Investing Billions - E151: The Rise of Asset-Backed Credit w/Billy Libby

Episode Date: April 1, 2025

In this episode of How I Invest, Billy Libby, Co-Founder and CEO of Upper90, discusses how his firm is redefining venture capital through a hybrid investment model that combines equity and credit. He shares how Upper90 empowers founders to scale without excessive dilution and offers insights into navigating today’s venture landscape. Billy’s approach to alternative financing provides valuable lessons for entrepreneurs and investors alike.

A few years ago, Crusoe Energy approached us and said, this new asset, it's called an NVIDIA GPU. We think it's gonna change the world. We think it's gonna be core to all AI cloud computing. Will you help us figure out how to finance this equipment? At the time, it wasn't really well understood by banks. We look for these equipment-oriented businesses where we can help kind of season

before it becomes well understood and well accepted as an asset. So today there's institutions from Blackstone and others that are financing the video chips. You can think about financing those partially with credit versus all with Grubhub and Seamless merged in 2013. The businesses were a similar size, but the Grubhub team owned a substantial larger stake in their company. Why is that? My partner Jason Finger was a lawyer for a moment and had to go and order dinner for his bosses and saw

that he could get a 2% cash back on his credit card if you ordered it through his own means for the order. So that's kind of how Seamless started. But he was educated in tax and finance and so when he raised money for Seamless he raised a small amount of equity like hundreds of thousands of dollars and when he raised money for Seamless, he raised a small amount of equity, like hundreds of thousands of dollars. And when he would sell that service, he would get the customer to, instead of paying over two years, maybe to pay those two years upfront and figuring out ways just to get access to our working capital lines and stretching dollars and effectively thinking of using credit.

And that really helped him grow the business where equity would have been raised in much larger quantities. The vast majority of Seamless was owned by the management team. The Grubhub team, which was Chicago based, ended up raising more of the traditional, you raise a seed round and then you prove the concept. You raise the A round, you raise the B round. It's almost this like flight of passage. It's like, you know, how many announcements can you get and how big can those rounds be and how preemptive can they be?

There's nothing wrong with that. But when they ended up merging, you know, the businesses because of that capital structure and because of the use of credit and just different tools, the Seamless team owned the majority of the business and the Grow Up Hub team on the minority of their business, same business, same size. And I think when Jason and I connected, he's like, most founders are just, they

don't think of these tools, they're not taught about credit and that's really drives his interest of Upper 90 and helping founders have different paths to own more of their company. When a lot of startups think about credit, there's this perception that it's only for FinTech companies. What kind of startups can utilize credit? That's a good point. I mean, fintech is very easy to understand

because you kind of have some payment in the future and you're factoring in or collecting it today. And it's part of everything we do. Everyone has a credit card and everyone has car payments. And it's kind of just normal. So we do that and still think there's a role to have a good early partner. But the other things that we've seen have been equipment. There's a lot of new forms of collateral or new businesses where

equipment's not yet well understood. A few years ago, Crusoe energy approached us and said, there's this new asset. It's called an NVIDIA GPU. We think it's going to change the world. We think it's gonna change the world. We think it's gonna be core to all AI cloud computing. Will you help us figure out how to finance this equipment? At the time, it wasn't really well understood by banks. We look for these equipment oriented businesses

where we can help kind of season before it becomes well understood and well accepted as an asset class. So today there's institutions from Blackstone and others that are financing Nvidia chips two or three years ago. Upper 90 was. If you can think about financing those partially with credit versus all with equity. You have this new thesis on Nvidia chips and you don't yet have the large institutional

investors, the Blackstones, able to finance them because the thesis is too new. How do you go about structuring the investment in such a way that's both attractive to the counterparty, but also attractive to you and your investors? It's a really good question. We always say like each facility we do is a bit tailored. And with a Nvidia GPU, the question was how long is this Nvidia GPU worth anything? How quickly is the next GPU coming out? How far ahead is Nvidia versus AMD? The big question for that was not demand. It was what's the right life of this investment?

And so in that deal, we said the most important thing is having a fast payback period. So having a shorter duration facility and having faster amortization and getting paid down along the way. So your break even is under two years. And as you make the investment, the idea is that if you're successful, you're gonna be taken out by a larger credit partner.

So talk to me about the incentives of the different parties when it comes to getting taken out of the credit facility. Alignment is something we think a lot about. There's a few ways that we accomplish this. So number one is we've kept our fund size small in the world of private credit. And so our last fund's around $400 million. We can do 10 or $20 million facilities.

Most people don't wanna be bothered with that size, but that's often kind of what the company needs when they're getting started. So one is just fund size matters. And number two is we typically, whenever we do a debt investment, we'll do 10% in equity of whatever we do in debt. As it just forces us to really think about,

is it a business we're excited about plus is it an asset that we think can pay back our debt? And I also think most credit funds don't think about it that way. They view themselves as like, hey, I'm going to be in this for a period of time, and then I'm not going to be in this. And it's like this very temporary relationship. And I think when you see things not go well, that's why there's this adversarial relationship often, because it's like a temporary partner versus equity. So the opposite of this is also has some truth in that a lot of great companies have been

taken down by facilities like venture debt or by credit. When should a startup think about bringing in credit versus equity onto their cap table? Thank you for listening. To join our community and to make sure you do not miss any future episodes, please click the follow button above to subscribe. The first thing is Jason Gus, who has been a long time partner, he runs Octane Lending. We've done a lot with them. He says, if you're a capital intensive business, you should have upper 90 or firm like them

on your balance sheet. Cause you're always going to have problems that come up. Like even in fintech, I saw a company who had a system outage and they ended up having a pool of receivables that they needed to use equity to fund. You know, they have a new product they wanna launch that's outside of their buy box. They wanna work with a customer that's bigger

than the concentration limit allows for. So often I see startups, they get equity or capital from like six firms and there are six VC firms that all solve the same problem. It feels diversified, but you're really not. So I think get two to three VC firms for hiring the best talent in marketing and just rainy day. And at the same time of that round,

and in a group like Upper 90, if you have receivables or equipment or do acquisitions, because it just allows you to have another tool and a kind of part of the foundational DNA to grow. It's like raise equity and then you think about debt. And I would really encourage firms where capital is kind of a critical part of their business strategy. It should be part of that round as one versus two step. Double click on the financial metrics. So what needs to be true within the profitability of a company either at Topco or on a specific product

before they should bring on credit? FinTech, you can probably start with credit earlier because it's, you know, if you lend a dollar out you kind of know how to get that dollar back and there's a lot of data of Finech receivables and collections and pricing. For roll ups, we learned a lot of hard lessons in that Amazon aggregator space where, you know, they were buying Amazon businesses and putting them into bigger entities. And what we, we still do some roll ups today, but we look for businesses

that have like profitable unit economics and are profitable at the corporate level. So for roll ups for equipment businesses, I often think that you want to kind of prove that out like stacks engineering. We just finance, they build barges for ships that come into port where they're charged an admissions tax from the state of California for their diesel exhaust. So Stacks builds barges with a vacuum cleaner attached that will suck out all of the diesel exhaust into carbon-free admissions at the port. And they built their first barge with equity. They proved the model, had really good economics, had good customers, and then said, okay, how do we build barge two through 10? And so that's a great step for us to come in. We did a $22 million facility, built those barges,

and now we brought in a bank to build the next phase of barges. And so they've been so capital efficient in terms of equity to debt, where they may have raised a huge initial equity round and built a lot more barges than they needed to to kind of go and get credit from the market. Talk to me about the seasoning process.

Maybe talk about the Nvidia chips and how you went about seasoning this product. What does it mean to have a seasoned financial instrument that somebody like a Blackstone would want to take out? Yeah, I mean, the Nvidia journey is pretty interesting because we didn't start there. Crusoe started capturing natural gas that was being flared in the middle of the country and they were building portable data centers to go and capture this natural strain and energy to do Bitcoin mining. And at that time, the CEO came to one of our events.

We bring together all these really interesting founders from different industries. I think you've been to some, and he's hearing another company talk about how they're using credit. And he's like, my biggest expense is a generator for my data center. It has nothing to do with being a startup. It has nothing to do with being a startup. It has nothing to do with being a Bitcoin miner, but the traditional equipment financiers viewed them as like risk on risk on risk.

So we said, we'll finance your generator. And we gave them like an $8 million facility. We as a small fund can start small like that. And that's really our season. It's like, don't overextend and try to make these initial phases bigger than they're really designed to be. Prove a concept, right?

Don't over lever the business. A good amount of equity. We did 8 million bucks. And then as he started showing good performance, we grew that to $40 million over time. And then at that point, call it around a $50 million capital. You have an endless number of banks and institutions that will finance that. It's almost kind of an RFP.

And so we said, great. The best thing for the business is now that we have the metrics in place and the financial team in place, we helped kind of put that infrastructure in place, not just capital, he had everything he needed to go get bank financing. And he said, Hey, what's the next problem? He goes, NVIDIA GPUs. And so instead of going and using equity for that, we then rolled into the next product

and got out of the product where he should get cheaper financing. Last time we chatted, we talked about just the magnitude of capital that's going into these opportunities once they're seasoned. So how much capital is actually available for once you're seasoned? And what are the second order effects of having so much capital

waiting on the sidelines to fund these projects? I just talked to an LP earlier today and it's like, hey, the market volatility, this must be creating so many opportunities. And I said, the amount of money that's sitting on the sidelines is huge. I feel like you have to work twice as hard now to find reasonably priced deals. You really have to hustle. And I'm sure it's the same in your world. You know, like there's just a lot of money chasing a fewer number of good opportunities at fair prices. Our biggest thing is starting small. And I would say the companies need to be really goes back to your first point.

If you're a capital intensive startup, you know, FinTech equipment, receivables, acquisitions, roll ups, you want to start investing in that early because the bigger banks and bigger institutions, they're going to want to see an audit. They're going to want to see good financial reporting. They're going to see like a controller or a finance lead overseeing the product. You want to adhere to all of their covenants that they're going to have in place. So I think a lot of it's just kind of looking the part and having enough capacity. There's a lot of concern of the consumer softening right now, you know, the consumer being maxed out. I was talking to some of our fintech companies and they're saying they're getting tighter pricing

today from banks than they've ever gotten in the past, which is fascinating. And it just shows that there's just more money versus kind of good opportunities. And I think these funds have all gotten too big time. And I think if you're a small, nimble fund like us, I think that's an advantage. A lot of funds want to do the bigger deals. What kind of returns are you looking to get into these kinds of investments? Low to mid teens from the credit.

And we want to make sure the company we're investing in is earning from the capital we're giving them more so they can service our debt. So venture debt, a lot of people often confuse with like what we call asset back debt. Venture debt is usually giving money to a company that's losing money. And the way that you get paid back is by the company raising more equity. So it's more of a bet on equity supporting the company versus the company

having profits to pay you and service your debt. So, you know, we want to make sure if it's a Nvidia chip, how much more is Crusoe making when they rent out that Nvidia chip than they're paying us in financing costs. If Octane is going and doing PowerSport financing for jet skis and ATVs, how much more are they able to charge a consumer

than they're paying us? And that's kind of the excess spread. That's a really important metric to make sure the company is providing a service that's valuable enough where they can charge a rate that's higher than their cost of funding. And I think that's like a really important metric for us. And you have to find these niche businesses.

We just find it's a company called Sunbound and they're built technology software for nursing homes. So nursing homes like Jason, when he started Seamless are offline and iniquated and they help like Toast or Seamless kind of control and capture all of your bill pay and finances as an independent nursing home. Somebody takes a bed in a nursing home and Sunbound's getting paid 60 days later from insurance.

Is there a way for us to kind of provide some of that capital upfront and collect it for the nursing home? And that's where Uprr90 steps in as a capital partner to Sunbound to offer a new solution in a vertical niche industry. This factoring like product, it's not something that they could get from typical banks. And why are there no other solutions for that? So there are being able to really move quickly. These are fast scoring companies, they want somebody that can come in and solve their problem quickly. So that's one often you might,

it might take a long time. Imagine going through a mortgage and how long it takes to get approved. So there's just an inherent time cost when you're dealing with a bank. So that's one. Number two is we really say, look, we want to be your partner for this phase. So we'll do a 10, $20 million facility. We're not doing rofers and locking you up for the next hundred million, which really might see a substantial drop in cost of capital. So that's number two. And then number three is, you know, how many credit firms have a partner who started a tech company? And so we come in and say, here's the other things that we think we can help you with. Like, Hey, before you raise your next equity round founder, have you stacked your QSBS to get maximum treatment

for yourself? You know, it's like we're kind of operating as this capital markets conciliar or partner to really help the founder. And I don't think a lot of other credit firms are designed to do that. So it's like our capital's greener and I don't think people, you know, 2% Delta here or there isn't gonna make or break the business.

Another founder in our portfolio from Monday, he said, you know, when you're deciding who your capital partner should be, often people think cost is the biggest factor. It's really certainty of capital, speed, flexibility. Can I use this in a way I need it? And then cost. Yeah. I see so many facilities where they get really cheap financing, but then it's doesn't really allow them to use the facility. Like, Hey, we have this amazing customer, but it's going to be 6% of our total portfolio and your concentration limits as 5%. And they're like, I'm getting paid 8%.

Why would I take any more risk? No upside. So you alluded to it earlier, how do macroeconomic cycles and just the stock market, the economy play into how you deploy your capital? One of our LPs said, it may be like a Stan Druckenmiller quote, it's like the hardest time to deploy is always today. So like any environment you're in, you know, it's like the market's ripping and there's more, you know, more capital. And it's just always hard to find good deals. We built our LP base, we have almost 300 LPs and most of them are founders.

We kind of said, hey, let's build it around sourcing. And if we see problems, we're good problem solvers are founders. We kind of said, Hey, let's build it around sourcing. And if we see problems, we're good problem solvers. Like that's kind of how we built it. I think a lot of funds are like, how much money can you raise? And then we'll figure out how to, you know, create incentive programs and affiliate programs and, you know, relationships to get deals. So I think it's just, it's always hard to find good deals.

The things that we've learned now that we're in our third fund are, it's really important to be diversified, get paid to take more concentrated bets like you do in venture. So I think just really diversification's your friend. Right now it's kind of an environment where you might want to like earn, even with rates being higher,

maybe a little lower return than trying to chase return because there feels like there could be, you know, a lot of unknowns around, you know, does the IPO market open up or not? Or does the consumer really get stressed to a level? So it's almost like earn less even when rates are higher and people think you should be earning more because of some of these uncertainties in the market. And we see a lot of top institutional investors cycling from just long equity to structural

solutions like asset-backed credit. That's one of the ways that institutional investors from just long equity to structural solutions like asset-backed credit. That's one of the ways that institutional investors are playing it. You have 300 LPs. A lot of venture funds or other types of funds have thought about having this kind of network-driven fundraising process.

What are the pros and cons of having 300 founder LPs? Pros are you're just interacting with so many interesting people that are really in the middle of unique opportunity. When we had our first Upper 90 dinner, I think it was 10 people from the quant world where I came from, and Jason brought 10 people from his tech world.

And we were joking. If the quant side of the room saw a tech deal, it's like how many people in the tech world said no to this deal that somehow it like trickled down to the finance people and then like in the same thing the other way like the best deals are capacity constraints so like if Jason or somebody sees a quant deal how many people said no or is that fund just too big so I just love interacting and learning from these people. And most people's networks are really vertical and the best ideas often occur when you bring together two different groups.

So I spend most of my day kind of uncovering opportunities or engaging that group to win deals. The firm that's probably done the best version of this is Lead Edge Capital and really like made that programmatic to open doors for customers. The challenge is, let me learned this in Fund 3, like some of the bigger deals in our portfolio require more capital and more

certainty. So there's a role for institutions like to speak for bigger dollars. And because in their broader portfolio, it's still a small position. So I think that we learned it's like the LPs that we have that are the entrepreneurs, it's really for deal sourcing and deal winning, not necessarily for more capital and kind of relying on institutions to fill the capital void that we didn't have in Fund One and Two. So you want to have a diversified capital pool and you want larger checks that can move quickly. What about from a time management standpoint, is it tricky to have so many LPs and how

do you deal with investor relations aspect? It's hard. I mean, we, I think any business, it's like 20% of your customers, you know, derive 80% of the value. So I think really kind of thinking of who are the people that see the most deals and be more proactive with them and engaging them. And so I think it's just like kind of any business,. Your most valuable customers, like you have to be intentional and add value to them and kind of deserve their time. And a lot of people have, you know, have time and might take your time. So I think it's just being more proactive and with the people you really want to make sure you're spending the most time with versus whoever takes your time. As you transition from fund two to fund three, you start to incorporate more institutional

practices. What are some of those practices that you had to implement in order to become successful in fund three? I view us like a startup, like as a company that we often deal with, you need to really invest in like operations and reporting and compliance and being able to go through each month and develop, you know, provide a really robust reporting package to your institutions, you know, to go through a regulatory exam, to go through, you know,

so like you have to upgrade your, you have to be big enough where you can have like the best accounting firms and the best compliance firms and the best tech third party. It's hard being a small fund, especially in credit. So it's like, you have to have kind of a minimal viable size to do all the things that institutions expect and get from the bigger funds.

We already had a pretty material investment on the investment team and the IR side, but you kind of have to do a lot of things well that institutions are just prerequisites. Today, it's 2025. What's the minimum viable fund size for an institutional quality fund? It's interesting.

I think that this number's going up, because the allocators, the big institutions have so much, they have to write big checks too. I feel like, on the credit side, like 500 million, what do you think it is on the equity side? It depends on the credit side, like 500 million. What do you think it is on the equity side? It depends on the, on the asset class, but we like to come in when there's like 300 million, roughly in capacity, because then to your point,

you could get 20, $30 million that aren't higher than 10% concentration limits that some institutional investors have. In credit, I think that for us, I see like, okay, if you're under a billion dollars, you can still do these 10, $20 million facilities. I see a lot of funds that are kind of creeping into this like one to five or one to $10 billion.

And everyone's like, hey, we're just gonna sell like Adelaya, Solta, Bluel. Like if we get to this size and we'll just sell, I don't think there's gonna be that many of those outcomes. So I think you either have to kind of stay small and stay focused, like first round's done for a long time in equity, or you have to be really big, like, you know, Apollo's, the Blue Owls, the Blackstones.

Like, I just feel like there's a lot of funds in the middle and everyone's looking at the same deals. There's a thesis out there that there's gonna be a couple hundred private equity funds in the future because of consolidation, because of the push from retail in the future, which is gonna be a substantial drive on the LP side. So there's a lot of economies of scale and because of the liquidity and the secondary market with the blue owls, the GP stakes players. So there's that aspect. There's also this aspect that you alluded to,

which is the chicken egg. You have to get to a certain size in order to get the institutional investors in and to get the institutional quality people. It's not just service providers. So hiring the top CFO, the top investor relations person, because it's a market. The labor market is a market. So you're competing against bigger firms that could offer bigger incentives. And unlike startups, it's hard to say that your credit fund is going to change the world more than another credit fund. I completely agree. I think the talent point is really interesting.

We looked and did an expensive search in NIR for a partner-level hire. And it's amazing. It's like bank levels, starting salaries and bonus guarantees. It's a very tight and hot market for sure. It's a good point and hot market, for sure, is a good point, like, to attract and retain talent. Most CEOs that have taken private companies as public, once they start to look for their public CFO,

they immediately realize they went on the wrong career path. They should have become a CFO, waited till a company's about to go public and get 5% of equity of the company, and that's a much better deal than being CEO. And for us, I think also having a little bit equity flavor, no, 90% private credit asset back, 10% equity. And everyone's like, why do you do that?

And why don't you just ask for warrants? And I said, most credit firms kind of use warrants as a call option. They're freebies, right? You know, if it works great, if it doesn't know it's going off their back to the founder, those warrants have value. I mean, that's why they wake up every day is for the equity value of the business. So if a founder values them, they're going to say, fine, I'll give you warrants, but then I'm going to have looser covenants and I'm going to have a lower

make-hole and I'm going to have a less cash pay and more pick. So we're like, let's get the best debt terms that we can, and then let's invest in the company and you know, if the company really does well, like, let's get the best debt terms that we can, and then let's invest in the company. And, you know, if the company really does well, like, you know, the Crusoe's Rock teams, we'll kind of let our investors participate as that equity, not in our fund, but as it grows in certain situations. I think you need to have a little bit of an equity mindset in this world, because it's hard to build an enormous credit fund. If I was a founder, I would almost demand that my debt investor had a little bit of equity

in the game. It just changes the whole relationship and how things transpire if things don't go perfectly. As you were transitioning to being an institutional fund, you're meeting with institutional investors. What exactly, what catalysts did they need in order to end up pulling the trigger on upper 90? One is, are you able to originate unique deals?

Like, are you able to secure deals that you're getting a premium for the risk and that others in the market are not seeing first? So that was one. Two, for the institutions, can you generate co-investment opportunities? So you're getting it early, and as these companies grow, is there a role for us to play as your partner

to help size up those investments where they outsize the funds concentration limits? So those are the two major things. And then do you have an institutional great team that can make sure that there's not going to be a black eye in any part of your business? Like IR, investments, portfolio monitoring, compliance, risk, ops, tech. Those to me would be like the three major criteria.

And also let's say you have a very high bar in hyper competitive marketing, you didn't choose the right HR person or tech person. Did you talk about being a placeholder and how did you handle that conversation with investors? It really kind of goes back to the first thing you asked me. It's like, when should a company think about credit? And if you know this is something that's in your roadmap, you want to get that in place early.

You know, so we had a head of people even in fun too, we, you know, for culture and, and for hiring and best practices, we were very fortunate to hire a great CFO that had come from a bigger firm that wanted to do something more entrepreneurial. You know, my partner who leads the investment team has been with us since inception. If you're not planning, I think it's really hard to say, Hey, we'll, we'll do it. You kind of have to start thinking and building that in early and have that

part of the foundation and part of the culture. So if you're a startup and you're like, Hey, I'm going to need to think about raising credit. I think if you're like, Hey, now that I've gotten to this phase, now I'm going to start thinking about credit. I think it's going to be a lot harder for you to kind of. It's not part of the DNA, it's not a senior function in the company.

It makes it a lot harder to like close that gap versus making an investment early. I wanna double click on your hiring strategy in terms of hiring people ahead of when you need them. What's your rationale for doing that? Walk me through the decision making on when you decide to hire somebody. Sure, so you don't have to hire the most senior person. Like if you just say, look, I want

to make sure that the finance function for my FinTech business or for my infrastructure business, like I really have to understand my unit economics. I'm really going to need to get credit now or in the future. This is a critical function in my company. You should have somebody who's a VP of finance or hire, just like you would have ahead of sales. If that's gonna be part of your critical roadmap, that should be viewed as a critical function day one. If you try to go and do that later,

you often are playing catch up, the person, they're not fully integrated into the business. And also like you have time, like you might hire the wrong person, you might need a junior person, you might need a more senior. You can kind of like iterate like you would with any role in the business. And also like you have time, like you might hire the wrong person, you might need a junior person, you might need more senior, you can kind of like iterate like you would with any role in the company. I think a lot of companies when

they try to go for that, hey, shit, I need to hire like a head of capital formation or CFO, often those like big home run hires like don't work. So I think it just gives you more ways to figure out what that right role is for your company. If it's a critical function in your company. You hire when it's on the path, the critical path to getting the company to the next milestone. What do you wish you knew right before starting UPR90?

Diversification, like our first fund was around $100 million, which is just a little too small for credit. So I think just starting with maybe a larger fund or partnering with somebody so that our average position size was smaller, just having greater diversification. That's something I wish I had thought about. We did a really good job. One of our views is if banks are coming into a trade that we're in,

it's probably a good time for us to not be in the trade. So I think we did a very good job of letting our facilities refinance to banks into larger institutions, which is good for the company and also good for our LPs. It's probably when you refinance a debt, a good time to also seek liquidity for the equity, kind of a natural endpoint for our relationship and value add for the company. And I think everyone was so excited about equity and momentum. It's kind of everyone wanted to keep the equity running, just be more programmatic of looking for equity liquidity when you're being refinanced out of debt versus kind of letting one run and retiring one. Some chips off the table.

I think so. I'm doing it a bit more programmatically because there's always a reason to kind of convince yourself, well, this one I should keep and that one we shouldn't. And I just think people's expectations of returns just got a bit out of whack. I mean, I played soccer in college and my whole life and you know, everyone wants to go and score three goals in a game, you know, have a hat trick. If you were on the US national team and you scored one goal a game, you would be the best player in the history of US soccer, probably of the world. So I think like two X's, three, I mean, those are exceptional returns if you can do it consistently. And I think everyone just kind of viewed those as

average returns. And you could build a Big business, especially delivering X returns to LPs over decades. I think that everyone just thinks it's easy to you know, they hear You know unit square ventures, which is an exceptional firm has it, you know that 12 X and everyone's like well that well, how do we do that? I mean that's not normal You mentioned diversification as you were talking to more institutional investors. How did you deal with the lack of diversification in your first fund? Talk to me about that conversation. In life, it's better to be lucky than good. So like we ended up having like good DPI and

we had good returns and it was kind of the reason they said, hey, you know, can you deploy your strategy in the same way being this like really early partner to companies? Like, can you do that at a four or $500 million fund versus a $100 million fund? So a lot of it was like, you know, how big can your strategy be without drift? And so that was a big part of what is a hypothetical portfolio look like and how much could you deploy into this? I think so that was like kind of number one. And the number two is we really want position sizing to be three,

4% per company process. What would you like our listeners to know about you, about upper 90 or anything else you'd like to share? Mike Lazaro started a buddy media golf.com and with his wife, Cass and there are just awesome people. He's like, anytime you have a complex capital situation, you know, in a company that you really like call up or not. And so I think like, we just want to help partner and find solutions that really help founders. And, you know, often we're equity, which is a very powerful, but very singular tool. We want to kind of help solve some of these other

things through credit. Listen to your podcast a lot. You know, we're still trying to figure out like, what do we look like? What does the next phase look like? You know, and so what are the different ways there's evergreen funds now there's BDCs, like there's so many different, there's SBIC funds, you know, I always feel like maybe we should partner with somebody who's figured out a lot of the capital formation side of things. And we really should just focus on finding deals and building that community of unique LPs. Thanks for listening to my conversation with Billy.

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