The Exchanges

Q I was going to ask about that. So these, these new managers, are you using them as scouts? Like, do you keep it bifurcated?

A Keep it bifurcated. Right. So, um, homebrew, Satya and I are individual investors in Screen Door as our Um, the other sort of VCs who helped get it started. We are a minority of the capital. The majority of the capital comes from large endowments, foundations, so and so forth. Um, we don't collect a salary from it, anything like that. So the only, my only upside is in the fund performing. I'm doing it because I care a lot about it, and I think it's fun. And the, the annual reports, the quarterly, there's, they go to ScreenDoor. They go to the team of three, um, who use it for their own underwriting and investment decisions and reporting. I don't have, you know, structural access to that. We're not processing that data to fill up our CRM, so and so forth. Is there collaboration, you know, opportunities amongst the portfolio and a homebrew, the portfolio and a forerunner, the portfolio and a precursor, obviously, and I hope they are, um, over, I think at the beginning, I probably sent more deal flow their way than they sent to me, but like over time that should, that should change. But I think of that more as like, um, uh, Like-minded investors collaborating to the benefit of founders rather than, hey, the cost of taking, you know, our money is, you know, you have to syndicate with us type of thing. I would never, you know, look to do that. Because ultimately I'm trying to, I'm t…

AI assessment note: “Keep it bifurcated. Right. So, um, homebrew, Satya and I are individual investors”

Q this current cycle? I mean, I was just, you know, around Milken, everyone's fundraising, they're trying to go out, um, and it's kind of a hard market to do it, most Portfolios have taken a slash, um, and there's lots of investors fundraising. So what kind of advice do you have for these newer emerging managers that are looking to like beat down the doors and become the next generation?

A Yeah. Um, well, I mean, besides all the stuff we talked about, which is like, what do I think the components of the successful firm are? If you're somebody who's in motion and you're deploying and you're trying to sort of prepare for your, you know, next fundraise or your first institutional fundraise or so and so forth. I guess the, um, two pieces of advice that I have, one would be like, be really self-aware and like confident, but also honest, right? So I sometimes see decks where the individual I feel like is, um, casting their previous experiences in a way that, um, is favorable, but doesn't stand up to Reference check doesn't stand up to reality. Um, they're marketing themselves as opposed to talking about their history of investing of operating so and so forth in a way that, um, says here's the sum total of what I've learned and accomplished and here's why I'm going to be a great manager. Um, the best investors make investments that turned out to be horrible, right? And if you just say you don't talk about those or you don't learn from those, then I don't know why the probability of the investments you make next year are going to be any better. It's sort of the, um, It's the way, you know, you talk about sort of the football, the quarterback throws an interception, but then when you look at the film, you can decide whether that's a pass that he should always throw becaus…

AI assessment note: “two pieces of advice that I have, one would be like, be really self-aware”

Q VC just entirely started to look different, and it's acting different, and there are just different incentives there. However, you and your partner Satya at Homebrew did something completely contrarian, and you decided to pull back and start, um, deploying as a self-funded fund. So could you just walk me through that and talk more about the incentives there and not And why you decided to not take outside capital?

A Yeah, absolutely. I mean, you know, so Homebrew itself was founded sort of late 2012, early 20 13. And it was an outcome of, uh, my friend and, and former colleague Satya Patel and I always wanted to work together again. And he had been running product at Twitter, left there. I had been running product at YouTube, was sort of preparing to make my exit out of Google for a while. And having that blank sheet of paper a moment to work together Led us to a conversation about, well, what would we do? Right. And neither one of us had ever talked about, oh, we should go raise a fund. So like, I think part of understanding why we made the decision we did in 20, 22 really sort of talks about that sort of how we started, which we started with the idea of, well, how can we spend the rest of our careers working together, working at the early stages of companies, which whether it was org chart or cap table was always where we had the most fun. And how can we keep things as simple as possible so that, you know, we can maximize the time together and the time with these founders and like not everything else that goes into, um, uh, you know, sort of large teams or, uh, lots of networking or whatever. It was like, I just want to work with great founders. And so that led us to say, well, there's a business model for that. It's called venture capital. Let's start a venture capital firm. It happened…

AI assessment note: “part of understanding why we made the decision we did in 20, 22 really sort of talks about that”

Q wants to be a venture capitalist. How has that made the screening process for ScreenDoor evolve and like What kind of trends have you reduced from those initial conversations or the processes in which you use to filter out fund managers or theses, or like what makes a real enduring manager versus someone who just wants to jump in and go for the ride and see how fun it is?

A Um, yeah, I think last year we got over 700 applications. So we, we see a pretty good cross-section of new emerging managers. There are some things that filter out just based on sort of, you know, The size that we are and sort of trying to make sure that we're doing a good job in our earliest years. For example, um, we'll look at North American and Latin American, South American funds, but we can't, we don't look at world global funds, right? So it's not because we've made a decision that, you know, emerging managers in Europe aren't as good as the U S or anything like that. Just, we can't do everything at once. So, you know, something is just like, are you in the box? You're in, are you in the box that We are prepared to underwrite. In terms of then of what we look for, you know, it's so much better now that we have this team of three who actually did this for a living before, because they have real systems, and like, I don't think we were making bad decisions before, but I think our process wasn't as good and quick as we want it to be. We're never going to be, you know, we're never going to be 48 hours to a term sheet like, you know, maybe a VC will be, but we're also not going to be nine months to a no, right? Like, um, and so we're trying to, we're trying to add a A level of deliberateness, transparency, and feedback to the, to the, um, venture process as a GP that I think,…

AI assessment note: “are you raising a fund or are you building a firm?”

Q deeper into the structure itself. So some people might think. You know, you have a self-funded fund. You two are billionaires. You're writing, like, two to five million dollar checks. You're doing 29 of them. Uh, maybe you are. I don't know. But, uh, could you, like, go a step further into how you structure the fund and how traditional funds are structured? What the difference is between the two?

A Yeah, when we, when we talk with our peers, like, when we announced this a few years ago, the three biggest myths or three biggest responses that were wrong were, Um, one, well, I hope you enjoy retirement, which is like, no, in fact, like I probably, you know, I'm going to work even harder now that I've got this plus our existing book of business, plus this fund of funds we're building called screen door. Second was must be nice to be a billionaire. I'm like, I only won't, I like, no, like, obviously I'm fortunate, but like, um, I own one house and it's the house I've lived in since 2005. It turns out that if you live below your means and are willing to go into your savings and the opportunity cost of giving up millions and millions of dollars of fees that like a lot of people who are saying that. Um, I believe, you know, had reached economic levels beyond mine, but it's really sort of like, what, why are you doing this and what risks are you willing to take? And then the third was must be so nice to not deal with LPs. I'm like, we love our LPs. We've always had a small group of institutional LPs who've been a joy to work with and we continue to work with. So, um, it was much more about, you know, sort of optimizing for the type of investing we wanted to do rather than, you know, sort of any, um, any other reason, you know, you sort of said, well, you know, talk to folks about…

AI assessment note: “talk to folks about how a traditional fund is structured and how this”

Q to funds, where you're backing emerging managers. You've also experienced and seen the massive upside of the potential of, like, the first and second fund, um, uh, positions, as well as, you know, having smaller funds. So I'd love to just understand more on, like, how did you get to develop Screen Door? What's the antithesis of, like, your, your meaning, your outlook, and what you're trying to build there?

A Yeah. So at its most basic, as you mentioned, screen door is a fund of funds. What does that mean? It means it's a, a fund and a team of people who, as opposed to investing in startups, invest in other VCs, right? And what they're trying to do is based upon their own strategies, pick a great group of VCs that they can invest in on behalf of their investors, you know, who might not, um, want to go direct, you know, might not want to build out a, might not have access, might not Be as skilled in sort of understanding, oh, who are the best managers and why? Um, but as you can imagine, there are lots and lots of, uh, you know, groups that want exposure to venture, um, can't buy it in the stock market. You know, if you, by that time, it's too late if those companies have gone public. And so how do you invest, you know, in, in, in venture? Some of them do it directly, right? Like, oh, I write a check to, you know, a homebrew. And some of them do it through groups that Pool that capital and then deploy it into a number of firms. Um, in addition to hopefully those people having good picking and access, it also, uh, if you're an investor in that, it makes sure that you're spreading it enough against enough managers to sort of lower the risk of, you know, uh, you know, failure, right? Um, so why did we, why did we start one? Uh, well, first I should note that today it has a team of three…

AI assessment note: “So at its most basic, as you mentioned, screen door is a fund of funds.”