The Exchanges

Q Well, I know this might be more of a personal question, but I'm really curious, structurally and economically, how do you swap funds? I know that there's a lot of extensive work that goes behind that, whether it's board positions, carry, do you get your carry bought out? How does this all work?

A So on the board positions, like, first and foremost, as personal a relationship as I have with each founder I work with, I have to remind myself that I was representing Kleiner Perkins on the board of all these companies that I served on, and I think with that, now that I've moved over to Lightspeed, there's this obvious, obvious question as to, like, who should do that on behalf of Kleiner Perkins, and so typically what you see in a situation like this is that those board seats do get transitioned, and my partners have been very thoughtful and very supportive of that transition, and making sure that the founders that I work with Uh, are in good hands. Um, so I'm really grateful for that. And so that's how that works. But, you know, that's a, that's a very complicated process and an uncomfortable one, of course, because I just, these are not just like people I work with, but they're lifelong friends, these founders, right? So that was a, frankly, a very emotional experience for me, um, and a difficult one for that reason. But I'm really, really grateful for how my partners at Kleiner Perkins, uh, helped me through that. So that's, that's on the board seats. And then with respect to the carry, you can think of carry similar to the way a startup employee vests equity, right? So they, they're, they're given an equity grant. That equity grant vests over some time period over multip…

AI assessment note: “those board seats do get transitioned... with respect to the carry, you can think of carry similar”

Q You have a little bit of a hot take on this, though. Um, why do you believe picking is ironically more important than winning as a lead investor?

A So, I think coming back to what I said, I think it takes to win in these very competitive processes. The, the, the limiting factor is really who do you choose to do that work with, right? You cannot do it with 20 different companies at once. And so there is this element of taste and picking that goes into that that I think you actually have to take very, very seriously. So like one part of that is like, okay, what are the few best ideas I have right now? Who are those really, really promising founders that I believe deeply in and think have tremendous potential that I'm going to go and spend that time with? It doesn't always work, right? You don't always build a great relationship. Sometimes you bounce off each other. And I think having the self-awareness to also say, hey, like, Maybe we don't vibe the way I'd hope we did, and that's okay. I'm gonna go move on to another idea is, is another part of picking. The other part of it, though, is sometimes you meet another company, and that company turns out to be extraordinary for reasons you didn't expect, and I think having the flexibility and the open-mindedness to then kind of reprioritize that and, and really pick that one to spend time with is, is a really difficult thing to do because of the sunk cost fallacy that goes into all the time you spent with others, but I think you have to kind of

AI assessment note: “The limiting factor is really who do you choose to do that work with”

Q on guard. You always have to be looking out for things, and I have a reason every week to aggregate all the top companies in one place and make sure that I'm keeping my mind sharp. Gotta keep your mind sharp. Exactly. I want to shift over into something a little bit more spicy, so we're wrapping up a bit, um, but why do you think ASI is already here?

A Look, for me, I think ASI is here in narrow pockets, right? Like when I use deep research, like I've seen the future. It's just absolutely incredible. Um, it, it, my eyes pop out every time I get back a report from that product. It's really, really special. Uh, I think what you see happening in, in code generation and some of these other more mature use cases for LLMs, like it, I feel like I'm seeing the future every day. And so intuitively to me, it feels like we have this, now this like higher power that is like super intelligent. And so therefore like ASI for me is here in certain areas and It's not to say that these LLMs don't have problems and that the AI doesn't have like holes in its ability to do things that we do well as human. Um, as Mark said, um, you know, venture's not, not under threat yet for, for good reason, right? Um, but I, but I think what, what I mean to say by, by making the bold statement that ASI appears to be here in some sense is that I think if progress were to grind to a screeching halt, we still have what I believe to be like the most incredible economic opportunity of our lifetime in front of us. And, uh, I'm very happy with what we have today. I'd be very happy if the next 10 years was about taking what we have today and applying it to the world and bringing it to consumers and businesses and every nook and cranny of their lives. But I also think …

AI assessment note: “I think ASI is here in narrow pockets, right? Like when I use deep research”

Q We've seen time and time again that companies are staying private longer. They have the ability to. It's attractive. They don't need to go public. How is this affecting the ventures class of receiving any sort of return on it?

A Yeah, so it's for sure a double-edged sword, right? Like on one end you have, ah, the challenge of how your early stage investments, ah, get, get liquidity, right? That, that's a big problem for many funds, ah, and what you're starting to see because companies are staying private longer is, you know, things like secondary and other alternative ways of, of, of generating liquidity for your investors are becoming more and more popular. So that's like one tension. But on the other end, what you start to see coming back to this group of companies that I keep mentioning staying private longer is that there is this new opportunity to, as an investor, Try to participate in supporting them in that effort and capturing some of the value creation that happens while they're still private companies that would otherwise have gone to the public markets. And so I think, again, that double-edged sword point is really just on one end, you have the challenge of how you get liquid with your early stage investments, and that is a real problem. On the other hand, you have this entirely new opportunity set on the late stage side to continue bridging these companies forward so that they don't have to go public, as you said. Um, and in doing so, you're, you're able to capture a lot of the value that they're creating as an investor, and that's, that's super compelling to LPs as well.

AI assessment note: “things like secondary and other alternative ways of, of, of generating liquidity”

Q What's interesting is I've been discovering a little bit of a paradox in the multiples from early stage to growth stage between tier ones and tier twos. Tier ones, mega funds are more apt to pay higher prices of the early stage and be more disciplined on the later stage, where it's the flip for the other side. Have you been seeing that? What's your experience with it?

A I, sometimes I struggle with this tier one, tier two thing because, um, beauty is in the eye of the beholder, and everyone has different perspectives on who's in each group. Um, but what I will say is that there are, there are definitely certain funds that come to mind that I won't name who have decided the strategy that they're going to employ is to, to use valuation as a lever to win. And, uh, it's not a crazy strategy, but it also puts a tremendous amount of stress on your returns if you don't pick right. And so, um, This is not a new strategy. There are actors in the system that are employing that strategy right now, and It's hard for me to necessarily delineate between tier one and tier two, but I will say that there are absolutely firms out there that, again, use pricing as a blunt instrument to, to win, and, ah, I would also say that the best founders don't typically respond very positively to that. I think they're really thinking more about, like, what's the right price for my company rather than, like, what's the highest price I can get? And I think that sophisticated founders arrive at their own conclusion on that, and they work with their investor of choice to Uh, find compromise there, and say, like, hey, this is why I think we should raise it this price. This is why I think we should raise this much money. And I think coming at it from this place of what's best for…

AI assessment note: “It's hard for me to necessarily delineate between tier one and tier two”

Q of that has to do with management fees. We had a hot take on this post by Josh Kopelman. Um, shout out to Hunter Walk. Big fan. Hunter Walk says, this is wrong. Wrong math. Should be about the fees the GP collects while storytelling to keep the dream alive before the results are conclusive. Are we stuck in a bubble of fees? Like, How do you see that argument?

A I think it just comes back to this belief that I carry that these companies that we're seeing are, they're alien beings. Like, we've never seen anything like this before, and these companies are growing at rates and at, at levels of scale that we've never seen before, and in, in, in all that together, to me, just leaves me in this position where it's just hard for me to see how investing in those companies right now will not lead to really compelling results for, for investors, and, ah, I think that's where, you know, you could see just tremendous gains, right? And I, I think ignoring that, that viewpoint sort of downplays the reality that I see, which is that these companies are like nothing we've seen before and going to be multiple orders of magnitude more valuable than those truly blue chip venture outcomes of the past five to 10 years.

AI assessment note: “hard for me to see how investing in those companies right now will not lead to”