This Week in Startups - Alexis Ohanian on Reddit's potential IPO & more | E1893

Episode Date: February 7, 2024

This Week in Startups is brought to you by… Vanta. Compliance and security shouldn't be a deal-breaker for startups to win new business. Vanta makes it easy for companies to get a SOC 2 report fast. TWiST listeners can get $1,000 off for a limited time at https://www.vanta.com/ NetSuite. Once your business gets to a certain size the cracks start to emerge.  Things you used to do in a day take a week. You deserve a customized solution - and that's NetSuite. Learn more when you download NetSuite’s popular KPI Checklist - absolutely free, at http://www.NetSuite.com/twist Scalable Path. Want to speed up your product development without breaking the bank? Since 2010, Scalable Path has helped over 300 companies hire deeply vetted engineers in their time zone. Visit https://www.scalablepath.com/twist to get 20% off your first month. * Todays show: Jason talks with Reddit co-founder Alexis Ohanian about their pending IPO (2:48), advice he tells young people starting out at his firm (13:51), then Ron Biscardi discusses the future of the iConnections conference (47:01), and more!  * LINKS: Check out Reddit: ⁠https://www.reddit.com/ Check out iConnections: https://iconnections.io/ * Follow Alexis: X: https://twitter.com/alexisohanian LinkedIn: https://www.linkedin.com/in/alexisohanian/ Follow Ron: X: ⁠https://twitter.com/rbiscardi⁠ LinkedIn: ⁠https://www.linkedin.com/in/ron-biscardi-79063/⁠ Follow Jason: X: ⁠https://twitter.com/jason⁠ Instagram: ⁠https://www.instagram.com/jason⁠ LinkedIn: ⁠https://www.linkedin.com/in/jasoncalacanis * Thank you to our partners: (11:48) Vanta - Get $1000 off your SOC 2 at https://vanta.com/twist (22:19) NetSuite - Download your free KPI Checklist at http://www.NetSuite.com/twist (32:42) Scalable Path - Get 20% off your first month at https://www.scalablepath.com/twist * Check out the Launch Accelerator: https://launchaccelerator.co * Check out Founder University: https://www.founder.university * Subscribe to This Week in Startups on Apple: https://rb.gy/v19fcp * Great 2023 interviews: Steve Huffman, Brian Chesky, Aaron Levie, Sophia Amoruso, Reid Hoffman, Frank Slootman, Billy McFarland * Check out Jason’s suite of newsletters: https://substack.com/@calacanis * Follow TWiST: Substack: https://twistartups.substack.com Twitter: https://twitter.com/TWiStartups YouTube: https://www.youtube.com/thisweekin Instagram: https://www.instagram.com/thisweekinstartups TikTok: https://www.tiktok.com/@thisweekinstartups * Subscribe to the Founder University Podcast: https://www.founder.university/podcast

If you look at the longevity of Reddit, what are the takeaways for you as the co-found? The power of community was able to sustain Reddit after the sale to Kahn and ask. In those four or five years when it was just a part of Kande, they didn't know what to do with it. It kind of just languished. But the community kept it alive. The community kept growing and engaging. And there aren't many products that should get away with basically doing nothing for five years and still succeed year after year after year. Reddit managed to, and I think it's a testament to the community of those users.

And we got just enough things right early that it endured. Yeah, it's like you set this foundation somehow that was so stable that even a giant media corporation couldn't knock it over. This weekend startups is brought to you by Vanta. Compliance and security shouldn't be a deal breaker for startups to win new business. Vanta makes it easy for companies to get a SOC2 report fast. Twist listeners can get $1,000 off for a limited time. at Vanta.com slash twist.

NetSuite. Once your business gets to a certain size, the cracks start to emerge. Things you used to do in a day, take a week. You deserve a customized solution, and that's NetSuite. Learn more when you download NetSuite's popular KPI checklist, absolutely free at netsuite.com slash twist. And Scalable Path. Want to speed up your product development without breaking the bank?

Since 2010, Scalable Path has helped over 300 companies hire deeply vetted engineers in their time zone. Visit scalablepath.com slash twist to get 20% off your first month. All right, everybody, I'm back, I'm back. I had an amazing time last week. I went to this conference. You maybe never heard of it because it's for VCs and the people who invest in VC funds, limited partners, VCs. It's called the I Connections Global Alt's 2024 conference. It took place in Miami, which is the last. I was lucky enough to have a podcast studio there, and I was able to interview two folks. One,

my old friend Alexis O'Hanian, the co-founder of Reddit, and we talked a lot about the Reddit IPO. We talked about what he's doing as a VC. We talked about anonymity and pseudonyms, a popular topic going around now because Twitter now is gone full. Hey, you can have pseudonyms and you can't be doxed or people can't reveal who you are. So a really interesting discussion. And then I got to have the I Connection CEO, Ron Biscardi, somebody I became friends with the last couple of years, a really thoughtful guy. And we talked about the state of the market, how LPs and GPs, general partners of venture firms like myself, who invest in startups, how that's all going on. Listen, it's a recorded outdoors. So you might hear a little wind or some sirens in the background,

but it gives it a little more charm. Enjoy. And thanks again to the I connections team for hosting us. All right, everybody. Welcome to this week in startups. Frequent guest and friend of the pod, Alexis O'Hanian is here. Founder. of Reddit, legend, friend, and just all around smart guy. I want to talk you about two things. Obviously, I want to talk about Reddit going public.

That's mind-blowing. Yeah. That's mind-blowing. For all of us. Crazy. 2005, we started that thing. It's nuts. It's the lesson.

What's the lesson of Reddit? If you look at the longevity of Reddit, what are the takeaways for you as the co-found? You know, the power of community was able to sustain Reddit after the sale to Kahn and asked in 2006. Steve and I left around 2009, 2010, respectively. And then I came back in 14 as chairman.

In those four or five years when it was just a part of Kande, they didn't know what to do with it. It kind of just languished. But the community kept it alive. The community kept growing and engaging. And there aren't many products that should. get away with basically doing nothing for five years and still succeed year after year after year and Reddit managed to.

And I think it's a testament to the community of those users. And we got just enough things right early that it endured. Yeah, it's like you set this foundation somehow that was so stable that even a giant media corporation couldn't knock it over. They couldn't destroy it. And then you were able to somehow wrestle it out. I think, more. Thanks to Sam Alvin.

Yeah, that's a funny story. Go ahead. Not for me to tell. Not for you to tell. I mean, I know the periphery of the story, but give us broad chunks. To the extent you can. He was pretty instrumental. Sam and I were in the same batch in Ycommona.

Yeah. Looped. Looped. Looped. And he was pretty instrumental in bringing a lot of folks around the table from a number of different venture firms to do the first investment that really brought in outside capital to dilute. Connid asked and let Reddit be an independent company again. Yes. That was around 14 maybe.

And joined the board. And yeah, it's been. I mean, it's wild. Like the, certainly the education that I got between 2014 coming back and then 2018, when I went back to doing venture full-time, showed me so much about how to actually grow a business, how to actually. As a first time CEO, first time out of college, starting this thing, I got so many damn things wrong. That second time around was an education. Caitlin, who was our head of people now started 7-776 with me. We worked together a decade. I've learned so much from her. And it's funny, I don't know. There were so many of us who were kids. kids, if you think about from that era, building these social media platforms. And I have to give him his flowers. Zuck really was in a league of his own. Yes. Understanding just this level of gamesmanship and how to build and execute a company

in a way that the rest of us, I'll just speak for myself, just didn't have. Yeah. It was like there were people doing it in a bespoke way. And then he came in and did it in a methodical, thoughtful, like just, yeah, perfect. way. But hey, we're going public, allegedly. Allegedly going public. Yeah, no comment on that. But they ought to be great for Reddit to go public whenever the valuation winds up being. It doesn't matter. It's, what matters is it'll be recognized for the juggernaut of a business it is. It actually makes tons of money in terms of

revenue. And where is it in terms of traffic in the United States and traffic in the world? I know it's a top top, top site. It's tricky. It's like people will cherry pick that, like based on Alexa data versus mobile data. Got it. But let's say top. 20. Top 20. 50.

I feel pretty solidly. Yeah, I mean, you could take out the Chinese sites, right? If you just were doing it. The Western world, English-speaking world, like, it's kind of a big deal. But what's surreal to me is, I don't know, we're entering this new era now where I think finally community is getting its flowers. That was the thing. pseudonymity and community were the two things that I begged people to believe in in 2005.

And there were a handful of people who did. Most people are like, that's nuts. Today, I think the durable businesses, I know you've talked a lot about Mr. Beast on the all-in pod. Yeah. The all-in pod is an example of this. Yeah. People who are able to build near fanatical community.

Yes. Are able to endure in a world where there's going to be a million distractions and a million different ways to steal your attention. And I think we're going to see the durability of real brands versus fake brands that people like maybe would have been happy to have a subscription to in the past. but didn't truly love. Right. And, you know, today someone can build it directly.

And I think Reddit, the one thing we did get right was not making about us per se. We built it for communities, you know, even the follow model. We probably missed out on building Twitter before Twitter. We did launch a few years before. They very, very, very wisely made a follower model around individuals. So you can say, hey, I'm Jason, follow me if you want more of my stuff. Right. We didn't have a follow button.

And we actually used to have product discussions about this internally because Reddit was about follow the community. If you love cute animals, follow that community. And so mods had a very different role there. But individuals didn't really have a place to put their content because they couldn't tell people, you know, even if you were a web comic artist like XKCD, which was like right down the fairway of beloved early Reddit content creator, it was weird to post your own content on the XKCD subred. because it felt too self-promotional. Yes. And so that I stay out of the all-in thing because it's like, that's not my place. Right.

That's your place. But it's, that's the fan's place. And it's magical for that. Right. But then it also makes my job really hard for a decade and a half to try to convince the creators to spend time there. Right. Because there's no obvious way for them to do it.

And where Twitter got it so right was they could just say, like, yeah, if you got cool content posted here, stream of consciousness. And if you dovetel pseudonymity and the ability, to be anonymous but thoughtful, or anonymous but clever, that's kind of how it washed out over there. It wasn't vicious, but it was candid.

And even yourself, you know, like they'll come after you. I mean, if you go into your own subreddit, that is like prepare yourself. Bring armor. It could be full contact. It is, in the best case scenario, you still have identity.

Like people, it's not pure anonymity. Pure anonymity has no consequences. If you're Fluffy Bunny 12, it may be a made-up name, but you still have identity, where if you're consistently an asshole, people know they see that reputation reflected in you.

There's a cost to being a consistent asshole. And so pseudonymity, and that was not any kind of brilliant thinking. That was just grew up playing video games. You always use a pseudonym. You had a handle. You have a handle. Exactly.

That's it. And what I love, though, was you would see what people really felt, and probably the best lesson I got was two, three months into starting Reddit. We're talking 2005. The site would go down. And the number one, one post would be, hey, nothing, which is my username, okay? You're an effing idiot. Why was the site down? And you're like, fair? And, and, but it was, I should have put more memory in the servers. You didn't load balance it. Exactly. You had to take responsibility for it. And so it's like,

show up in the comments, explain what's up. And I think that endeared in the early community to what we were doing and how we're doing. And it gave me the best education for how to handle those types of situations. And it's not to say I've been perfect, but generally speaking, being the front, like the face of a community-driven platform, and Elon is experiencing this, is a very, very different dynamic than building a business as a CEO in a physics-based company. Yes. And it's almost, it's part political as much as it is just business. Right. And so the greatest education that I could have gotten was being a CEO in the internet age was having my own users shit on me two months into creating this thing. Yes. And knowing that that was just the norm, we'd have to hold ourselves

to that standard. Well, but you know what I see in that? Now it's every. What I've learned over time is if they didn't care, they wouldn't have made a comment. Very true. So here they care enough to roast you. Yeah. And then you like take the roasting and then there's like, oh, and here are two really good points. Yes. And then here's a lot more roast. And so what you have to do is just be like, okay. Yeah. Okay, you're fat, you're ugly. This is a great podcast.

You disappointed me. I'm publishing this week. I'm talking about me. I'm talking about me. Not you. But like literally, this is before I lost away. They're like, you fat Greek. Why didn't you publish this week?

That was on Reddit? Whatever it is. And then they're like, because I really love the pot. And I'm like, thank you, mom. I always come back with some joke like that. All right, listen, selling software is hard enough right now. the last thing you need is to slow down your sales team because you don't have SOC2 dialed in. So if you're a SaaS services company, that stores consumer data in the cloud.

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Just work with Vantam. Get your compliance automated and tight and close those big deals. So here's your call to action. Vanta is going to give you $1,000 off at vanta.com slash twist. That's vanda.com slash twist for $1,000 off your sock, too. But what I want to talk to you about is venture capital investing in companies, because you and I have had like a little dove test, like a career experience. We both created properties on the internet that were love.

whatever, and then we started investing in companies and we had great success there and innovating in what we do. We both started our own firms and we're both trying to innovate a bit and then I watch what you do and you create it Cerebro and I'm a huge X-Men fan. And I'm like, oh, why didn't I think of that? And I thought of a lot of things. I have a lot of little secret things I do as an investor. But I never thought to create Cerebro where you track the mutants like Professor X, and then you track how you're helping them at Professor's School for gifted mutants. That's good. That's canon. Yeah. That's right. And so tell everybody about what Cerebro is to the extent you're willing to talk about it.

I really should do a better job of talking to us more. It's not like it's secret. It's just lack of whatever interest. Or I think you're focused on actually being Professor X not promoting the X-Men. It's reasonable. There you go. Focus on that core work. But to your point, I think there is a, there has always been, and there's certainly in this new era of venture will be a type of investor that is truly differentiated through just the shit they do. And by consistent is what I tell younger folks at the firm. It's like the best way to build a reputation is do dope shit consistently. Like do the things you say you're going to do consistently for founders. And that builds your reputation slowly at first and then gradually it increases.

And as a product designer, I think I've wanted a version of this for my entire career, not just as an investor, but also as a founder. Because so much of work gets lost. Like there's even rebuilding the Reddit revenue business. In 2014, I think it was an 8 million revenue business when I came back. Did 8 million revenue that year? Turning that into 150 a few years later was actionable because we could hire a sales team that would use Salesforce and we could see very clearly, okay, here's the effort, here are the dollars. how are we doing? Who needs to improve? Who's doing well? What do we learn? There's a feedback loop. You measured it. It was obvious and easy to measure. That's probably the easiest part of any

business to measure, but you can still unlock so many things by learning more. But in venture, most folks have no idea. And you don't even know if you did well as an investor until five, seven, ten years later. Yeah. So how do you create the feedback loop with your team, with your founders? And so I wanted this notion of receipts for myself as well as for the team and for the founders. You could hold your team accountable. Exactly. And they can hold themselves accountable. And creating that culture of accountability that like you need in a business. But frankly, I think a lot of traditional venture firms were not built by operators in a business like way, right? They're lean back financiers who wire some money wearing their, what's the, what are the

sweaters? What are the sweaters that Chimoth likes? Oh, Loripiana. Luripiana. Leverie sweater is leaning back type of stuff. It's a different energy. And I do think this new era is going to be won by builders and folks who are hungry for that kind of accountability to founders to themselves to their team. Right. So what do you track? What do you track? Introductions is great. I know we'll do even if I

so founders can actually use Cerebo to draft tweet storms as an example almost like a hoot suite or a tweet deck. Yeah. For me to then edit and approve sweet. Then we track the impressions, the click through rates, the I can say unequivocally like the tens of millions of impressions we've

generated, the idea that we can do distribution and then have accountability back to the founders to say, here's what it is, and then gamify it. Yes. So the top five companies, shout out intro, which is one of the best at doing this, now set a standard and we have a leaderboard, because I fucking love a leaderboard, so that other founders can see like, oh, wow, like here's an amazing tool, here's a resource. Now that competitive fire that's in most of our founders makes them say, okay, why aren't we getting more out of this? Let me talk to my social team and try to do things that frankly, I don't know if other institutional venture folks have done. And I also want to scale my time, right? I want the time spent not to be thinking, hey, who do I know at company

X to make the intro? I want a founder to run a search through my Rolodex, find the person they're looking for, click a button, draft the email. So then all I'm doing is at two in the morning looking at a push-notiff, clicking, making an edit and you zip, zip, zip. Like, that's a way better use of time than a 20-minute phone call to like pick my brain about who I know at Disney I think what we learned as entrepreneurs was there are these, as rule off a call my Sequoia crucible moments, there are just little pivot points, sliding door moments, butterfly effect moments where you know, you tweet something, the right person sees it, they lead the next round. Changed everything.

The right person, the right celebrity sees it, boom, they use the product and they organically tweet about it or share it on Instagram, and those sales go 10x. And it really is that blocking and tackling. What have you learned through this latest boom bus cycle? We both lived through dot-com era. We both lived and experienced up close and personal, great financial recession. Now we're here third time. We've been through this.

It's like that scene where they're both in the nooses and the guy looks over the other guy. It's like first time. First time. First time. What did you learn this time around and we sort of collapsing? And arguably now, 24, we're starting to come back. It feels like how did you handle it this time? What did you learn?

I barely, admittedly, I was in high school during the dot-com one. But the hitting the recession when I did, I was very lucky because I was an executive at Connast. We certainly felt the revenue drop, but I didn't feel the existential dread because, you know, we had exited. I had a salary. I wasn't worried about, you know, losing my job. And we were a team of four.

So it wasn't like we were a big burden on their balance sheet. So this time around, it has been, I think, I keep thinking about that meme about hard times create great men or in this case hard times create great companies the sobering up and i will say this y'all's i it's funny i have such a i have such a tormented relationship with the all-in podcast oh you do because i love listening to it okay i know your favorite bestie so that's good there are times there are times i wish i could teleport into the conversation sure you can i'll give you the limelink no i but like there's and that's why i'm tormented by it because i'm like oh but And, and, but that's, I think, part of the magic of it.

I will say, too, it gives me, it gives me a view into the brains of people like David that I normally wouldn't want to spend a lot of time in. Sacks. Sacks. Yes. Yeah. That, uh, yeah, not Freeberg. Freeberg's brain is, it's a beautiful mind. Yes.

But it's a helpful, it is such a, it's such a very helpful extra perspective to get that while I'm sitting, you know, on a commute in South Florida, I can like get into my brain. Yeah. But the sobering reality of how. drunk everyone got and how, I mean, you all have been one of the few voices actually talking about like, hey, everyone's going to have their come to Jesus, pump the brakes. Like, it's been, it has been so helpful in even thinking about the kind of counsel that I'm giving to founders. And look, sometimes it's validating. Because sometimes I'm like, yes, like, we were telling our founders this two weeks ago and now they're talking about it on All In. Or other times it's like,

damn, Allens got a point here. I really should take this more seriously. Well, great conversations amongst people who are in the field doing the work are invaluable. And you think about how we grew up and it really deftails with what you created and Steve as well with Reddit. You know, you give a voice to counterbalance other voices. We have mainstream media that we grew up with. Maybe we have government.

And then academia. Oh, this is community. And they have a say too. And then people type in. The name of the movie, review. Reddit. Oh, yeah. Throw Reddit on every Google search, please.

You know what? There's experts in the field. I could read this tech publication or I can listen to these guys, gals, people, this podcast, that podcast or their social media or their substack or their email newsletter, and get another perspective from experts. And I think adding the community, bottom up, and then adding experts to your media mix will get you to truth quickly. Absolutely.

To traditional media. There's plenty to dig them about. But there's something about the age of expertise. and you know, you should be doing more. I need to consult with you on the pod strategy. It's, I have wondered, though, it's funny. I'm sure you all have noticed there's been a handful of other folks in and around tech that have tried to do what I feel like is their version of all in.

Oh, my God. There's like five of them. And they're all, and it's, I don't know what it reminds me of. It feels like, I think it's so cliche, but like they're not attacking it from like first principles thinking. they're just saying like, okay, we're going to, exactly. It's like a, it's a duplicate with different people. That's the formula.

Yes. But it's, they're not. Through a cold open, laugh. Right. And then edit it. And it's just like, it's not quite there. And it's so funny to me because I would have expected at least one or two others that would be inspired by y'all that would have started to get some traction because I want that.

Right. I want more operators. Maybe, okay, we've got a great roundtable of investors slash company builders. But like, where's the version of that around, I don't, brands or developers or marketing or community? Yeah, there's. And so I'm excited to see that. I don't think it's starting. Like, there are people.

Are you just going to do it as part of the all-in empire? You know, here's the thing about empires. Like, be careful because when you try to build an empire, that's maybe when it falls. Indeed. You know, and I'm a big fan of like, if you have something that's working, here's an idea. Make it 10% better every time you do it. Five percent better. compounding drill.

Every 7.2 weeks or every 15 weeks, it doubles in value, which is the lesson of running. Like, you guys made very small changes. You kept growing it, but you didn't F it up. And I'm a big fan of not fucking things up. Yeah. So I told the guys, like, we did a podcast, we did an event. Like, okay, and that's in three years. So that means every 18 months on average, we drop something.

Let's stick with that. And let's just make every week fantastic. And, you know, maybe we'll get there. 776 is the fund. Yes, sir. You're on your second or third fund now. Third. Third.

And you invest in seed series A. Yeah. We do a little incubation too now. So incubation pre-seed. Seed's still the sweet spot. But I've been messing around a little bit on the incubation front. It's fun. I think it's a great thing for you to do.

We're doing about 100 investments a year for more programs. Let's go. Well, you know, I think. Watch out YC. Well, here's a gauntlet thrown. 99% of people don't get into YC. So you have to ask yourself, if we do 100 more, that's like 1.25% of the population getting into a program. And so, you know, if you had your program and another 0.25 or 0.5% of the applications to a YC and TechStars get accepted, it's not really competition.

That's fair. You know, it's fair. It would be like, if Harvard is so good, why aren't they accepting 20% more students every year? right except some more students and make it more available if it's that good and that's why I think you should just do your own and don't worry about it like All right, there you go. Galith throne. Why? Just do one seat in there and do it if you enjoy it.

Five companies that you enjoy and that you want to spend time with. You have to optimize for what you enjoy. We'll see. So I am so sadistic or no, masochistic. I want to incubate. Like, I'm incubating some idea that I have getting the like V1 built. Yeah, a little bit more studioy, but not like, not full on studio. But like, we'll probably do one or two incubations that way this year because I'm a

masochist who loves that. And it's getting, dude, the rate at which you can get something to market now, that's good. I mean, it's, it's not.

Is this co-pilot? So whatever, I mean, it's like you could have the idea and six weeks later you're in market. You're actually testing it. You've got, I mean,

everything from copy, I mean, so much of this stuff is now getting accelerated. To stand up content, uh, customer support, payments, AI,

whatever. It's all button. It's like everything's abstracted. And so what's left? Community, brand, you know, and solving problems for people. All right, listen, you've got to go. You got more meetings to do.

I know. I'm on a meeting. Thank you, Jay. 776. If you want to have one of the greatest investors of this generation, I think what you're going to do if I keep at it for the next 20 years. Don't quit, brother. No, I mean, honestly, you are just getting started.

And I think what you're doing with Cerebro is really when a founder's making a decision about who to pick, I think the best way to do it is to just talk to existing portfolio companies, once that failed, especially. ones that succeeded, ones that were in the between. And then you know everything you need to know. And I think that's why you're going to be tremendously successful. I'm taking notes. Good to see you, brother.

Thank you. Congrats on Reddit. Appreciate you, man. Yeah, I appreciate you too. And we'll see you all next time on this weekend service. Bye-bye. Hey, when your business gets to a certain size, the cracks start to emerge. We know that.

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I am here at the I Connections Global Alt conference with the founder, the patriarch. Ron Scarty, how are you, sir? Very well. Good to have you here. For people who don't know, you run a conference. It's called Global Alts. It's in Miami. Thousands of people come here.

And then there's an app called Eye Connections where they all get together and set up meetings. Who are these people? Why have thousands of people come to Miami to take meetings? Excellent question. connections assembles the alternative investment industry. So there are about a thousand institutional investors. So think family offices, endowments, foundations, pensions, sovereign wealth funds, all those entities that put money into hedge funds, venture funds, private equity, private credit, real estate. That's the other side of this event. Collectively, 4,362 people are registered here

for global wall. Amazing. And I got to speak at your New York version of the event. I came to my Miami's much bigger. Much bigger. And for a fund manager like myself, I didn't even know this existed. You reached out to me at some point, you know, my bestie Chamath. It was really incredible for me because I'm raising a fourth fund. There's so many people interested in alternative investments. And what you've done here is really magical, I think.

You have a little bit of content, a lot of nightlife and parties and, you know, events, people can network. But really, the meat and potatoes, the foundation is people have boots or rooms. and the app people can request meetings and the LPs, the limited partners, get to take 30 minute meetings with the GPs and you run some sort of algorithm at the last minute and it just sends people to Rooms. Yes, exactly.

So it's too cumbersome for 4,000 people to calendar all of this. So everyone just picks a time slot or they tell us where the open time slots are on their calendar and then our algorithm runs about a week before the event and it plugs in all the meetings. and we do that so that we can cluster the meetings for the LPs because the LPs are the ones who are doing the walking.

The GPs are stationary in a booth or a room. And this way we don't have the LPs walking end to end. You can see we're here at the Fountain Blue and the Eden Rock Hotel. It is a massive campus. And the only way to navigate that is if we keep those meetings close together. Yeah, and I've experienced that because I went to the wrong building. I had to go double back. But once you get settled and you get into your rhythm, it's great.

So maybe you could talk about we went from a ZERP environment. It was insanity. The market collapse. You're running this conference for the two years during this market turmoil, 2022, 2023. Here we are in 2024. And the vibes seem different. As somebody who coordinates all this activity,

what are the vibes telling you going to 2020? So there is no question. The alternative industry went through a lot of turmoil in 23, especially in Q3, and we saw it in clients just telling us the war story of trying to raise money in an environment where... In 22 or 23? In 23, mainly because as interest rates have gone back up, allocators are now rejiggering their portfolio because for the first time in 15 years, you can actually have a bond portfolio. Places in the portfolio where they probably used hedge funds in particular, they're now rethinking,

Does it make sense to put this capital in that kind of vehicle? Should we be in more of a traditional fixed income vehicle? As a lot of that change took place, things really slowed down and fundraising was much, much tougher for Alts in the middle of the year. But November, the market did well. December took off. We have been inundated in the last two months with signups on both sides, LPs and GPs. We have over 1,000 LPs in this event. it's up about 100 to 150 over last year.

On the GP front, we're up about 25% in terms of the funds that are over a billion and about 20% overall. So the activity in Alts is not slowing down, but it is always shifting. Traditionally, long short equity was always our biggest category in this event. This year, it's about 20% versus in past events. It was probably more like 30, 35%. Private credit, absolutely huge. everyone wants to meet with private credit. They are getting more than their fair share of meetings

because LP's really want private credit. Why is private credit so attractive at a time like this? Well, the interest rate moves have had a huge impact on private credit and the rates that these funds are able to charge and the market opportunity has just exploded because banks are still really difficult to do business with, especially if you're like a small business, even approaching the mid-market, there is still, if you don't have real assets to lend against collateral that the bank can identify, they are very tentative and not moving quickly at all. So these private credit funds come in, they are going to charge you a much higher interest rate. 15%, 15%, 16%, absolutely those kind of numbers. But if you're a growing business and you just need the capital, it's still a lot better than

raising equity and probably much, much faster. Yeah, so the interest rates go up. People are questioning private equity venture, those portfolios are being cleaned up. You know, obviously I'm in the venture industry, so I've been watching that. I'm early stage, so I get a little bit abstracted from the later stage where that mess was, you know, in the process of being popped up. Yeah. Clean up ILA, you know, growth funds, just everything fell off the shelves. But as the rates went up, hey, if you're, if you were sitting, you're a sovereign wealth fund, you're an LP, you're an endowment, yeah, you can give somebody, you know, $100 million, and they guarantee, guarantee you 15% a year, that's pretty great. I mean, that's spectacular. Yeah, it hasn't existed in a long

time. It's not existed. Yeah. For the private credit funds, the interest rate move is absolutely been a win. Yeah. But now, hey, they say three, four rate cuts this year and, you know, maybe mortgages leveled off, maybe start going down. So then you'll see that maybe taper down. and then maybe people will get frisky and want to be back in equities, back in private companies, yes? Oh, absolutely. I mean, I've been running these types of events for a decade now, and there is just a constant shift in strategy focus for the LPs. And they're just adapting their portfolios to whatever the market environment is.

So for sure, I mean, I think we're probably, if we're not at a top in private credit, we're probably close. It feels like this is the top because, hey, we're going to have an interest rate cut sometime in the spring or summer. Hopefully. Yeah, and that's what people are saying. But hey, me, the economy could heat up again. So overall, when you look, you know, and let's go to a 10-year view, if we're sitting here in 2034 and we're looking at the markets, what things do we know will be true about the trends that you're seeing now? What can you extrapolate out and say, you know what, we know this trend's going to continue and we know this trend's going to continue. I don't know that I'm qualified to give you a 10-year projection with any accuracy, but I will tell you the one talk that really resonated for me was Brad Kersner's yesterday.

Yeah, Brad's great. I think Brad, I think Brad, looking at the venture market, your market, and how companies have had to become fit. Yeah, I think his term. This is his term for. Capital efficient. would be a translation to what he means by fit. Exactly. Companies have had to operate probably in a more traditional form than they had been operating leading to the peak in 21.

I think this is probably one of the best markets in a long time for venture money to be put to work. However, venture funds have been having a really hard time raising money. The last two years have been tough. I think a lot of that has to do with the lack of exits because LPs are saying, saying, look, we need the exits from your last couple of funds to be able to fund the commitments you want us to make in your future funds. Yes. And those have been delayed a bit.

For sure. Because public markets are a little bit tight, but hey, we have read it. And hey, well, there's a story that is almost 20 years old, 15, 16, 17 year old company. I think it started in 2006 or five or six. And now they're going public here, almost 20 years later. So it can take time. And it will take time. And again, I can't predict the markets, but I can tell you the sentiment I'm hearing is that people are very optimistic that the IPO market will begin to loosen up and open up ultimately.

Yeah. I'm hearing second quarter, third quarter. I think Reddit will obviously be a big indicator. Yeah, Stripe, Reddit. There's a whole cohort waiting to go out and that could open things up. It's hard to balance hiring top-tier developers and keeping your burn rate under control. But these days, I see a ton of founders successfully doing this by hiring remote talent. So let me tell you about Scalable Path. It's a software staffing company that can help you build an awesome remote developer team.

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Okay, fine, they're getting access to some private equity fund, you know, and maybe get access a step removed or two steps removed. But now we're starting to see those same, I think, sovereign wealth funds show up here in person. Yes. So I had a great conversation with, you know,

somebody from Abu Dhabi last night, is about one example. This isn't just an arm's-lying transaction anymore. Maybe you could speak to what you're seeing in the numbers of attendees coming from the Middle East, Southeast Asia, China, India. Yeah, where are people coming in? We have sovereign wealth funds from all over the world at this event.

I think the total attendee count from sovereign wealth funds is somewhere between 20 and 30, but they are super active. And there are some sovereign wealth funds who absolutely went through fund-to-funds vehicles who are now taking direct meetings with fund managers. And also doing direct deals, you know, obviously at a larger size. But there is huge interest among sovereign wealth funds. They are, I mean, we can get you the meeting count. it's hundreds of meetings happening across that collection of Soverealth fund attendees.

And by the way, across all categories, they're meeting with venture funds, private credit, private equity, you name it. I mean, obviously they have huge portfolios, so they kind of have a need for everything. Yeah. And then when we look at the classic endowments here in the United States, it feels like those classics, their dance cards are filled up, so to speak. Maybe they don't come to an event like this. Maybe they're, you know, been doing it for. for 50, 60 years, they're not adding new managers or maybe kind of locked into a system of investing and they don't need these new alternatives. Am I correct in that assessment? So I'll say this. They are definitely slower to deploy capital. They're incredibly selective and they may select just one or two managers a year in a $10 billion portfolio. But they are

coming to this event in big numbers. We have about 70 and downings and foundations here. because they're using this event to keep funds that are interesting for the future on their radar. They will meet you and they will track you. And of course, this is not a quick sale cycle as you. I'm learning because my business has always been, oh, we're friends. You know, Ron wants to be an LPM. You know, tiny $10 million or $40 million fund. Okay, no big deal.

But once you get about $50 million, you may have to have a process here. You may need to expand the pool. Yeah. And they do take years. Years, literally years. So I had to talk earlier with Ted Citey's here. A capital allocators podcast. He's amazing.

Great podcast. And we were talking about how Ted asked, can we track the results of this event? And we do a lot of things to try and get a sense as to what happens after the event. But the reality is for a lot of funds, especially emerging managers, you have to be in this for the long haul. And you have to expect this is a multi-year sale cycle. you're not going to meet Yale or Princeton or Hewlett and expect, you know, next month they're going to be cutting a check. That does not happen. No, a family office. If you meet the principal, perhaps. Perhaps. Perhaps. High net worth individual? Certainly. Yes. You're meeting with the direct decision maker. But there's an entire class of people in this capital allocation field, refer to as LP's limited partners. They are answering to different constituents internally. Yes. And they have to build up. case. And the way I heard it recently was, hey, you never got fired for investing in X.

We used to say in technology, hey, nobody ever got fired for choosing Microsoft or IBM. It was IBM originally then became Microsoft. So there is like sort of safety in brands. You know, if they're going to take a new brand on, they need to check some boxes. What are those boxes they need to check to get comfortable? If you were advising somebody like me or another VC fund manager, I noticed you had Sophia Amorosa here and some Nicole Wishoff, like some emerging managers, very small funds, five, $20 million funds. What's the advice for how do you nurture those relationships with LPs? And what are the checkboxes they're looking for?

Well, I can tell you, when we run our investor surveys, one of the top issues related to this is your investment process and how much business risk do they think they're taking when they make a commitment to you. So for emerging managers, the business risk is really the number one issue, right? What does it mean in English business risk? We know what a risk is. We know it's a risk in business. What does that mean practically?

So what they don't want to do is making a commitment to a $200 million fund run by, let's say it's two or three individuals who got together to form this fund. And they've only worked together for a few years. And you know what? They don't like each other that much. They break up. The band breaks up. The band breaks up.

And now I've got, you know, I've made a $10 million commitment to what happens. What happens to this fund? Yeah. No L.P. No secession planning. What happened? Well, what happens is some form of a wind down and hopefully capital return. Frankly, it's much easier when it's a hedge fund because, you know, the portfolio is more liquid.

You sell the assets. You return the capital. It's not a 10-year window. Right. When it's a new venture fund or a private equity fund, it's a much bigger issue because someone has to watch over this. A sophisticated person. Yes, exactly. Yeah.

So. I've been on the other side of this call. There was a high profile collection of startup investments. I'll leave it at that. And it kind of imploded. And I got the phone call. Hey, would you take this on? Yeah.

And I didn't make any of these bets. I don't know who these founders are. Thank you. I'm flattered, but no. Right. That sounds like catching like 200 knives. Like, catch it one knife hard enough. You know, there are circumstances where it could benefit you to do it.

But from the LP standpoint, if you are inside of a large institution, and you're part of the investment team, and you made this recommendation, and then this happens, who egg on the face. Not great. So now, if it's a family office and you dealt with the principal, at least it was the principal's decision. Yeah.

And it's their capital. They made the bet. They made the bet. It was their risk. They took it. But for this reason, larger institutions want to track emerging managers for long periods of time, get to know them. Three or four funds.

Absolutely. Three or four funds. Now, not to say that it never happens, you'll certainly see spin-out. from brand name firms with someone who they've known for a long time as part of a bigger firm. This person was a partner at Sequoia or Kleiner or they worked for Chamath at Social Capital. Then they started their own fund. Exactly.

Okay, I watched you do this investment. I know your fingerprints were on it. Hey, we're going to go over here. And they've spent time with these people. Yeah. You know, if you're inside of a fund and you have visions of starting your own fund, one of the most important things you can do is meet the LPs who are in the fund. you're working for because those will probably be at least some percentage of your initial seed

capital. Rod, people don't know this, but you're done incredibly well for yourself. You're allocating your own capital. I'm fighting the fight every day. You're out there. It's, I think so things are going very well for you. I could see here. Where do you allocate your capital? You see all this. And so, hey, you know, what, what does the, what medicine does the doctor take? You know, for us, I would say we're allocating to strategic partners primarily. That is a big focus for us. If it's a fund that's an interesting spin out, like I'll generally we don't talk about our portfolio investments, but one that we invested in because we thought it was a really

interesting new area that we think will absolutely crush it, is taking advantage of social media influence. And Kim Kardashian was here last year. I got to interview Kim and her partner, Jay Salmons. They just in their private equity firm, I guess, did their first deal as a hot sauce. Yep, exactly. Got a hot sauce. And the truff founders were here.

Truff is called? Yep, Truff. T-R-U-F-F. Truff hot sauce. Truff hot sauce. Oh, I understand it. There you go. Truff hot sauce.

All right, free plug. So when you think about what an entrepreneur is looking for, when they source capital, of course they need the capital itself, but they also want business experience and relationships and assistance, because, as we all know, building these companies is incredibly hard. When you go to a firm like Sky Partners and you partner with Kim and Jay, and now you have Kim's influence and prominence in the marketplace and ability to drive customers towards a consumer brand. Yeah, at least to try it. Yeah. Still got to be good. There's not many people in the world who can drive, what Kim can drive. So that's an example of an investment we made. And

And of course, we love having Jay here, taking meetings with investors and the Trump guys here doing, you know, joining him for those. So we look at deals that will help increase the visibility of our event and the prominence of our event. So it is a strategic and then there's the uniqueness. That's one of the things you look for. Exactly. And then, of course, you have guys like Brad Gersner at Altimiter, another firm that we invested

in, you know, Brad's in the Hall of Fame of Venture Investing. Yeah, it's done pretty great. Snowflake is, you know, and it only takes one, right? And that's one of the... That's an example of one where we're really appreciative that Brad was willing to let us join. Yeah, yeah. And so where does this all go next? I mean, Miami's great. You got New York. Where are you taking this all? It's a little confusing, too. You got the Global Alts brand. You got the I Connections brand. I know. I know Brad actually suggested I just changed the company name to Global Alts. He said, I Connections is too confusing. What do you think? I think I Connections is the Global Alts app. I'm always a fan of, like, less brands. Yes.

Yeah, so I think you could consolidate it. I'm sure why not. Global Alts sounds more like what we are, which is true. It is true. I Connections is an awesome app. You guys have been racing to keep that app up and running, I see. Updates every day. I know.

It's a lot of updates. It's hard to build an app, a great app, isn't it? It is, and the whole thing is custom built. So, but here's what the future is for us, especially, you know, the first half of 24. We're taking the app and expanding it outside of events. You know it, and pretty much everyone knows it as the app they use. to coordinate 20, 30, 40 meetings when you come to an event. And we support about 20 events throughout the year, this being the biggest.

We're going to take the app and add a roadshow module so that when you go to New York and you do 20 meetings in New York and you have to coordinate schedules and travel time and all that stuff, we're going to help you do that and back that up with a concierge team. So you'll be able to call our concierge team and say, book my hotels, book my car, book my plane. and if anything goes wrong during the road show, you'll be able to call the concierge to rejigger your schedule. The concierge is a great idea, but the introductions is really the power. Like, I have an assistant that can help with that. I mean, for us, the logistics of the concierge will be new, but the relationships of the LPs, we already have those.

Yes. So if theoretically, let's say I'm going to Boston, New York, whatever, would you be able to then, I say to you, just find me 20 interesting people in any city? You'd enter your roadshow into our system and it would message all of the LPs who have downloaded the app and attested that they are accredited investors and qualified purchasers. They would see, oh, Jason's coming to town on September 25th. Yeah, I'll take a meeting with Jason. So that starts putting you into this like broker kind of category, but you can't be a broker. No, we're definitely not a broker.

You're not trying to charge a commission on that. It'll just be part of your membership or something. Exactly. It is, in a sense, like, calendarly on steroids. I love it. I'm just trying to ease the logistics of all of these people who are members of our community. But no, we absolutely. So like Davos has a membership. Exactly.

You have a membership for Global Alts. To get meetings. It's the same exact thing. I love this. I love this vision for it because, you know, I've been making these trips and trying to meet folks. And you don't know who you don't know. Right. And that's always the hardest part is, like, if you're an endowment from a college,

and you're on this list of the top 50 or 100, you're getting hammered. Now you're, I met a couple of really interesting family offices here that don't have websites. They don't have, they don't tell you their email addresses. Everything is, you know, very cloak and dagger.

Yes. But you have those folks. And, you know, I think that's like a really special thing, especially if they can double opt into it. Hey, I'm going to be in town and this person's in Baltimore or Philly and New York. Hey, yeah, why not go have dim sum or something?

Absolutely. And the, Remember, and especially when you get to a few hundred million of AUM and a family office, there's generally a team of people. So someone's job is to know who's coming through town. What are the funds that are out there actively raising money? And you're going to them in this circumstance. So it's pretty easy. You're going to pop into their conference room. Easy breezy. They're there anyway. It's a coffee in their conference room for a half hour. They get an update if they've already met you or they're learning about you for the first time, but it will make everything more efficient because

all of your information will be contained in the system the same way it is for this event. So the LP will just have, as part of their allocator portal, your information that you choose to share with them. Yeah, because I did notice that too. Like, I share my phone number. I'm just like, hey, whatever, yeah, let's go. I can always block you if you get weird. It hasn't gotten weird sometimes.

By the way, how did you like the, did you notice the business card exchange that we added? Yes, I had a bunch of people go scan. Yes, exactly. So we exchanged 22,000 business cards before we got to Miami. Sweet. Because all of the, we did, you know, we're doing 15,000 meetings here in two days. The participants decided, you know what? Yeah, let's exchange our information.

So if anything comes up, I can call your cell, I can email you. Wonderful. Yeah, that was something we had talked about. I was like, hey, I can't find me in my booth or that I stepped away from the booth. Can I just put the phone number in here and you were like, ah, yeah. So I just give me a little product. I don't want my product team to get upset with me, but you may have had something to do with that idea. Yeah.

Well, I was like, hey, it's supposed to contact people. I mean, I'm okay with it. I don't know. And I think 90% of people are okay with it. Most people are. You know, I would say the allocators, to your earlier point, who are inundated with calls and emails. Yeah. I mean, these are people literally getting two, 300 emails a day from funds that are trying to get to them.

They are more protective, as you can imagine. I'm in that. I get that. but with founders. And I think the way you have to look at it is, that's a sign of success that people want to participate with you. So whenever I see a VC, you'll see a VC lose their mind once in a while,

and they'll go on Twitter, don't email me, blah, blah, blah, blah. If you should always do your research first and know that I do this sector and I'm not in that sector and then I do this stage of it. And I just think, oh, that's the end of their career. Like, they really don't care. Like, here's another idea.

You get 100 emails in the morning, feel blessed, and then delete the ones that you can't respond to or just archive them and you'll get to them someday if you want to. And then the ones you do, provide them. Or another crazy idea. You have an assistant or an associate, have them read your email box and sort them and do a first level sort for you. But don't, under any circumstances, be upset that the world wants to meet with you.

Wants to meet with you. People get weird. Well, I think they're just overwhelmed. And I know, like, I'm terrible at organizing my inbox. So it would drive me crazy for sure. But in general, everyone has to just, like, take a breath. We're all lucky enough to be in this industry. We are super fortunate.

Everyone at this conference is super fortunate. I mean, this is incredible. Yes. I mean, to be worse than my email box is a little overloaded. Boo-hoo. Yeah, I know. It's pretty hard. We are trying to overload it less.

I mean, this is like people who complain that like their Apple TV, it's like three or four clicks to get to the movie they want to watch. And when we were growing up, it was like, wow, I wonder if this Star Wars is ever going to come out on VHS or if it's ever going to be on TV? We have to watch it with commercials. I have to watch it with the commercials and they added out all the good scenes. If you were giving a piece of advice or just assessing, what are the qualities that make a great LP, two or three? And what do you think the great qualities are of GPs?

If you think about those two things, take a minute to think about it because there's two sides of the table here. It is, but I'm actually going to give you the same answer for both. Here we go. It is build relationships and you build relationships by paying it forward. I have done really well in my career, mostly because I was nice to people. I helped people. I didn't ask them for anything. And all of those favors came back to me in droves.

I think it's basically the same idea. If you're an LP, a great way to make sure that you're in the best stuff is to build relationships, right? If you know the right people, if you have the right network. And by the way, this is all super long-term stuff. This is not a business. If you are a naturally like super transactional person, I don't think this is really the best business for you. It's, it is such a long-term play.

If you're an LP and you want to build great relationships, you have to make a lot of friends along the way. Yeah. And being helpful and doing favors and not asking for anything in return is a great way to do that. And if you're on the GP side, it's all about deal flow, right? It's like, I want to get access to the best deals. It's the same concept. It's helping people that are going to help bring you in the, to deals, send you deals. In the case of a GP, it's really about the service provider network,

right? Yeah. Making friends with the lawyers, the accountants, the investment bankers. When, you know, it's such a simple thing, but people do business with people they like. And, like, they don't teach you this in school. They don't. Also, they don't teach you this. You know, our relationship is based on the fact that you just, when you met me, you were like, hey, I think I could be helpful with a couple of things here and I really appreciate what you do. And I was like, oh my God, that's literally one out of a lot of. a hundred interactions I have. The other 99 are, I'm glad I was one out of a hundred. No, the other 99 are, hey, you know this person. Can you get me a meeting with him?

Or hey, you know, I'm like, oh yeah, sure. Well, let me just check my punch list here. Oh, yeah. Let me just put you right at the top. I have nothing else going on. It's just crazy. Listen, Ron, you're a mensch. Thank you so much for inviting me. You treat me so well when I come here. I really do appreciate that. We really love having you here. Thank you. We love all the besties, obviously. Thank you. I love really partnering with you. Yeah.

Well, you. Sacks and Freberg and Chmach. Yeah, it's been a great relationship. So thank you guys. All right. Continuous success. Your team is amazing. Awesome.

And we'll see you all next time for this week in starters. Bye bye.