a16z Podcast - a16z Podcast: How To Understand And Choose A Venture Investor

Episode Date: July 17, 2019

Incentives matter. So understanding the incentives of venture capitalists will help you decide if raising money from a venture investor makes sense for your business. In this first of a 3-part series, which originally aired as YouTube videos, a16z Managing Partner Scott Kupor talks with Frank Chen about how venture capital works: how the money flows, what Limited Partners (the organizations that invest in venture capitalists) are looking for, what differentiates the top investors, and what all of this means for an entrepreneur raising money. Want to learn more? Read Scott's book "Secrets of Sand Hill Road: Venture Capital and How to Get It" (https://a16z.com/book/secrets-of-sand-hill-road/). Stay tuned for parts 2 and 3. The views expressed here are those of the individual AH Capital Management, L.L.C. (“a16z”) personnel quoted and are not the views of a16z or its affiliates. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by a16z. While taken from sources believed to be reliable, a16z has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only, and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any fund managed by a16z. (An offering to invest in an a16z fund will be made only by the private placement memorandum, subscription agreement, and other relevant documentation of any such fund and should be read in their entirety.) Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by a16z, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by Andreessen Horowitz (excluding investments and certain publicly traded cryptocurrencies/ digital assets for which the issuer has not provided permission for a16z to disclose publicly) is available at https://a16z.com/investments/. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see https://a16z.com/disclosures for additional important information.

The content here is for informational purposes only, should not be taken as legal business, tax, or investment advice, or be used to evaluate any investment or security and is not directed at any investors or potential investors in any A16Z fund. For more details, please see A16Z.com slash disclosures. I'm Frank Chen, and today I'm delighted to be here with Scott Cooper. Thank you for having me. Scott and I have known each other for 15 years, maybe longer. Maybe longer than that. We were in the Hard Things book because we were both at Loud Cloud. And we've been here at Andresen Horwitz. This is our 10th year.

Yeah. Yeah. Is this the longest you've ever held a job? It is now that I think about it, right? Yeah, I mean, Loud Cloud Ops where if you include the HP acquisition, but ever quite got 10 years, right? Yeah, but almost, yeah. 10 years at a single entity.

It's like the longest for me. Yeah. So Scott is our managing partner. He was the first employee at Andresen Horowitz. He is also my boss. So this is great that you're here. Somehow in the midst of a fundraise in managing the firm, you went off and wrote a book.

And so we'll talk a little bit about that today. I try to stay busy, right? Yeah. So here's what we're going to do today. I'm going to pretend to be a startup CEO who is raising money, and I get a free reign at asking any question I want about the fundraising process, about how I should think about how much to raise

and who I'm working with. And Scott has promised to candidly answer all these questions. So this should be a huge treat for people who are thinking about raising money for their own startup. We also have some questions from Twitter that we're going to interleave into this conversation. So it's not just me.

Scott hosted a Twitter, Ask Me Anything, this morning, and we had some questions come up that we wanted to treat with a little more depth. And there were some questions we couldn't get to. So we're going to wrap that all into a package here. The three segments that we're going to use to talk about the startup journey are basically the chapters in a startup. So we're going to talk about how do I figure out which venture capitalist I want to work with? How do I raise money? And then how do

I build my company? So after the fund raise, the venture capitalist typically takes a board seat and then our relationship changes. So we'll sort of ask questions about that too. So you're ready? You ready? All right. Let's do it. Fantastic. So maybe let's start at the very, very top, and this is about sort of how do you pick a VC to work with. Like, why does the world need VCs? This was also a question that we got on Twitter. Like, how are the VCs helping the world address the most urgent problems that the world has? Yeah, so it's funny. So there was a time where the world needed VCs because the VCs had the money. Right. And so if you needed, you know, if you needed to actually raise money, that was definitely the way to go. And that was kind of

most of actually the first 30, 40 years of venture capital from kind of early 1970s to mid-2000s, I think, was characterized by that. You know, capital was scarce. The VC's had it, and therefore you went to the BC's to get the money. And so the banks wouldn't lend it to you. That's right, yeah. So, yeah, definitely, yeah. So, I mean, think of it if we even back up a step, right? Think of BC almost.

I think of it as it's capital, it's risk capital that kind of has to exist because there aren't alternative forms of financing that will actually finance those types of businesses. So you're right. You know, we do have these things called banks, and they do things called loans. And there are plenty of businesses where people might say, hey, great, that's a perfectly way to finance the company. The problem with loans is, number one, is obviously there's some.

risky categories like startups in general that, you know, they generally don't like. And then two is it's not permanent capital, right? So the idea of a loan, of course, is you have it for a period of time, you pay some interest on it, and then you've got to obviously give it back. And the theory of VC financing is, number one, to finance those very risky assets, but also to be able to kind of be what we'd call permanent capital in the business, right? So that, you know, you never have to give it back to me. I hope, of course, that you go public or something happens and I earn a return on that money. But, you know, you don't have to think, hey, five year some now, just when my business is starting to get going, do I have to kind of come out

of pocket and basically repay that money? Got it. So let's follow the money trail. So if we need VCs to fund things that banks won't fund, where do we get our money? Yeah. So we are lucky enough to have what we call limited partners. And there's a bunch of categories are probably the most prevalent and the easiest examples are, you know, university endowments. So we're sitting here on Sandhill Road. Stanford is just down the road from us. So Stanford has an endowment where you know, graduates have over time given money to. And the goal of that endowment is, how do I earn a return on that money? Because I need to be able to help subsidize the high costs of college education

and make sure that the professors are all taken care of. And so they build a whole portfolio of which venture capital is one component. But venture capital is a very important component for them because it's kind of their major high risk, high growth, high returning asset category. So if you look at Stanford, do you look at Yale, what they're saying is, hey, look, I need to earn 25, 30% annualized returns on this money. Venture capital is one way where I can put a portion of my money there. I'll then put some money in stocks and bonds and things that sort as well.

But basically, they effectively think of it as they lend us the money. We take that money, invest in great entrepreneurs like yourself, and then hopefully some years down the road we give them the money back with some interest. And the surprising thing is that they have a pretty big stake in private equity and venture capital, right, if they think about portfolio. And so maybe talk about their portfolio construction, sort of how much like a Yale or Stanford would actually allocate to private equity.

Yeah, so, you know, we talked about this a little bit in the book, but, you know, Yale was really kind of, you know, the founder of what a lot of people call kind of the modern endowment theory model. And the whole idea behind that is to have lots of different asset classes to provide diversity. And an asset class just means, you know, something to which you invest in, right? So it could be real estate. It could be literally like timber or oil and gas. It could be public stocks. It could be bonds. And venture capital and private equity, obviously, are a component of it. And what Dave Swenson, who's the person who, you know, kind of has run the Yale endowment for, I think, almost 30 years now, his basic innovation was, he said, look, if I could

find places where there is imperfect information in the markets, there's an opportunity for managers in those markets to hopefully earn excess returns, then you otherwise might be able to earn if you're just investing in public stocks. And so he said, look, what people like Yale and other endowments have is we have the benefit of time, which is the goal is for Yale to be existing in perpetuity. And every year, of course, he has to give some money to the university to kind of pay for annual expenses, but he's got a $30-plus billion kind of endowment that can live for the next 100-plus years. And so that allows him to kind of invest in things like venture, which will take a long time for them to realize, but in return,

that gives him exposure to hopefully imperfect markets that give him an opportunity for return that's much higher than other assets. So he might have, for private equity, you know, in venture, venture is probably almost 18, 20 percent of his assets. And then if you layer on other private assets. He probably has, you know, kind of 40 plus percent, maybe even 50 percent of his assets in the private markets. And, you know, that's a little bit, you know, higher than others. But the idea is he's just looking for abnormal returns, and he thinks the private markets is a great place to get it. Yeah. So 40 percent seems super high. That's great news for an entrepreneur, because not only does David Swenson have a lot of Yale's management money tied up in this asset class,

but people who have emulated Yale's portfolio strategy have also poured in money. And so as a result, a direct beneficiary from David Brinson saying 40% of my money needs to go into private equity. Yeah, so, and, you know, there's a historical, you know, anomaly here, which was in the, you know, before the kind of mid-1970s, you know, institutional asset managers like Yale actually were prohibited from being able to invest in assets like venture capital that were considered too risky. And, you know, kind of there were a lot of changes that came along the way. But basically, kind of there was this thing called the prudent man rule, which came in and said, hey, we think it's actually reasonable for. for pensions and other people to invest in these assets, as long as they do it, of course, in a reasonable way. And that really opened up the floodgates, kind of in the mid and late 1970s, to venture in private equity as a broad institutional asset class.

And you're right, we've been the beneficiary of that for the past 40 years. Yeah, great. So there's a pull of money, and then what David is chasing and all the fund managers like David, is they're chasing asset, sort of outsized returns. Correct.

Uncorrelated with public stock market or sort of, you know, other asset classes. Sure. So how does it work? How did the great venture funds make their money? And let's talk a little bit about sort of batting average and slugging percentage. Yeah, so we use the baseball analogy inside the book. But the basic way to think about a venture portfolio is, you know, about half, 40 to 50% of what we do, we're going to get wrong.

And there's this very euphemistic word that we have in this business, which I know you and I've talked about called, you have an impaired asset, which is a very polite way of basically saying you lost all your money, right? money, right? But it sounds much better to say it's impaired. Right. So you've got 40, 50%, that's, for all intents of purposes, is zero. And then you've probably got 20 to 30% where you make a little bit of money, right? You might get your money back. You might make two times your money, three times your money. That's a lot more fun. But if you do the math, right, if you've got 50% at zero and, you know, call it 30% at 2x, you can tell you're still not even back to one yet, right? You're still kind of negative. You've not filled the pothole that you've created for yourself by wiping out 40% of your portfolio of dollars. So basically what that means is the way this

business works, the difference between success or failure in this business means you've got 10 or 20% left of your investments that need to basically generate 90% of your returns. And so you have to find a Facebook or a Google or a Twitter or an Instacard or Airbnb where you can earn 10, 20, 50, 100 times your money. So it's a very kind of skewed distribution, right? So unlike, you know, kind of a normal distribution, right, where things are kind of, you know, normally distributed around a bill curve, you will hear people talk about the concept of a power law curve for venture capital, right? Which basically just means you have very small number of you know, N companies that will drive the very, very large portion of returns and then this

very long tail, quite frankly, of companies unfortunately that won't move the needle on your economics. Got it. So let's turn that into concrete advice for me as the startup CEO. So what type of business is going to be attractive to somebody who's optimizing their portfolio for sort of slugging percentage? Yeah. So that's the right way to think about it, right? So, you know, what, you know, you as an entrepreneur need to understand is what are the incentives that I have based upon the incentives that my investors have given me, which is exactly that, which is, you know, to continue the baseball analogy, I need to swing for the fences. I need to try and hit a home run, right? And so for you to determine whether venture capital is right for you,

you have to decide, okay, is that what I'm signed up for, right? Is there, is the market I'm going after big enough to be able to sustain a company like that? And then even if it is, on a personal level, is that the kind of business you want to grow, right? So maybe you decide, hey, you know what, I can build a really nice business here. And in two years, Google will come along and buy it for 30 or 40 or 50 million dollars and that's a life-changing event for me and my family and that's perfectly fine outcome there's you know there's no normative uh you know kind of reason why you shouldn't do that but that's probably not the kind of alignment of interest that you would have if you took venture capital the venture capital is probably disappointed with that outcome and they would want you to kind

of be playing for a much bigger opportunity and a bigger long-term vision got it so the reason that they come to my board meetings and say faster growth higher margins is right because they're trying to get the company to be as valuable as possible because they need, like, a huge Facebook-style return to cover up for all the mistakes they made. That's exactly right. So, you know, we, unfortunately, we don't necessarily know which of the companies at the beginning are going to turn out to be in that upper right quadrant of returns. And so, you know, everything is kind of option value from a, you know, venture capitalist perspective. And so they will, you know, be encouraging you to kind of try to ultimately find ways to get your company into that return profile. Okay.

So it's important for me to understand that as I go fundraising. the VC, which is there's going to be a situation where our interests don't align if I don't want to build one of these enormous companies. That's right. Yeah, exactly right. So does it matter when I go raise money with a fund? And here I want to talk about the J curve, right? So maybe explain the J curve and then let's talk about whether it's important that I understand that. Sure. So the J curve, and you'll see a beautiful picture of it in the book, it literally looks like a J, which means you basically kind of have this dip and then, you know, it comes up, right? And so the concept of the J curve is that in the early years of a fund, we are investing money.

So if you're an investor, if you're a limited partner in my fund, you have negative cash flow. So I'm asking you to give me money so that I can go and invest in what I hope is going to be the next Facebook or Google or Twitter. And so from your perspective, you are in the bottom, shallow end of that J-curve where you are negative in terms of the cash. We hope after three, four, five years, you kind of cross the X-axis and start to generate positive returns from a cash perspective. So what that means is it's mostly relevant for limited partners.

It has probably less relevance for an entrepreneur. The only relevance for an entrepreneur is you want to have a general sense of where in the fund you are and the investor is when you take their money. So for example, if these funds tend to be 10-year lives, right? So at the early days of the fund, if I invest in you and then two years from now you have to raise money again or four years from now, I probably still have some money left over in my fund because I'm at the relative early stages of the fund. Whereas, you know, if you come in in year five or six of my fund, I might have already invested 90% of the capital. And so when your next round of financing comes up, maybe I'm out of money, right? And so the J-curve probably is less relevant for you,

but this concept kind of where are you in the time diversity of the fund is a relevant thing as an entrepreneur for you to at least have a sense of so you know kind of how long-staying the financial power might be of that venture partner. Got him. So sort of the further along you are, the more risky it is for me and that you might run out of money for my next round. That's right. Right. And then all the other investors will start asking, hey, why is Andrews and Horwood's not filling up this round? That's exactly right. Yeah. Hopefully, if we're doing our job well, we go, we will raise another fund, right? So we might, you know, have money now from a new fund to invest. But, you know, none of that's guaranteed, of course. And so it's just,

it's something to think about, you know, kind of at the margin as, you know, you consider your venture partner. Yeah. You get money from your limited partners like university endowments. The general partners, do they also invest money in the firm? And do I need to know how much they've invested? Do I care? Or do I not care? Yeah, I think to answer your second question, I'm not sure you care that much. The general partners typically do invest.

It ranges anywhere from, you know, on the low end, 1% of the fund will come from gender partners. Some funds, it would be as high as 5%. So it's meaningful. Again, it's a little bit more the LPs care about it because they want to make sure, hey, you've got some kind of, you know, stake in the game here. and you're not just relying on other people's money, but you also actually have kind of your own money at risk as well.

And as funds tend to get older and more mature firms, I should say, and hopefully the partners have done well and they've accrued some financial profits themselves, then you tend to kind of see that in 1% to kind of shift up more over time as increasingly larger percentages of the financial well-being of those partners goes into the fund. So in theory, a general partner who has to fund 5% of a fund

has more skin in the game. But you're saying, as an entrepreneur, I shouldn't overweight that factor when I'm raising money. I wouldn't overweight it too much. Number one, you certainly don't. There's no public place for you to find it, quite frankly. You can always ask your venture capitalist about it. You might be one of the few people, though, who've ever asked them that question. It does go, you know, I think where it's relevant as an entrepreneur is it goes a little bit to kind of the staying power of the firm and how likely are they to be able to raise another fund, right?

So the more the LPs feel like they're aligned and, you know, kind of, you know, they have some skin in the game. the more likely, you know, of course, the LPs will also think this is a long-term partnership that we want to continue investing in. That's probably, again, the only kind of potential, you know, impact as an entrepreneur that that piece of information might provide. Now, aside from how much of their own personal money they have in a fund, there's also this notion you introduce in the book of GPs with economic interest only, versus GPs with governance interest in sort of the management company around the fund. Does that matter to me? Do I need to pick only one or the other, or am I indifferent? I think the most important thing, I think there is some relevance,

but I'd say the most important thing is more of a meta point, which is you and I both come from the enterprise software world, right? And for any of our viewers here who are used to enterprise selling, there's always this concept of enterprise selling of kind of, you know, who is your economic buyer, who is your kind of champion or your sponsor of the organization, and, you know, ultimately who's the decision maker, right? And so the way I would think about venture capital is in the same way, there may be different partners who play different roles as it relates to your fundraising process.

So ultimately, part of your job is to map the firm and understand, okay, what is the decision-making process? So at some firms, for example, maybe there are certain senior partners who always have to sign off on a deal to get something done. You know, here at Andrews and Horowitz, we do things differently, which is, as long as people follow the process, you know, consistently, you know, any single general partner has the ability to ultimately make a decision to invest and go on the board of a company. But understanding that's important, you know, understanding kind of, you know, if there are differences. So some people, you know, kind of use the term general partner to encompass, you know, different job categories. You know, for example, here at Andrews and

Horowitz, a general partner to us means you can write a check and you can sit on a board. And so if you understand that based on the different firms you interact with, you'll understand kind of the selling process in a way that I think will make it more effective for you to try to close your deal. Yeah. So it is like enterprise sales. You have to identify who. you're working with, what budget do they have, who owns the budget. That's exactly right, yeah. Rather than sort of narrowly asking the question, do they have governance rights and the management company, that's kind of their relevant.

I mean, that's more, quite frankly, sometimes that's more a symptom of how the firm is set up, but I think if you understand the decision-making process, then that will incorporate all information you really need to know. And then compare and contrast for me a little of the, I'm going to do Silicon Valley financial investors like us, right, versus sort of other categories. So maybe talk a little bit about how are corporate venture capital general partners incented and is it different? Like they probably don't have limited partners, right?

Because the capital probably comes from their corporation. And so what other incentive differences are there? And how should I think about when do I put those guys on the cap table if ever? Yeah, so corporate venture capital actually over the years has grown a lot. So kind of, you know, it was never that prominent. I don't know the exact numbers today, but something like 15, 20 percent of deals often have a corporate partner in them. So it's grown a lot over the last 10 years.

And so the answer to your question, look, they vary a little bit. So some of them, you know, like a Google Ventures, for example, is a corporate VC. You know, Google is their only limited partner in that sense. And so, yeah, you're right, they don't have to go raise money. Some corporate venture firms do have some external LPs, but most of them are kind of captive to the corporation they do. So it does change the incentive structure for them, right? Because oftentimes they're not purely financial investors, right? So they clearly don't want to lose money and they'd like to obviously earn a living on the profits from the business.

But ultimately, it's a diversification strategy for the firm to say, hey, look, there's new technologies that could come up and impact our business. This is a way for us to kind of keep an eye on that technology. Oftentimes, it's a pipeline for business development or even M&A opportunities. And so I think there's good and valid reasons to take corporate venture capital. The big advice that we often give our companies is the thing you want to be careful about is you don't want to sell your business to a corporate before you've actually received an acquisition premium for that. And what we mean by that is, right, if I allow them to invest at a point where they own so much of the company that, quite frankly, it almost makes it impossible, whether legally or just from an external perception perspective that nobody else could ever buy my business, you know, I've essentially kind of almost sold the company without, quite frankly, getting paid, you know, what you would expect to get paid for the company. So I think they can be great partners with, you know, kind of more limited economic interests. You want to make sure they don't have any rights, right, that would kind of, you know, kind of cause, again, other companies that, you know, might be interested in the company over time, either from a partnering or an acquisition perspective to kind of be scared away.

But in that context, they can be very good partners. So in my seat as the startup CEO, it sounds like the right order, the optimal ordering, if I'm trying to build, like, the biggest possible company that I can is try to find a financial investor first who doesn't, who's not trying to buy me, right? They're just trying to give me fuel so I can build. And then later maybe find a corporate investor or a set of corporate investors who can go together into a round. I think that's right. Or I think the third alternative is you could couple a corporate investor with financial investors, but probably just size them appropriately, right, where you might want to have the financial investor have a slightly bigger stake and, again, make sure that the corporate investor doesn't

have rights that might kind of deter future corporates from, you know, partnering or potentially being an acquisition partner down the line. Keeps my flexibility as open as possible. That's right, that's exactly right. Option value high. So, related question from Twitter. So what are the return on investment pressures and time horizons for corporate VCs?

And how do they differ from the ones you and I have at A16? Yeah, they're definitely different. So the way ours work, right, just to understand it is, our funds tend to be about 10 years long, right? As you know, and to be successful in this business over the long term, you probably need to return two and a half to three times the money that the LPs give you over that 10 year period

10 years is a little bit of an inside joke in this industry because actually even though funds legally are supposed to expire after 10 years, they often go 12, 13, 15 years. So let's keep the fiction and stick with 10. So over 10 years, you know, we need to basically generate those kinds of returns. So it matters, it goes back to the question

you and I talked about earlier, it matters a little bit about where are we in the fund when I invest in your company? Because again, if I invest in your company late in my fund cycle, I might have pressure to be able to kind of in a relatively short number of years before my fund expires to be able to show some results from that. And so that could have an impact.

The corporate venture partners tend not to have those constraints because they don't have to raise typically fund by fund. They typically just are investing off and off the balance sheet of the corporation. And so therefore arbitrary timelines are less relevant. And as we talked about earlier, they certainly have some financial pressures, right? I mean, I'd be hard-pressed, you think, for a corporate VC to stay in business if they always lost money on their investments. but the primary goal in many cases

is kind of not pure profit maximization but strategic maximization and so there's other ways that they can effectively kind of generate a profit that don't have the same kind of financial constraints that a pure financial investor would have. Got it. And then two more questions from Twitter to sort of round out

this section of how do VCs work and how do I pick one? Here's a question from Verroon on Twitter. What's the value of a specific advice and dedicated one-on-one help from a VC since like, look, you can crowdsource all this stuff, right? I can do a crypto IPO, and then I can get some advice from Twitter, and like, why do I need you? That's right. Well, it's funny.

I talked about this in the book, and you probably remember this quote. You know, our partner, Mark, has always kind of asked us the question, are we the last dinosaurs, basically, right? So, you know, we think we've got this incredibly advanced venture capital model, and, you know, maybe we're just about to, you know, kind of be extinct as we're all the last dinosaurs. That's right. And so I think it does point to a very fundamental question that the, you know, the Twitter users asking, which is, what is the role of it? venture capital, right? And so, look, my very simple answer is, you know, we used to live in a world as we talked about at the beginning here where the venture capitalists had the money, and that was, you know, a very defined role they had, which is if you wanted the money, you had to go there.

Today, look, money is, you know, we're awash in money, right? And there's venture capitalists, there's hedge funds. They'll probably always be someone else who's got more money than do we and a lower cost of capital. And so to me, the answer as to whether it's ICOs or crowd fund or anything else, whether those exist and whether venture capital and its current carnation exists, to me, is really a function of whether venture provides something other than capital. And, you know, obviously, you know, since you've been here since the beginning, you know, the whole way we set up entries in Horowitz, the way we did, was to kind of invest in, you know, 100 plus people in addition to our investing team who, day in and day out think about

how can we be valuable to our companies. And, you know, my personal view, and obviously we live this every day in the firm is, you know, for venture to be a viable entity for the next 10, 20, 30 years, capital loan is not a differentiator. And, you know, we will all have to find other ways to provide value. And so I think to the, to the, you know, Twitter person's question, he's right, which is if we don't do anything else, then you're right. We're no different than anyone else and you probably don't need us. And, you know, it's incumbent upon us to demonstrate the way, actually have some other form of value. Perfect. And then last question in this section, Broadstrokes. How does the VC game look different in 10 years? We've been doing it for 10.

Yeah, yeah. We're looking forward to the next 10. Yeah. So I think if you look at the last 10, the biggest thing that happened was the introduction of seed as its own kind of investable category. And, you know, for people who are old enough to remember, you'll remember these things called Angels, which were actually people who wrote money out of their own checkbooks. You know, Ron Conway being a very famous one and even, you know, Mark and recent event Horowitz before they started the firm here, we're doing that on their own. That really changed the whole competitive dynamic. I think for the next 10 years, I think you have a couple things that are going to happen. Number one is I think the competitive dynamic is going to continue to get even more. challenging, partly because of this issue we talked about that money is not scarce. There's plenty of availability of capital. I think the other phenomenon we've seen, which I think is going to continue, is this idea of companies staying private much longer. And so it used to be that companies would go public six, six and a half years after they were started. Now it's 10, 12 years. I don't see any reason to believe that's going to change. And I think the third big thing that we're going to see over the next 10 years is more of a blending of private and public markets. So today you have this

interesting dichotomy, which is you're private, you're private, you're private, and then we flip a switch, and all of a sudden, you know, you're public, and, you know, you have a stock price, and you have new investors, and, you know, we ring the bell at the stock exchange, all these fun things. I think there is a continuum that we're already starting to see, and I would expect over the next 10 years you will see a more active secondary market, which means a resale market for private stock that happens in the private markets, but that is a little bit, you know, may have some elements of regulation might look a little bit like a public market, but not quite all the way there. And so that we have more of a continuum of a life cycle of companies as opposed to kind of

this very sharp event. Exactly. Right. The day of where everybody takes the pictures. Yeah, exactly. Yeah. All right. So hopefully that gives you a great sense of how venture capitalists work, what their incentives are. And this is going to help you pick the right venture capitalist for you. If you decide venture capital is the right way to put money into your company. And now we're going to move on to part two, which is about fundraising and actually getting and negotiating term sheets. So for those of you that will join us for part two, we'll see you there.