The Exchanges

Q And so you're doing venture capital. More recently, I've been seeing your name and your face pop up on plenty of podcasts. So you have one with Jason Calacanis for This Week in Startups, and you're also doing one with Eric Thorenberg at Turpentine. So how did this VC route transfer into podcasting?

A Yeah, it's great. I'm also, I'm ad retargeting you, so I might be, I might not be on as many, many podcasts as you might think, but, uh, but appreciate the kind words, um, first with Eric. So, uh, as you know, Eric started a network called Turpentine, um, and for, for many years, people had told me to do a podcast. I didn't want to do a podcast because I think it's, you know, I'm big on, on coming up with Creative differentiated strategies. I didn't think at its, at its face doing a podcast was anything too clever or too unique, but me and Eric had a three and a half hour dinner at my place in Miami. Um, I think it was the beginning of last year. And he basically said, you know, we, we basically both decided that it would have been a good podcast, our conversation, uh, just, we weren't recording. And then, uh, he basically said, you know, would, would you like to, would you like to start a podcast together? And because of Eric and because of his incredible media reach and his reputation and all those things, I actually gave it a serious thought. Um, and I came back and I said, you know, what if we start a podcast interviewing limited partners and focusing on the very opaque world of limited partners? Um, you know, limited partners control, uh, our, our biggest part of the venture ecosystem and the venture ecosystem in many ways. Creates the future of humanity. So it's an import…

AI assessment note: “me and Eric had a three and a half hour dinner at my place”

Q a rational exit window. Let's start to sell it now. It might not become twenty billion dollars when it IPOs, or it might not become like five billion dollars when it IPOs, but Looking across our portfolio, five hundred million dollars, seven hundred and fifty million dollars, that looks pretty good. Um, is that when you would be considering this kind of strategy or would it be mostly multiples based?

A You mean valuation versus multiples based? I think you have to do both. So if you think something could only be worth 1.5 billion inside a billion, and there's a lot of risk, I think you, you have to sell all of it. That's really your, your analysis, right? I'm talking about some things that five hundred million has 10 X more potential. I think you sell 20% of it at that point, just to return. And one of the things that people don't think about is what is your LP base and what do they want? Your LPs are your customers. Maybe, and this is rare, but maybe your, your family offices want you to get, you know, a 12% return predictably. And maybe that means that you keep it in if it's, if it's growing at 20%. So it also depends on the LP base. Typically you are the riskiest part of your bucket. Uh, Chris Presti has a very long last name. Uh, uh, he, he manages three percent of one hundred forty billion dollars state of Wisconsin investment board, right? So he's paid to take risks. Um, so if I was to deliver an eight percent to him, you know, that would be, that would not be the point of that asset class in his portfolio, even though, even if his entire portfolio is made to return seven, eight percent. So I think it really depends on your LP base as well.

AI assessment note: “You mean valuation versus multiples based? I think you have to do both.”

Q incredible. Um, I spent some time in the LP world when I was at a corporate venture fund. I do know that all different types of LPs exist amongst institutional family offices, um, and multi-stage strategies. So it's, it's great that you're bringing light to that and you've done over 40 episodes. Um, I'm curious between working with Jason and yourself getting more experienced in podcasts, what are the secrets?

A What are the secret sauces? Yeah. Nice thing about podcasts is you get to extract, extract the best practices from everybody. Um, so, uh, there's a couple of things. So one is one of the keys to being a better podcaster, just like with any skill is to continue doing it. You do something 30, 40 times, you're going to get better at it. I don't even think one should even judge their skillset until episode 10. Uh, that there's nothing more cringe than seeing yourself on camera. And what you're really experiencing from a psychological standpoint is the Delta between how you perceive yourself and what you actually are. One of the first things that happens when you, uh, do a lot of podcasts, you start to really appreciate individuals like Jason Calacanis and how good they actually are. When I jumped on my first podcast with Jason, I was like, holy crap. The, the Delta was so high, but I also got excited because I'm like, look, if I, If I learn, if I become better, there's a lot more room for improvement. So the first thing that I would tell you is just rapid repetition. Um, I've been doing two podcasts a week now, I think for about 10 to 15 weeks, which of course, you know, not every podcast makes it. And I also do Jason's podcast. So I do a minimum of three podcasts a week, but really it's about five or six a week. So the second aspect is active listening. I had a podcast earlier tod…

AI assessment note: “one of the keys to being a better podcaster, just like with any skill is”

Q been really fun to see all of this evolve so quickly and to see even partnerships and applications emerge, um, between the companies, whether it's like Rabbit and Anthropic or Anthropic, uh, or I'm sorry, Plexity. And perplexity is now doing lots of partnerships with many people and starting to deploy their search model. If we're talking about alpha, does alpha really exist in VC? Where do we find alpha?

A That's one of my favorite, favorite questions. Um, so yes, extreme alpha exists in VC, but it also extreme dilution of alpha exists in VCs without, without saying specific funds. If you look at, you know, some of the best funds in the world, you know, One way that I look at it is stage. I think if you look at their seed in series A, if you just carve that out and put it in the portfolio, I think they would be perennially a 10, 15, 20 X. In fact, one of the things in venture, it's a little bit confusing because you have a lot of scale, scale benefits and scale disadvantages. One of the biggest scale benefits is brand and, and, and reputation, all these things. Obviously the main scale drawback is The dilution of alpha. So if you look at C in series A, I think these funds would be returning 20, you know, and I think once in a while they would return a 50 X, uh, you need, you, you only have to look as far as benchmark to see what returns are possible for platforms that do not scale. So there's a lot of alpha, but there's also a lot of beta, uh, in terms of later stage investing, which isn't necessarily bad. You know, perhaps that portfolio is a two X, uh, perhaps it's a 1.75 X, um, Totally good portfolio. One of the paradoxes of asset management is that as your fund scales, you actually become more attractive to the majority of capital in the markets, not the majority of LPs, but …

AI assessment note: “so yes, extreme alpha exists in VC, but it also extreme dilution of alpha exists”

Q Why are you against DPI? It's a lovely thing everyone should be distributing.

A Yeah, my, my, my IR will like murder me. No, DPI, DPI is a very, very, very good thing. The problem with DPI is that it is a lagging indicator. So it shows how good Molly going back to your seventy-five million dollar, uh, fund one, you won't have DPI until You know, 2034. Really? Maybe 2033. So that means you were a good VC in 2024. What happens between 2024 and 20 33? What happens there? Many different things happen. The industry changes. People get fat and lazy, uh, in terms of like motivation. Um, you know, people get rich, the people get addicted to management fees and don't care as much about the carry. Um, Partnerships break up. Uh, people move. Uh, I just saw like a famous unicorn found, like they forced him to go, come back to San Francisco. He had raised like at a five billion dollar valuation. They're like, you have to go back into office, right? So stuff like that happens. So a lot of things that happen that would technically you had, yeah, great. Congrats Molly. Like you have a seven X return on your fund one, you know, top, top one percent. That doesn't mean that now your 20, 34 vintage is going to be good. So I think DPI is important. And DPI is kind of like ground truth. Like it's an equalizer. You could be the worst marketer in the world, but eventually like your DPI will catch up. Right? So it is a great equalizer is the most empirical fact, but it is a highly…

AI assessment note: “The problem with DPI is that it is a lagging indicator.”

Q out of COVID restructurings, right? Like, We're kind of optimizing our business stocks. We're creating more efficient businesses, um, getting more fit as some investors like to call it. Um, so there's a lot of movements going on and it's hard to know which signals are going up and going down, but I'm curious from your perspective, what are you most excited about? What are you spending your time on?

A One thing that every great investor LP and GP will tell you is that We don't try to be macro investors. So you really want to be time diversified in the asset class. Um, if you look at a lot of high net worth individuals, not family offices, they literally come in at the height of the market. There were super bullish in 2021, and then they leave, you know, 20, 23, 20, 24, which I believe will be some of the largest vintages. So, you know, absent of being, of coming in when things are difficult and coming out when things are good, which is very difficult to do. One key thing is to always be in the market, always be time diversified. And there's a very actionable way to do that, which is you make sure you invest in six to seven year increments. So you're putting in a sixth of your money every year, um, to make sure that your time diversified. The nice thing about venture capital funds is they typically, although they technically have five year investment periods, they're typically deployed two to three years. So you already have some time diversification versus investing in a single startup. So the first aspect that I would say is time diversification is very key. The more volatile a time period, the more time diversification is key. Second aspect, uh, I would, I would advise is a stage diversification, you know, early, mid stage, late stage. Some would argue, uh, right now, late…

AI assessment note: “We don't try to be macro investors. So you really want to be time diversified”