This Week in Startups - Series A valuations, M&A in 2024, and M.A.N.G with Jason Shuman and Raja Doddala | E1883

Episode Date: January 20, 2024

This Week in Startups is brought to you by… The Paintbrush Loan is the earliest startup financing on the internet. No pitch deck, no business plan, no minimum time in business, and no warm intros. Plus, you get to keep your equity. Visit http://www.getpaintbrush.com  to see if you qualify for a $50K startup loan in less than 2 minutes. OpenPhone. Create business phone numbers for you and your team that work through an app on your smartphone or desktop. TWiST listeners can get an extra 20% off any plan for your first 6 months at https://www.openphone.com/twist Lemon.io - Hire pre-vetted remote developers, get 15% off your first 4 weeks of developer time at https://www.Lemon.io/twist * Today’s show: David Weisburd hosts Jason Shuman, Raja Doddala, and Jason Calacanis to dive into 2024 startup valuation trends (2:00), insights on how VCs can secure great deals in a competitive market (17:46), a detailed look at secondary deals (36:25), and more! * Timestamps: (0:00) David Weisburd hosts Jason Shuman, Raja Doddala Jason Calacanis to dive into the world of VCs, LPs and GPs. (2:00) A look at the encouraging trends in startup valuations as we head into 2024. (6:39) Delving into the intricacies of current valuation methods and key aspects investors should be cautious about. (11:22) Paintbrush - Visit http://www.getpaintbrush.com to see if you qualify for a $50K startup loan in less than 2 minutes (13:42) Examining the balance of demand and supply in the seed funding stage of new startups. (17:46) Insights on how venture capitalists can secure the most sought-after deals in today's competitive market. (22:00) OpenPhone - Get 20% off your first six months at https://www.openphone.com/twist (23:29) Discussion about M.A.N.G., a rising player in the venture capital scene.(28:26) Exploring the unique and often controversial practice of round-tripping in the venture capital industry. (33:03) Lemon.io - Get 15% off your first 4 weeks of developer time at https://www.Lemon.io/twist (36:25) A detailed look at Lexington's successful raising of $22.7 million in secondary investments. (57:24) Observing the recent increase in mergers and acquisitions activity within the industry. * Subscribe to This Week in Startups on Apple: https://rb.gy/v19fcp * Check out Churchill Asset Management here: https://www.churchillam.com/ Check out Primary Ventures here: https://www.primary.vc/ Check out David’s other podcast here: https://www.youtube.com/channel/UCncFI0XEvTu7k4er6BgVN9g * Thanks to our partners: (11:22) Paintbrush - Visit http://www.getpaintbrush.com to see if you qualify for a $50K startup loan in less than 2 minutes (22:00) OpenPhone - Get 20% off your first six months at https://www.openphone.com/twist (33:03) Lemon.io - Get 15% off your first 4 weeks of developer time at https://www.Lemon.io/twist * Follow at: X: https://twitter.com/JasonrShuman https://twitter.com/rdoddala https://twitter.com/DWeisburd https://twitter.com/Jason * LinkedIn: https://www.linkedin.com/in/dweisburd https://www.linkedin.com/in/jasoncalacanis https://www.linkedin.com/in/rajadoddala https://www.linkedin.com/in/jasonshuman/ * 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 * Subscribe to the Founder University Podcast: https://www.founder.university/podcast

If you're an existing shareholder, you're happy. If you're a new shareholder buying at the new inflated price, you might want to take a second look at that. Totally. I mean, the irony is, by the way, this has happened in many, many other industries even before this whole AI boom. I mean, go look at Clavio's IPO, like who's on the cap table, Shopify. You know, go look on the cap tables of a lot of these companies in healthcare, who's

on the cap table, different hospital systems. And so like, it's just being done in a different way here and now we're hearing about it versus the fact that it's been getting done behind closed doors. This weekend startups is brought to you by the Paintbrush loan is the earliest startup financing on the internet. No pitch deck, no business plan, and no warm intros. Plus, you get to keep your equity. Visit getpaintbrush.com to see if you qualify for a $50,000 startup loan in less than two minutes. Open phone brings your team's business calls, texts, and contacts into one delightful app that works anywhere. Get 20% off your first six months at openphone.com slash twist and

lemon.i.O. Need to speed up your product development without draining your budget? Hire vetted engineers from Europe at lemon.io. Go to lemon.com slash twist to get 15% off for the first four weeks. Welcome to this week's liquidity podcast. With me today, we have a rock star lineup of guests, including Raja Dadaala, the head of VC at Churchill Asper. management, a limited partner with $47 billion under management. Jason Schumann, general partner of primary ventures, a venture firm headquartered right here in New York City. That was one of the most active investors in the New York City ecosystem. And of course, last but not least, Jason Calcanus, J-Cal, founder and CEO of launch, a fund focus on the very early stage of venture.

And of course, the world's greatest moderator, moderating not one, but two of the most popular podcasts in the world, all in podcasts and this weekend startups. Gentlemen, welcome to the podcasts. Thanks for having me. Thanks for having me. Yeah, thanks for having us. First up, we have startup valuations. What will happen to start up valuations in 2024? Here's a chart by Carta. According to Carta, the median series A valuation has increased by roughly 17% from $38.8 million in Q3, 2023 to 45.5 million in Q4. For context, peak ZERP valuations for series A companies in Q1, 2022, was 48. What this means is that Q4 evaluations have reached peak ZERP pricing.

Question for Jason Schumann. What series A multiples are you seeing in the market today? And do valuations feel rich to you? I mean, I think at the end of the day, it depends on the company, right? And so I always think about three different buckets of series A's. There's like what I would call the moonshots that are the high flyers. There's like the predictable growers, which are your traditional like B2B SaaS companies. And then finally, like the ones with what I would say is like fake product market fit,

but they know to sell the story. On the moonshot side, I mean, just to give you an idea, like seed infrastructure deals, this is being driven by the AI boom. Like, the median valuation of a seed deal is $39 million. And then the mean is about $56 million. But what we're seeing at the A is about a 2.1-X step up there. So you are still getting paid a little bit by paying up at the seed. Meanwhile, like the predictable growth side of things,

I would say like B2B SaaS companies are going for like 8 to 12X NTM versus like the less predictable product market fit companies or the fake product market fit companies or more in that like 25 to 35 range where maybe they were up at 50 to 60 in the go-go times. Jason, what are you seeing on your own? So, yeah, an NTM next 12 months revenue, I think is what Jason is referring to there. Candidly, what people are calling a series A today is really like feels more like a series B evaluation and seed feels like the old series A and then precedeat seeds like the new seed. So all these names have kind of moved down a bit.

But I do like Jason's framing there of, you know, those three different buckets. My guess is that these Carter numbers, and they don't represent the entire world of startups, obviously. I think what we're seeing is these large language model series A's and some of these Moonshot Series A's are kind of setting these numbers off a little bit. And then large funds want to put in $10 million, $8 million. dollars, they want to hit 20% ownership because they're a large fund. So therefore, if founders only want to dilute 15%, 20% in the round, it's got to be five times the $8 million, five times the $10 million. I'm not sure what the number was there on the average dollar amount. Was it $10 million? The average dollar amount was $13.9 million in terms of the valuation. We don't have the average

dollar amount put in, but I'm just going to pick a number, $8 million, right, in the series A, $10 million in the series A. So if they want to buy 20%, it's got to be, you know, a 30, it's got to be a $40 million pre, $50 million post, something in that general direction. And founders are pretty sensitive to this. And they're doing more with less. So these numbers, I don't buy them exactly. The seed stage numbers I do buy them, that does seem on target, $10 million seed rounds, $15 million seed rounds, raising $3 million. And I think that's where the value is. I think these series A is, it's very hard for investors to actually, you know, make money in this.

I think it's going to be really hard for people to make money investing in companies that have no traction that are commanding a $50 million post. I think this is going to be a bad vintage for those investors. I think the good vintage is hitting the seed round or the pre-seed round. And Raja, you get to invest. You have the purview of investing in pre-seed, seed, series A. Where do you see Alpha today? Yeah.

Just to tack on Jason's point on the series A valuations, I think there's probably a lot of distortion in this data. There's AI startups and what we're seeing in our portfolio of managers, and we've done an occasional sort of A1 or A plus direct investment ourselves. What we're seeing is the entry criteria certainly has changed. I think companies that we've seen to raise Series A in our portfolio, solid product market fit. It's not fake product market fit. And forward revenue multiples we've seen as low as four and we've seen as high as 12. But we haven't seen, or at least the managers that we have in our book are not doing, you know, 15, 16 times for revenue. And they, you know, the seed and pre-seed and A1 and seed extent, there's just a lot of noise in the data.

But I think it's clear that the entry criteria definitely has changed to more realistic, more real. I think that is the key, Raja, is the soberness at which people are evaluating these and looking at the valuations is not in these numbers, I don't believe. And then even looking at, you know, the Ford revenue versus the previous revenue, we're looking at,

hey, what did you make the last three months and we'll average it? Okay, so you're a SaaS business. You made, on average, 75K each of the last three months. Let's have a discussion about the last three months, not your projections for next year. Well, we'll take your projections for next year. But let's look at the average last three months because it might be spiky.

You may have signed a big client, lost a big client, somebody had layoffs. They cut a bunch of SaaS products. Let's look at that average and let's talk about what you're going to do in Q1, Q2, Q3 and have a thoughtful discussion. Then what you did in Q3 and Q4 and how that relates and what changes are you making. And I think that's the sobriety that the market needed as opposed to these just projections. Here's our two-year projection. And then it's a competition between, you know, new funds.

with too much capital, you know, trying to win a deal. And what are you winning? You know, in that case, if you're a venture capitalist, you're winning the ability to overpay massively and not make a thoughtful bet. So I think the sobriety is there. And I think VCs are not differentiating themselves at that Series A if they don't have that sober discussion. And any entrepreneur who's raising a Series A right now is probably having,

with the exception of the, it seems like AI people are given an exception. And I don't know how long that's going to last because I do think you're going to start to see people expect to see revenue and expect to see traction. And so I think this AI party is coming to an end this year because you might see these large language models not really compete or not make any money. They look like commodities, Jason. I don't know, J-Cal, you know, they're turning into more like a cloud, you know, provider sort of commodity type of maybe two or three oligopoly of two or three services. And that's why I think it's really hard to see if those valuations won't last. That's a great point, by the way, but Roger just made just today as we're taping this, you got Zuckerberg saying, I'm putting at open source models.

I want to make an open source AGI. What does that do to people who invested at these massive valuations for these language models? And then you have Falcon going on in the UAE and that's going to be available. All these language models, it seems like those bets, people just invested in a bunch of storage companies. And does anybody care which storage company they use? It's good for Nvidia. Picks and shovels are going to absolutely take that venture money and, you know,

bank the revenue. I just don't know about anybody else. And do you think, though, if you even take AI out of it, there's really two things that are going to prop up prices at the end of the day. One is you have a lot of young VCs that have been not doing deals over the last couple of years that are being given checkbooks by multi-stage firms and they're propping up seed prices. And then, Jacob, you mentioned it, but there are a lot of new funds that raise capital. And there are also a lot of funds that raise a lot more capital.

And now all the investors are specialized at those firms. And if you're a specialist at a firm and you want to invest in the asset, you're going to make sure that you're going to pay whatever price you need to to win that deal. And I feel like that is ultimately pushing up things across every sector, even outside of AI. Yeah, it's interesting inside. I think there are sector-specific people. They bet their reputations on it. They raise the fund based on it. And now they're going to deploy capital.

but you have to be aware of the game on the field. You know, and these companies eventually are going to be, as they say, the market is a weighing mechanism. Like, we're going to weigh things. And the weight is determined by revenue and then eventually earnings. So having invested in Uber in the early days, you know, people love the growth. They were super excited about it. And now Dara is being weighed. What are the earnings?

What's the free cash flow? How many shares are you buying back every quarter? That's the story of that Wall Street eventually. gets to. And so the disconnect between private markets, public markets, it's all starting to, I think, get cleaned up, but we still have some cleaning to do. Is East Coast personality coming out, by the way? You know, I invested at Com and Uber at $5 million valuations. And so, you know, I look at Thumbtack, data stacks, Com, Uber, all those initial investments I made, they were at $5 or $6 million

dollar valuations. Now, of course, the world's different. It's whatever, 14, 15 years later. So maybe they should be at 10 or 15, but even still, I have a hard time believing people are going to be able to make money in their portfolios investing in companies without product market fit at a $50 million post. I just don't see it happening. You could get lucky, but I don't think it's a great investment strategy if I'm being candid. Listen, not every business is venture scale. If you're not, you won't be able to raise money from VCs. We all know that. And not everybody has a rich family member to do their friends and family round. So if you want to jumpstart your business with $50,000, let me tell you about Paymbrush loans. Paynebrush has created a new kind of loan product.

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J-Cal, how price sensitive are you as investor in the early stage? Everything is a competition for dollars is the way I look at it as a fund manager. So you are going to eventually have to make deals, right? You're in the business of investing. You have to deploy the capital as a venture fund manager over some period. of reasonable time, three, four years, or you have to give it back. So if that's the case, you're going to look at your deal flow and you're going to make the best, most thoughtful decisions. If your deal flow is very high, which mine has gotten to in the second decade,

you can make really thoughtful choices. And if somebody wants an extraordinary price, well, if it's an extraordinary team with an extraordinary product, an extraordinary traction and product velocity, you can pay up. That's not a problem. But at the early stage, we'll see people who want to come to our accelerator or want to do, you know, a a six to $12 million seed round. And then somebody else will have less traction and they want to do a $30 million round. So we'll look at that and then we'll have an internal discussion. Should we do three other deals that we have on our plate that are at the $12 million

valuation or should we do this $36 million deal? And it's pretty easy to say to yourself, well, three shots on goal as an investor at $12 million each, all things being the same. And then we'll just tell somebody, hey, we want to see you, you don't want to see one more year of traction. And let's talk in a year. Many of those deals, I'd say most of them, come back, David, and they have the same valuation, or they didn't hit their targets.

And so... In that sense, are you, in your world, are you seeing a seed stage? Are you seeing, so demand vastly outstrip supply at this point? Demand of... Per dollars. It's a great question. You know, certainly is the case in the late stage. Growth, you know, CD and E, certainly is the case.

It's hard to tell, seat stage. If you mean the demand for dollars is greater than the supply of dollars? Yeah. Yeah, I think that's the case. Yeah, people are trying to raise rounds and unable to raise rounds. In that case, like, you know, picking, the skill of, like, picking becomes probably more important in this environment, right? I am obsessed with making great decisions. You know, when you, we're on our fourth fund, not counting when it was a scout, so arguably it's our fifth fund.

But the first two funds were $10 and $11 million for us. So they were very tiny. They were like sort of my part-time fund. It was just me making choices based on my internal network. But once you have a big network and then you have a big team, we have 21 people, decision making becomes a critical, critical part of this process. So you have the deal flow. How can you make a really thoughtful decision, right?

And how do you make those decisions when you're not under time pressure anymore? That's the other thing that's absolutely fantastic about investing right now is there's no time pressure. You know, if you don't get into our, around, company's going to be racing in six months or 12 months or if you made them

an offer, let's say they were closing quickly and it's six, 12 months from now and you say, oh, wow, you hit some targets. Hey, we'll step you up 20% of the valuation.

Would you take another half million? They'd be like, yeah. Founders are realists now. So I think it's a lot healthier in the market that people take the time. I don't know what you're seeing, Jason, in terms of the time for a deal to close,

but it seems like it's three months right now, two or three months for deals to close. It's definitely extended. It's definitely extended. And candidly, we look at that as an opportunity for us. And the reason why is, you know, we're concentrated investors. We're writing three to four checks a year per partner.

And, you know, we go very deep into markets because, you know, we agree decision making is incredibly important. And so ideally, you're getting a deal in and you're moving in through a process because you're bringing a prepared mind into those meetings and can make a decision in two weeks. And if you can, while also getting the chance to get to know the founder very well or already have gotten another founder very well, then you can ideally win the deal at a very high rate north of 90% annually. But I find candidly that a lot of investors now, nobody knows what the pace is anymore. Whereas like the go-go times, everyone was like at max speed. And so now it's like

all sorts of weird of managing expectations with the founders of how long it will take to actually raise around. How many meetings? How many meetings? How many meetings now would you say is your average or median mean whatever? Five meetings. and I hop on about four sales calls where I introduce the company to a potential customer, and I get to listen to on those. Nine calls. Wow, that is incredibly thoughtful. That's great.

That's great. Trying to suck up as much time as possible while also helping them grow their business, you know. I love that hack. Tell us more about that one, the hack of being on a sales call with them. Wow. I think at the end of the day, you know, it's pretty funny that you end up meeting a founder, you hear them pitch, and then you call customers, you call potential customers, right? But you never get to hear them actually do the pitch themselves.

And so when you do, you don't actually know, like, what are the questions that are popping up with the new potential customer? And how are they reacting? Does it take them two minutes to react and then, like, fall in love with the business and the product? Or does it take them 20 minutes? And that's a huge, huge difference in terms of finding product market fit. And then if you want to win a deal at seed against some of the best investors in the world,

I think you need to show value out of the gates. And that's just one way to do it. that's really easy for us because we've just built this massive customer pipeline across all the different sectors now. Jason, what do you believe is winning in today's markets? You have this kind of relatively stable seed valuations that have gone on over the last couple of years and you have this increase in Series A pricing. What is leading to VCs winning the hottest deals in today's market?

I think it's very, very simple. It's who can build the best connection with the founder and who can end up adding the most amount of value at the end of the day. You know, if you're net net, you know, the way we look at in J-Cal, I think you were saying some really interesting stuff earlier, you know, we're doing four deals. We're incubating companies to bring our average entry price down. But then if whether you're doing a deal at 14 or you're doing a deal at 20, it's not that big of a difference for us.

You know, we'd rather just make sure we get our ownership there. So during the process, it's showing how we can add value and go to market, strategic finance, and then like the people side of things. And we have 35 operators here at our offices in New York that work with each one of the portfolio companies. It's an expensive operation. But that's how we end up trying to go out there and win deals. Jason, who are you competing these days for deals or ownership? Is it the multi-stage firms going earlier?

Is it Super Angels? Like, you know, J-Cal, circa 20, you know, and who are you competing with? Only deals we've lost over the last 18 months have been to multi-stage funds. Speaking of multi-stage funds, Raja, you alluded to the Series A and beyond. It's a stage that has really turned around. At its lowest, Series E and beyond had a median valuation of $251 million in Q1, 2023, and has since increased to a median 708 valuation in Q4, representing 182% increase in valuation over the course of just one year.

Raja, do you think this is a response to previous over-correction early 2020? or do you think public markets are really dragging these valuations higher? You know, it's interesting. You say, you know, the correction, I don't think it was an overcorrection. I was just looking at this new report that Pitchbook and NBCA put out. Median exit size for IPO. This is just IPO and there's data for acquisitions and others. It's like 110 million.

That's the median exit. And if you look at that chart, you know, last year of the median series E was $250 million. And then this quarter, it's median, you know, is $750. And I'm still trying to find data, but there aren't many $2 to $3 billion X's. There just aren't. So it still feels high to me. the other thing that I'm trying to figure out is who's doing these seriesies, crossovers or not.

And corporate venture, you know, X, Microsoft and intermediate, I put that aside. Corporate venture is down like 10-year low. And so I'm trying to figure out who's doing these rounds. And then what is there underwriting timeframe in what? what do they expect in terms of multiples? I can't imagine, you know, a series E investor not expecting at least 4x or at least underwrite for, you know, 4 to 5x and a 3 to 5 year hold, and that's about a 22% IRA. I have to believe that that's challenging for a typical outcome if you're doing it at 750.

I don't know what you got other, J-Cal and Jason, how you guys feel about that. It's important segue, I think, because if you look, a lot of those late stage rounds were, in fact, he alluded to it being done. I think maybe, David, you could key up the story that Bill Gurley has been talking about of this massive investment. Because these numbers in the abstract are very confusing. As you can see here, two GPs and LPs because they don't match the game on the field. So what's with the distortion here? Perhaps this blog post and Bill Gurley tweet about the invidias of the world. and the Microsofts of the world,

doing all this investing for credits, etc. might be part of the challenge and the numbers. Are you still using your personal number for business? Well, stop. Such a common mistake that founders make, but you never have to make that mistake again because of Open Phone.

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Why? I don't want people using their personal number. Then they leave the company and they're still getting phone calls from our customers, clients, and partners. No, I want all of that to be professional and open phone. Is the number one rated business phone on G2 for customer satisfaction because it's so professional, easy to use? Here's a feature I love. You can create a shared phone number with multiple. employees fielding calls and texts from that number. So we want to reply to our founders,

to our partners really quickly, and we don't want to miss a call. We don't want to miss a text. And that's why we use open phone. And it's already affordable starting at just $13 per user per month, but Twist listeners get an extra 20% off for the first six months at openphone.com slash twist. If you got existing numbers and you're paying through the nose for some insane service, you can port those right over to Open Phone at no extra cost. So here again is the offer. Go to Openphone.com slash twist and get this all organized. Get the 20% off as well. Openphone.com slash TWIST. Two of your besties, J-Cal, Bill Gurley, and Brad Gersner's Ultimate are involved here.

Apparently, there's a new VC in town, and his name is Meng, Microsoft Amazon and VDen Google. Highlighted VC investments from Microsoft Amazon and VDivdian Google have ballooned from only 1% in 2022 to 8% of the entire. higher VC market in 2023. So an 8x increase. If you look at rounds individually, there's been massive rounds like Open AIs, $10 billion around led by Microsoft. In Anthropics, $4 billion around led by Amazon, which have had ripple effects. Question for the group. What do you think about this new VC, Meng, entering the space? The definition of strategic, right? They're coming in here for strategic reasons. It doesn't have to do with return on investment. Microsoft

Amazon and Invidia are not looking at these investments the way LPs and GPs are looking at that they don't not care about the multiple on Investa Capital. They care about being disrupted by a startup that comes in and, you know, eats their cheese. They're looking for option value here. It's really Nvidia volume-wise and Microsoft. And it's really option-value, but that should be completely distorting the averages. It's a very temporary, you know, hopefully it's a temporary friend. Pretty amazing that. I mean, I absolutely love it. When you think about venture investing,

it's like, how do you create asymmetric upside? And these guys can create a lot of asymmetric upside and be kingmakers. And at the same time, we're undergoing one of the biggest revolutions or the biggest revolution in my professional career. And like, they don't really know who the winner is going to be. So why don't we just deploy a lot of capital and do a lot of partnerships with companies and see where it goes and index it all. Now, it's like a much different scale in terms of check size and credits and so on and so forth. But it's added to their business and they'll be able to catch the returns from the space. We do a little bit of co-invest, you know, direct investing alongside our GPs.

If there is a company that's in the vicinity of big strategic investor going in, I stay out. I don't know how to make sense of it. I don't know how to underwrite it. I don't know how to think about the valuation. I just don't know how to even look at it. So I just stay out. This is one of the problems with Strategics investing, I think, is because they're not investing, they're investing because of the optionality and to protect their core business,

the distortion is so great that whoever the angel investors, the Seed investors, the Series A, Investors, Series B investors, all of those people, the co-investing LPs, perhaps, they now are left with this monstrosity, this Franken startup that if it goes public, well, now it's competing against Microsoft. If it goes public, now maybe it's competing against the people who gave it strategic money. And then maybe they don't want it pursuing certain opportunities and going into certain markets. And this is why strategic capital is so dangerous for founders. It's incredible to get it.

The high valuations are alluring. The dollar sizes here are extraordinary. But then what happens when you have somebody on your board, you know, like Amazon, and the founding team says, you know what? Here's an interesting idea. I have something that's disruptive of AWS. What are they going to do? Now, you've got, you know, this serious conflict of interest.

And that's eventually what happens. And then you're the early stage investor. Valuations got sky high. How does a single public? How does it have an exit? And we've, you know, you've seen this before with strategics, where it can get really challenging and difficult, especially with these big companies. So I think it's, it's going to end in tears in many cases.

The good news is, I think to Jason's point, right, you were talking. about how extraordinary it is to be alive at this time. It's kind of interesting that Microsoft is doing interesting things with these cash hoards, you know? They're just putting massive amounts of cash to work, which is kind of inspiring in a way that they're taking advantage of this opportunity. I was going to ask you guys, if you guys are shareholders of Meng, are you happy about this that they're doing this?

Or like, I was looking at it from that perspective, and I'm like, that sounds good to me. Of course. I think if I'm a shareholder of Microsoft, I'm happy. I don't know that in video. InVidia just seems, I just don't know how to think about that company and the future prospects with everybody doing their own Silicon.

I just don't know how to, but if I'm Microsoft, I think Satia and the team there, I think they're just really just, I would be happy if I'm Microsoft's shareholder. The interesting part about this, that Bill Gurley was bringing up, which I think we should talk about as well,

is how much of this is round-tripping, and I'll define round-tripping in a minute, but how much is round-tripping? of either credits for Azure in Microsoft case, Microsoft's case, or buying Silicon from Nvidia. So, Nvidia puts in, you know, whatever, hundreds of millions of dollars, and then the company...

Corleave is an interesting case there. Yeah. Yeah. So explain it. I think it's like, this is really worth... And round-tripping for people who don't understand is when one person invest money and then the other person buy services from them. So the money is round-tripping, the SEC, and other Department of Justice, they've taken action against companies in the past for doing this

because it can look like you're propping up, painting the tape, etc. No, no, so the core weave, I think, you know, they buy processors from Nvidia and then they resell them and they're a reseller of core reuse services and it's, and then they're an equity investor. So where are they counting the sales? Are they counting, you know, for Nvidia? Are they counting for Corveeve and how are they valuing their investment? I tried to make sense of it, I couldn't. So even to explain it, I couldn't.

So it's a really strange, strange case. This is ultimately just old school financial engineering. You give somebody 40 million, they buy 20 million worth of chips. And if you're trading out a multiple on your stock, whether it's a 7x or 10x, you get to capture all that upside while also having the asymmetric equity investment in that company, if that company ends up actually coming like an open AI and ending up being equity value is double counted. See, your core we've valuation and then Nvidia's public valuation, it's double counting

going on and definitely an evaluation. You know, I don't know enough to say the sales are double counted, but I'm reasonably certain the valuation is double counted in two companies. So I think to your point, Jason, if you're an existing shareholder, you're happy. If you're a new shareholder buying at the new inflated price, you might want to take a second look at that. Totally. I mean, the irony is, by the way, this has happened in many, many other industries even before

this whole AI boom. I mean, go look at Clavio's IPO, like, who's on the cap table, Shopify, you know, go look on the cap tables of a lot of these companies in healthcare, who's on the cap table, different hospital systems. And so, like, it's just being done in a different way here and now we're hearing about it versus the fact that it's been getting done by and closed doors. We have an expression in the industry, no conflict, no interest. And so, yeah, you know, it's conflicted.

So that makes it super interesting. You just can't get too cute or else regulators get involved. And they're like, hey, can you explain this to me? And I remember early in my career, an attorney was speaking at a conference I was at and just said, the appearance of impropriety is impropriety as far as he was concerned. And so you, once it looks inappropriate, it is inappropriate. That was his, you know, message to folks. This looks inappropriate in some cases.

Therefore, it is inappropriate. It would be much cleaner if the investing was done by professional investors. And then people made independent decisions of what they would do with those dollars, as opposed to the round-tripping. And you can just type in AOL round-tripping, time one around tripping. AOL did this in the 90s. Sales teams would sell a startup on taking a $50 million investment from AOL. Well, that company would then buy 30 or 40, maybe even $60 million worth of advertising over the next seven years to be the default portal page for music, for women, for whatever vertical topic

editorially, you know, they were involved in. And there was a massive fine. And I think some people even went to jail for a short period of time for doing this kind of stuff. So when your name is on that insertion order and you've done the round-tripping thing, and then you get a commission on it, man, this stuff can get really, really gnarly, really quick because you also have people with equity compensation. So you're the CEO of Company A that made the investment, and your equity went up to Jason's point. Your equity just went up. And then Roger was like,

hey, well, equity in both companies went up. And then the management team gets equity bonuses for hitting revenue targets. And this was a contributor to the revenue target. So let's say the entire management team, if they hit $1 billion in sales, gets this incredible bonus. And then this investment with the round trip got you over the hurdle, really messy. And so people got to keep an eye on this one. But it's definitely sort of the AI enclave, I think as you talked about J-Cal and other podcasts, like, there's just lots of weird stuff going on in the AI enclave. Because people don't know where the value is going to reside, I think, in some cases. And there's so much value that's obviously going to be created. So if a lot of value is going to be created, people don't know, it's

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I don't know that we know. This is sort of a six to 12 year. Alpha, we won't see, you know, until, you know, eight to total years. So, but here, but I'll tell you where our dollars are currently. 60% of our LP dollars are currently in Series A through D. But in terms of actual number of positions, it's the opposite. 60% are in precedency, sort of smaller funds. So that's kind of how our portfolio looks like currently.

There's a rush right now to get to seed and precede. I think the seed is kind of Series A. And so Series A has always been the coveted spot. You got just enough traction to know it's, you know, it's, it's, it's just past, you know, the, the product market fit phase, but not where the valuation is obvious to everybody. It's like this very sweet spot. We used to call it Series A and Benchmark used to do it. Now it's really seed and benchmark, I think it's still doing it. It was the early stage, right? That was the early stage. And then in terms of, you know, J-Cal's point, like sobriety is back to Series A, at least, you know, some of the firms, not all. them. But you know, which which makes it, David, if I have to pick one entry point, that's probably we're at the, you know, on a risk adjusted basis, the alpha is it's probably Series A. You have a much larger portfolio at the preseed and seed and a much more concentrated in Series

A. Are they fundamentally different asset classes to an LP? I think they are. Because, you know, seed, you know, C and pre-C, there's a five to eight percent, you know, premium that's available. As an LP, you know, you know, historically that's been true. So as an LP, it's tempting to put more dollars there, especially in the period, you know, that we're in where sobriety is back, that are processed, you know, to Jason's point, you know, more meetings. But that's a, that's a really fraught area for LPs, especially large institutions because you have to see, we've seen 250 firms last year and we made, what, 12, 115 bets. That's a really hard thing to do. Lots of institutions just don't have the patience or the time or the resources to do it. So speaking of asset classes that may or may not have alpha, let's talk about secondaries.

Lexington Partners has raised a new massive secondaries fund. The fund Lexington Capital Partners 10, which initially had a fundraising target of $15 billion, raised a whopping $22.7 billion, significantly up from their 2020 vintage of $14 billion. It's reported that already 40% of the capital has been deployed across 50 deals. Other firms are also following suit. Pine Grove Capital Partners, which is a joint venture between Brookfield and Sequoia, as well as Stepstone, are also raising multi-billion dollar secondary funds. Based on a recent SEC filing, it's reported that Stepstone has already raised $1.25 billion.

Raja, I know you've seen a lot of opportunities in the secondary space. What are you saying today? I've looked at secondary funds, a lot of them, and I've turned them all down, David. The reason is, you know, a lot of them, most of them, not all of them, but most of them, the strategy is basically price arbitrage. It's not that interesting to me that part of, you know, if it's the secondaries is a way to sort of, you love the company, it's a way to get in the door and then increase ownership, and there's some that do that, and we're an LP in a fund that does that.

But if your secondary strategy is strictly, you know, you think there's this massive arbitrage in price, I'm a little skeptical that that will work and it warrants tens of billions of dollars at capital. I can't believe that there are that many quality distressed assets. I just can't. You know, I just, you know, I've tried to understand it. I've asked them to explain it to me and they're not able to convince me. I had one or two people who know our book of business from, you know, our first. funds, you know, kind of knock on the door. Hey, can we talk about doing, I think they called

it a strip and they, you know, hey, we'll look at your two funds as the GP. We'll get just some liquidity. So as but one example, our first fund, I think is like 4.9 or 5x on paper. We've distributed 1.x. And they're like, hey, we can get you to that 3x, that would look really good to GPs in this kind of market. I'm sorry, to LPs in this kind of market. Can we, can we get a little strip there? And we know there are some cool assets in there, whatever, they've done the math. And so, you know, I did look at it. I didn't go very deep because I looked at it and said, well, you know, this is a small fund. These are me and my friends money. I have faith in the names. Yes, the market came apart for two years and we, you know, post-Serp and COVID, everything went crazy. But we could hold on. We could just communicate to our LPs. Yes, we think things are undervalued. I had somebody email me just last night. Hey, can you tell me about these three names? And I was like, I'm on the board of this company. I'm in touch with these two founders. We still believe in these names. Yes, they're, they're peak valuation in two out of three cases is definitely lower. But we have insight into those companies and we think they're great. So why would we give that opportunity to somebody else and

go through the point of a transaction? We'd rather just, you know, I'll pick up on that. I think we get occasional calls from our GPs. Hey, you know, we have this opportunity to sort of bank some when it's like a three to four to five X. When that's a minority, like they're selling 10 to 20% of the position, not like 80% of the position at 40% discount. I think that's a valid, you know, creating liquidity is kind of what makes the system sort of, you know, the flywheel turned. So if you have the opportunity to create a 3x, you know, outcome for the fund by selling 20%, but that's not a distressed sort of sale.

That's more of an opportunistic way to create DPI, which is, I think, valid to do. And we've sold a couple where we're, you know, we're sitting on a, you know, a, you know, a 7x net and it's a nice, you know, four to five year hold. And, you know, my capital provider likes cash, especially with liquidity being delayed in the market. But that's not a, we're not selling an address. It's sort of a more of an offensive thing. Jake out took the words out of my mouth because I think that, you know, there was a lot of funds that started to get raised in the 2015 to 2017 era that now are sitting on a lot of big marks and they need to come back to market. Right. And if you're a secondary fund and you're looking at all these funds and you try to find the funds that have the most diversification, you know, for instance, like our first fund here primary, I think it'll be about eight unicorns out of 24 companies. Like, if you're going to go do a strip sale, that's the type of fund that you want to go do it at because like you know that there's going to be some companies that don't pan out. There'll be some companies that do pan out. And like it's easier for you as an LP to underwrite if you're going to buy that out versus I think it's very, very scary when you're looking at some of these.

funds that are, you know, I mean, you look at the average seed stage fund, what? 8% of their deals become, you know, north of 10x type returns and hopefully that's going to pay for everything. But all of a sudden, you see companies like, you know, convoy and a number of others that go out of business just like that overnight and all of your returns are gone. So I do think that managing liquidity is an incredibly important thing that some firms don't well. It's an active activity.

It's not a passive activity. So I think every GEP should be, you know, trying to create liquidity. Jason Schumann, how has primary managed liquidity? What's your operating principle? I mean, anytime we're constantly thinking about it, and we will sell shares of companies when it starts to get to the point where it's obviously a fund returner. For instance, we have a couple of positions that were north of that first one was 60 million.

So we took off, call it 10 to 20%. We left the remaining 80% riding. That got us a half a turn of the fund or a full turn of the fund. or a full turn of the fund, and then, you know, you still have all the upside in the world. But, you know, whenever I talk to LPs, by the way, they say one of the most impressive things about Union Square is like Fred Wilson's ability to get out of positions as much as it is to get into positions. Because if you look at the best venture funds in like any vintage year, the top 5% is never

much further north than 6x. So if you're out of 6x, maybe you should start considering selling out at that point. Yeah, I think it's really wise. And, you know, Fred and Jerry Colonna when they were running Union Square ventures back in the day, or sorry, flat iron partners, the precursor unit square. They had a bunch of investments like GeoCities and a couple of other ones that did collapse. And I think they got scarred early on by some of those. And then you look at a firm like benchmark, I think does a good job as well. When you look at WeWork, which funds made money on WeWork? Like that thing went down in a blaze of glory, as we all know. And they seem to have sold their position. You know, you know, know, at a couple of billion dollars, and it always looks smart. So just at launch, when we get these offers, we sell 10%, 20% on the way out, maybe once or twice. And, you know, then you have the 80% in play. And on a personal basis, I've told you this, David, before. Like, I sold some of my shares back to Uber at $32 a share years before they went public. I sold a bunch to Masta, I think

at 40 or so. I don't remember what his secondary was for our shares. And then I held the rest. And here we are today. It hit an all new record. There's not a signaling risk. If you're a small fund and you're, you know, you're not, you know, the lead, you know, series B investor selling half would be, you know, a signaling risk. But a seed investor selling 20% is not a signal at risk. I think this is why also, Roger, you tell me if I'm right, LPs are interested in seed funds. Because they do have this chance to hit the early liquidity. Correct.

Whereas, like, if you're a later stage fund or a Series A fund, well, you already pay $200 million. Now the company's worth $600. Like, it doesn't, to Jason's point. give me that full turn of the funds to agree to whybex in a smaller fund, definitely. Yeah. I always find it funny, though, especially, you know, when I first got an adventure and, you know, being in New York, you hear this, like, West Coast mentality of rider winners. I think, Jay, it's in your, in your headstrong, right?

For all in. Let your winners ride. And, like, you know, you go through one down market, by the way, that completely changes. Or you talk to one hedge fund manager in New York City, and that also completely changes. Because managing risk is just super. super important and too many VCs are good at picking companies, but they're not good at getting out of them. Yeah, let your winners ride with a caveat of, yeah, sell 20, 30% on the way up. You know, like if you think about if, you know, people who were in Facebook or Google,

you know, I have a lot of friends who were early Facebook, early Google, many of them liquidated their entire positions, you know, and if you liquidated your Google or your Facebook or your test, that very early positions, man, that's smarts. That's smarts for a while. things, right? And I'm always a fan of, yeah, maybe 50%, keep 50% and sell 50%. You said that you're never selling your Uber shares. I, you know, I don't think I'm ever going to sell the, the ones I have remaining because I believe it's a trillion dollar company. I believe in network effects. I believe in the management. I believe in the profitability of it. It's a verb right now. And so I feel it's kind of like destined to be like Amazon or Apple or some of those companies. And

you know, if it's going to be the next Amazon or Apple, I'm going to be alive for hopefully 30 or 40 more years. Like, what's the point of selling what I have left? I could just ride it forever. And that's worked okay. I mean, it is a little stomach, I will say, you know, when it hit $15, $16 a share, man, my stomach was like, you know, you had two, because that was at, you know, a certain point, the majority of my net worth, I did diversify some of it. But, you know, that was, that was, that was a gut check. What was that for you, J-Cal, 4,000x? Is that the correct? multiple? I mean, depending on where you tip it, you know, if you tip it today, it'd be more than 5,000 X, right? So I always tell my LP is the same thing. My returns are only going down from here.

The chances of me hitting another 5,000 X are low, but, you know, I did change my strategy to try to own 10% of the winners rather than 10 basis points. You know, so if you, you know, adjust your approach, your portfolio math is different now. Your stage of your life. Yes. Yeah. And right now, like I'm trying to, my strategy is have enough surface area per fund, which is 300 of the accelerator type companies to have 20 of those become unicorns or something really meaningful, hundreds of millions of dollars, and then be able to plow half the funds dollars into the top 10 names, right? So they're spraying prey as a portfolio strategy, then there's concentrated, and trying to do both of those things in the same fund is very hard for people to understand.

and that's the thing I'm trying to do. We'll see as a strategy if I'm successful. We'll know in the next couple of years. You almost have an entire portfolio that an LP would have. If you look at Roger's portfolio, you have how many 20 funds? But 30 managers, about 50 funds. So you're not investing as a single fund. You're investing as a portfolio.

Tell me about how that changes your calculus. So our approach to the portfolio is we sort of like, I think earlier you alluded to, I never thought about it that way, but it's true. We think about seed and precede in sort of a separate asset class, and then A through two. My focus is pre-C through D, and that's as late as we will go. We sort of have this barbell strategy where A through D is these five, six core, you know, reputable, multi-stage firms out of the, I don't know, 20 or 25, let's say, the ones that kept their

fund sizes somewhat, you know, manageable, somewhat exercised price discipline over the last six, seven years. Generalists where they have, we have a, you know, diversified sector exposure. That's one part of the sort of the barbell. And the other part is sort of precede seed and seed. And the way we think about that is these are a lot of small $25 to $85 million dollars funds, where they have some specific network or expertise or value that they're able to get into these, you know, these syndicates and then have good graduation rates.

And then layer an additional capital on top of that sort of an inflection point, series B, you know, late A or B or C, that, you know, lower hold periods and better economics. That's kind of how we think about our portfolio. And J-Cal, you alluded a little bit to your portfolio construction. you have 300 at the early stage. How do you pick which companies to follow on? Yeah, this is something I've hard fought and learn over 10 years, I think, and also just talking to LPs because really the fourth fund is the first time I've met with a lot of LPs.

I think people are GPs are softies, right? We love founders. We want to be supportive. And it's very hard to communicate with your portfolio and say, we don't do bridge rounds. we don't do, you know, we don't expand our position, you know, except in these circumstances. And in my early years, as an investor, I, too, was a softie, right? And I would give token investments. I want to support the rounds signaling.

So, you know, we have a portfolio company. They've worked really hard, but they don't have escape velocity yet, right? It's not a hockey stick. But we're going to put an extra 50K in. We want to be supportive of the founder. We want to put an extra 100K in, right? And you know what? That next 100K could have been another accelerator company. It could be actually a new bet. So this bet has proven it's going sideways. And we didn't make a new bet. Was that the most capital efficient thing to do? Obviously not or probably not. Was it the kind thing to do? Did it make you feel good as a GP? Yes. And so we've told our founders, we have two follow-on bets we do. One is in likely winners. One is in definitive winners. And I just came up with a framework for my team because I have to train. a team of people now, right, with this many investments. I'll start with definitive winners.

A definitive winner in our definition, there's a, there's a Lee, a notable lead investor doing this round. Sequoia, benchmark, you know, go right down the line. So there's a notable lead pricing the round and the revenue has grown three X year over year. So just if you just take those two things, how often do you see that in your portfolio, you know, Jason Schumann, how often do you see we got benchmark leading the next round and it's tripling revenue over year? It's a It's not often, right? It's a unique event when those two things are occurring. So that's definitive. We all know, and maybe that's 5% of the time, if you're lucky for a seed fund, that those kind of scenarios happen. And then we have likely winners. And likely winners, we're seeing two or three X

year-over-year revenue, and we're seeing a lead. Maybe it's not the top-tier lead that we would want. And then we try to say no to everything else. And we've now communicated to our founders. We are a seed fund. Our agreement with our LPs is we do not do bridge rounds. We do price rounds. And so, and, and that's the truth. That's what I pitched LPs, because now these serious LPs who we have are saying to us, what is your follow-on strategy? So I had to clearly define it, and I just clearly defined it. We're not doing bridge rounds. We're not doing, you know, these internal rounds unless it's like five-x revenue, right? Like, if there's something crazy going on, but that's like, if you're, if you're growing

revenue five times year over year, shouldn't benchmark or Sequoia or somebody be coming in? Yeah. So, you know, that's the kind of, I think, discipline you have to have. And I think it comes from having a couple of funds under your belt and having to face the scrutiny of LPs who say, tell me about this investment. Tell me about that investment. Oh, you followed on with this one. It was struggling. Why did you do that?

Oh, because I like the founder. Oh, the founder got to me first. The founder told me a good story. I'm founder friendly. You know what? You have a portfolio strategy and I've told my internal team, it's a competition for the, those dollars and the competition is amongst the top six or seven percent of the portfolio. So there's 300 names in the portfolio and the top 20 get to compete for those dollars.

So, you know, more than nine out of ten do not qualify for the top seven percent by definition. So it gets a little bit easier as you get older and you just have to communicate it to the two customers, LPs and founders. They just, I think if you tell it to them straight early on, everybody's in alignment. I don't know what Jason's human. I don't know how many years you've been doing this now. So tell us how many years and what's your philosophy? Nine years at this point.

I mean, I'll say a couple of things. So one, you know, I've had this exact same conversation with the Josh Koppelman in first round and Jesse over at IA. And our three funds all looked back at the historical data and all of our funds. And basically what we found was that if you like survey all your partnership in the middle of a fund and you take the top third, the second third, and the bottom third, The top third is definitely where you want to concentrate your capital, by the way. Like, everybody knows that because if you look at funds and I've looked at the fund and portfolio

breakdown of funds that have returned over 10x before with one of our LPs, and 91% of the value came from 14% of the investments. However, 23.9% of their capital went into those 14% of investments. So concentrating capital is a great strategy. However, what we also saw all three of our funds, there's always one or two fund returners, that comes from that bottom third or that messy middle that you never would have anticipated. And you look at a company, you know, like Alloy and they're in our portfolio and Lightspeed did a big round. That company basically had zero revenue. We wrote three checks while it had zero

revenue, you know, and all of a sudden it was up into the right. And so I think what you really need to do is you need to either A of the trust of your LPs, but B, you need to have a lot a conviction if you're going to be writing checks in those bottom two-thirds. Otherwise, you should be putting all your money. How do you find that conviction? What are the non-tripling revenue, non-metric ways that you did it, Jason? Yeah. Candidly, your job is very different. I think than my job at the end of the day where like we, I'm literally talking to our founders almost every day because I only work with, you know, three or four new ones a year. And so, and we have different people at our firm who work inside those companies, you know, one day a week.

And so we're using asymmetric information to make those calls. And so if you're a founder and you're moving super fast and you're learning really quickly and you're iterating and finding product market fit or it feels like there's signs of that, great. We'll give you capital because we think you'll finally hit it. But if you're not learning super fast and we give you some advice and you're not taking it or you're not going out and getting great advice, then unfortunately, you know, there's probably other things that you should be doing.

I love that answer. In those cases where you have this asymmetric information because you're spending a lot of time with the team, are you doing a conviction-based bridge round? Are you bringing in outside funding to go along with your dollars? Give you a great example. So our L-PAC gave us approval to lead later stage rounds now in our portfolio companies when we had conviction in the outside world didn't. So this actually happened recently three separate times. In every time that this has happened, we gave a company a term sheet for an $8 to $12,000 check from us, which as a seed fund is really big, but our opportunity funds $150 million.

And that round became oversubscribed by 30, 40, 50 percent afterwards. And it was just because, you know, I think we're in this weird time right now in the world where sometimes, especially with the later stage companies, they just like are having trouble figuring out where's pricing and people don't want to get fired because the market's still figuring itself out. But at Seed, you know, the answer at the end of the day is we usually are the ones who are stepping up, pricing it, increasing exposure because why, you know, if you're going to write a check, write a check, and then go out and try to bring in some other folks as well. And you mentioned the three, the third, upper third, middle third, and bottom third.

Is that from a revenue standpoint or is that qualitatively, have you had companies in the quote unquote bottom third, the ones that you had least conviction in really be a fund returner? We have had, yes, we had fund returners come out of the bottom. And what are the lessons learned from that? What did you guys miss? What did we miss? The market usually catches up. So one thing I fundamentally believe in is that you can put a great founder in bad market.

The market will keep its reputation. The founder won't. And oftentimes, you know, we have been right on the idea, but wrong about the timing. And sometimes the timing catches up and then all of a sudden that's when you, you know, start to see things take off. The world catches up to the founder's vision in some way. And I think that's like super profound. Yeah. Speaking about the world catching up, M&A activity is finally starting to pick up.

It's reported that PE firms Bain Capital and Helman and Friedman are in competition to acquire DocuSign may even end up partnering together on the deal. After the news broke, DocuSign shares were up 5.3%. According to a BAA analyst, the company could potentially see a buyout of up to $95 a share based on comparables. Is it now time for the M&A market to start to heat up? What has been present when M&A has heated up historically? Generally, you know, capital scarcity and money sitting on the sidelines.

That's definitely true. There's a lot of money sitting, especially we're seeing in some funds that we're in, where they're now getting inbound from PE firms, sort of growth equity, you know, tech growth equity firms. I mean, they have a lot of, you know, dry powder and people can't sit on the sidelines forever. The IPOs is what I'm watching. I think we saw today there's rumors Reddit is quietly filing and to go out in March. Stripe, obviously, bite dance, plaid. There's just a ton of backlogged inventory. And these private equity firms,

they don't call them bottom feeding, but they're looking for a really good deal. I mean, they're the most value conscious. And so if they want to buy Zendesk or DocuSign or whatever, they want to buy it, reorganize it on a Google spreadsheet in Excel and make it super profitable and then flip it for max return, right? So if they're active and they're seeing opportunities, that means maybe there is some market opportunity. And this does dovetail with the layoffs and being more fit, as Brad Gerster says, you know, as companies get more fit and founders accept, you know, financial discipline and throwing off profits, the companies become more attractive. Companies that are losing money are not attractive in M&A, except in very rare instances where, you know, they have some

strategic value. When they become money printing machines like Uber, like Airbnb, you know, having talked to the Airbnb founders, like when they started becoming profitable and the cash flow started, man, did they get treated completely differently by Wall Street? And so I think that's going to change everything. As founders work through these like really difficult times and the companies become profitable

and the balance sheets look really good, which takes founders a couple years coming out of ZERP to clean it up, that's when I think everybody gets a little greedy. Jason, is the bid and ask spread? Is that coming down a bit? Great question. That's been the problem like last, you know,

I don't know if that's changing or not. Yeah, I mean, Instacart took the medicine, right? So they bit the bullet. They went out at $7 or $8 billion or something. And now people are saying, wow, it's such an attractive valuation that Uber could buy it with no problem. They could buy it for like $30 or $40 a share I read.

Like they could buy it for a much higher price than it's currently trading at and it would make sense in terms of the arbitrage between Uber's valuation and theirs and how Uber might be able to do it. When people start having those, moments of greed, right? Like a healthy greed,

that's when I think that shows the market has turned a corner. And I think it feels like 2024 could be the year that that happens. I'm super excited to see exits happen so that LPs can feel like this business is viable again. I think some LPs are like,

is venture viable? And I'm like, are we really having that discussion? Is venture capital viable? Not at the ZERP, lunacy. It doesn't, it wasn't viable. But what we do every day, you know, sticking to our knitting. Yeah, of course, it's incredible. On the 10x side, we do quite a bit in the public markets. And one of the consensus views is that if Instacart had actually gone really well last year, there would be a flurry of IPOs. There's certainly a lot

of pent-up demand behind Instacart. It's one of the largest IPO pipelines, I think over the last several decades. So I think a lot of the success will actually depend on a Reddit IPO and whether IPO investors are able to make money. The only people that made money on the Instacart IPOs were the ones that bought it on the IPO day and sold it at the end of the day. And that's not healthy for the IPO market. So I think people made fun of Uber and Airbnb for years over the same exact issue. And then all of a sudden, you know, it turns a corner. So I just keep thinking about incentives at the end of the day. And you know, if you're a founder, get profitable, open up the market to a P.E. acquisition. Because if you're not profitable, it just turns out a

massive chunk of the market for you. And on the public market side of things, look, I think going back to your comment about VC, there's going to have to be some companies that go public that are going to be below their last round price because we all need liquidity in order to keep this engine rolling. Well, this has been an exciting episode. We covered quite a lot on liquidity from Jason Schumann at primary partners, Roger Dadaala, at Churchill S&Mangement. Of course, J-Cal, the world's greatest moderator.

This is David Weissbert from 10X Capital, signing off.