This Week in Startups - The $97 Billion VC Panel | E1987

Starting point is 00:00:00 We always have conversations about what's going on in the market. If you're not, that's kind of irresponsible in my point of view. But we've always had a dictum that our strategy dictates the fund size, and fund size does not dictate strategy. And every single GP will repeat those exact words. And so for us, it's always like, okay, we're trying to lead rounds that are B's and C's and in the occasional D and even sometimes in A. But how big are those rounds?

Starting point is 00:00:25 If we want to write the lead check, how big is that lead check for the premium companies on average. And we want to write 30 or 40 of those checks per fund over three years. That tells you our fund size. I'm struggling with a number of managers where there is no succession plan. They're well into, this is not like funds two or three. Succession plans are incredibly important, especially for long and during, you know, kind of funds that we hope to invest with into the future. This week in startups is brought to you by Squarespace. Turn your idea into a new website. Go to Squarespace.com slash Twist for a free trial.

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Starting point is 00:01:49 Welcome back to this week's liquidity podcast. With me today, I have Tom Lovero of IVP. Next, we have Dana Johns' head of private equity at the state of New Jersey, division of investment, which manages a whopping $90 billion. And of course, we have Jason Gallicannis from the launch fund. I'm your moderator, David Weisperd, co-founder of 10x Capital. Today, we have many interesting topics to discuss. Secondary pricing is giving us hope of a potential recovery in the VC market.

Starting point is 00:02:17 VC leverage is at the same time an all-time high against startups. We look at the metrics there. We discuss the NVCA monitor. and what it spells for the industry. And finally, there's a new hot sector in the startup ecosystem, and it's not AI. We'll finish with the latest three investments from Tom and Jason. Let's get right to it. Last week, we saw some positive news with some promise of DPI coming back with Sequoia's

Starting point is 00:02:42 planned purchase of Stripe. This week, we're seeing another bullish signal. TechCrunch reports that the median price for company's secondaries is at a 31% discount, coming up from a 46% discount just seven months ago. Secondaries market has heated up recently with industry ventures, new $1.45 billion fund raised in September, Stepstone raising a $3.3 billion secondaries fund to focus just on venture, and Blackstone's rumored Secondaries Fund that expected to top its previous fund,

Starting point is 00:03:14 which was a whopping $23.5 billion. Tom, you spend a lot in the midstage and later stage venture, series B and series C. What are you seeing from a valuation standpoint today? The chart you have of secondaries is I think pretty representative of what's happening in primaries as well. Jason, you and I have discussed the Great Extinction event, which if you draw a line on that chart, you know, that was published in January of 23. That was probably around the low point of valuations and liquidity as well, funding. But we've seen a really strong rebound, but in a healthy way. Like everybody's very very, very important.

Starting point is 00:03:52 cognizant of the public multiples that people are getting now. So I think on average, things are rationalizing. It feels pretty normal to me. Yeah, I think what's interesting to build on those comments, Tom, is that investors, GPs have a certain amount of time and bandwidth. And in a cataclysmic event, like we witnessed when the market, let's call it what it is, it crashed for private companies. You know, you had to give maybe 80% of your time to your existing portfolio and stabilizing. In some cases, it was 100%. There were some VCs I know. I would forward them an interesting accelerator company that say, JCal, not the time. I'm doing triage. And so this is the finite resource. Capital is not a finite resource. The capital allocator time is very limited.

Starting point is 00:04:37 What this represents to me is, well, there's three places you can spend your time. One, your existing portfolio companies, two, finding new ones. And then there's this third place you could find value, and that's the secondary market. And so, for people who are looking for value, a lot of these companies are known entities. They have known management teams. They have functioning boards. And so then there just has to be a clearing price. And so I think we went through a period where there were no bids on these companies. Like, even for great ones, you know, Instacart, great product. Market cap was obviously at a sync with market realities and then potential IPO. Stripe, same thing. 100 billion, 50 billion. Now it's

Starting point is 00:05:19 75 billion, I think, in the Sequoia secondary that they did recently. So, you know, it's not like these are bargain hunters necessarily. I think these are people looking for value. But even myself, I have to look at my existing portfolio and say, is my next best investment a company that we've already funded or the next new company? And that's great for capital allocators to now be looking at the existing, you know, a cohort of companies that raise their Series B-CD aren't IPOing necessarily any time soon, but they're also not, you know, in tech stars or Y Combinator or, you know, on Seed Extension 4. So this is a extremely promising sign. Now, I do wonder about this data and David, which is, you know, is this a company's clearing

Starting point is 00:06:10 market? In other words, there must be a large number of companies that aren't even on these secondary markets because there is nobody buying or selling them. Or I should say, nobody buying them. Therefore, there's nobody selling them. They might actually be a buyer. So it's a great sign. Combine with the last six new news, these are two great signs. Dana, how do you feel about secondaries in the secondary market today? We're super excited about secondaries, but I'll set some context for why I'm so excited about them and how I'm going to include them in my portfolio. Our private equity portfolio is about 11 billion in NAV. It's largely skewed, it's global, but largely skewed to North America.

Starting point is 00:06:49 America, large buyout. And that's primarily because over time, you know, we invested in buyout managers who are in the middle market, who have now just, you know, kind of grown up and are now mega funds. We've had very little venture in the portfolio. The venture that I do have in the portfolio, we were accessing through partners where we have SMAs. We have about 30% of my portfolio is managed by separately managed accounts with different partners. We leverage those partners. Our investment process is fairly challenging. It just takes a long time.

Starting point is 00:07:25 And sometimes with venture, the fundraise is six months. You know, it takes us sometimes, you know, over a year. The secondary market has primarily been, you know, focused on buyout. And there's been, as you noted, you know, kind of industry ventures and stepstone have the largest secondary focused funds, a lot of these larger funds, you know, don't haven't really focused on venture. It's just been too hard for them, primarily because, you know, kind of relative to the pricing and

Starting point is 00:07:57 trying to price a portfolio, an LP portfolio. Venture has always been much lower, 25 to 35% where buyouts getting, you know, depending on the timing and the quality of the funds, like 80%. So it's just been, you know, challenging for venture. But I do think venture is catching up. I do think because of liquidity needs that LPs need, there are more opportunities for really great portfolios to become available. And for someone like me who's trying to build a venture portfolio

Starting point is 00:08:35 where I'm trying to do a couple of things. I want to, I'm missing vintage. years. I'm missing managers. I'm, you know, so I'm really excited about, you know, being able to, we just actually today, in building out this secondary program at New Jersey, I just kind of, I always think of things as like three pillars. So we've just approved a buyout, more European focus, but buyout a secondaries manager, which does LP and GP-led structurings. But anyways, so I could go on about why we're excited. But, you know, we think it's also from the perspective of duration.

Starting point is 00:09:25 I would like to, you know, kind of shorten the duration. This is a long, you know, kind of long duration asset class. If I can get in at a point where these assets, these, you know, portfolio companies are mature. not seed, but, you know, kind of more mature, then kind of moving, you know, shortening the duration, mitigating J-curve, and smoothing cash flows. No one knows your product like you do,

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Starting point is 00:11:08 for some of these like industrial and everybody, you know, do you know, David, what their, or Tom, what their return window is? What are they saying five,

Starting point is 00:11:17 seven years? What are they saying? I think it's, it's almost similar to growth equity. They're very tightly banded. I heard a statistic somewhere that there's almost never been a secondary fund that returned less than a one X or something. It's almost never happened.

Starting point is 00:11:30 So it's always within this like one and a half. And then two and a half is like the absolute best because these assets are already mature. But what time, what time period? Are they looking at? Does anybody have insight into that? I don't know what they have on the cover of their PPM. My sense is it's like five to seven years is generally what they're targeting on their investments, probably targeting five and then something stretch out. Makes sense. But overall, David, I think pairing this with last week's news about Stripe and Wiz now flip-lopping, we're going to sell, we're going to go public.

Starting point is 00:12:02 That's a bullish signal, right? Well, yeah, if there ever was a bullish shingle, it would be immediate greed versus is, you know, a long-term greed. You know, I'm always looking for greed in the system. And, you know, it's like Gordon Gecko said, like, you know, it's good. When you see people getting greedy like this, like, hmm, you know what? We could sell it and take the $23 billion right now or we can IPO into a market that would never value the company at $23 billion like Google would. That tells you something about their long-term hypothesis for that business.

Starting point is 00:12:34 One of the things on secondaries that's interesting is that if you're coming from the outside and looking at, of venture secondaries, you would think it's kind of this super liquid, super efficient market that people have different views on different assets. There's really two large buyers. One is existing people on the cap table. You might have an IVP on the cap table and someone's selling shares. A lot of times the main investors will actually have the right of first refusal, the rofer on the shares. They'll be able to go that. And of course, the company loves to have existing shareholders buy those shares because they don't have to bring new people on the cap table. to deal with information leakage.

Starting point is 00:13:10 And then you have these other parties with these secondary funds, industry ventures, Blackstone, also Lexington has a pretty big sleeve in this. And the reason they're willing and able to get into these opportunities is because they have a really good reputation. So if you're looking at like Wiz, they're raising money and somebody comes to them, they say, I want to get out of my position. Another way to look at that is like, I want to end my relationship with you, Wiz, the company. They don't have a huge incentive to accommodate them from any

Starting point is 00:13:38 reasons most of the time they don't want them sharing any information in the market because a lot of time Jason you've seen this like you'll have somebody blast out their information to like 20, 30, 40 buyers, right? Because they're getting out of the position. They want to maximize their price because the secondary market, you have two main drivers price and information for those buyers that have perfect information. Oftentimes they're even able to to bid higher. So I think that's interesting. And then you've had this new retail class of secondary buyers via platforms like Forge where you have, it's typically like very late stage companies, pre-IPO companies, they're two, three years away from buying.

Starting point is 00:14:15 So I think it's an interesting space. It's a space that's largely driven by the ability to transfer shares, but information. And also, frankly, regulatory VC funds like 10x capo, like IVP, we're not able to hold more than 20% of our AUM and secondary funds, or else you get kind of in this dreaded the RIA area where a lot of funds don't want to go, although it's becoming much more acceptable to do that. So there's a lot of interesting things that lead to the kind of these returns in the industry. It seems like the trend, though, has been in one direction over the past, you know,

Starting point is 00:14:54 19 years at least that I've been in venture, which is towards more and more liquidity, both on the LP side with secondaries and also on the cap table side of the companies themselves for employees and founders. You know, it's interesting, like, I don't know where that naturally ends. Like, how liquid do the private markets become 20 years from now? Because there is a pull, you know, and a push between people wanting to be able to sell at any time they want, but also the companies wanting to control information and wanting to control who's on their cap table. But my sense is things are going to still get even more liquid, both for GPs and LPs in the future. You mentioned retail.

Starting point is 00:15:33 I mean, if retail can get out. access to this asset class in a predictable, trustworthy way. This could get really exciting. And you see that with this, I've been tracking this company. I had the founder on Destiny 100 or something. He basically raised $100 million to buy secondary. And he got himself an allocation at SpaceX and a couple of other things. And he's got this publicly tradable, I guess it's an ETF where you can buy it.

Starting point is 00:16:00 And man, it has been like a meme stock. And so I don't think that that's the ultimate format for doing this, but it does show like crypto did that retail wants alpha. They want to swing for the fences. They want access to, you know, really high potential, high risk venture assets. And so, you know, I don't know which administration would be most pro this, but I have a feeling J.D. Vance would very much with his venture experience, you know, help us push through more fluidity. in access to the asset class, which would benefit a lot of emerging managers and create more liquidity. One thing that's been interesting to see is some of the most progressive thinking companies have instituted these tender processes. SpaceX famously has a tender twice a year where they let all their employees or their current employees sell via a specific price.

Starting point is 00:16:55 They control the process. They bring in the buyers and everything. So I think that would be something that would benefit a lot of companies. but you do get in a position where you have Nvidia. I don't know if you saw today, Jason, something like 73% of Nvidia shareholders are millionaires and 25% have over 10 or 20 million. Are you talking about employees? Employees.

Starting point is 00:17:19 Yeah. That becomes a problem because, you know, somebody comes to you and says, you know, I want you to spend all of August in the office and you look in the bank and you're making $20,000, your salary is $200,000. It was a bit of an issue there. Part of the process.

Starting point is 00:17:35 You know, there'll be like Google, you know, and Apple and Microsoft before them. Tom's much older than me. It's much more experience. I'm joking. It's a little bit older. But that is what creates, you know, the next wave of companies is people who make their 10 or $20 million chip and they got a chip on their shoulder and they want to be the CEO. And they think they can do it better or they saw some opportunity.

Starting point is 00:17:57 So, you know, short-term pain for the company to have to turn over. staff. But every time I've seen companies turnover staff, more times than not, the company is stronger because the company knows what it needs more and there's an infusion of new talent and energy. So there are a lot of Google millionaires

Starting point is 00:18:15 also who, you know, started other companies. I always say there's a reason there's a four-year vesting schedule at most startups. It's not a number we just picked out of the, you know, out of the sky. Like, there's a shelf life for how long or Half Life for how long people want to be at a startup.

Starting point is 00:18:32 And it's usually somewhere between four and eight years. And so that's why we grant equity in those schedules. It's very rare for somebody these days to be at a company for 10 or 20 years. And that's a natural thing. That's okay. I think as everybody here knows, without the non-compete laws in California. And equity vesting that doesn't go on forever. It allows people to jump jobs and take skills with them to the next thing.

Starting point is 00:18:57 So it gets very healthy. market. And Tom, you have a lot of CEOs ask you about secondaries. And when is the earliest that is appropriate for a founder to get liquidity via secondary? Yeah, I think it's all a matter of degrees. It's one thing to take a few hundred thousand dollars, you know, to make up for the fact that you're barely paying yourself for the last few years or, you know, maybe to buy the first house. It's different if a founder's taking 50 or 100 million off the table. There's no perfect guidelines, but, you know, I like to think about it in terms of how stable is the company. how closer are they to a liquidity event?

Starting point is 00:19:31 You know, how do we think about the other founders, the other employees and fairness and trying to be more inclusive there? There was definitely a point, though, in 2020 and 21, where I think founders pushed it a little too far, and VCs were more than happy to oblige, and it feels like that's been dialed back, but we're also not going back to, like, their early 2000s,

Starting point is 00:19:51 where founder secondary was this, like, super taboo topic that would ruin a company and nobody even wanted to broach. Now it's like, hey man, yeah, you know, San Francisco's expensive. You just had your second kid and you need to move, you know, houses. Like, sure, that makes sense. There's a good reason for that. So I think the world is more rational when it comes to these things. It's kind of like how LPs think about GPs and GP stakes when a fund is taking on

Starting point is 00:20:16 outside capital and how is that capital being used. Is it being used for growing the firm versus taking money off the table? You know, a little bit different. but, you know, it's kind of signals, right? You know, how dedicated are you? Yeah, I love this pari-par-sue term, not just how wonderful it sounds rolling off your tongue, but just in the reality of it, you know, we've had many situations with founders and other investors who gets to sell, right?

Starting point is 00:20:46 And it does seem profoundly unfair when one group has that option, another group doesn't have that option. And, you know, we've seen that in companies when this first was, bubbling up, Zinga had a bunch of secondary interest, and Gary Milner was buying shares, and this group was buying shares, and, you know, Mark Pinkis was not letting people sell shares. He wanted control the company who was on the cap table. It was a very unique moment in time. Evan Williams went a different way with Twitter where, you know, he let Chris Saka, Ron Conway, some others, I think create vehicles to manage that process. And it all kind of got hashed out there,

Starting point is 00:21:23 which is if people have access to the information and they're making a thought of decision and to Tom's point, it's not life-changing F-U money, which technically starts, you know, at 20 million. Yeah, the last thing you want is a founder thinking about planes, you know, at the board meeting and, you know, what houses they're going to buy. And I've seen it. I've seen it. I've seen it. Very distracted. Especially for a young founder, you know, it takes $100 million, 200 million off the table. And actually, that's where a lot of times the test comes in. When they do actually make those big sales, that's when you see a founder drop out. And then you see the other founder double down, right? And then that's when the board can make a decision. Hey, this person's

Starting point is 00:22:04 checking out, this person's doubling down. Well, then that tells you how compensation should go from that point forward. So it's a good test. And I think this is really going to help us go long in the industry. And the longer we can go in an investment, and the more independent it can be, the greater the chances of an IPO, the greater chances of a sustainable company that doesn't get bought by Microsoft Google and Apple and meta. And that's actually healthier for the ecosystem as well. It would be really nice if, you know, this gang of seven was a gang of 70 or 17 at least. And we didn't have, you know, Amazon, Apple and Google ruling the roost, as it were. All right, founders, one of the things you always ask me for is, hey, will you invest in my company?

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Starting point is 00:23:45 Next up, the second quarter, NVCC, is out and there are a lot of great nuggets in the report. One gauge of the market is the investor startup index, which shows that VCs are near all-time high as it relates to leverage against startups. Up from a low in Q4 in 2021 when startups had leverage on VCs, as Tom mentioned earlier. Not all metrics in the report were positive, however. Price to sales, the technical term for price to revenue for VC companies going public, was down to 4.9x from 12.6x at the height of COVID, signaling that now may still not be the best time to go public.

Starting point is 00:24:25 Dana, you got a chance to read through the report. What are some of your takeaways? I know this sounds kind of bizarre, but as a long-term investor, I think about macro trends and I think about, I think in decades. I don't think quarter to quarter. I know, I read my quarter. Tom, I read the quarterly reports. I do. It's thinking about, you know, kind of a private market investor versus a public equity investor and a private market investor thinking about I'm putting capital on the ground today and I'm thinking that it gets invested over the next three to five years. I don't have a crystal ball so I don't know what five years, ten years is going to look like. But I invest with parameters which are basically, you know, kind of return. What's the return target? Is this manager going to meet those? Have they met that? Have they met that target? We have

Starting point is 00:25:18 like 52, 52 GP relationships, over 100 funds, definitely over 100 funds. So as we're managing, I'm actually like kind of head down into what's happening in the portfolio. And then I like stick my head up, you know, kind of quarter to quarter to quarter to, you know, kind of figure out what's going on in the world. And then I kind of go back in, you know, from a monitoring perspective, making sure that our managers are executing on the investment strategies that, you know, we agreed upon in committing capital to those managers. This is why Dana's been a great partner for us for a very long time because you want

Starting point is 00:26:00 your LPs to think like other venture investors and long periods of time. And whenever I meet a potential new LPs, or somebody within one of our existing LPs and they're trying to time the market, that's always a sign for me there may not be a fit. Because if you think you can time the venture capital market, man, that is a tough thing. So it's way more interesting for me to develop the relationships with the managers than not sleep at night because, you know, the market's really volatile and, you know, what is going to happen? And I can't predict that.

Starting point is 00:26:40 But what I can predict is in developing relationships with our managers, that that's more important to me. Yeah, I mean, I focus a lot with my team on, you know, what are the strategies that we have? How are we executing on those strategies? And then any data that we have that we're learning that would inform evolving those tactics and strategy. And the game of venture, I find, is really a very tactical, strategic. discipline and much like playing poker, which is why many of us are addicted to that game, because you have partial information and you're trying to unpack, you know, some strategies here and to make decisions with it with that partial information, because you cannot,

Starting point is 00:27:24 you cannot control outcomes. You know, there are many crazy outcomes that I've seen. And if you told me, your top three investments would be a cab company, a stock trading app that doesn't charge users for trading and a meditation app, I would say, and a marketplace for, you know, handymen and for handy persons, whatever you call handymen today, I'd be like, what? But, you know, that's Uber, Thumbtack, Robin Hood, and Com. And you have to have some humility here to control the things you can control. And, you know, when I talk to my team, especially the young researchers that were turning into analysts and the analysts, returning into associates and associates were turning into principals, I said, how many meetings did

Starting point is 00:28:03 you do and how many check and calls did you do with these founders and what are they telling you know and where are your notes you know that i can work with but you know i can't magically have them you know create a um a follow-on investment for the portfolio but we can set them up with meetings with investors and then talk to those investors and say what did you think and those investors will tell us like yeah you know you really love the company but why is it growing so slow or why is their product velocity so bad or you know that founder is really interesting on a product basis, but where's the CFO and the, you know, chief technology officer and the director of sales?

Starting point is 00:28:40 Like, they're doing everything. You know, what's going on with the management team, Jacob? And so that's what you're trying to do is really make sense of what you have in that portfolio. And what are the strategies you came up with? And what did you sell to the LPs? I'm constantly thinking about that. We said 50% of the fund's going to go into these 200 names.

Starting point is 00:28:58 The next 50% of the fund is going to go into the top 5% to 10% of those. Okay. we're almost done with those 200 investments and we are looking, did we actually find something great in here? If there's not something great in there, okay, well, we need to maybe call an audible here. Maybe we need to change the strategy for the second half of this fund. And I think that that's the name of the game now. I used to think it was just being a great picker because I got lucky if I'm being honest with hitting some, you know, half-court shots. But I don't think you can make a career of half-part shots.

Starting point is 00:29:33 We all do respect to Steph Curry. What are you focused, Tom, in that sort of regard on strategies and tactics? Like, what is the strategy or tactic? And how does it evolve? How has it evolved recently? I'm curious. Yeah, we've been, I would say, strategy-wise, pretty consistent over the past 23 years or so.

Starting point is 00:29:51 And just to name it, the strategy is to invest in companies just as they hit product market fit. And that can be a variety of things. like when we did Twitter and Snapchat, they were both pre-revenue. Typical software, the company, though, has some revenue, and we're trying to and only invest in the things that can go public one day, that strategy hasn't really changed much, but some of the details the tactics have. For instance, we opened a European office.

Starting point is 00:30:19 We've got five people there now in London. We've done more secondaries over the years. It used to be 0%. Now it's, you know, probably 15, almost 20% of a given fund. And 20 years ago, 15 years ago, on average, I think we said, hey, a startup needs at least 10 million of revenue when we're investing. Now, of course, revenue models have changed. They're more predictable. There's no hard and fast rules for that. We're just looking for that like magical product market fit. So it's same strategy, sort of year in, year out, tactics have changed.

Starting point is 00:30:54 Obviously, the other big thing is, as Dana knows, if you're going to be around like IVP has for 44 years, the team's also going to change. And you need to go through generational transfer, which is some combination of tactics and strategy there too. And I would have to say, like, best in class, like evaluating so many managers that IVP does it right in terms of succession and how transparent they are with their, you know, their investors, their LPs and the plan for this is what's going to happen. It happens. And it happens. And it happens. consistently have to say, you know, kind of I'm struggling with a number of managers where there is no succession plan. They're well into, this is not like funds two or three. So I think, you know,

Starting point is 00:31:43 succession plans are incredibly important, especially for long and during, you know, kind of funds that we hope to invest with into the future. How many years ahead of time would you want the succession plan to be communicated as an LP? Just depends on the cycle where the manager is in their life's, you know, kind of life where the leadership is. I think it just depends on the situation, whether it's a near-term exit or it's an exit that's going to happen in the following fund, you know, it just depends, I guess. I was first, Tom, when you were talking about the strategy and the tactics, one thing that has

Starting point is 00:32:25 change radically is the competitive nature of getting in at your Goldilocks zone. That product market fit and definitely got the IPO possibility doesn't seem like you're the only fund that's going after that. It seems like there's a lot of funds now that maybe didn't even exist 20 years ago. How do you deal with competition and valuations given that that's a Goldilocks zone that a number of people have identified or just follow what it is, crib copied from you? Frankly, I think it's a a natural thing and a good thing because if the market were so small, there were two investors at this stage. We'd be swimming in a very small pond. But the interesting thing is from like a day-to-day operating procedure for our firm, the market's not as big as it appears, mostly because people

Starting point is 00:33:10 tend to specialize pretty quickly. You have a bunch of firms that ran some experiments and doing high volumes of, you know, pre-IPO type investments with no governance, you know, and trying to add little value outside of the money and that experiment kind of ran its course. You have folks who are very high touch. But if you're high touch and you're actually taking board seats, you can't make that many investments. There's just there's hours in a day and you can't scale your team infinitely. And so if you like zoom into the different strategies and different stages and you think about just the U.S. and Europe and people who want to do B's and Cs, but take board seats and the senior people take board seats, they don't pass it off to a more junior person, and their reputable fund who's had,

Starting point is 00:33:59 you know, been in a lot of IPOs and a lot of been associated with a lot of successful companies, that field starts narrowing. And then you say, okay, well, this happens to be an enterprise infrastructure company that does open source software. And we want to take on a board member who's done that before. Then all of a sudden, you're actually down to like relatively few competitors. So, you know, there's five, six firms that kind of end up. up in the same conversations, but that five or six will differ between a digital health company and an enterprise company and a consumer company and based on where they're located and the exact parameters of the round. So I would say, Jason, like, you asked me that question in January of 21.

Starting point is 00:34:41 I give you a very different answer that I wouldn't have given in January of 2018 or today, which is like, yeah, the market's like, you know, pretty predictable. In 21, all bets were off and, you know, everything was crazy. The rest came in and just took over the island, and then they all went home after. How did you avoid the temptation at IVP? You had your peers making hundreds of millions sometimes in management fees, and you guys were sticking to your knitting. Did you ever get tempted to try to replicate the strategy?

Starting point is 00:35:10 Listen, we always have conversations about what's going on in the market. If you're not, that's kind of irresponsible in my point of view. But we've always had a dictum that our strategy dictates the fund size, and fund size does not to teach strategy. And every single GP will repeat those exact words. And so for us, it's always like, okay, we're trying to lead rounds that are B's and C's and in the occasional D and even sometimes in A, but mostly B's and C's, how big are those rounds? If we want to write the lead check, how big is that lead check for the premium companies on average? And we want to write 30 or 40 of those checks per fund over three years. That tells you our fund size. The hard thing about 2021 is the round

Starting point is 00:35:51 size has got so big. As we were beginning to do the implied math, we were like, oh, my God, our fund size, we need to be three times as large as the most. And that kind of scared us, because then we're like, but what if the market's changed? Well, fortunately, we were pretty disciplined in our pacing and deployed over three years that fund during that time. And by the time we actually went out to raise the fund, things had corrected. Round sizes came down and were able to raise the same size, you know, fund as before. And so it kind of worked itself. out. But I have to admit, like, there were some, you know, flying by the seat of the pants moments where we did wonder if we had to change our strategy and our fun size. Our gut told us no,

Starting point is 00:36:32 but man, there were a lot of blog posts that said otherwise, like, hey, you know, ventures being disrupted, etc. It's like that chocolate cake. Everyone knows you're not supposed to eat it, but not eating it is the hard part. We also have this amazing governor on our strategy, which is called time, which Jason alluded to, which is just like, I can't be on 27 boards. And, and we take board seats. That's like the fun part. That's the enjoyable part of the job. It's why I show up every day is to work with founders. I'm not a stock picker. I can't do my job halfway as a board member. And that can only be sliced so many times. And so I think that temptation just kind of governed itself because of the hours and a day. Okay, most of us in the startup game have heard of Brex.

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Starting point is 00:38:00 slash twist 24 at brex.com slash twist 24. Moving on. Cybersecurity is starting to play center stage in Silicon Valley. We saw last week Wizz's $23 billion acquisition offer from Google that the company rejected. And perhaps not as positively, crowds, strikes outage that grounded many companies, including airlines, into a halt. Crunchbase is reporting that cybersecurity funding is up 144% in Q2 from the same quarter last year.

Starting point is 00:38:34 Dana, thoughts on cybersecurity and how do you look at this space? Why is it suddenly heating up right now? So the way I look at cyber, you know, as one of the biggest categories of enterprise software. you know, what is it, 200, maybe 200 billion in Tam? And it's just growing, you know, double digits. And what is the investment opportunity around that? And I think that that is, you know, kind of thinking about the crowd strike. I mean, I was impacted. I had a blue screen for, you know, kind of four days until I could get back into. So here's the interesting thing, because a lot of folks are working, you know, remotely. I could not get this fixed until I got back to my office. You. You know, you know, in New Jersey, which, you know, yeah. And they were like, keep rebooting, keep rebooting. They figured a way to get people to return to office, just turn their computers off at home. Now you have to come in.

Starting point is 00:39:30 We're also turning off your electricity. I think in terms of just the security, though, you know, kind of how AI is enabling, you know, kind of offense. You know, we have hackers and how, you know, companies are developing. I think it's a huge opportunity, and I think it's just going to get bigger. And it's going to be represented throughout my portfolio in a big way. Tom, you guys are pretty busy in the cybersecurity space. Tell me about your view on the space right now. And why is it getting hot today?

Starting point is 00:40:01 I think all of this stems from platform shifts. When there's a platform shift, you need new types of security. We were investors in CrowdStrike. It's obviously a fantastic company. testament to the fact that if you have a company that goes down and the world stops, you know they've kind of made a difference in the world or pushed a wave out. And that's true for Crowdstrike. For them, the innovation was using the cloud and the central intelligence of taking all

Starting point is 00:40:29 the intel from endpoints, i.e. computers, bringing it to their central cloud, taking that data and using that knowledge to push out updates to the edge, which gives everybody better protection. that was their innovation. I think WIS as well as kind of representative of one of those megatrends and security, which is the cloud operating model, all of a sudden your servers aren't in a room somewhere. They're out in, you know, out there in AWS, etc.

Starting point is 00:40:56 How do you protect those? And the side scanning technology that WIS has was a really, you know, innovative development that makes it faster. AI is one of those platform shifts. How do you defend, you know, in terms of like the innovative, inputs, the outputs for all these AI models, that's a brand new area. So I think that's driving some of that investment. You've got also a huge trend. I think maybe sleepily, one of the biggest trends is just the complexity of software development. So when you're building a new

Starting point is 00:41:28 piece of software, it's not some monolith where like you can do a code review and the QA, you know, test in. It's super easy. You've got like 3,000 microservices and the combinations of those things. It's so complicated. How do you make sure if one of those or two of those goes down, your service still works? And then you've got data and you've seen a bunch of companies get funded, our company rubric, which has data security at its core. They were the first real software tech IPO in recent times. As all this data grows and becomes more important to AI and everything else, you've got to protect it somehow. And so you've got these changes in the importance of the components and the nature of the components getting more complex.

Starting point is 00:42:09 What's happened is the surface area for attacks has just grown, you know, a multiple versus the days when everybody came into their desk and had one computer and it was on the network and there was one server and it was in the closet. Today's world is far more wild and woolly than that, and so you need more solutions. Tom, you mentioned a rubric. It had an IPO this year, one of the only ones to come out. You guys are, I'm sure, always talking to the Goldman Sachs. J.B. Margins of the world. What's your view on the IPO window? And will we see any action in

Starting point is 00:42:41 2024 or 2025? The IPO window, you have to kind of reference another window, which is the Overton window. It's kind of like, what's your definition of an open IPO window? Because if you think it was 2020, that ain't coming back. But if you think back to like post-GFC, the great financial crisis when, you know, what was that 2011, 12, when you had like Facebook and Workday go out as like the big successful companies? What happened in the following years? It wasn't a rush to the exit. It's like only really high quality companies went out for a number of years until maybe 2015, 2016, did you see a real uptick? And even then, it wasn't a flood. So I think the bar is going to stay high. I mean, to go public, you probably want three to 300 million to a billion

Starting point is 00:43:30 of revenue. You want to be near free cash flow positive. You've got to be growing 25% plus probably to project the sort of 15 to 20% growth you need in the public market. That's a high bar. I wish I could say all companies in our portfolio, you know, we're doing that consistently, but that's a high bar. There's just not many who are going to meet that. Not to put words in your mouth by you're telling your portfolio companies go public as a last resorts, stay private until the market recovers? What's your guidance? No, I mean, listen, everybody wants to go public. It's going public means you're, in general, your metrics, the health of the business as good as it can be. It's just hard to do. And so if you have those sorts of

Starting point is 00:44:12 performance metrics, you do it, which is, I think, you know, to Assop's credit at WIS, like, he looked around and realized, and I'm not an insider in the company. I've certainly met him, but he probably looked around and say, hey, we've got options on the table. Let's go along. A lot of companies aren't going to have that option, though, and so they're going to do their best and ultimately, you know,

Starting point is 00:44:35 kind of like the secondary market we were talking about earlier at the top of the show has become more liquid. The ability to sell a startup has also become more liquid because it's not just strategics, but you could sell to one of these PE firms, the Vistas and Toma Bravo's of the world that didn't exist. You know, you got a startup that's growing 10, 15%, As long as it's not burning cash, they can be buyers.

Starting point is 00:44:57 And 15, 20 years ago, that entire ecosystem, that company would be worth essentially nothing because you couldn't go public. And if a strategic didn't want to buy you, you're in that company forever. Today, at least you've got some options. Yeah. You'd imagine if M&A comes back with this regime change in Washington one way or the other. You know, we could see Lena Khan and this anti-MNA, anti-tech philosophy maybe weighing to one of more dynamic markets. And, you know, the fact that PE has to come in and buy some of these companies

Starting point is 00:45:29 means there's something broken in the M&A market, right? Because they are value. By definition, they're looking for serious value, right? Whereas I the public markets are just so optimistic, right? You're betting on the story and the future, whether, you know, it's Square or Blue Apron or it's Instacart or Uber. Like, you know, these things can go in different directions. A more fluid marketplace would just be great for Americans and innovation and American exceptionalism globally.

Starting point is 00:45:58 And I don't know why we are not letting Adobe or Wiz. Like these are under $100 billion acquisitions. Let them rip. Under a billion, not by the top three companies. Yeah, that Rumba, I robot one with Amazon or whoever it was like, just. I mean, just whole foods. Like, did something terrible happen when Amazon bought whole foods? Nope. Whole food's still great. No problem there. And you can get it delivered through your Amazon app. Great. Let's keep moving. Ring doorbell. Bought for a billion dollars by Amazon. Did it end the world? Nope. Can you still buy other doorbells? Yep. No big deal. Drop cam. You know, now Nest. Bought by Google. Billion dollars. Did it end the world? Nope. Still buy, you know, cameras for 15 bucks if you don't want the Nest ones for 150 bucks. I think people don't understand in Washington or it.

Starting point is 00:46:50 in Europe exactly how violent and brutal free markets are. In a global marketplace, you don't need to start putting your thumb on a scale. This is already a gladiators arena where if you're not producing the best product, the market's going to stop you. People at Google right now are very scared of people doing searches on chat, GPT, and Claude before they go to Google. And that's the mighty Google with the biggest money printing machine, humanity, I think, has ever made, you know, putting aside natural resources.

Starting point is 00:47:24 I don't know if you all saw Ben Thompson had a piece about CrowdStrike. Lina Khan made a comment that, you know, the power of a company like CrowdStrike is problematic and leads to these sorts of outages. But it was really the government's interference with Microsoft telling them that they couldn't close down their kernel access, basically, that sort of created the need for companies. companies to do what they do versus what Microsoft was going to do in the first place. So, you know, but of course, that was a different regulatory regime and nobody's going to, you know, take the fall for that. So there's just a ton of unintended consequences, I think, when regulators get too involved here.

Starting point is 00:48:05 You know, just to add a cherry on top of this great icing you set up, Tom, I just, like, it's almost like we have referees trying to be referees with Darwin. It's like, oh, there's a shark. It's going to eat a seal. and they're like, yeah, you know what? That seems unfair. And like the sharks just rips the hill and a half. Like, that's the free market. You don't need to get involved.

Starting point is 00:48:27 It's going to be fine. There are like price fixing. There are some tactical things that absolutely price dumping, price fixing, funding, funding, sure, let's give speeding tickets. Let's keep an eye on them. M&A, like the VCs and the capital allocators, the LPs who own these companies,

Starting point is 00:48:45 they do a pretty good job of making sure that value is extracted. If they think this company should IPO, like the investors in WIS seem to think, they're not going to sell. If they were going to sell, it's because somebody paid an extraordinary premium and or they don't have long-term faith in the business. What we saw this week, when they walked away from $23 billion, is that they have extremely, extremely high confidence in that management team and products to continue to grow to fill in that premium. Or they're absolutely terrified and convinced that that is going to get stopped as an acquisition. So it's one of those two things drove that decision or maybe a combination. I don't

Starting point is 00:49:22 know if you've given it any thought or other panelists. Does anyone know the breakup fee on that deal? Anyone know the rumored breakup fee? I didn't see a breakup fee. No. Figma was a billion, I think, right? Yeah, a billion dollars. I think that one of the things that regulators don't think about in M&A is it's a marketplace. So you have tech companies, buying companies, but you also have a very important other player, which is a startup. And the startup ecosystem, which is funded by Venture And regardless of what you think of personally, you might like or dislike ventcapolis, it is the engine of the American economy, almost the totality of GDP growth or incremental GDP growth in the U.S. You look at the magnificent seven, I believe all seven of them

Starting point is 00:50:05 were venture back. So it's really important for regulators to think of it as an ecosystem. What happens if you turn off the faucet? What are the downstream repercussions to that? because that will end up hurting not just Google, not just Microsoft, not just Facebook, which, you know, people may like or dislike it'll hurt the next startup and the next founder and the next employee and that could have really poor long-term consequences on the ecosystem and on the entire U.S. economy on GDP and even down to the taxable income of the country and Social Security and Medicare. So there's a lot of repercussions to trying to hurt, you know, the large tech companies, that may or may not be intended.

Starting point is 00:50:49 It feels like it became political when it should like when the FTC, et cetera, get involved should be purely a business decision based on market share and, you know, perceived surplus or detriment to the consumer. Tech companies are in the headlines. So, you know, the UK will undo the Giffy Facebook acquisition,

Starting point is 00:51:08 but some boring, you know, PE-backed ball bearings company does a roll up and gets huge market share. And that's not in the headlines and the regular. aren't going after those more boring businesses. So I think part of this is just like, you know, being in the spotlight as for the technology industry has some downsides to it, but I wish this were less political. Next on to our lightning rounds, where our guests go through their latest three investments,

Starting point is 00:51:33 Tom. Good timing on this. I've got a security company that'll be announcing a new investment that'll be announcing this week, probably tomorrow. So I can't talk about that one right now, but it's really exciting. happy to come back and a future day and talk about that one.

Starting point is 00:51:49 You got to give us some headline. I would say it has to do with the complexity of developing software today. It's a company we've been tracking for a long time, really awesome set of founders and is growing like gangbusters. So we're really excited about that one.

Starting point is 00:52:05 And by the way, at IVP, there's no like, we don't take individual ownership for any given deal. There's at least two GPs on every single investment as sponsors, but it's really the whole partnership behind every deal.

Starting point is 00:52:19 So it's always an awkward question, but I'll take some ownership for these. Cortex is a company that has a recent IVP investment. Think of it like a portal or a catalog that helps give developers a reference on all the services and pieces of software that exist within a software stack of a tech company so that you're not going in and trying to basically figure it out for yourself every time and is a sort of a rich database of information on everything running within a company's software stack. Cribble is another one. Cribble is basically a platform for data or log management.

Starting point is 00:52:56 IVP invested in. It's a company that's at scale right now. We invested a few years ago and think of it as sort of the next generation of log management, like a Splunk or other systems like that. and they help save companies a ton of money and give them more control, granular control over how they route that data and ultimately what they do with it.

Starting point is 00:53:21 Really boring stuff. I love this sort of stuff that's deep within the stack of the infrastructure of big enterprises. Absolutely amazing. I will share some fun stuff we're doing. Okay, so this is a fun one. So you know, we have an accelerator

Starting point is 00:53:38 called the launch accelerator, very similar to TechStars, Y Combinator, we've done 32 classes. We've had a number of companies become worth over 100 million. We had a unicorn come out of it and we're on a 30 second class. And before that we have something even more fun called Founder University, which is Year Zero people building projects. So we now have year zero and year one. So we kind of get in ahead of Ycombinator and Tech Stars with this Founder University product where 200 teams come together to build a product. Half of them aren't even incorporated. One of those companies was Chef's reactions, somebody who I met online, and I was watching Mr. Beast and some of these other performers create really large businesses.

Starting point is 00:54:19 And he reacts to videos on TikTok. Have you any of you ever seen him in these hilarious videos? Yeah. You have. Great. Yeah. So he's absolutely extraordinary. Well, because of my son. My son.

Starting point is 00:54:32 He has 3.6 million followers now. He gets regularly, you know, quarter million to a million people view each one. And he was working at like a golf club or resort in Canada making a, you know, a chef's salary, basically. And in our founder ofversity, we'll give people 25K for 2.5% if they start the company. We become the first investor, a million dollar valuation. I've done 80 of those investments so far. People in the industry think we're crazy. And now they're starting to become real businesses.

Starting point is 00:55:01 This one, when we gave them the 25K, went from being a, you know, maybe $15,000 a year to $30,000 a year, like a little ad business, immediately to $300,000 in advertising revenue and some merchandise. And we said to him, hey, would you come to the accelerator and let's take the next step, let's build a repeatable business

Starting point is 00:55:19 with product, services, etc. We're not going to announce the product or service here now. But distribution is the hardest thing that founders can do. Now, imagine you have distribution and a loyal audience and all they need is a product with your name on it. That's what we think, you know,

Starting point is 00:55:35 these top influencers represent. And so we're doing two experiments. can't talk about the other one yet, where we're making small bets on them, then a second bet, and then eventually a third bet. So now Chef Reactions is in our accelerator, and we have a really exciting business that he'll be debuting shortly. Layer Path allows people to really quickly create product demos. Product demos, super important, whether you are a startup or a big company, like taking people through your product in order to adopt it, super important, whether you're like walking people through how to use a drone or how to use your car, VCR, what, you know, historical, or it could be an app.

Starting point is 00:56:14 And so they make this tool that is incredibly fast and let you manage. So imagine Figma or another content creation tool like that, Adobe Premiere, Photoshop, but just for this one use case and just think about how amazing those product demos can be. Product demos are so arduous to build that a lot of people skip them. And those are some of the things that make products the most sticky. So we're very excited about that one. MasterTech.AI, yet another AI company, verticalized, they are creating a companion like a co-pilot for mechanics. Now, you're like, well, mechanics, like, you know, what do they know about AI in computers? They don't need to know anything. If they put on a pair of glasses, or they go to their computer or a laptop, which they have in every bay now, and you tell

Starting point is 00:56:57 it what you're doing, whether through voice or by wearing a pair of AR glasses or taking a picture of something, they now can get you in touch with the latest reports. And there are these reports created by every car manufacturer, and they change all the time. Toyota will put a new one out for a carburet or whatever it is. So now imagine using AI to make mechanics, make less mistakes, and to get that car out of the bay and into the parking lot ready for the customer faster. We think there's massive leverage here. And if you can make a mechanic but 5% faster and reduce errors by 5%, this could be a money

Starting point is 00:57:31 printing machine. And we just love these kind of boring businesses and we're getting really good at finding them. Ridiculous, Tam. You know, when I asked them the number of mechanics, I think is low millions and the number of bays. We actually, we do a top of what we call a bottom up Tam every time we invest in a company and we train our researchers to do that. And actually, I was really surprised because I was like, tell me the number of people. They're like, oh, the number of mechanics isn't what's important. I'm like, okay, educate me. They're like, number of bays. And my team figured out the number of bays there were, because that actually is the throttling, is how many bays you can get active at once. And then one mechanic might be working three bays at a time because

Starting point is 00:58:08 they're waiting for a part and they don't want to take the thing down. You get the idea. So super excited about these three. And I just want to say, like, the entrepreneurial activity because of AI, I'm Tom. I'm sure you're experiencing this. And it has reinvigorated entrepreneurs where they are looking at every single problem in the world and saying, AI first. What does it look like? Just like they did with mobile, just like they did with cloud, just like they did with the internet, broadband, dial-up, CD-ROMs, media before that, PCs before that, client server before that. And this one feels to me like the one that takes all previous platform changes and just, I don't know, 10x is it? Like the leverage these companies are getting to, I don't know if you're seeing this in your portfolio, Tom, like the number, the revenue per employee or the number of employees to get to a million,

Starting point is 00:59:00 number of employees to get to 10 million. It's saying static. It's a good. Static head count is a thread or a theme I've been really focused on. Uber stays the same size, but grows revenue in the high teens or low 20s every year. What's happening? Wait a second. Like, this is a really big, big story that is not being reported anywhere. Yeah, we're definitely seeing that within the portfolio. Like a bunch of companies do riffs take out 20% of the head count and they're like, oh, our sales are going to go down 20% or 10% and they're like, it went up 3% this quarter. Like, how did that happen? Dead weight.

Starting point is 00:59:36 Yeah. And just people underestimate the bigger you get, the more complex organizations get, the less gets done. Yep, 100%. I mean, you essentialism, you know, just like this, what is essential in running a business is a question being asked right now. And I think in a world of unlimited capital and some money printing machines, the wrong lessons were taught to two generations, Gen Xers and Millennials, which was just hire a head

Starting point is 01:00:03 of growth. Just keep hiring. Just get that talent off the market, get them into your, get them into a cube. We'll figure out what to do with them later. Wrong. Bad idea. Total distraction. This is why I hate internships because they do 10 weeks of an intern. By the time they do it, whatever they do something meaningful. They're like, bye, I'm going, thanks for the, thanks for putting me on your resume. I'm now going to go work at IVP and, uh, bring them all your secrets, Jay Call. And I'm like, thanks. I only do internships for LPs and their kids.

Starting point is 01:00:36 I was going to say, I love my interns. I mean, it's, it's real. Don't get me wrong. Actually, I'm trying to like train them up to go into private equity. You know, I'm like, skip the institutional allocator job. Go straight to private equity. You just want a network of spies out there, Dana, who can report back to you. Exactly.

Starting point is 01:00:56 There it is. She's planting them everywhere. Sleeper cells inside of Black Rock and other people. I love it. Right, right. And Dana, I want to put you on the spot. You have a $100 million minimum check size. How do you invest in a bunch of funds?

Starting point is 01:01:13 So we were talking about this earlier. Yeah, I just wanted to say like I 100%, 100%, you know, I want innovation in our portfolio. I think we have like 800,000 retirees. I think to have an alternatives portfolio where you have, you know, different return profile, you know, kind of investing in different assets, but private equity, it's the growth engine of our $90 billion, you know, portfolio. And a big key to that is having venture in the program. And how do I do that when I'm writing $100 million checks? I write $100 million checks because I have great partners like IVP that can take $100 million. We think very carefully of what is an LP base of a manager. And we never want to be more than 10 to 15% of a fund because you want a very balanced OP base. And what happens if a CIO comes in and hates venture

Starting point is 01:02:10 and you never get to invest in venture again? That happens where there's just different priorities about how allocation policies should be developed. I fortunately work for an institution where, you know, our allocation policy is very generous. the alternatives. And, you know, we're targeting 13% for private equity. And that ranges. I would say, like, you see other large institutional investors. It's 16%. In endowments, it's much, much more, right? It's, you know, kind of north of 20% or 30% is, you know, kind of their portfolio's dedicated to venture.

Starting point is 01:02:50 So 13%. I'm under-allocated. I'm at 12. I'm one of the few, you know, allocators out there. a whole more $100 million tax. That actually has some capital to deploy. I mentioned where it's a global portfolio and I'm investing in buyout growth and venture. And we have a lot of partners that help us get allocated dollars to. We're investing in emerging managers. I'm investing in emerging venture managers. I'm investing in emerging growth and buyout managers.

Starting point is 01:03:20 And then I'm also investing. I have an SMA for mature. seed series A funds. That's where I'm kind of like skewing to seed series A in this SMA, where the check sizes can be from, you know, 10 million to 35 million. And these portfolios are meant to be built and, you know, we'll keep allocating. It's 300, 200 million, 250. And then we'll, you know, kind of will fill it up with allocations. We'll close it and then we'll start a new one. And so, you know, you have these vehicles where you can kind of keep re-uping into the managers in, separate, so you have vintage year diversification, you have manager diversification, you have generalists, you have sector focus, you know, it's the whole, you know, nine yards, primarily North America, you know, for the venture programs. But yeah, that's how I'm building my venture program where I have my core, you know, the key primary, where I'm investing 100 to 150. I'll have the SMAs where I can do my smaller checks for the emerging and then for the mature

Starting point is 01:04:23 kind of early seed series A. And then eventually I'll probably do some sort of secondary to kind of, you know, as I said earlier, kind of cover those vintage years where we did not have, you know, exposure. So we're really busy over here. It's been a year. I probably allocate between a billion and a half and 1.9. That's my target annually. So far this year we're probably at about 1.3 billion in terms of what's been committed.

Starting point is 01:04:51 and there's stuff that was just approved today. This has been a really busy day. We had our state investment council meeting. And I am very consistently building a program that, you know, kind of will into the, you know, kind of, I'm thinking, again, for the next 10 years, what will this program look like? And each year, I know what managers are going to be going into it. I'm constantly on the hunt for new managers. Don't forget seed in Series A. No, no, no.

Starting point is 01:05:20 See, in Series A is a huge part of the SMA, well, both, both for the emerging and for the, I mean, it's a challenge because we, we decided we're going to do $50 million funds. Back, Tom, to your thing that, you know, strategy equals fund size, I think you said, or strategy dictates fund size, not fund side, dictionary, I could raise larger funds, but when you're trying to do something, you know, that's an accelerator, pre-accelerator, and then just follow on to the top winners, you don't need 150 or $250 or $200,000. 50 million. You need 50 or 75 is the right number, right? And then everything else becomes attraction, which means we have a lot of people who love us, but they're like, oh, we have this

Starting point is 01:05:59 thing. 25 is the minimum and we can't be more than 10%. So you have these, you know, formulas that are, you know, codified. And they make sense. I understand why they're codified. But then they just preclude in a relationship from occurring. And I'm like, make an exception, do $5K, do $5 million or do $10 million. I go to a group, I got to get them to approve that exception. But I do see people now starting to think about it. So I think it's a creative solution. You can all, yeah, like, how do we engage those managers? And it's not a fund of funds.

Starting point is 01:06:30 I mean, this is managed account specifically from New Jersey, but the key to it is that there are five other managed accounts by large institutional allocators. So they're, you know, kind of our, you know, partner goes out, they get an allocation, they come back, split it across. I don't even have to go into all of the allocations that they bring to us, but there's a whole allocation policy. And it's just what I'm focused on is building a flywheel and also back to relationships. Because some of these managers may grow or I may make that exception and do $25 million versus $100 million.

Starting point is 01:07:11 But it's all about getting to know the manager, right, and developing the relationships. And having the conviction around that that this is going to be, especially if it's CED or Series A, this is going to be a 10X fund. Which is, you know, what seed is in a unique position to do. Great job, David. Congratulations on 20 episodes. Thank you. Yeah. Congratulations.

Starting point is 01:07:32 Wow. Yeah. I mean, I just wanted to do a niche podcast because I couldn't find anybody talking about these things with people like us. And it's like this is like a wonky podcast that we all enjoy about a thousand of our friends. it's very difficult. We're very, very, very honored and very privileged to have somebody like Dana from pension funds because it's not easy to get pension funds on on on on on guests. Oh, really? Oh, I'm sorry.

Starting point is 01:07:55 Well, I'm sorry on behalf of my peers, but. No, it's great. It's more than compliance compliance. Yeah. I feel like part of my job too is to educate, you know, kind of our broader audience on why what we do, why we do it and, you know, and how we do it. Well, another great up. We've made it to episode for Dana Johns, Tom Lovarro, Jason Calacanus. This is your host, David Weisper. Thanks for listening.

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