Animal Spirits Podcast - Talk Your Book: Why Aren't There More IPOs?

Starting point is 00:00:00 Today's Animal Spirits Talk Your Book is brought to you by Vanek. Go to Vanek.com to learn more about how they can help you access private markets. That's Vanek.com. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. All opinions expressed by Michael and Ben are solely their own opinion and do not reflect the opinion of Redholz wealth management. This podcast is for informational purposes only and should not be relied upon. for any investment decisions.

Starting point is 00:00:32 Clients of Bridthold's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. Michael, I love a good straight shooter. On today's show, we have one. We talked to Chris Monoffa. He's a head of private growth strategies at Vanek. And he enlightened us with some information today that was new to us. Because there's not a lot of data as far as private markets go.

Starting point is 00:00:58 Not nearly as much as public markets, obviously. And I think it's fair to say now that the 2021, 2022 period is maybe one of the crazier periods ever for like late stage growth companies. Yes. In terms of pricing, things gotten just absolutely insane, right? Like it's like the hangover scene the next day where everyone's walking through the hotel room and there's beer bottles everywhere and there's a tiger in the bathroom and everyone kind of wakes up goes, what happened? Who was I talking to about this? Probably Josh. I can't remember the context of the conversation.

Starting point is 00:01:26 But we missed. Oh, it was actually on T-KF. A comment was made about valuations back then. And I said, listen, I get it, not to absolve everybody. Oh, maybe it was you and I of their duties as an investor. But like, we were all a little bit, a little bit drunk. Yes. It was an exciting time.

Starting point is 00:01:43 And yeah, you're right. There was tons of new. And obviously no one saw AI coming, which was kind of the next thing. So you're right. It's not everyone that's absolved there, but there was just so much money sloshing around. Right. And that was, yeah, it was a different period. And maybe one that we'll never see again.

Starting point is 00:02:02 But Christian kind of set us straight and told us like why there's a, I mean, I guess if you have a private investment on your books and you don't have good see-through that there hasn't been a round in a while with a pricing, you should probably give it a haircut. Yeah. Not a Ben Carlson haircut, a Michael Badnick haircut. There we go. All the way to the skin. But think about 2020, 2020, 2021.

Starting point is 00:02:21 Everybody was at home all day, every day. Hop on a Zoom. Hop on a Zoom. Well, and think about the growth in business startups then to people, like the ideas, and it was an exciting time. Funded, funded, funded. Yes, you and I had a lot of conversations with people who was just like, I have an idea. I don't have a business model, but I have an idea. People are throwing money at me.

Starting point is 00:02:40 You can't blame people for taking that money. And, yeah, there's a lot of money sloshing your own. So we kind of did a state of the private markets with Christian in terms of the IPOs and what it means for private markets and why there haven't been more IPO. So this was a really fascinating conversation. So as I'm concerned, the fact that he said there's a thousand, this is the stat of the show, a thousand unicorns essentially, and just six of them have had a down round in the last, what do you say, 12 months or something? So these things are just not, these things got so, these companies got so much money

Starting point is 00:03:09 and they don't have to reprice, but you can make the assumption most of their valuations are way, way too high. Interesting stuff. But it's not going to be a car crash. It's going to be, what, a flat tire that catches up with you five miles down the road? Sorry, I'm reaching on it in my mind. analogy there. Anyway, here's our talk with Christian from Benek. Christian, welcome back. It's great to be with you guys. Last week, I was talking with Josh about

Starting point is 00:03:34 Airbnb and the stock is doing quite well. It's at about the highest level it's been at since it came public. And we were talking about the business and the underlying fundamentals and what's changed. And one of the big stories or the primary stories as far as I'm concerned, high level with Airbnb is the starting valuation. It came public in 2021 during a very different environment, trading at whatever, 70 times sales. I didn't even know what it was. Company was unprofitable, and the market cap just didn't make any sense. And Chesky and team have been operating. And it just, you know, it took time, took five or six years to grow into that valuation. The market in 2026 looks a lot different than 2021, but we are still dealing with some of the bad

Starting point is 00:04:22 decisions, some of the sloppy, investral, behavioral decisions that were made back then, where do you see the growth equity environment today? Yeah, I mean, it's a spot-on question. We talk about a lot here. I think, you know, as you said back in 21, you had just these absolutely incredible valuation runs without, in many cases, the underlying operating metrics to support them. I think now you have this environment where you have companies that used to take maybe eight to 10 years to hit 100 million in revenue. They're hitting it in 12 to 18 months, right? In some cases, you have companies hitting a billion revenue inside of a couple years, which is just, it's just incredible. So I think to your point, there's definitely a dynamic when you have all these valuations running in private

Starting point is 00:05:06 markets where some companies are going to take longer to grow into them, right, once they go public. And I think in our market, you have a situation where there's more concentration of value, more concentration of capital, concentrating in fewer and fewer numbers. So back in 21, I think you had just like ubiquitous run up just across all these innovation themes. I think now you're seeing some of that in our world in private markets, but more and more of it is being driven by fewer and fewer companies. So I think that's what we're seeing now.

Starting point is 00:05:37 And in some cases, I think, frankly, the valuations have gotten ahead of themselves. And in other cases, it's actually warranted. Is it harder to say disciplined in this environment because there's just so much more money in private markets now where it's like, hey, you talk about these concentrated deals. It's like, take it or leave it. You know, everyone else wants to throw their money in here too. So how hard is it to be disciplined in a market like this?

Starting point is 00:05:59 Because it seems like that was kind of what was going on in 21 and 22 is that there was so much money sloshing around. People were given these really high valuations just because people were throwing money at them. Yeah. I think in this time around, there's more money but going to fewer companies. And so if we focus on the fewer companies that are getting the money, you're right. Some of these valuations are like really hard to swallow. Like one of the biggest things we're facing right now, you know, we've stepped back and look

Starting point is 00:06:26 at the major themes, right? Major themes that we think about them. On one side, you have AI touching everything, right, like software, hardware, physical. On the other side, you have the whole reindustrialization, right, of the economy, whether it be space, defense, advanced manufacturing, right, energy. One of the biggest things that we're seeing is companies being awarded valuations without actually haven't demonstrated the ability that they can produce products at scale, right? So you have companies in like the defense space, for instance, in certain areas that are generating,

Starting point is 00:06:58 you know, all sorts of capabilities, autonomous systems, and they're getting valuations that essentially give them credit for executing on a rollout of multiple product lines. I think for us, like that's the biggest thing that we're getting concerned about and while we're we're pausing, other investors are not. And I think to some extent, the TAM is so large that you're giving them credit because maybe they're good seasoned operators and you say, hey, they did this before, they're going to do it again. So you can kind of get behind why people are doing it. Frankly, we're trying to avoid that. And then there's different tactics you can use like by secondaries, maybe at like better pricing to offset some of that valuation froth. But you're absolutely right.

Starting point is 00:07:38 It is, it is hard to be disciplined. 2000, I guess post-GFC through pre-COVID was a really nice glide path. for private markets. There was a lot of, there's a lot of money, subsidizing a lot of really interesting companies that ultimately transformed the world and returned a great amount of money to the investors at every stage. And that environment is now over.

Starting point is 00:08:04 We're in this weird place where you mentioned companies are getting to a billion dollars faster than ever. And it's obviously very exciting to have growth rates like this, which poses another problem. Investing during disruptive times and disruptive technologies, who the hell knows where this is going and companies that can get to a billion dollars overnight or similarly overnight are they at risk of disruption because holy cow look what they did and now there's a million other copycats yeah michael so you know we have a saying if it goes up like a

Starting point is 00:08:34 rocket it could fall like a bomb right so like a lot of these companies it's questionable what the durability and shelf life is of these businesses right there's no moat in many situations in some in some instances in hardware in particular, like capital almost becomes the moat. So your ability to outraise the cohort that you're competing against, in some instances becomes a bit of a moat. But if I could just step back a little bit because you're right, like zero percent interest rates, right, for 10 years, in some instances seems like it was great. The reality is, as you point out, on one hand, that led to everything getting funded, good and bad. Frankly, we've been seeing that in the past several years as well, although it's starting to

Starting point is 00:09:21 tighten up a little bit. But if you actually look at the data, there's still a tremendous amount of unrealized value locked up from those ZERP-oriented capital deployment vintages that investors have not received, right? There's one of the lowest kind of distribution cycles over the past kind of five, six, seven years that we've seen in a very long time. And just because, you know, SpaceX goes public and maybe an Anthropic or an Open AI goes public, it's not going to change that overnight, right? More and more of the exit value that you're, you know, reading about is in fewer and fewer names.

Starting point is 00:09:58 The story that's not being told is there is a tremendous amount of unlocked value that's continuing to sit out there. And frankly, and, you know, this isn't, you know, meant to be Mr. Doom. But there's going to be a lot of capital destruction from that era, from companies. that have been rendered obsolete and that frankly have not pivoted enough and don't have an ability to raise more capital to sustain themselves. So you're absolutely right. The low interest rate cycle definitely led to some good outcomes. The ending of the story is not yet written. I have a fairly good sense. I think of where it's going for a lot of the market and it's concerning. Christian, it's funny you mentioned this. I was looking at a report from Pitchbook this morning, private equity zombie problem.

Starting point is 00:10:43 And they say, of the 13,509 PE-backed companies currently in U.S. sponsor portfolios, 33.8% of the total universe have been held for more than five years. And 2,536 of, again, that 13,509 have exceeded the traditional exit window. So GPs are sitting on more than $860 billion in buyout nav across funds that are more than seven years old. And the problem, as we discussed earlier, not surprisingly, the problem is most acute among the 2018, 2012 vintages. So what does the zombie problem? How does this ripple across the rest of the pond, the investable landscape? The other aspect of that on the buyout side, Michael, is those companies are all levered, right?

Starting point is 00:11:35 So you've got a leverage problem on top of the duration issue for the equity investors. You have a leverage problem. And an interesting problem. And an interest rate problem, right? When you look into the buyout assets, I mean, the world we focus on kind of the later stage venture growth. These companies typically don't have leverage. They don't deserve it. They're not often like printing cash or dividends, right? They're just investing into growth. And I'll give you one other stat that's kind of similar to that, which also comes from Pitchbook recently. We're having a debate internally here. Maybe this is all asked us as like a trivia question for you guys. So there's roughly like a thousand reported of these unicorns in like the venture growth landscape, a thousand of them. Some other publications say there's more than that. Let's just say it's 1,000, okay? How many of those do you think have reported down rounds in the past 12 months? Because we hear a lot about up rounds.

Starting point is 00:12:28 How many of them have actually reported down rounds, would you guys say, of the 1,000? That'll be a small number. I would guess a small number. No, I was going to guess 30%. 300. Six companies. Yeah, because they don't want to yet, right? Yeah, that's what I was thinking.

Starting point is 00:12:42 that people that those down rounds are company. That's kind of where you're going here, right? Is that I told this to Mike about a month ago, I said, like it just seems like the reason these companies aren't going public is because they don't want to admit that they're overvalued. Right. I mean, that's telling what you're getting at, right? It's a huge issue, right? So these companies are going to make the runway last as long as they possibly can until they have to reprice themselves. Now, you can on one hand, say some of them may be profitable. Okay, great. If you're profitable, you don't need to raise money. God bless you. The reality is most of these companies, shocker, are not yet profitable.

Starting point is 00:13:16 So they're using the runway and extending it as long as they can until they have to reprice, until they get bought on the cheap, or until they go away. And this is a follow-on trivia question. So how many of these companies, the 1,000 companies, right? What percentage of those would you say have not priced a new round? in the last two to three years. Oh, wow. I'm afraid to answer.

Starting point is 00:13:46 80%? Yeah, 80. Sounds good. About half. Wow. So about half of those companies, you're talking about probably low trillions in market cap of arguably stale market cap value. These are the companies that were raising every six months.

Starting point is 00:14:01 They were. They're not now, right? But to your point, they raised enough money where they have this runway. And to Michael's earlier question, a lot of these companies have probably been, been disrupted in many ways? A thousand percent.

Starting point is 00:14:14 How many of them are software? Let me ask you that, Christian. What percent of the number of software? A lot. I can come back to you with the stat. The answer is a lot. This is not me being like Dr. Doom. This is just saying that you're looking at these numbers, right?

Starting point is 00:14:27 I've lived in this world the past 25 years. The reality is it's not all sunshine and rainbows, right? Everything's not SpaceX or anthropic. So, like, we have to step back and say there's going to be some incredible wins, right? There's going to be some incredible success stories. You have companies raising three, four rounds in a 12 to 18 month period. Each one's successively larger than the next one. But the frequency of that across the book is smaller.

Starting point is 00:14:53 So there's more concentration of value and more capital flowing to fewer managers and to fewer assets. The question is, what happens to the rest of them? Well, let me ask you this. You know what's great about this model? I think investors mentally understand that the 20, 21 vintages are terrible. and maybe they see AI as their get-out-gill free card, and they think that the 24, 25, 26 vintages will be better. And by the time these numbers really show up as actual cash returned

Starting point is 00:15:23 or lack of cash return to investors, all right, I mean, it's nine years ago, right? So these numbers will show themselves actually they will mark to market in 2029. Who cares? It's so old. What do you think about that? So one, you're right. However, if you factor in that the exit activity for the past 10 years has been pretty low,

Starting point is 00:15:48 you have a situation where you have investors that are already quite overweight illiquid assets. And unless you can see a path to liquefying that through increased frequency of M&A or IPOs, a lot of these institutional investors are tapped out. Now, why is everyone spending time focusing on the RQA? RIA and wealth channel because there's a new channel of capital to access that doesn't have a lot of that legacy overhang of these in some situations, right, like zombie capital. And so I think that's one a good thing because the ecosystem can continue to access capital. We have to be careful for all the reasons that we're talking about.

Starting point is 00:16:28 But unlike the past, I would say it's not as easy as to say we're going to kind of keep raising. And by the time this catches up, we're on two, three funds from now. I think you have a problem. There's a problem. There's an unrealized problem that increasingly needs to be solved, especially for your more institutional grade investor. So they're going to have a much harder time fundraising, because you're right. Hey, we did fund three a couple years ago. It's time for fund four, either pony up or you're not going to be included anymore. But a lot of allocators are probably saying, no, we're going to wait. You're still, you're still haven't called much capital. So what does that just mean that fewer deals going forward? Or what's the, what's the outcome here? So one word, secondaries. So I've been in secondary since the early 2000s. And back then there was probably like five, six billion of annual deal volume. And everything was just playing musical chairs with LP stakes, right? Like an endowment needs to sell their LP stake for this, whatever. It was this very kind of uniform market focused on LP interests. And the last 20 years, you've seen this evolution where now annual deal volume this year will probably be a quarter trillion, at least. And at least half of that, it's going to involve everything but LP stakes.

Starting point is 00:17:43 So basically, these GP leads you hear about, we were working on them 20 years ago before we had names for them. So like fund recapitalizations, winding down funds, strip transactions to manufacture liquidity for the GP ahead of exits so they can get capital back to the LPs to recycle. What kind of discounts are you thinking here? It depends on, one, the asset class and two, the underlying fund and manager, frankly, like the better managers are always going to warrant a higher return. And then in Inventure, historically, you'll see, like, bigger discounts. Usually, like, in a normal environment, you'll see, like, I don't know, 10 to 30 percent discounts in venture, maybe, like, single digits to 15 percent in buyout and probably similar with, like, with real assets. In periods of disruption, right? So think of like 22 to 24, 25, when you've got 11 consecutive interest rates just knocking, right, a big kind of hit to the private markets.

Starting point is 00:18:42 Those discount ranges at least double. But the higher quality managers and the higher quality assets, even in those market cycles, can actually defend better pricing. And this is what I keep saying. There's more capital flowing to the perceived winners, whether you're a fund manager or whether you're an underlaw operating company. But secondaries in general, whether it's fund level solutions or asset level solutions, right, tender offers, right, helping employees achieve liquidity, getting early investors liquidity. Secondaries is going to be a major release valve for all of this unlocked, unrealized NAV that's creating problems. I think private equity, primary fundraising, will have a problem with the wealth channel. I think secondaries and private credit make a lot of sense.

Starting point is 00:19:26 Secondaries is a very easy story to understand. Private credit is, all right, income floating rate, no duration, right? Like people like that. But private equity. All right, I'm going to lock my money up for eight to 10 years. Maybe I'll beat the S&P by two to three percent, maybe if they're really good a little bit more. I don't know. That doesn't sound that attractive to me, especially when advisors and clients are looking in the rearview mirror.

Starting point is 00:19:49 Not saying that that's right. But the reality is we've gotten 14% for the last decade. Pretty damn good. again, I don't think anybody don't mishear me. I'm not saying anybody expects it going forward. But that is how people make decisions often. Yeah. And let's strip that back for the unlevered returns because that's probably using like

Starting point is 00:20:07 creative financial engineering. So your your actual unlevered returns may be more like 8 to 10 or 12% but whatever. So so yes, right. Like I think I think you're absolutely right. The question is what is the wrapper that these strategies are being offered to wealth channels through, right? If it's like a 1940 act closed-end fund that has structured liquidity, like an interval fund or a tender offer fund, investors in those will have an option to take partial liquidity out, right, during the redemption periods. So you don't have to technically lock

Starting point is 00:20:40 yourself up to your point, Michael, I think for eight to ten years, if you're coming in through those wrappers, if you're a qualified purchaser and you're going in through like a traditional private equity style drawdown fund, then yeah. Those are like 10-year lives. Shocker, they're never actually 10 years, especially if you're in venture, it's more like, 15 to 20 years. But the rappers that I think managers are bringing to the wealth channels, give more flexibility so there could be some liquidity along the way. So, Christian, I appreciate your willingness to like look at this using just the clear data. Because a lot of times there's unrealistic expectations being set by private managers.

Starting point is 00:21:17 So I'm just curious, like, what are you doing at Vennick now then? With this backdrop that you've laid out for us, that sounds relatively negative. Like, what are you, where are you seeing in this market now? Yeah, so we're, it's a rifle shot approach. So one, like thematics, like one, you know Vanek, we're very thematic focused, right? Whether it's to reindustrialization, electrification, right? De-dollarization. So one, those same themes that drive our large thematic ETFs, they live in our world in the private

Starting point is 00:21:43 side as well. So one, it's like deconstructing where we're seeing the biggest innovation of disruption happening. Then it's following where we see the smartest money going. And on our side, we focus on later stage companies. So like we're not investing at an like, you know, two guys in a garage and, you know, Palo Alto, whiteboarding, the next great idea. As I always say, that's a perfectly fine area to part capital. It just comes with a different risk reward proposition. Back to your question, what are the moats of some of those businesses?

Starting point is 00:22:12 It's really hard to figure out over time. So our approach with building out this kind of later stage private growth strategy at Vanek is focus on the major themes, look at the companies that have demonstrated. demonstrated significant traction. So the technology works, clear product market fit, a lot of customers, hundreds of millions to billions in revenue. You can actually diligence the operating metrics of the business, seasoned operators around the table, good governance. And then from our standpoint, as we talk to clients about, our real risk is, back to the comment you made earlier, Michael, about Airbnb, is are we coming in too late, right? Like, did we miss the run up by waiting for this underlying asset to be too de-risked? And then the answer is yes, then we don't do it.

Starting point is 00:22:56 If the answer is yes, but we can get in through a discounted secondary and the capital structure is friendly enough where we're okay to sit a little bit below the last private round of financing, then you can use that tactic, right? Or you just may have conviction. But for us, it's like very rifle-shot focused. As I say, the market's concentrating in fewer, fewer names. That's where you're seeing us do, is we're focusing on what we think are. their perceived winners and building out diversification across the major thematics in those perceived winners. Two of the largest companies in the world that are massively impacting the conversation and the allocation of capital in the United States are private. Of course, Open AI and Anthropic are

Starting point is 00:23:38 talking about. How do you guys see the landscape there and are you involved in any way? We're following very closely. I mean, without talking, you know, our specific portfolio holdings. I mean, let's say we know the space really well. Our view, when you look at like the AI models, if you will, is you have, as you said, like the two leading frontier models right now in a private wrapper, right? Let's not forget about what Elon's doing, right, under SpaceX AI, you know, with GROC, some interesting recent releases that they have there. Our view is you're going to continue to have a use case, especially for enterprise level super users

Starting point is 00:24:15 and, you know, nonstop agenic running solutions for the, premier frontier models. And so long as they maintain their performance gap, right, compared to the more generic, more cost-effective open models. That's a big kind of qualifier. If they don't maintain those performance gaps, there's a different question to the equation. But we think you're going to continue to have a use case for the large frontier models. But we also think you're going to increasingly see orchestration across the open models that are more efficient and frankly more cost-effective. How much of a threat is that to the two big boys? I think you're going to have similar to the conversation we're saying you're going to see more of the revenue probably going to the large frontier models because the super users are going to be paying for it.

Starting point is 00:25:01 And then you're going to have a lower share of revenue, but more ubiquitous usage of the kind of open models, right, that are more generic. They're more cost effective. They're going to continue to iterate a lot more. But we think you're going to live in this hybrid solution. We don't think it's like one model takes all. That's not our view. Can I ask you a basic question? I know nothing about this world.

Starting point is 00:25:24 Like the open source stuff is that, how does that compare? Like, is that just a couple of people in the room? I have literally no idea. How does, where does, where do these projects come from? So the whole idea is if you go with like a frontier model, a closed model, you don't really have a view as to how all of the data is being processed, how it's being interpreted. Right? So you have these intelligence units ultimately that we're looking to get created by any of model, whether it's closed or whether it's open. And then the question on the intelligence units is

Starting point is 00:25:56 like, how is the inference, they're all getting trained, but how is the inference being used to give you the interpretation of the prompt you've asked it for? This gets into like the weights, right? So can you impact how that data is being interpreted? Can you actually have a lens into seeing how is that model interpreting all this data that you're seeing? Or are you blind? And so you're just trusting the model is going to give you, right, like the right outcome, the fair outcome, the unbiased outcome. There's questions about that. Those on the open side want to have more kind of visibility and transparency into how

Starting point is 00:26:28 the sausage is getting made, right? And then you have all this, the data sovereignty. You obviously heard with Alex Carp did at Palantir about these closed models also just are taking advantage of all your data and you're essentially becoming competitors to you. So you have the intelligence units that are being created. We want them to be accurate. We want them to be fast. We want them to be secure. We want them to be cost effective. And then you can bolt on to that the sovereignty. But what that means is there's going to be different use cases for different prompts, different users. So if you're trying to cure cancer or you're running a massive kind of capital markets type prompts or exercises or nonstop running agents, the reality is you're probably going to want the best in class models, even though they're closed. They may not be telling you exactly how they're doing everything. But they're the best in class, massive performance gaps. If you're looking to create your own kind of agentic workforce and do to specific tasks

Starting point is 00:27:21 for you guys, you can probably use like a perplexity or someone to match you with their orchestration and pair you with the best open model for you. It'll probably be a lot more cost effective, right? And you'll have the visibility into how it's running. The other thing about open models is you may also need to manage your own infrastructure, which not everyone can do. So there's this idea that if you want to have data sovereignty, You actually need to own the infrastructure that runs these things, right?

Starting point is 00:27:47 You need to own hardware. You need to own chips, all that stuff. Not everyone's equipped to do that. So you have these open solutions in the orchestration layer that can match you with the right solution for the right use case. And then again, if you're willing to just use best in class and pay up for it, you'll go with one of the premier foundation models. How do you think about diversification in this segment? Because you mentioned, like, hey, there's a ton of concentration. there's like the really big players, but it seems like the winners change on a weekly basis.

Starting point is 00:28:16 Oh, this model's the best now. And oh, no, actually, this is a loser. And software's dead. No software's alive. But in a private transaction, you're locking your capital up for a long time. So do you have to be more diversified in that sense? Because no one really knows who the winners are going to be? Yeah. So from our perspective, one of the things that helps us is by being patient and waiting because you can have a better lens as to like what the outcome looks like. But to your point, you know, look, we're happy to be involved. in particular with one of those frontier companies that we're talking about, TBD, ultimately, on a long-term outcome. And even if one of these go public, guess what, we're going to be locked up for a while. So I think from our perspective, we're stepping back and saying, look, inside of AI software, this is how we're going to play it, right?

Starting point is 00:28:58 We're going to go after one of the frontiers. We're going to go after one of the orchestration layers that can connect clients to the variety of open models that are more useful for them. If you're looking at, you know, infrastructure or energy or compute, this is a play. we're making. If you're looking at FinTech, right, payments, this is a play. If you're looking at defense, right, here's someone that goes after autonomous systems, AirLand Sea. Here's someone that's doing stuff in space. So for us, it's like just stepping back, looking at the thematics and then looking at what we think are the category leaders, we're not going to be right all the time. But by waiting until the companies are more mature, it gives us an ability to further

Starting point is 00:29:36 risk adjust the entry point, right, and have less of a binary outcome. If I'm in your shoes, you're reading about all these, you know, the exit activity and the IPOs, like, beyond open AI and anthropic, like, what else is there? Like, I'd be, I'd be questioning, like, when these companies go public, like, what else is there in the private markets, right? Because you got like $6 trillion right now, roughly, of value across these unicorns alone, right? These thousand companies, some of which, as we said, may have still evaluations. So I think one of the questions is, is like, what's next? What does a private market have to offer? So from our perspective, we think companies out there that are quite compelling are companies like data bricks, right, which is the

Starting point is 00:30:22 equivalent to, or somewhat the equivalent to like a snowflake. And they're kind of playing in the whole data aggregation layer. We think that's a really important place to play. We think we're just starting to see use cases for the healthcare ecosystem on the administrative side, right, to the technology side, there's some up and coming companies we think in the healthcare space that are super compelling. We think you're going to see more data center and data center and jason companies coming online. You know, we can have debates if we like them in our backyard or not. Most of them obviously are not. But we have a real issue with energy. Like these intelligence units, right, we need we need watts to create them. Regardless of what your views are, we need

Starting point is 00:31:05 power to fuel these things. And we need massive infrastructure to fuel these things. So we're looking at areas there. I think there's companies in our ecosystem that are playing there. So our view is you've got to be patient, you got to be disciplined, but there are a host of companies that are going to continue the staying private for longer trend, driving value for clients before they enter the public market. So is the hope that once that capital becomes unlocked finally, and you mentioned, yeah, even if it goes public and be locked for a while, maybe that money will flow back in and That'll help a little bit? Correct, right? 100%. So as that capital unlocks, it's going to look for a home. You know, the question again becomes, how is it going to be allocated? And I just think what we're seeing is

Starting point is 00:31:45 there's more being allocated to fewer managers and fewer companies that are the perceived winners. And I think you're going to have, again, a big reckoning across the broader space as companies have to get repriced. What type of investors are you looking for and how do they find you? From our perspective, if we step back, we're trying to provide clients. access to what we think are the premier areas of private growth. The way we offer them through is different wrappers. So if you're a qualified purchaser, institution, we're going to have a solution for you. If you're more of a wealth channel investor, right, we're thinking about ways to address that. We're also thinking about how to potentially have retail, you know,

Starting point is 00:32:23 oriented products. So we're still in a thinking process, you know, of doing all this right now. but our approach is deliver this strategy, which is what you used to look for in a small mid-cap growth strategy in listed markets, which frankly doesn't excite a lot of people now if you look at what's available small mid-cap growth listed and put it together in wrappers that are conducive for the end-use case client. Let everyone know where they can find you guys. Vanek.com and under Vanek, you'll see we have areas for private capital and private growth. And if you're so interested, you can track us down that way.

Starting point is 00:32:55 Perfect. Thanks, Christian. Appreciate it. Pleasure. Thanks, guys. All right, remember check out vaneck.com. To learn more, email us, Animal Spirits at the compoundoondute.com.

Animal Spirits Podcast - Talk Your Book: Why Aren't There More IPOs?

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