unfair because there…

AI assessment note: “So I think that that is true, and I think it's more a function”

Q What are the characteristics of a first-time fund that you'll invest with relative to one that you take seriously but don't?

A Well, that's a great question. I think a lot of it is partially, and I don't mean to dodge your question. I mean, partially, you know, we have a portfolio, right? So we have a fairly robust portfolio of managers, and we like Many of them, or most of them, or all of them. So to add a manager is, right now, is somewhat of a challenge, unless we have a new product where we have the capacity to add. Lots of managers. So sometimes it is, is this manager accretive to our portfolio in terms of what it is that they do? But basically, we like people who are trained in the business. They've apprenticed somewhere else. For us, we don't need a referenceable track record and attributable track record, which I know is very important to certain institutions, but We can sort of gauge how good is this person in terms of being a deal partner, in terms of sourcing, in terms of really having a differentiated reputation in the community. Part of it is, as our managers get bigger, we really like smaller fund sizes, so we have had a lot of a hundred and fifty million dollar growth equity managers that end up scaling over time, but initially, maybe they had a Pledge fund before they started their firm, and so we can see a bit of a track record. There's a small team. They've worked together. They know each other well. They're coachable. We can help them understand how to build an institutional firm. So…

AI assessment note: “we like people who are trained in the business. They've apprenticed somewhere else.”

Q So when you bring that experience to bear, and now we're seeing it again, there's always this balance between you want to be supportive of the venture firms that you like and continue to like, but if they're coming back rapidly, you're losing that vintage year diversification. So how do you approach that?

A So I think a lot of, I've talked to a lot of my colleagues in the business, and I think maybe this is a, a rationalization, but we sort of look at our allocation to a manager, and We think of it over three years instead of over one fund cycle, and we sort of divide by three knowing they're going to be back sooner. So you create your own time diversification that way. I'm not sure that's a great answer, but it doesn't mean that that particular fund won't be at risk, right? But at least your dollars that you normally would allocate to that manager are hopefully spread over a longer period of time. And then you maybe will revert back to something else. It's hard to say. I think it's concerning. And also, the last decade has been very favorable to all of us that have been investing in this asset class, and there are a lot of young people within those venture firms that have never experienced a down market, and certainly young founders that have never experienced inflation, rising interest rates, inability to raise capital, etc. So I think there's some painful lessons that are going to come down the road. I mean, it's not always going to be Like it was, but it went on for such a long time that there's sort of a whole generation of people who haven't experienced what we've been through investing over 30 plus years.

AI assessment note: “We think of it over three years instead of over one fund cycle”

Q same problem. There's more money that you're deploying coming back. How do you think through what became the denominator effect as when public markets sold off and Chris said, oh, maybe stale prices are okay in venture because if you wait long enough, the businesses do smooth out the volatility. How did you manage the deployment cycle and helping your clients think through how to do it on their side?

A For a while, it all worked, right? Because we had a very vibrant IPO market. We also invest in growth equity, where there were a lot of transactions of companies getting bought by financial buyers and strategic buyers. So for a while, you know, we were sending Bunny back to the LPs, and then to your point, the music stopped and has ground to a halt. So I don't think we're any different than anyone else. Everybody's trying to figure out what is the appropriate Valuation for a lot of these illiquid assets since we know what's happened to the denominator, which is the public markets have collapsed. Bonds performed horribly. The only thing that did well last year was oil and gas and some multi-strategy hedge funds. Most people don't have enough exposure to that to matter. So I think what you're seeing is a flight to quality where people are being much more disciplined in terms of re-ups with managers and also sizing things appropriately. And frankly, You're going to see a lot of turnover in the LP base for managers broadly, as people see who really performed well, and what was a very promiscuous environment, and those people who stayed at the party too long, as my dear partner, Ophel, is inclined to say.

AI assessment note: “people are being much more disciplined in terms of re-ups with managers and also sizing”

Q I'd love to dive into each one of those a bit. So let's just start with size and capital. We've seen this movement, say, led by Tiger Goblin, high velocity, seemingly less price sensitive, and kind of arbitraging this late-stage private and the public markets. Where do you think that goes?

A So what, I'm not sure that I'm smart enough to really know the answer to that, but I think it's a different philosophy. I think it is very much of a portfolio approach that is born out of their experience in the public markets. And so I think they are probably underwriting to also a different return profile than what we aspire to get in venture capital when we back companies at the earliest stages. So I think you've got to keep that in mind. What I'm hearing is in that cohort of companies in that specific sector, They hopefully will have picked the one that's gonna be the statistical outlier and be the home run investment, and so obviously right now we're experiencing a pretty dramatic correction in the public market where I think the public market companies are much cheaper than what we're seeing done in the private market, but maybe over time that works its way through. I mean, they've been extraordinarily successful over 20 years, and I'm not sure I'd be the one to bet up against that. It's just a different strategy, philosophy, That's much more akin to being a public portfolio manager.

AI assessment note: “maybe over time that works its way through. I mean, they've been extraordinarily successful”