Investing Billions - E389: The Future of Investing: Data Centers, AI & the Next Trillion-Dollar Companies

Episode Date: June 12, 2026

What happens when one investor sits at the intersection of venture capital, natural resources, AI, space infrastructure, and geopolitics? In this episode, I sit down with Rob Stephens, Director of Investments at Spider Management, to discuss how institutional investors are adapting to a world where private markets are capturing more value, AI is reshaping capital allocation, and the boundaries between asset classes are disappearing. Rob shares lessons from both the GP and LP sides of the table, explains why traditional portfolio construction frameworks may be outdated, and explores how themes like power generation, data centers, space infrastructure, and venture capital are becoming increasingly interconnected. We also discuss emerging managers, co-investments, continuation vehicles, concentration versus diversification, and the future of private markets.

Tower is the main bottleneck for everything that the U.S. is trying to do in the AI space. And in technology, broadly speaking, we have data centers in Richmond, Virginia, out by the airport that I didn't even know existed. I drive by there all the time to go home to my childhood town. And these massive meta and Amazon data centers are just hidden back there behind the trees. And you get back there and you say, like, how big is this building? And they don't answer you in square footage. They answer you in megawatts. Rob, your director of investments at Spider Management, which has over $6 billion.

And before you were an LP, you were also a GP for 10 years. How does that change how you approach being an LP? I think, honestly, it provides a little bit of a different lens than a lot of my peers have because they don't have the experience having sat on the other side and recognizing some of the nuance to the way that GPs speak to LPs. Some of the things that might get hidden behind the marketing materials, behind the return figures that are presented. There are ways to massage the numbers and also to tell a story that befits the GP more than perhaps the LP knows if they're not kind of aware. And being on the LP side now for half a decade, what are some of these patterns? What are some things that GPs are doing that may not be apparent to LPs?

More subtle things. It's not always in writing. It's not always something that you can find in the materials. Perhaps the easiest one is just recognizing whether or not the GPs are putting their performance if they have it. If the fund or firm has been around long enough, then the performance should be front and center or at least available. If it's not, you have to know that it's probably not worth sharing, and there's a reason why it's not included. There are also times where you'll see situations where the GP will say underwriting targets as opposed to underwriting returns. And you say, okay, this is what they're thinking that they can generate in terms of their portfolio returns.

But in reality, that may not be exactly what they've been able to achieve. What's the hardest part of being an LP? For me, it has been adjusting to the pace of being an LP, working within the LP mindset, the philosophy, the construct, the speed at which things move. I feel like GPs on that side of the table was a little bit more dynamic, a little bit faster pace. And part of that was because I worked for a smaller company where there was one decision maker. I would say that there are kind of philosophical norms that have come through, if you call it the Yale model or the typical endowment allocation setup that are hard to shake for folks that's all they've known in their careers and have grown up in that. We were talking before we started recording about Michelle Delbuno, who now runs A16 and Z perennial. And one of his views is that there's a lot of dogma in the asset management space around portfolio construction and methodologies.

what do you think is too dogmatic in the space that you like to see change? Love Michelle, Wahua, a great guy that I've enjoyed getting a know over the years. The easy one for me is the allocation buckets in that when I first joined Spider, I wasn't familiar with the way that the allocations were established and how they were targets for each asset class. And there would be opportunities that were tweeners, that it was special sits where it was half credit, half equity. Well, where does that live?

there's the crossovers where it's public equity and private equity. Does that live in the public equity portfolio? Does that live in the venture capital portfolio? How do we treat that? Who's responsible for that? And then there are situations where there are increasingly thematic strategies that apply to specific asset classes. So, for example, met a team this past week on a venture firm that's building a strategy explicitly around the electron economy. So all of the AI power and electrification required, but it's entirely venture, but it's,

It's an entirely natural resources theme. So which portfolio does that live in? To me, I feel like there are opportunities for investors out there to kind of blur those lines to pursue the best investment opportunities available. You have a similar phenomenon right now in the public and private markets. Because of the lack of IPO and public IPOs, there's just not that many ways to be exposed to public growth. Now you have Anthropic, Open AI, SpaceX coming out. But before then, there's just not that many growth companies in the public markets.

So a lot of investors are looking at late-stage private as the new small growth in the tech space. What do you think about that? We are seeing a concentration of winners in the late-stage private growth companies and private tech in particular that are creating a halves and have-nots of LPs and investors in that the anthropics, the open AIs, SpaceX, the, Largest companies in the private markets are accruing more value there that if you don't have exposure to those, you are missing out because a lot of the value that used to happen in the IPO markets no longer occurs once the average retail or institutional public investor has an opportunity to buy in. It is a great seat to be in for us because we have opportunities to invest and participate in some of these rounds early on while the companies are private, and we are very fortunate that we can do that for our clients and our university. but it does create an imbalance across public and private investment markets. You referenced earlier the slack of DPI and venture capital. Now you have three of the largest IPOs in history coming out.

Does this solve the DPI crisis? It certainly helps, but these are three of thousands. There are something like 1,500 unicorns in the U.S. alone right now. And those three, while that's going to be great for a lot of people, and great for a lot of GPs, to be honest, because that will create track records that they can rely on for a long, long time. There's still going to be a lot of dead weight in terms of the underlying portfolio companies that have not gotten to maturity.

They have not gone public. There are going to be kind of second order effects, though, of these IPOs that I think are going to be really intriguing for new investment opportunities. But at the same time, that doesn't absolve the managers that have not been able to cycle these assets through their lives on the schedules that the terms of their funds and our expectations as LPs require. But the exciting part is that when these companies all do go public or they generate liquidity, think of all the wealth and new money that it's going to create for a lot of their employees, as well as the potential opportunities and spin-offs that's going to create.

Last year, something like 75% of the money went to a handful of firms in venture. They're not having any problems fundraising. The rest of the industry, and especially emerging managers, are having a lot of trouble. Just came back from a lunch with a $100 billion plus multifamily office, and he said, that emerging managers are going to have to innovate on the structures and how they access growth companies. Do you expect structural innovation venture capital? I do, but I think it's going to be very hard for emerging managers unless they come from extremely strong pedigree backgrounds to access these late stage growth companies. It's going to have to be the ones that have come from the tier one firms where they were already personal investors in some of these brands and

businesses and have the personal relationships in order for them to then go out and say, you know, XYZ, my new platform, we would like to participate in your CRIZ because we were there when we did the seed at my old firm. Otherwise, I think it's going to be extremely hard because there's so much capital being raised by these growth funds at the tier ones that they can continue to preempt rounds and write hundreds of millions of dollars into a single check. So unless the emerging managers are able to compete on a capital scale, it's going to be extremely difficult for them to get into those rooms. A lot of people don't really realize how these mega rounds come together.

And what I've been told by many people is Sam Altman or Dario will text his favorite five-ton funds and say, look, we're looking to raise some more money. And implicitly, that means send me term sheets in the next 48 hours. He looks at the different term sheets, decides which two or three funds he wants to lead. They do the lead, figures out the valuation, and then everybody else comes in. Your guess is as good as mine, honestly, because I haven't seen how, that sausage is made. But it does sound like that is the approach that some of these hottest, most in-demand founders are able to engage the VCs that they want to work with. The CEOs are

setting both the terms, the price, and the timing of these rounds, all three. I'm not sure that they get all three at once. I'm sure there are situations, but I would imagine that the VCs on the other side are sophisticated enough that they're not necessarily going to give everywhere. And if you believe this process to be either literally, either Dario and Sam are texting these fund managers or figuratively they're emailing them, the second order of fact so that you could argue that there's economies of scale or capital itself could become a moat. Why? When you're raising $25 billion, you need to go out only to funds that could write one to $2 to $3 billion checks. You can't go to most of the investors. Correct. And that's what creates such an opportunity for. the big tier one VCs out there that do have that much money to extend their lead on the rest of the VC landscape. Because they are the ones who can write those checks. It's them and the sovereigns, which play a big role in the environment today. There are only a small handful of these tier ones that have the checks to be able to follow that playbook that the founders are seeking right now.

That's exactly the thesis for Mubodala capital. So I had the CIO, Oscar Falligran, he said that there's just not much competition of people that could write five, ten, $15 billion checks. I've come to think of this as an hourglass. So you have hundreds of thousands, maybe even millions of people that would like to put 25K checks into startups, obviously popularized by platforms like Angel List, but also directly through Angel Investing. And then you have hypercompetition, maybe 10 to 500 million. And then again, starts to thin out. And when you're looking for a billion-dollar plus checkwriters, there's just not that many people that have blind pools of capital that could put that kind of concentration of a single asset.

And then it comes down to what are your return expectations? What is the growth potential for that business? Is that where you want to continue to put money? And there are certain financial dynamics that make it more attractive for the mobile laws of the world that they want to write $200 million checks because they're so large that they can't go smaller and get the kind of 10x upside from earlier stage. I think the hourglass analogy is great because it does create opportunities for those of us smaller fish down at the bottom where we can write and do smaller things. You know you're in the right market where a $6 billion LP considers themselves a smaller fish. We like to say we are right-sized because we're big enough to get the attention of most folks that we would want to have a conversation with, but small enough that we can do $10 million checks into funds where we're not going to have to really elbow or scratch and fight for allocation if there's an opportunity.

One of the most fascinating things about your model, I don't think I've ever seen this speaking to now over a thousand conversations of people in the space, is that you guys force all of your limited partners into the same exact portfolio. Tell me about that. So we have about 30 in total. We don't force anybody doing anything. We offer it to them, and that is the opportunity to work with us. From our perspective, it's hugely valuable to have the network, the relationships, the shared history of investing across all asset classes that we have at Spidey. in Richmond, Virginia, and it's a best idea's portfolio. So across all of our public assets, all of our private assets, it is, here's what we think is going to generate the best long-term return for perpetual sustainability of our clients' missions. What are the advantages of this model?

Let's say that we do get a slug of $20 million into a great Tier 1 VC, and we are trying to figure out, okay, of the 30 clients, how much is the university going to get? How much is our largest client going to get outside the university? Is there going to be anything left at the bottom for the smallest? Perhaps that doesn't always work out at the benefit of all of them on an equal basis. But because they all have the same gross exposure to the entire portfolio's returns, it really benefits clients so that they can enjoy the rewards of our long-term success and experience in this industry.

We invest on the collective shared experience of our investment team and put together the best portfolio that we can, which the returns have proven out to be worth them continuing to work with us. And what I love about this model, I love this razor, that everybody, what I would call, is forced into the same portfolio. It has so many second order effects in terms of making sure that the hurdle is really high for every new investment, making sure that they're underwriting you philosophically before they invest, all these things. Also, another part of your model is you're both an endowment, but you also have outside

investors, which are constantly sparring partners for you, constantly out. asking you questions on every single investment and making you better as thinkers. How does that play into your model versus a traditional endowment model? Absolutely. It keeps us sharp. I mean, we have obviously a much more robust reporting schedule and cadence with all these outside clients that typical endowments don't have that because they might quarterly meetings perhaps with the university that they're affiliated with. We have that with the university, but then we have the 29 outside clients. And in terms of the actual meetings, our team, we are constantly on our toes. because it's, okay, there's a new presentation.

Let's run the numbers. Let's get their updated reports and their results. And let's get ready to go in there and address the questions that this specific group has on their minds about what's in our portfolio and what's happening in the world. So it sharpens us because of the frequency with which we have these conversations. Expert calls have always been one of the most powerful ways to build conviction. But today, investors are asked to cover more companies, move faster and do it with leaner teams.

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The first to see wins. The rest follow. Learn more at alpha-sense.com slash how I invest. There's this philosopher call it proper. And his whole theory on getting to ground truth, he called it falsifiability, which is you go around with a thesis

and you have other people negate parts of the thesis or bring in more nuance or push back on parts of the thesis and you keep on getting closer and closer to ground truth. It's one of the reasons why I have this podcast is I come in confidently with an idea. I talk to the world's smartest people. And every day I get corrected on my thesis little by little.

And over time, I start to get closer and closer to ground truth. I'm jealous of you. I'm sure you learn a lot of interesting things. Going back on venture capital and this concept of capital formation, last time we chatted, you said that more venture capital firms to build out co-investment programs. What did those look like? It's probably a good opportunity to use your hourglass example again, in that there are the large firms that are putting as much of their,

fund allocation as they can into a given round and opportunity, but they want to commit more to these large fundraising rounds. And so then they go out and they raise SPVs on top of that in order to maintain their ownership and potentially provide additional equity for both their LPs or non-LPs. Those are typically into the premier elite assets that are all access constrained and the ones that we talked about earlier that you would want to be able to have an opportunity to invest in and have exposure in your portfolio. On the other side of it, though, there are increasingly number of smaller emerging managers or smaller GPs that are raising their hands for allocations and rounds that they can't fulfill from their fund. So they are raising SPVs in order to kind of meet that gap

and kind of pinky promising the founders that, hey, we'll go find this money. So there are a lot of different incentives across both of those as to how it works. One of the main ones that we're constantly aware of is the fact that providing Creating a co-investment opportunity to an LP like us puts the venture investment strategy decision in our record. We invest in the smartest people we can find so that they are making those decisions on our behalf. But if there's an opportunity then to invest in co-investments, which increasingly there are and there are a lot of interesting ones out there, it changes the portfolio construction, it changes

the concentration, it changes our budgeting that then decide on what we had long relied on the managers to do for us. I had the former CIO of Calsters, Chris Aylman. They tried everything at Calsters over 23 years there, and he said that the only thing that worked was a rules-based approach. The alpha that they received that rules-based approach was actually the fee alpha that you would expect. What do you think about that? I would love to see the data, but I'm honestly not surprised.

And the thing about a rules-based approach is that you have to have predictability around how the program might evolve from your managers as well. With the market evolving, as we talked on earlier, I don't think that any manager can have a full kind of blueprint for how they expect some of these SPVs and co-investment opportunities to come over the course of an investment period for a fund. That is a huge perk of the opportunities that we see is that you get additional exposure to high conviction ideas at lower fees, which LPs love. If we can blend down fees, then great. But at the same time, if we're going to see an opportunity to co-invest in multiple of our fund investments, especially if there are situations where the GP is not putting their full commitment from the fund in, then we've got some serious questions to try to sort through.

Is that the main thing that you're looking for, which is alignment? Of course. Everything is alignment. Like, for me, investing generally is in people and ensuring that we are aligned on both sides of the table as best as possible. Because this goes to the question, what are some first. principles they use in order to process these co-investments? We were looking at one this morning, actually, where one of our highest conviction managers across the entire portfolio, a well-renowned VC in Silicon Valley, brought us a co-investment opportunity that he had fully maxed out the allocation from his fund and the concentration

limits made it so that he could no longer add any further. So one, that's a great sign, that he thinks this is worth backing up the truck in the main fund because that is where track records are made and that's what people are able to raise subsequent vehicles on. Then he came to us and said, I've got so much extra conviction that I really want to fill this because I can continue to back this elite management team and business model. And so first order, it's are they making sure that the fund that we have exposure to going to have the maximum allocation to this opportunity? If that's not true, then we have to figure out what are the incentives there. Because from the GP side, there are different incentives that they are pursuing.

And that's whether that's additional management fees, whether that's duration, whether that's the opportunity to obscure the potential outcomes from their flagship vehicles. Because in the event that an SPV goes sideways, that doesn't flow through to their main fund's track records. And almost all the time when they're fundraising, it's only here's our main fund track record. The SPVs all get lumped together and it doesn't necessarily come with a number. Reminds me of strategy by Scott Wilson, University of Washington, St. Louis, famous CIO. and he would meet with his fund managers, and he would ask them one very specific question, which is at which positions are you at your max, whether public or private? And the idea being that the fund positions that they had that were at their max,

they were actually under allocated into. Why? Because portfolio construction. You want to make sure that you maintain longevity on your career, especially in venture capital. What is the highest amount of conviction you could have on something working? 60%, maybe 70%, they're going to risk little Johnny's university tuition. in order to back the truck up even more into these investments so your fund could go from a 3 to 5x, unlikely. So he would go and he would source these best ideas within these managers and back them

and SPVs or co-invested to do even more in those investments. The portfolio construction and the model that we operate within dictates a lot of our strategy, despite conviction. This is something we talk about frequently. And as we hit on earlier with the increasing value of companies at the private business, levels, there is an interest and incentive to continue to hold on to those despite them potentially pushing allocation boundaries beyond the norm. But the best ideas in my mind shouldn't necessarily be constrained by concentration limits. So what you mean is as these companies get more and more valuable, they start to be more and more the fund position. That's not necessarily a bad thing.

That could be a good thing. On the GP side of the construction, we absolutely want them to stay within the bounds of whatever the legal terms are that we agreed to. Because that is one thing that when we are underwriting, it is with the full expectation that what we negotiate up front is what they are going to abide by, and we need to make sure that that is something that they follow through on to ensure that alignment. On the LP side, what I'm referencing is when our allocation to privates or illiquids, and this is something that we debate frequently, both internally and with our clients, there is a certain threshold where people are most comfortable. And if you exceed that threshold, people are, people start to say, what about in the event of a recession or a downturn, something sideways,

but what about the fact that the best performing companies in our portfolio happen to be these private ones? And there's an opportunity there that sooner than later, they will cycle through and they will go public. The thing about venture investing is long duration, patience, and recognizing that the upside is worth that weight. Do you think endowments in general or private investors are over-diversified? In other words, do you truly need 100 individual positions or should be focused on the best 25, 35 positions? There are certainly models that I've heard of where if you have access to the cream of the crop managers, then 20 to 30 is really all you need. Because you know that those are the highest conviction, best investors across the asset classes, that then it is an allocation game.

And if you're able to fill those spots with the best, then concentration is wonderful because you have an opportunity to really be partners, hopefully, with your managers, to get to know their portfolio as well. Know the items that you really want to push on and monitor so that you keep track of them as time goes on and as portfolios evolve. On the other hand, one of the things that's great about our business is that we see and get to talk much like you to so many smart people all over the world, every given day, any given strategy. And the idea that we are reducing the opportunity for potential investments with

exceptional folks because of concentration gives me a little pause. Tell me more. So let's say if you want to establish strict limit on this is the number of venture managers, this is a number of public equity managers, this is the number of hedge funds we want to have in the portfolio. Yes, that is good for discipline in making sure that you have almost like a one in one out. Support for today's episode comes from Square, the all-in-one way for business owners to take payments, book appointments, manage staff, and keep everything running in one place. Whether you're selling lattes, cutting hair, running a boutique,

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There's a ruthless competition for capital in order to make a change. But at the same time, what if you like all 10 of your managers and you just found something else that's really, really intriguing? And you think it's complementary to the portfolio and you think that there's a chance that could be a new, long-term kind of mainstay in your book. And by complementary, you mean it gives you exposure to some part of the market. You didn't have previously exposure to and there's some asymmetry there. So there's some non-zero chance that I could go up 10x, 100x, maybe on an individual asset basis, and it brings more diversification to the rest of your portfolio.

Yes. So I think that there are certainly a lot of angles to it. My colleague, Jeff, loves this word, orthogonal nature of some of these relationships, gives an opportunity for the portfolio. If you're bringing a new entrant to create breadth and optionality in the book that you don't necessarily have prior to it. I mentioned earlier, 75% of funds last year went to a handful of managers. You also have emerging managers going through what some call an extension level event where half or three-fourths of them will not be around or are on their last fund. And you also have some spin-outs as well from the top funds. What do you make of this industry known as VentureCAP? I'm grateful that I get to pay attention to it every day because it's

fascinating and it is evolving quickly. That said, it feels like there might be a little bit of hyperactivity in terms of all the new spinouts, the new launches, the new investors. We hear frequently from our managers as well as people in the industry and founders that to the point of the spinouts, increasingly portfolio companies are working with individual partners over firms, but I feel that there's only so many of those partners that are value add without the firm. It remains to be seen. We don't do a lot of spino outs. We try to keep an eye on them in case that there are interesting opportunities. But the key question for us when we see spinouts, when we see emerging managers, is just when is the right time for us to engage.

And historically our approach has been we want to see either long duration first quartile returns across the various metrics including DPI where possible or if not the return streams the potential to generate that and there has to be something from their background that exhibits that potential. Otherwise for us it is extremely hard to do any of these spinouts, any of these emerging managers because we just recognize the dynamics and the potential challenges that a new firm faces. faces. But never say never. We have done it. I've been proud to support one in the last 12 months that I'm really excited about, but I'll tell you, it takes a lot of conviction and banging your head against them all around the office at times to convince everybody else that it's worth making that leap. When doing diligence, how should NLP separate the partner from the firm when assessing whether he or she could continue to persist? References. That is the Holy Grail in terms of trying to figure it out. There's an opportunity to do track record analysis on a given partner,

but for the most part, even if there's a lead, there's often support, and if that supporting group is not going on to the next organization with them, then you can't really tell if it's transferable. The references across the ecosystem are what's going to be most valuable in my mind. That's talking to who they worked for, who their mentors were, what portfolio companies they had invested in, what their value ad was, what they were able to, introduce or who they could bring to the table to support ongoing rounds for the portfolio

companies. It is our aim to be as plugged in as we possibly can, sitting from however many miles away Richmond is, from Silicon Valley or New York, because we recognize, to our point earlier around the stories that we are told from fundraising meetings and what goes on behind the scenes and a layer down between the VC and the founders are different. And we need to make sure that we can try to eliminate the opacity there as much as possible. It's such a hard challenge because even the track record itself is not necessarily black and white. And to make it even more difficult, sometimes the firms are negotiating what the manager's track record was retroactively. So they're saying, we'll give you this deal, we'll take that deal.

But also the firms have a huge incentive not to give track record to the spin out. It's not because they're bitter that the partner left. It's because now they're going to go out and fundraise and LPs are going to ask, well, which one of this spin-out GPs deals were his and which were the firm? So there's almost a zero-sum nature to the track record, which makes it even more difficult to kind of figure out what's narrative versus ground truth. To be honest, I'm glad we haven't had to face many situations. The firms that we tend to back are ones that have trusted long-duration partnerships that have largely stayed together. and in the event that the ones who have spun out have not tended to be ones that

we were crediting for being return drivers. But you're right, that zero sum makes it really challenging. And I can see that also being valuable from an LPC to make sure that if there are stars that are walking out the door, you might better understand how your fund was performing that you might not have, even though that wasn't someone

that you were personally interacting with. So you could kind of do the math, well, if this GP did this deal, then this firm, minus those deals, what would that return me? You could, but again, I think it's more of a team sport than an individual game. And there are a lot of people that have their own deals, their own kind of companies, and they champion them. But again, it's without the surrounding team.

I'm not sure that anybody would be as successful in this industry because it is such a relationship-driven business. When you sparse out the economic incentives, what percentage of these spin-outs are driven by purely financial decision-making versus non-financial. It feels like whenever we hear about them, it's financial because the teams that we hear about bring a story where I led XYZ deals for, and I went back to the managing partner, the GP, and said, hey, I would like to renegotiate, and typically that doesn't go well because that senior investor is comfortable at the top

and appreciates the kind of splits that they have and the amount of work it requires. And so giving that dynamic up is challenge. So I'd say that the ones we hear about, the stories we hear about, tend to be more about misalignments of those financial incentives. Second order to incentives is also

all these things, respect, autonomy, all these things. Of course, no one will ever say I left because I didn't feel respected. It sounds childish. But there is a semblance of that. If you respected me more, you'd give me a higher title,

you'd give me more autonomy, you'd give me more economics. Yeah, totally fair. But at the same time, I don't think anybody wants that to be the rationale for why they're leaving, especially if it's a name brand, great firm, because then it's going to cause questions of, well, why weren't you respected? Why wasn't it that you didn't feel like you got that kind of credibility from a team that has a great reputation? I would imagine that when people bring that as the rationale, they're going to have a little bit of trouble with that story. One of my hobbies is talking about continuation vehicles.

I'm fascinated by the space. It's grown to $110 billion in the last. last year. Do you think continuation vehicles will proliferate within the venture capital space? If venture-backed companies continue to stay private for longer, I think they probably will at LP's requests. I don't know that they should. And there's a little discrepancy nuance there because we have spent a fair amount of time in our buyout portfolio looking at CV strategies and recognizing the pros and cons, the various things you have to consider as a rolling or selling LP and what you want to do there. In private markets, especially for these large private venture back companies,

the managers know the business is better than the LPs do. And if there's a situation where the LP is pushing for CVs to generate DPI or close out a line item in the book or some other non-economic reason, the GPs are going to happily do it. But I think that the GPs that are going to run CVs are going to have to be the ones that are large and have significant operational resources. and budgets in order to make it happen. Because these things take a long time. And there are a lot of players involved that I think on the buyout side, it takes anywhere from six to nine months, from soup to nuts.

And for a VC, my guess is that unless they have an army of lawyers, it's going to be that or longer. Now, on the other hand, I think that sometimes the VCs save LPs from ourselves in that if there were opportunities in prior years for certain large private companies, companies to generate liquidity through a CV, we might have elected. And I think that would not be the right decision. So in my opinion, we will see more of them. Again, when you are investing in venture, the duration is often well beyond the 10 years that the term suggests. And it probably pays to stomach for waiting a little longer. It also comes down just to the incentives. So continuation vehicles when you take one or multiple assets from a fund that's past its term line. and you essentially secondary it into another fund. And then LPs get to decide whether they want to roll their economics into the new fund

or whether they want liquidity. And incentives really depend on who you are. So if you're a GP that's worried about going out to fundraise without enough DPI, you could use a continuation vehicle because it's classified as a secondary, which is classified as DPI. I think they will proliferate in venture capital. And I think similarly to buy out, LPs need to be very careful about these CVs because these CVs could be used for the right incentives or for the wrong incentives. The right incentives are the Stanley Drunken Miller, invest and investigate.

I'm investor in this company. I know I'm on the board. I think it has another two, three, four, five X to go. I know that you guys are asking for liquidity, but I don't want to sell it. I'm going to CV it so that if you don't need liquidity, we could continue rolling and continue compounding on that. assets. The negative aspect of that is, as I mentioned, some people need to go out and fundraise and they might have assets that are not good and they might CV these into a new vehicle hoping to hide those losses against the rest of their portfolio. It is absolutely a precarious

game of incentives in CVs because the GP sits on both sides of that deal in that the sponsor who owns one to three or however many assets they're trying to roll over, they are selling to themselves. Now, they have to get a fairness opinion. There are still limited data points to prove out that those are always rightly assigned. In the buyout side, you sometimes have these CVs that are stapled with a primary check into the underlying asset. Have you seen that execute on the venture side? Not for CVs, but saw an SPV offer this week for that, where a manager that we do not work with yet sent us an email saying, hey, I've got an opportunity to invest in XYZ's series D. We would offer you attractive economics on the SPV in exchange for a staple to our next fundraise.

Or if you don't want to do the fund, then we will offer you kind of standard SPV terms. But yes, the GPs are getting more and more creative with the offers of access, because that is what they have to sell. Even if they don't have the relationship necessarily with us, it is the access to the companies that they're bringing to our portfolio that would be beneficial. What's the framework to look at the staples? Are you just re-underiding the managers for the first time? And how do you look at the dynamic?

We do very few co-investments and SVVs and venture at all. And the ones that we do are only with managers that are already fund commitments for us. If we are going to consider anything that is outside of the portfolio, it has to be at the fund level first. Spider has been investing in venture capital in private assets for almost 30 years. So we have a mature book, and we are fortunate that the managers that we had the highest conviction and the longest relationships with are bringing us plenty of opportunities that we're not looking for additional exposure through newer relationships. As I mentioned, I've had probably over a thousand, like conversations with mostly LPs and some GPs. I've never met anyone whose role was both venture capital and natural resources.

What makes this really interesting today is that natural resources and venture capital are starting to, converge. Tell me about that and through which lens do you look at natural resources? When I joined Spider five years ago, the team was all generalists, which I was really excited about because I was going to give me an opportunity to broaden back out from my Chinese credit backstory. When I got exposure to learn about the other assets that Spider invested in and the various kind of strategies that we have, we got to the point where our CIO at the time said, we're going to switch from a generalist model to privates and publics. And on the privates It's buy out venture, natural resources, and real estate.

And I had done enough VC work and underwriting and relationship building that that was kind of my primary objective. The tradeoff there was they said, okay, well, then you also have an opportunity to help us with natural resources, which is a smaller part of our portfolio and one where there are a lot of relationships that we are still trying to optimize and figure out how best to continue to invest there in the future. But it wasn't long after that, and especially at the time, I didn't understand or, think about the connections and the way that they would come together until AI. And as soon as AI became a buzzword or chat GPT became a household name, we started to realize just how interconnected natural resources and venture capital are today. The power is the main bottleneck for everything that the U.S. is trying to do in the AI space

and in technology, broadly speaking, right now. So it is a fascinating intersection, especially as venture tends to. to become more and more industrial tech, hard tech, deep tech, all of these are power hungry. This is not asset light software that a lot of the people are investing in and backing these days, and natural resources are right at the heart of it. But I will take you back to the first time I ever really put it together, which was we have data centers in Richmond, Virginia, out by the airport that I didn't even know existed. I drive by there all the time to go home to my childhood town.

and these massive meta and Amazon data centers are just hidden back there behind the trees. And you get back there and you say, like, how big is this building? And they don't answer you in square footage. They answer you in megawatts. And they talk about data centers based on what power generation is required to run the racks in there. I think that today with the United States electricity and power demand finally growing for the first time in a long time. and the energy independence that the U.S. has been able to achieve, that the AI race, as well as a lot of the venture-backed businesses that we are actively backing and investing in today, are directly reliant on the natural resources portfolio. And so that intersection is creating really interesting opportunities for us.

What's the investment thesis there? The thesis broadly is that demand for AI and new technology and electrification, here in America is insatiable. And with our legacy power grids, with the interconnect systems, with the regulatory environment, there are going to need to be alternatives such as the small modular reactors in nuclear,

or they're going to be battery cells, or they're going to be different ways that all these devices will be powered. You're not the only one investing in natural resources and this data center and this power thesis. A lot of money. is going into the space by a lot of unsophisticated investors. What mistakes are investors making when it comes to investing in the space?

The premise of your question is insinuating there's a bubble of some sort in data centers. And there may be, but I don't know that there's a bubble in demand for what they produce. And your point about the AI, the data centers, the power, it's funny that all of that also kind of connects to outer space and the data centers that all of these firms are now realizing that there are opportunities to streamline the process and complete the biggest need for all these companies by doing orbital data centers. So I think that terrestrial data centers, it seems to me that there's a big difference between how quickly a traditional data center construction group or builder can put one up, but then getting the power hook up is a

multi-year process. Contrast that with what Elon and the Colossus facility were able to do in Memphis, where they were putting up an entire data center from scratch, the first one, in four months. And the second one, they did in three months. So there's just a pace at which kind of legacy industry is continuing to operate, that venture and venture-back businesses are seeking to append. So what are the second or effects of that? Data centers in space. Like one of the things I love about this job is that we get to talk and learn about businesses that sound wacky. And I remember when one of these companies came through Y Combinator and they announced the batch two years ago and it said, we're going to put data centers in outer space.

And I thought, you've got to be kidding. There is no world in which that makes sense. And now we have all our just tech companies, but public and private, actively building out plans to pursue just that. When I invested in SpaceX, it was a rocket company. Today, you could argue it's an infrastructure company. If you were reinvesting in the company, you would almost have to look at it on the natural resources side, not the venture side. Or an AI company.

The rocket business is the lowest revenue of all the business lines. There's Starlink, which is the wireless communications. There's the XAI and Colossus, which is the data center and the power. And then there's the rockets, the transport. We're all watching carefully, as it seems to be a generational entrepreneur that has continued to defy people's expectations about what's possible. But you're right. SpaceX was a rocket company, and then it became a internet service provider, and now it's an AI

company. And I think it will continue to pivot and evolve and create new markets. What's mind-blowing about this is you mentioned this YC startup that couple of years was talking about data centers in space. At the time, it did not violate physics. It's pretty much doable. But this entire space, essentially overnight, was created by Elon Musk having a thought experiment, which is, can we do data centers in space? Yes, we can.

What are the cost savings? What are long-term cash flows? And then suddenly, Google's investing into it. And suddenly Anthropics doing an LOI and buying compute from Elon. But he literally willed this entire industry into existence just through a thought experiment. A thought experiment? and extremely deep capital at his back. And credibility.

And credibility. But where we started today was around private markets getting bigger and raising more and more at each subsequent round. That is one of his superpowers. He's been able to attract more and more capital to allow him to pursue these wild ambitions. As long as he continues to make people money, there will be people that continue to give him more in order to pursue the next big dream. Going back to our previous conversation, through my podcast, I'm able to develop my thinking and essentially defalsify my thesis. And I've had this idea of this perpetually private company for a long time, this thought experiment. And Matt Wildheart from Wellington gave me a very important stat, which is private markets in a year is $2 trillion.

The public markets is over $100 trillion. So another way, these companies end up being a victim of their own success. So if you're a $900 billion company like Anthropic, you could raise 60 plus billion. But what if they double in a year? Now they're a $1.8 trillion. Can they raise $120 billion? Now what if they double again? At some point, if a company continues to grow, it must access to the public markets.

Even though I would argue companies should stay private longer or it's easier to stay private longer, all things being equal, all things are not equal. And what's crazy about this thought experiment, let's just imagine a world where they're, now $10 trillion private companies, and they go public at $10 trillion. What happens as a second order effect of that? Now you have a multitude of funds that are $10,50, $75, $100, and you probably have a couple funds that have now returned $500, call them seed fund. What happens when there's an asset class that's returning now $4,5X median return versus the public markets that might be returning 10%?

you start to have at the LP level, CIOs look at, well, maybe we shouldn't be 60% public, 40% private. Maybe we should be 40% public, 60% private. So now these funds and these private pools of capital get more money. And as a result of that, now Anthropic, instead of having to deal with a $2 trillion private market, maybe they're dealing with a $3 trillion or $4 trillion. So they're able to stay private longer. So there's this evolution of the public and private markets. And there, in many ways, they're competing against each other to fund these breakout companies.

What I wonder is that if these elite companies are staying private longer and continuing to accrue value before going public, is an opportunity for the investors in the private markets to compete with the publics of recent years. And that the public markets have been so strong, everyone started to wonder, why do we continue to commit capital to venture, to buy out, etc. QQQ has beat almost all of venture capital firms. Maybe the GPs out there wised up and said, you know, well, let's really lean into these big ones that are true compounders that just blow those away so that people will remember why we invest in venture and buy out in the first place. Brad Conger, the CIA of Hurtle-Kalahan, mentioned that the reason that the Fama-French model,

so Fama-French came up with this model that small in value stocks and the public markets will outperform other stocks. In the last decade, that hasn't proven to be the case. And his thesis on this is that what was small in value 10, 20 years ago, is today private companies, bio companies, and also on the small side, venture back companies. 20 years ago, Google and Amazon went public years and years and trillions of dollars before today, Open AIs, Anthropics, and SpaceX's are going public. So we also have that almost a survivorship bias. Why has Tesla went from $100 billion market cap to several. trillion dollars, it's because they want public at 100 billion. And if now Tesla is going to

$1 trillion or $2 trillion in the private markets, the next Tesla, now you only have that 2x. There's a cyclical nature to these markets that you can only see looking back. I think that's a great point. And our managers continue to try to convince us otherwise. The law of large numbers is that they will continue to exceed the highest ceilings and keep growing. This is a theory from some of our managers that I have trouble wrap my head around at times because I agree with you that on an absolute basis, the idea of going from $100 billion to a trillion is a lot easier than going from a trillion to $2 trillion. But they say it's the exact opposite.

The first trillion is the hardest. And then it just opens up. It's like that we're talking about trillion-dollar companies. Even six months ago, it's crazy. And what's even crazier about this, so I'm talking my own book, I'm investor in Anthropic and full disclosure. But I've talked to some of the growth investors in the round, and they said it actually was pretty cheaply priced.

$900 billion valuation and revenue now is north of 40 ARR. So on an ARR basis, if you take away the $900 billion sticker shock, it's actually not that expensive. And Dario didn't optimize on price. With so much evolution, so many different things going on in the public and private markets, you really have to step back and think from first principles. Not what sounds crazy or what has always worked, but what is ground truth today? What do we know? What don't we know?

explicitly think about what your exact thesis is, put it down, and keep yourself to that thesis when you look at it three to six months later, and constantly try to think from first principles on what's the right move forward, even though it may look nothing like historically what you've done. I agree with you. We have to constantly underwrite and stress tests our own assumptions in order to try to identify the right opportunities for the long term. And kudos to you for getting anthropic of $4 billion. Like that is an amazing outcome. I'm sure you're very proud, but you wear it modestly.

Rob, thanks so much for jumping on the podcast. I'm looking forward to doing this again soon. Thank you, David. Appreciate you having me.