Latest / The Neon Show / Anthropic, Sequoia Investor: 55x Returns in 18 Months, Is Anthropic Worth Trillions? | Vishal Verma

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Anthropic, Sequoia Investor: 55x Returns in 18 Months, Is Anthropic Worth Trillions? | Vishal Verma · The Neon Show

• 0:00
  SPEAKER_00: From Kleiner to Sequoia to Lightspeed to General Catalyst.
• 0:04
  SPEAKER_00: We have 21 venture funds that we've invested into.
• 0:07
  SPEAKER_00: And if I was a betting man, which I am, I would say it's about 50 or 60 of the different vintages.
• 0:12
  SPEAKER_00: You have the PayPal Mafia and you have the YC mafia.
• 0:15
  SPEAKER_00: And you have a little bit of Google and Meta, but the impact that these two uh companies have made are so significant.
• 0:22
  SPEAKER_02: And then you have the what is the IR you have been seeing from these investments?
• 0:27
  SPEAKER_02: So I don't look at IRR.
• 0:29
  SPEAKER_02: Then what do you look at?
• 0:30
  SPEAKER_02: So hi, this is Siddhartha Luwalya, your host at Neon Show and managing partner at Neon Fund, a fund that has invested in some of the best enterprise AI companies between India US Corridor like Atomic Work, Spotraft, CloudSec.
• 0:52
  SPEAKER_02: Today I have with me Vishal Varma from Redwood Collective.
• 0:54
  SPEAKER_02: Welcome, Michal.
• 0:55
  SPEAKER_02: Well, thank you, Sid.
• 0:56
  SPEAKER_02: It's a great to be here.
• 1:00
  SPEAKER_02: Your father, Devindur Varma, came from India.
• 1:03
  SPEAKER_02: He was an ISRO scientist, I believe.
• 1:04
  SPEAKER_00: Yeah, he was.
• 1:05
  SPEAKER_00: He was a rocket scientist.
• 1:07
  SPEAKER_00: First job that he had was he was working, his boss was Dr.
• 1:10
  SPEAKER_00: Abdul Kalam.
• 1:11
  SPEAKER_02: Wow.
• 1:12
  SPEAKER_00: In the 1960s, after he did his PhD.
• 1:14
  SPEAKER_00: And how did your father come to the US?
• 1:16
  SPEAKER_00: So through ISRO.
• 1:17
  SPEAKER_02: Okay.
• 1:18
  SPEAKER_00: In 19, the way the way I understood was in 1977, he was uh deputy to come to the United States as part of ISRO.
• 1:28
  SPEAKER_00: Sure.
• 1:28
  SPEAKER_00: As a first science counselor to the Indian abyss to the United States.
• 1:32
  SPEAKER_04: Okay.
• 1:32
  SPEAKER_00: And at that time, the government of India was manufacturing its first satellites here, actually in Palo Alto.
• 1:38
  SPEAKER_00: Okay.
• 1:39
  SPEAKER_00: At that time, the company's name was Ford Aerospace that was manufacturing.
• 1:42
  SPEAKER_00: And this was a project that was for education called Inside 1A and 1B.
• 1:48
  SPEAKER_00: And that's what brought our family in to the United States in 1977.
• 1:52
  SPEAKER_02: And which company, like your father started companies and then in VC and then became an LP, right?
• 1:58
  SPEAKER_02: Some of the first ones.
• 1:59
  SPEAKER_02: Would love to know the story.
• 2:00
  SPEAKER_00: So the story, let me tell you a little bit about the story.
• 2:02
  SPEAKER_00: Yeah, it was a great journey.
• 2:04
  SPEAKER_00: And I really saw it up front from the perspective of how innovation, technology, how all that is built.
• 2:12
  SPEAKER_00: And the world is very well, the world was very different in the 1990s compared to what it is today.
• 2:19
  SPEAKER_00: For Indians to succeed, we were known as great engineers.
• 2:23
  SPEAKER_00: We were known as maybe great managers, perhaps, but we did not know.
• 2:28
  SPEAKER_00: The world did not know how amazing, talented Indians are.
• 2:51
  SPEAKER_00: Beyond your own terms, creation of this wonderful technology is whatever is there.
• 2:56
  SPEAKER_00: So my my uh our family uh made the journey from India in 1977 uh till probably 1980.
• 3:04
  SPEAKER_00: We were in Washington, DC, and um I was five at the time.
• 3:08
  SPEAKER_00: I'm assuming my parents got to around the dining table.
• 3:10
  SPEAKER_02: So when you moved to the US, you were five years old?
• 3:12
  SPEAKER_00: I was two years old.
• 3:15
  SPEAKER_00: So I was born in 1975.
• 3:16
  SPEAKER_00: So this is uh now everyone knows how old I am.
• 3:19
  SPEAKER_00: So um, and we uh what I was told we were moved in, we moved in February of 1977.
• 3:24
  SPEAKER_00: We were here for three years in Washington, DC.
• 3:26
  SPEAKER_00: So and then um, as you know, being a government servant, you only have a three-year rotation.
• 3:32
  SPEAKER_04: Yeah.
• 3:32
  SPEAKER_00: So I'm assuming my father and my mother were around the dining table and said, hey, let's figure out how uh we will build our life in in the United States.
• 3:41
  SPEAKER_00: Yeah.
• 3:41
  SPEAKER_00: So then my father got a job at another UN organization called Intelset, same space and satellite oriented.
• 3:49
  SPEAKER_00: That's what took us to LA.
• 3:51
  SPEAKER_00: Okay.
• 3:51
  SPEAKER_00: So we're in LA for a couple years.
• 3:54
  SPEAKER_00: And since early 1980s, 1982, we have been in Silicon Valley.
• 3:59
  SPEAKER_02: And and what brought your father to Silicon Valley?
• 4:01
  SPEAKER_00: What uh brought us the same company that he worked for in LA, transferred him to uh to uh to Palo Alto.
• 4:10
  SPEAKER_00: And interesting enough, he was working for the same company that he gave a contract to at Ford Aerospace.
• 4:17
  SPEAKER_00: And if you look at fast forward 20 years later, Ford Aerospace sold that entity to Lorel Corporation.
• 4:24
  SPEAKER_00: Okay, and that's where my dad became our executive for Lorel after Intelsat.
• 4:28
  SPEAKER_00: So it's also it's in America, and in the in the in the in the world, it's in in life, it's always a circle.
• 4:33
  SPEAKER_00: So the contract that my dad gave in the 1970s, eventually he worked back with them in the in the 1990s.
• 4:40
  SPEAKER_00: Wow.
• 4:40
  SPEAKER_00: And and when did he become an entrepreneur which year?
• 4:42
  SPEAKER_00: Uh he did a few things.
• 4:44
  SPEAKER_00: Um he became an entrepreneur and investor at the at the same time, and uh he invested in some amazing companies that uh did well, and um became uh an avid investor in venture capital firms.
• 4:59
  SPEAKER_00: And uh I think he realized early on that uh investing into venture, A, getting access to investing into venture, number one, that's humongous, b is having the capital to invest into a venture is is is quite uh quite interesting.
• 5:14
  SPEAKER_00: And especially in the in the in the 80s and 90s, writing a check, especially for a single-income family, was quite quite risky.
• 5:22
  SPEAKER_00: Yeah.
• 5:23
  SPEAKER_00: Right?
• 5:23
  SPEAKER_00: And and as you know, especially for immigrant generation, right?
• 5:27
  SPEAKER_00: The biggest fear is oh my god, going back home to the motherland is a failure.
• 5:31
  SPEAKER_00: So um, and that's the reason I think immigrants and especially Indians and other immigrants are very successful, is not just the fear factor of going back home, is that they want to succeed.
• 5:42
  SPEAKER_00: They want to build a life in a comp in a country that they adopted.
• 5:46
  SPEAKER_04: Yeah.
• 5:46
  SPEAKER_00: Right?
• 5:47
  SPEAKER_00: And they they take the best of the breed from the country that gave them birth.
• 5:53
  SPEAKER_00: So, for instance, a lot of the Indians have these amazing work habits, education platforms, of course, um, family values.
• 6:01
  SPEAKER_00: Yes.
• 6:01
  SPEAKER_00: Uh I think Indian as a whole has that.
• 6:04
  SPEAKER_00: And then when you come to the United States, in terms of it's just ripe for immigrants, especially Indians, to succeed, is because it's conducive to for folks to become and become successful.
• 6:18
  SPEAKER_00: We just had this conversation, right?
• 6:19
  SPEAKER_00: It's just it's it's America, especially Silicon Valley, is based on the merit of the individual, based on the merit of the person, not of anything else.
• 6:29
  SPEAKER_00: And that's what makes America great.
• 6:32
  SPEAKER_02: And and tell us some of the early funds that your father invested in.
• 6:36
  SPEAKER_02: And and uh the thing is, how did he source capital?
• 6:39
  SPEAKER_02: Like was it through investment, through, through job?
• 6:42
  SPEAKER_02: How did he make that capital to invest in those funds earlier?
• 6:45
  SPEAKER_00: So my my father was a he was he took the different route.
• 6:48
  SPEAKER_00: He was actually a senior executive for many, so he was more of a senior executive, then became an entrepreneur.
• 6:54
  SPEAKER_00: Yeah.
• 6:54
  SPEAKER_00: So he already had money.
• 6:55
  SPEAKER_00: Uh oh, sorry, that's the wrong way to put it.
• 6:57
  SPEAKER_00: He already had resources to invest.
• 7:01
  SPEAKER_00: So some of the I call them the legacy funds that our family office still invests into are the front first funds that he put money was a Sequoia fund, uh, Kleiner, and and NEA.
• 7:11
  SPEAKER_00: Okay, well.
• 7:12
  SPEAKER_00: I still remember.
• 7:13
  SPEAKER_00: Um, unfortunately, he passed away in 2020.
• 7:15
  SPEAKER_00: So I I've got to tell you the story.
• 7:16
  SPEAKER_00: This is a um, so when he passed away, I went to his home office.
• 7:20
  SPEAKER_00: In his home office, he has a bookshelf.
• 7:22
  SPEAKER_00: Yeah.
• 7:23
  SPEAKER_00: In the bookshelf, there was a three-hole punch binder.
• 7:25
  SPEAKER_00: First of all, who the hell has a three-hole punch binder anymore?
• 7:27
  SPEAKER_00: No one does it.
• 7:28
  SPEAKER_00: It's all docusign this or send me this, everything's digital.
• 7:31
  SPEAKER_00: So I took the three-hole punch binder out, and I I knew what it was because I made it in late 1990s.
• 7:37
  SPEAKER_00: It was the first investment that he made was a Sequoia 9, a Sequoia fund in Vintage 9, which closed November of 1999.
• 7:45
  SPEAKER_00: And I was I was going through it, and it was like a fossil.
• 7:49
  SPEAKER_02: How large was the fund?
• 7:51
  SPEAKER_01: Exactly.
• 7:51
  SPEAKER_01: So I'm I'm I'm gonna get to that.
• 7:53
  SPEAKER_01: So let me tell you the before the the the uh the the the findings.
• 7:56
  SPEAKER_00: So we were still using our AOL accounts.
• 7:59
  SPEAKER_04: Yeah.
• 7:59
  SPEAKER_00: All right, kids today don't even know what AOL is.
• 8:02
  SPEAKER_00: Uh we were using fax machines.
• 8:04
  SPEAKER_00: Again, kids today don't even know what fax machines are.
• 8:07
  SPEAKER_00: But more than that, we were not using the laser jets fax machines.
• 8:10
  SPEAKER_00: We were using the perforated, you know, those carbon.
• 8:12
  SPEAKER_00: Yeah, I don't remember.
• 8:13
  SPEAKER_00: And by the time I fax something to you, fax the same document back to me.
• 8:16
  SPEAKER_00: I can't even read it because it's all perforated.
• 8:19
  SPEAKER_00: So we're still using that.
• 8:21
  SPEAKER_00: And there was an ink-signed letter, and no one signs any letters anymore.
• 8:26
  SPEAKER_00: Yeah.
• 8:26
  SPEAKER_00: Uh, from Doug Leone and Mark Kwame to my father stating that the Silicon Valley is a washed of capital.
• 8:34
  SPEAKER_00: And to be honest with you, immigrant generation.
• 8:36
  SPEAKER_00: I didn't look at what a washman.
• 8:37
  SPEAKER_00: So I Googled it.
• 8:38
  SPEAKER_01: Flooded, okay, flooded of capital.
• 8:40
  SPEAKER_00: Yeah.
• 8:41
  SPEAKER_00: And then Sequoia closed its biggest fund ever in the history of Sequoia Capital at that time in 1999 of$339 million.
• 8:51
  SPEAKER_00: Today we were talking about that.
• 8:53
  SPEAKER_00: Serious A's are$500 million of repeat founders.
• 8:57
  SPEAKER_00: $339 million was the whole fund.
• 8:59
  SPEAKER_00: Back then you could write a half a million dollar check, a two million dollar check.
• 9:02
  SPEAKER_00: Twitter's very difficult out of a$10 billion fund.
• 9:05
  SPEAKER_00: Sequoia has a$15,$15 billion fund, Lightspeed closed just under$10 billion.
• 9:09
  SPEAKER_00: Uh General Catalyst last fund closed uh just under$8 billion.
• 9:13
  SPEAKER_00: They're closing another um uh fund, fund number 15, this is GC, uh probably end of this year.
• 9:19
  SPEAKER_00: So it's just the the the dynamism of Silicon Valley is still there, but the magnitude of the capital is different.
• 9:26
  SPEAKER_00: Yeah, which is which is a big part.
• 9:29
  SPEAKER_00: And um today for a fund to write a two or half a million dollar check is is completely impossible.
• 9:36
  SPEAKER_00: Also, what's happened is the the venture definition has changed, where these bigger, more established um credible funds, like a Kleiner, like a Sequoia, like a Lightspeed, have moved up or down, depends on how you want to say it, be back on the food chain.
• 9:56
  SPEAKER_00: Because when you raise a$10 billion fund, you can't write a$2 million check, you have to write a$100 million check or whatever the amount is, correct?
• 10:03
  SPEAKER_00: And you have to own a certain percentage.
• 10:06
  SPEAKER_00: So that gives a big gap to these early stage investors to come in.
• 10:13
  SPEAKER_00: And now, if you believe the data or not, there is 15,000 funds created over the last two decades in this valley.
• 10:23
  SPEAKER_00: Early stage funds.
• 10:24
  SPEAKER_00: Which is mind-blowing.
• 10:26
  SPEAKER_04: Yeah.
• 10:27
  SPEAKER_00: It's a great opportunity, right?
• 10:29
  SPEAKER_00: And also what's happened is because of the wealth creation in this in this valley and throughout the uh throughout the United States and throughout the world, more of these funds have been created.
• 10:38
  SPEAKER_00: Um but but the the the main issue is in terms of what's gonna be the next finer, what's gonna be the next whatever, because it's dead.
• 10:49
  SPEAKER_02: So and uh which are the let's say top 10 funds that your father invested in that time?
• 10:58
  SPEAKER_00: So um those three funds were the ones that uh uh kind of uh hit it off the crushed it, hit it out of the park.
• 11:06
  SPEAKER_00: And now we have um as of today 21 venture funds that we've invested into.
• 11:11
  SPEAKER_00: And if I was a betting man, which I am, I would say it was about 50 or 60 of their different vintages.
• 11:15
  SPEAKER_00: So we're many vages in Sequoia, many vages in Kleiner, and we continuously invest.
• 11:20
  SPEAKER_00: And the reason we continue to invest is it's a great asset class, number one.
• 11:23
  SPEAKER_00: Number two is also if you don't if you miss a cycle, you don't you don't get reinvited to the party.
• 11:29
  SPEAKER_00: I did that once and I'm like, oh my god, I'm like I didn't get reinvited to the party.
• 11:33
  SPEAKER_00: The party meaning the next fund and the parties too.
• 11:37
  SPEAKER_00: And uh so we continuously invest.
• 11:39
  SPEAKER_00: However, what happened in the 1990s to today, kind of stock stock differences.
• 11:48
  SPEAKER_00: We just talked about the magnitude of the capital, right?
• 11:50
  SPEAKER_00: Yeah, well, that's just one area.
• 11:52
  SPEAKER_00: Second is the cycles in terms of fundraising cycles were usually four to five years.
• 11:59
  SPEAKER_00: That means investment cycles were four to five years.
• 12:02
  SPEAKER_00: Today companies or funds some of them even do it in two to three years.
• 12:07
  SPEAKER_00: Certain funds do it every year.
• 12:09
  SPEAKER_04: Yeah.
• 12:10
  SPEAKER_00: So one challenge for a family office like us is we don't have depth of, I mean, just we cannot write a blank check.
• 12:16
  SPEAKER_00: Number one.
• 12:17
  SPEAKER_00: Number two, if you're deploying capital for per fund every year and you're raising funds every year, I know VCs are smart, but you might miss a cycle where you might get maybe you might top the cycle.
• 12:31
  SPEAKER_04: Yeah.
• 12:31
  SPEAKER_00: So just give you an example if you have a fund of 2021 vintage, yeah, and you all you deployed all the capital in one year, it's you're in a tough position because the entry prices are very high.
• 12:41
  SPEAKER_04: Yeah.
• 12:42
  SPEAKER_00: Right?
• 12:43
  SPEAKER_00: But if you have invested over three years or maybe four years, fine, you got the 2021 high, you got 2022 low, 2023 low, 24 rebound, maybe 25, uh and get into just not the AI, but also the the previous technologies.
• 12:58
  SPEAKER_00: Also, what happens is that I like funds whether that are investing into multiple platforms, multiple industries.
• 13:05
  SPEAKER_00: If someone says, I shall I have the great, the best AI company, single GP, uh first fund, only doing seed funds, that's not for me.
• 13:15
  SPEAKER_00: Sure.
• 13:16
  SPEAKER_00: I invest into more later stage companies, Series B and beyond.
• 13:20
  SPEAKER_00: Why?
• 13:20
  SPEAKER_00: Because they're a little bit more proven.
• 13:21
  SPEAKER_00: Yeah.
• 13:22
  SPEAKER_00: I understand the um the returns are very different.
• 13:26
  SPEAKER_00: But if you kind of look at it, I'm in a whiz, or I was in a whiz at 2 billion and 8 billion.
• 13:32
  SPEAKER_04: Yeah.
• 13:33
  SPEAKER_00: Through directly or through these funds?
• 13:35
  SPEAKER_00: Directly, through the funds, but through SPVs that the funds create.
• 13:38
  SPEAKER_00: So many of the funds, if not all the funds, have uh give opportunities for the LPs to co-invest with.
• 13:45
  SPEAKER_00: So um, and I'm an active participant in the funds, so I have great relationships with some of them to understand really what's uh uh what's going on in the in the market.
• 13:56
  SPEAKER_00: So coming at 2 billion and 8 billion valuation is not a bad thing.
• 14:00
  SPEAKER_00: And I mean to be honest with you, I was a little bit concerned when I was writing the check.
• 14:05
  SPEAKER_00: Um, and for the young people who know that's a check when you now you call it wire.
• 14:09
  SPEAKER_00: Yeah.
• 14:11
  SPEAKER_00: But um writing the checks was very was uh I was thinking, oh my god, what's really gonna happen?
• 14:17
  SPEAKER_00: So if you kind of think about what happened on on Wiz, it's it's a it's it's a little bit silly, but I mean we we we we had a good good outcome.
• 14:27
  SPEAKER_00: Um where even you came at a multi-billion dollar evaluation, it was great.
• 14:31
  SPEAKER_00: Uh same thing as anthropic.
• 14:33
  SPEAKER_00: Yeah.
• 14:33
  SPEAKER_00: I came in anthropic at 18 billion.
• 14:35
  SPEAKER_02: 18.
• 14:36
  SPEAKER_00: 18.
• 14:36
  SPEAKER_00: Yeah.
• 14:36
  SPEAKER_00: Just think of how silly it is.
• 14:38
  SPEAKER_00: 55x returned in 18 months.
• 14:41
  SPEAKER_00: On paper.
• 14:43
  SPEAKER_00: Everything's on paper until something goes, something goes IPO or something, there's an exit.
• 14:47
  SPEAKER_02: But Wiz uh you received cash, right?
• 14:49
  SPEAKER_00: So Wiz was a great exit.
• 14:51
  SPEAKER_00: Um, I wish we got um Google stock, but because Google, when the transaction was announced, Google was at 200, today Google's at 400.
• 15:00
  unknown: Yeah.
• 15:01
  SPEAKER_00: Um, but I wish uh we we got stock, but you know, I wish is not all wish comes true.
• 15:07
  SPEAKER_00: And uh it was a great uh month of April for Silicon Valley and for investors because the distribution of two-thirds of the capital came back to the LPs.
• 15:15
  SPEAKER_00: Yeah.
• 15:16
  SPEAKER_00: So I've been reinvesting that capital into different venture funds.
• 15:19
  SPEAKER_00: And about 10 plus 10 billion or one-third of the funds are uh are are in earnouts and other um performance matrixes that uh Google and Vis has uh come to a conclusion with.
• 15:30
  SPEAKER_02: So got it.
• 15:31
  SPEAKER_02: And and right now through Redwood Collective, which is your fund of funds.
• 15:35
  SPEAKER_02: Yes, right.
• 15:35
  SPEAKER_02: Uh can you talk more about it?
• 15:37
  SPEAKER_02: Which are the Yeah, yeah.
• 15:38
  SPEAKER_00: So um so the Family Office, let me just kind of put a timeline.
• 15:41
  SPEAKER_00: So the Family Office, we started in late 1990s, was more of an angel investment than my father did, then we formalized it more structurally in the mid-2000s, and we've been investing into a bunch of funds and direct investments.
• 15:53
  SPEAKER_00: So we are in 21 venture funds and uh 27 now uh direct investments.
• 15:59
  SPEAKER_00: And then um the fund that we started was is called Redwood Collective.
• 16:03
  SPEAKER_00: And uh the reason we started Redwood Collective is first of all, to be honest with you, it was a bunch of my friends saying, Hey, how do I get into these companies?
• 16:11
  SPEAKER_00: Yeah.
• 16:12
  SPEAKER_00: Um, because you're getting into these companies, I would love to figure out how we can you know enjoy the capital appreciation, if there is any capital appreciation.
• 16:20
  SPEAKER_00: So I said, hey, let's just start up fund of funds.
• 16:22
  SPEAKER_00: Yeah.
• 16:22
  SPEAKER_00: So I started the fund of funds and um we quickly closed, it was a small fund, the first fund.
• 16:28
  SPEAKER_00: Uh that was the vintage of 2022.
• 16:30
  SPEAKER_02: I believe it was a$10 million fund.
• 16:31
  SPEAKER_00: It was a$10 million fund.
• 16:33
  SPEAKER_00: We have uh actually marked it up almost by 3x.
• 16:37
  SPEAKER_00: And um the reason we marked it up by 3x is because we have a lot of these.
• 16:41
  SPEAKER_00: I I call them the megacorns.
• 16:43
  SPEAKER_01: I don't think it's a word, but uh you can use it for three times as long as you you quote me, and after that it's all yours.
• 16:49
  SPEAKER_01: Because you have the unicorns, you have the decacorns.
• 16:51
  SPEAKER_01: As you know, unicorns a billion dollars, decacorns is 10 billion.
• 16:54
  SPEAKER_01: I don't think anyone said megacorns yet.
• 16:56
  SPEAKER_00: So anyways, so the megacorns, um so we're in all the megacorns.
• 17:00
  SPEAKER_00: Yeah.
• 17:01
  SPEAKER_00: So we're in SpaceX, we are directly all through the fund.
• 17:04
  SPEAKER_00: Both.
• 17:05
  SPEAKER_00: Yeah, both.
• 17:05
  SPEAKER_00: I mean, uh when I say I'm in, that means I'll refer to that as direct and to be completely transparent, uh directly means to an SPV that the fund has created.
• 17:14
  SPEAKER_00: Understood.
• 17:15
  SPEAKER_00: I don't I don't understand secondary markets, so I don't do do secondaries.
• 17:18
  SPEAKER_00: Yeah.
• 17:18
  SPEAKER_00: Yeah.
• 17:19
  SPEAKER_00: Uh when we started investing in the 90s, we were always the big check in a small round.
• 17:25
  SPEAKER_04: Yeah.
• 17:26
  SPEAKER_00: And you know what the issue there is is it's your problem if the company does, if they need more um uh more capital to to run.
• 17:35
  SPEAKER_00: Over the decade or so we reversed it.
• 17:38
  SPEAKER_00: My father and I saying that, hey, let's figure out how we can be in a big round the smallest check.
• 17:45
  SPEAKER_00: Yeah.
• 17:45
  SPEAKER_00: And the smallest check is probably the big bigger check than the the big check in the small round.
• 17:50
  SPEAKER_00: Um, so we came in because then it's not my problem.
• 17:53
  SPEAKER_00: Yeah, it is technically my problem, but it's not my problem.
• 17:55
  SPEAKER_00: Someone's writing a hundred million dollar check and I give a small check, and it's the venture funds, make sure the venture fund has the fiduciary responsibility to figure out how that company can become successful.
• 18:05
  SPEAKER_00: And they will have the dry powder to continually invest if they think it's a winner.
• 18:10
  SPEAKER_00: Plus, they have so much research, yeah, they have so much talent on the bench, they have so many knowledge bases, and they have so much in then many of the funds that I've invested into are the ecosystem, not part of the ecosystem.
• 18:22
  SPEAKER_00: They're part of the ecosystem.
• 18:24
  SPEAKER_00: So um, and we've been I've mentioned the funds we've invested into from Kleiner to Sequoia to Lightspeed to General Catalyst, uh Menlo, 8 VC.
• 18:34
  SPEAKER_00: So we've invested into a lot of tier one VC firms.
• 18:37
  SPEAKER_00: Um NEA, um, I mean, so continuous.
• 18:40
  SPEAKER_00: We've done some emerging managers, but uh, and I think I would love to have a conversation with you also what the definition of emerging manager is.
• 18:48
  SPEAKER_00: Um so so so but but but coming back, um the strategies has always been invest in uh for the last 10 years, invest into the later stage uh funds to have access to and co-invest in some of their later stage, when I say they're the VCs, later stage high octane, high growth companies.
• 19:09
  SPEAKER_00: Very simple model.
• 19:10
  SPEAKER_00: It's nothing sexy.
• 19:11
  SPEAKER_00: Um actually it is sexy, I guess, but we get into some of these amazing companies which are ripe now to go for an exit.
• 19:19
  SPEAKER_02: So you get into these SPVs that these funds create for their LP.
• 19:23
  SPEAKER_02: Yeah, some direct depending on how big the check is, but usually it's an SPV.
• 19:27
  SPEAKER_02: Understood.
• 19:29
  SPEAKER_02: Got it.
• 19:30
  SPEAKER_02: And uh can you talk about some of these funds, like which has which today has been some of the best investments apart among these, which vintages or which assets?
• 19:40
  SPEAKER_00: Well before getting into that, let me tell you what's going on.
• 19:46
  SPEAKER_00: There is a time, and history will tell us, we are going through a time of generational change.
• 19:50
  SPEAKER_00: Yeah, we we are all living it.
• 19:54
  SPEAKER_00: Yeah, you and I and all your viewers are living what's going on.
• 19:58
  SPEAKER_00: We might not grasp the impact that's going on, but we're living it.
• 20:03
  SPEAKER_00: Same thing happened in the 70s with Oracle, with Microsoft, with Apple, in the 80s with companies like Cisco, in the 90s with companies, which is the revolution uh of the internet from Nvidia to Amazon, in the 2000s, the the Googles, the the Dropboxes, the all these companies which are out there.
• 20:25
  SPEAKER_00: And um it's happening the same thing here.
• 20:29
  SPEAKER_00: And uh AI is the hot thing today, it might not be tomorrow, which might not be there.
• 20:34
  SPEAKER_00: But these generational companies with these generational founders are changing the way the world is churning today.
• 20:43
  SPEAKER_00: And the reason they're the this time, well, I shouldn't say this time, the reason some of these selective companies and this industry is going to be vibrant is because they're really generating real revenue.
• 20:55
  SPEAKER_04: Yeah.
• 20:57
  SPEAKER_00: If you remember in the in the in the in the um dot com first web 1.0, yeah, you had companies like the Globe.
• 21:04
  SPEAKER_00: When out went, I think it was about$10 billion zero revenue.
• 21:08
  SPEAKER_00: $10 billion and zero revenue?
• 21:10
  SPEAKER_00: Maybe maybe$10 million revenue.
• 21:11
  SPEAKER_00: I mean zero revenue meaning very very very low.
• 21:14
  SPEAKER_00: Very um so that's the reason these companies blew up is because there is this exuberance of uh extra exuberance where uh the the FOMO money came in.
• 21:26
  SPEAKER_04: Yeah.
• 21:26
  SPEAKER_00: And that's where the retail investors and other investors too.
• 21:31
  SPEAKER_00: And I think the the reckoning day will happen in terms of how AI will transpire is probably end of this year, early next year, when these mega corns will eventually exit.
• 21:40
  SPEAKER_00: Everyone talks about SpaceX.
• 21:42
  SPEAKER_00: In the grapevine, SpaceX is trying trying to target to go IP on on June 28th.
• 21:47
  SPEAKER_00: Okay.
• 21:47
  SPEAKER_00: So ask me why.
• 21:49
  SPEAKER_00: It's because it's a birth it's uh Ilan Musk's birthday.
• 21:52
  SPEAKER_00: Okay.
• 21:54
  SPEAKER_01: Um that's the target, at least that's what I heard uh from some folks that I know uh well.
• 22:00
  SPEAKER_00: At least that's the target.
• 22:01
  SPEAKER_00: And then you have Anthropic preparing to go IPO.
• 22:04
  SPEAKER_00: You have OpenEI ready to go IPO.
• 22:06
  SPEAKER_00: And just think about this.
• 22:09
  SPEAKER_00: SpaceX 2 trillion.
• 22:11
  SPEAKER_00: And Anthropic is raising around at a trillion.
• 22:14
  SPEAKER_00: Yeah.
• 22:14
  SPEAKER_00: 200 billion at two at a trillion valuation.
• 22:18
  SPEAKER_00: They're definitely going to go out at maybe a trillion and a half, maybe two trillion.
• 22:21
  SPEAKER_00: Just think about what I'm saying.
• 22:23
  SPEAKER_00: Trillion dollars IPOs.
• 22:25
  SPEAKER_00: Yes.
• 22:26
  SPEAKER_00: It's just mind-blowing.
• 22:28
  SPEAKER_00: Now we have to come up with a new word for the trillion dollar IPOs.
• 22:32
  SPEAKER_00: More than mega corns.
• 22:34
  SPEAKER_00: And then don't forget, you have Stripe right in the back, you have Databricks right in the back of all of this stuff, you have Andro right in the back.
• 22:43
  SPEAKER_00: When are these guys going to come up?
• 22:45
  SPEAKER_00: And it will be a good time to figure out that when these companies go public, how the market, in terms of the public market, is able to gauge what really the companies are doing.
• 22:59
  SPEAKER_00: So what I mean by that is if you look at um all these trillion-dollar companies, multi-trillion dollar companies, Google, Meta, uh even Tesla, they went up the first IPO, first day of IPO, crashed.
• 23:12
  SPEAKER_00: Yeah.
• 23:12
  SPEAKER_00: Was hanging out for a year, maybe two years.
• 23:16
  SPEAKER_00: And then um and then they had the big rise.
• 23:20
  SPEAKER_00: So also don't forget, in in in in technology, first mover advantage is not an advantage.
• 23:28
  SPEAKER_00: What Silicon Valley, in what Silicon Valley uh VCs are buying, it's like real estate.
• 23:34
  SPEAKER_00: What is the three things you like in real estate?
• 23:36
  SPEAKER_00: Location, location, location.
• 23:38
  SPEAKER_00: Here in Valley is growth, growth, and growth.
• 23:42
  SPEAKER_00: So one thing that we talked about for a few minutes before this was growth on venture style returns, the definition has changed.
• 23:53
  SPEAKER_02: Yeah, now uh Anthropic has proved that you can go 10x at a$10 billion revenue.
• 24:00
  SPEAKER_00: Which is which is mind-blowing.
• 24:03
  SPEAKER_00: Right?
• 24:04
  SPEAKER_00: I mean the first year of Anthropic was 100, the second year was a billion, third year was nine, which was last year.
• 24:10
  SPEAKER_00: And originally early this year, they were thinking 30 to 40 billion ARR.
• 24:14
  SPEAKER_00: Now they're thinking 80 maybe.
• 24:15
  SPEAKER_00: Yeah.
• 24:16
  SPEAKER_00: To maybe 100 billion.
• 24:16
  SPEAKER_00: I don't know what the numbers are, but it's it's it's it's just mind-blowing.
• 24:22
  SPEAKER_00: So also what's I think what's happening is So the definition of venture style is now the new definition of what Anthropic and OpenAI is able to achieve.
• 24:33
  SPEAKER_00: However, there are all of these companies in the which are still venture star.
• 24:38
  SPEAKER_04: Yeah.
• 24:40
  SPEAKER_00: I don't know what percentage, say 20% of the companies.
• 24:44
  SPEAKER_00: Anthropic, those high performing are only handful of yeah, they're only 10 names like Anthropic.
• 24:49
  SPEAKER_00: Exactly, right?
• 24:49
  SPEAKER_00: But those companies that are, I was put, I say it's in the second bucket, they're growing amazingly well, but not venture star.
• 24:58
  SPEAKER_00: With a new definition of venture star.
• 25:00
  SPEAKER_00: The old definition they're definitely yeah.
• 25:02
  SPEAKER_00: So you see this with uh um many funds, they're they're starting funds to do roll-ups.
• 25:06
  SPEAKER_00: Yeah.
• 25:07
  SPEAKER_00: You have uh you have General Catalyst that's doing a roll up, Lightspeed, A16Z, and even our common friend, BG, yeah, is doing a roll-up strategy.
• 25:16
  SPEAKER_00: How do you really take these amazing companies that are growing amazing growth, but not the new venture style definition growth?
• 25:24
  SPEAKER_00: So I think that's the hardest thing that's gonna happen because you can cut a lot of gut out and still build a lot of margins out of it.
• 25:30
  SPEAKER_00: And that's the one thing why the street, on the when I say the street, the public market do not understand yet.
• 25:36
  SPEAKER_00: And that's what happened with with what I mentioned before with the meta and and Google and Tesla when they went public, the street did not understand what the margins are.
• 25:45
  SPEAKER_00: Basically, you can you perfect example is Oracle.
• 25:48
  SPEAKER_00: When Oracle went from$200 to$340 in one day, yeah, because they signed$550 billion worth of RPOs, but then later on you found out they have to spend$180 billion to make the$550.
• 26:00
  SPEAKER_00: So then what's the margins?
• 26:02
  SPEAKER_00: So we don't understand the margins.
• 26:04
  SPEAKER_00: And these businesses have continuously revamped itself.
• 26:08
  SPEAKER_00: Today we do we we talk about the cloud and hosting, and before that was co-hosting with Exodus and above net, and before that was, I mean, on-prem.
• 26:18
  SPEAKER_00: It's just this markets have differentiated itself.
• 26:23
  SPEAKER_00: And coming back to the previous point is I think that is a great opportunity to invest with where companies are venture old venture style returns, however, not with today's venture style risk.
• 26:36
  SPEAKER_02: And I think today's venture style is also favors in terms of five to ten exceptions only, right?
• 26:43
  SPEAKER_02: Yeah.
• 26:43
  SPEAKER_02: That's true.
• 26:44
  SPEAKER_02: The megacorns.
• 26:48
  SPEAKER_00: The megacorns, yeah.
• 26:49
  SPEAKER_00: But but there are companies, so a lot of people have said this, so I'm gonna repeat this, is that we do not know the companies that are gonna be the next generational founders because they haven't been born yet.
• 27:02
  SPEAKER_00: They're being born in a garage, they're being born in someone's dining room, they're being born in someone's dorm.
• 27:09
  SPEAKER_00: Uh we don't know.
• 27:11
  SPEAKER_00: And there's also other companies which are there, which have been around for many, many decades that have revolutionized themselves to become cool and part of the AI revolution, right?
• 27:22
  SPEAKER_00: Apple, Microsoft, the latest one is uh Oracle and Cisco, right?
• 27:31
  SPEAKER_00: In terms of getting into this market, and now it's becoming the AI-led and everything's AI led first.
• 27:38
  SPEAKER_00: And the thing is, as long as companies can change and revolutionize themselves from a product positioning perspective, they can be an AI first company, perhaps, like an Oracle, like a Cisco.
• 27:54
  SPEAKER_02: And and let's talk about um the wealth creation is cut uh made by like certain groups.
• 28:01
  SPEAKER_02: We were talking about the Palantir Mafia, right?
• 28:05
  SPEAKER_02: And uh Palmer Lucky was like the first employer at the early employees of uh Palantir Palantir.
• 28:11
  SPEAKER_02: Palantir, right?
• 28:11
  SPEAKER_00: And and then he went to the He was a protege of uh Joe Longstead.
• 28:14
  SPEAKER_00: Yeah.
• 28:15
  SPEAKER_02: So let's just talk about how these small groups are creating enormous amount of unconcentrated amount of wealth.
• 28:21
  SPEAKER_00: So so the valley is ran by gang members.
• 28:24
  SPEAKER_00: Yes.
• 28:26
  SPEAKER_00: Ethnic gang members and company gang members.
• 28:29
  SPEAKER_00: The two company gang members, in terms of the spin-offs, when I mean gang, for for your viewers, it's technology gangs, is the the you have uh you have the PayPal mafia and you have the YC mafia.
• 28:42
  SPEAKER_04: Yeah.
• 28:42
  SPEAKER_00: And you have a little bit of Google and Meta, but the the impact that these two companies or these two um companies have made are so significant.
• 28:51
  SPEAKER_00: And then you have the ethnic mafia.
• 28:52
  SPEAKER_00: You have the Indians, you have the the Persians, you have the Chinese that are really changing the way that this whole dynamics of entrepreneurship is going into.
• 29:01
  SPEAKER_00: And of course they they overmix uh uh as well.
• 29:04
  SPEAKER_00: And if you think about it, PayPal changed the way FinTech works.
• 29:11
  SPEAKER_00: First of all, changed the way with Elon Musk has come because what was it called?
• 29:14
  SPEAKER_00: Zip2?
• 29:14
  SPEAKER_00: That changed the way that uh um catalogs and uh telephone directories worked.
• 29:19
  SPEAKER_00: Then you had uh um, if you remember x.com merged with conformity to become PayPal.
• 29:27
  SPEAKER_04: Yeah.
• 29:27
  SPEAKER_00: That was in 1998 or 1999.
• 29:29
  SPEAKER_00: I saw that up front is because we had shares in x.com through Sequoia.
• 29:34
  SPEAKER_03: Okay.
• 29:35
  SPEAKER_00: So so um so actually lived this.
• 29:39
  SPEAKER_00: Um so so so coming back to this, so just from a PayPal Mafia standpoint, they they've changed the first half a million dollars came from Peter Teal, PayPal, uh, LinkedIn, PayPal, YouTube, PayPal, all of these companies that have started PayPal.
• 29:53
  SPEAKER_00: Then they went to much more frontier technologies, Android, PayPal, all this SpaceX.
• 29:57
  SPEAKER_00: Palantir came from PayPal.
• 29:58
  SPEAKER_00: Palantir, SpaceX.
• 30:00
  SPEAKER_00: Um, it's just um the uh and uh Oculus Oculus um Palantir slash PayPal.
• 30:10
  SPEAKER_00: So there was something in the water or something in the bits and bytes in the office that and you know at the end of the day, it's just how they think.
• 30:20
  SPEAKER_04: Yeah.
• 30:21
  SPEAKER_00: They don't think about how do you make incremental changes.
• 30:24
  SPEAKER_00: How do we really change the world?
• 30:26
  SPEAKER_00: And how do we look at the world in 20 years today?
• 30:30
  SPEAKER_00: Right?
• 30:30
  SPEAKER_00: I would never think in my when I was growing up we're gonna have autonomous vehicles in my lifetime.
• 30:36
  SPEAKER_00: We're gonna have flying vehicles.
• 30:37
  SPEAKER_04: Yeah.
• 30:39
  SPEAKER_00: Electric, autonomous flying vehicles that are vertical takeoff and landing V O T V T O L.
• 30:45
  SPEAKER_00: That's mind-blowing.
• 30:47
  SPEAKER_00: At least when I was growing up.
• 30:48
  SPEAKER_00: I used to watch that in the Jetsons in the movies.
• 30:50
  SPEAKER_00: Yeah.
• 30:54
  SPEAKER_00: Terminator.
• 30:54
  SPEAKER_00: No, no, not Terminator.
• 30:55
  SPEAKER_00: True lies.
• 30:56
  SPEAKER_00: Was it true lies?
• 30:57
  SPEAKER_00: Uh where he goes to Mars.
• 30:59
  SPEAKER_00: Um, so it's just you see that in the movies.
• 31:02
  SPEAKER_00: Yeah.
• 31:02
  SPEAKER_00: In today, I mean terminator also, but in today it's reality.
• 31:08
  SPEAKER_02: And uh for you, uh, you have always concentrated into some of the larger funds.
• 31:14
  SPEAKER_02: Yeah.
• 31:15
  SPEAKER_02: Uh right.
• 31:16
  SPEAKER_02: So what's been like, do you ever ask the question of like what are the real cash returns at the end of the day?
• 31:22
  SPEAKER_00: So of course we ask that that question, continuously asked questions, but that's everywhere else.
• 31:29
  SPEAKER_00: So I think more than that, I think from a strategy perspective, and that's what I'm also doing for Redwood Collective, uh, we're raising over a second fund right now.
• 31:37
  SPEAKER_00: And um, same strategy is to invest into the top-tier venture funds.
• 31:42
  SPEAKER_00: Sure.
• 31:43
  SPEAKER_00: To co-invest with them on some of their later stage high octane, high growth companies, where they're able to invest into these amazing repeat, but also first time, but mainly repeat founders.
• 31:57
  SPEAKER_00: Um and that's the whole strategy.
• 32:00
  SPEAKER_00: And also what's another issue in this in this in this in this industry is that the holding times have expanded so much.
• 32:06
  unknown: Yeah.
• 32:07
  SPEAKER_00: I remember the so the first fund my father put money into was Sequoia 9, which had uh which had PayPal in it and Zappos in it.
• 32:13
  SPEAKER_00: Yeah.
• 32:13
  SPEAKER_00: Uh six companies returned four times the money.
• 32:16
  SPEAKER_00: And within five years, I mean it was the exits were just amazing.
• 32:19
  SPEAKER_00: In a short period of time.
• 32:20
  SPEAKER_00: We're like, oh hey, this works.
• 32:23
  SPEAKER_00: We got our money back before all the capital calls were due.
• 32:27
  SPEAKER_00: I think we got 30% of our money back.
• 32:29
  SPEAKER_00: So basically we're we're we're we're really writing on 70%.
• 32:32
  SPEAKER_00: And the rest 30% is on the house.
• 32:35
  SPEAKER_00: Uh, because we already got the capital back from from these investments, like a PayPal, like a Zappos.
• 32:40
  SPEAKER_00: Yeah.
• 32:40
  SPEAKER_00: Uh and there's another big company called Infoblox when we're in public.
• 32:43
  SPEAKER_00: And there's another company called uh Versatile Opera, I think it was called Versatile that was acquired by uh uh by Vitesse and Vxtel that was acquired by Intel.
• 32:53
  SPEAKER_00: So those five companies, and none of them were mega corns.
• 32:58
  SPEAKER_00: Forget mega corns, they were not even DecoCorns, forget DecoCorns, they were not even any corns, yeah, right?
• 33:02
  SPEAKER_00: Um Zappos was acquired for$980 million, just under a billion.
• 33:07
  SPEAKER_00: VXtel was acquired for$550.
• 33:09
  SPEAKER_00: I think it was uh the uh which the one the Vites pod was bought for$220 million.
• 33:14
  SPEAKER_00: But that was still a great return.
• 33:16
  SPEAKER_00: Because entry price was slow.
• 33:17
  SPEAKER_00: Entry price, you hit it right now.
• 33:21
  SPEAKER_00: Entry price was slow.
• 33:22
  SPEAKER_02: Yeah, today entry prices are almost like a billion dollars in some of these companies.
• 33:25
  SPEAKER_00: And that is concerning.
• 33:28
  SPEAKER_00: The reason it's concerning is that combined with if you believe that we need less people, less employees, the wealth concentration will be only in the handful of people.
• 33:39
  SPEAKER_00: Yeah.
• 33:40
  SPEAKER_00: And in Silicon Valley, I'm I'm afraid, I'm uh afraid is not the right word, concerned.
• 33:46
  SPEAKER_00: I'm concerned that we're gonna be left with the the haves and the have yots.
• 33:53
  SPEAKER_00: So there's no middle class, there's in a in a in a society, you want to have a pyramid that's like this.
• 34:00
  SPEAKER_00: Silicon Valley is slowly, slowly going like this.
• 34:02
  SPEAKER_02: What do you mean by that?
• 34:04
  SPEAKER_00: Meaning you want a certain people, like this, meaning you have want a good chunk of people at the top, uh, a strong, healthy middle class, and you're obviously gonna have people who are um who need help.
• 34:15
  SPEAKER_00: Not trying to go up.
• 34:16
  SPEAKER_00: Who are trying to go up, exactly.
• 34:17
  SPEAKER_00: Who are trying to go up, trying to go from that too.
• 34:20
  SPEAKER_00: What I'm saying is that this is so you have a certain amount here, certain amount here, certain amount here.
• 34:25
  SPEAKER_00: All of a sudden it's gonna be like this, where you have only handful up here, the megacorn megacorn owners, founders, a very small middle class, the people who work for the megacorns.
• 34:36
  SPEAKER_00: And any of the rest of the people who are employees, who are your the barista that uh the that that you got your coffee from today.
• 34:42
  SPEAKER_00: Yeah, right?
• 34:43
  SPEAKER_00: The the the in-and-out burger uh drive-thru uh person you're gonna get um your your lunch from today.
• 34:49
  SPEAKER_00: It's just what are they gonna do?
• 34:52
  SPEAKER_00: And you see that already.
• 34:53
  SPEAKER_00: And you mentioned about wealth creation in the 90s.
• 34:57
  SPEAKER_00: If you made$10 million, you're living at large.
• 35:01
  SPEAKER_00: You can buy a home in Atherton for two million.
• 35:04
  SPEAKER_00: Yeah, home what would be like a million or two million dollars?
• 35:06
  SPEAKER_00: Yeah, yeah, a million and a half.
• 35:07
  SPEAKER_00: In Atherton, a home was a million and half, two million.
• 35:09
  SPEAKER_00: In Los Autos Hills was a million and a half.
• 35:12
  SPEAKER_00: Two of the same home in Los Autos Hills is ten million.
• 35:14
  SPEAKER_00: In Atherton is twenty million, or whatever it is.
• 35:16
  SPEAKER_00: I don't know.
• 35:17
  SPEAKER_00: So with your 10, if you make$10 million today, what are you gonna be able to buy?
• 35:21
  SPEAKER_00: A cottage uh uh 40 miles south of you.
• 35:25
  SPEAKER_00: And then it's interesting also, the wealth dynamics has changed.
• 35:31
  SPEAKER_00: In the good old days, I shouldn't say in the good old days, in the in the olden days, four, thirty years ago, it was when people had gray hair because you want experience.
• 35:39
  SPEAKER_04: Yeah.
• 35:40
  SPEAKER_00: What did Venture was at that time?
• 35:41
  SPEAKER_00: You invested in semiconductors, you invested into networking, you invested into telecom.
• 35:46
  SPEAKER_00: Companies were industries, sorry, industries where you need experience.
• 35:52
  SPEAKER_00: You need to know the distributors, you need to know the customers, you need to know the whole ecosystem.
• 35:57
  SPEAKER_00: Here you start an app, you can distribute it on some channel, and voila, you're big.
• 36:02
  SPEAKER_00: So you so the age group is going lower and lower and lower.
• 36:04
  SPEAKER_00: And I see that where I live.
• 36:07
  SPEAKER_00: Where you live in lots of out of.
• 36:09
  SPEAKER_00: Yeah, so people want to live closer to downtown.
• 36:13
  SPEAKER_00: Yeah.
• 36:13
  SPEAKER_00: And the downtown has become so expensive, or near the downtown.
• 36:17
  SPEAKER_00: Before downtown was okay.
• 36:19
  SPEAKER_00: The hills was more expensive, and now the Los Hotels, now the flats are more expensive.
• 36:22
  SPEAKER_00: Why?
• 36:22
  SPEAKER_00: Because of wealth creation.
• 36:23
  SPEAKER_00: Because if you're 35 years old, you don't want to live in the hills.
• 36:26
  SPEAKER_00: You don't want to live in the hills because you have young kids.
• 36:28
  SPEAKER_03: Yeah.
• 36:28
  SPEAKER_00: You want to go down to uh to the local uh coffee shop, walk away, walking distance, you want to take your kid to eat wherever the local lunch spot is.
• 36:36
  SPEAKER_00: You want to do things which are local.
• 36:37
  SPEAKER_00: So the dynamics have changed quite quite significantly in in this valley.
• 36:44
  SPEAKER_00: And um I traveled the world, and especially in the United States, and it's it's people always ask me, why are you in California?
• 36:52
  SPEAKER_00: I'm like, this is the best place on earth.
• 36:54
  SPEAKER_00: Why not?
• 36:56
  SPEAKER_00: Then I released two people, two sets of folks have have moved out.
• 37:00
  SPEAKER_00: The folks that are just extremely wealthy, I call them the loudmouths, uh, who left for tax reasons, and then the folks who are barely making it.
• 37:11
  SPEAKER_00: And that's what I'm saying, the pyramid.
• 37:14
  SPEAKER_00: The people are also barely making their moving out.
• 37:17
  SPEAKER_00: They're going to Vegas, they're going to Florida, they're going to wherever they're going to.
• 37:21
  SPEAKER_02: Because the cost of living at the cost of living is so high.
• 37:25
  SPEAKER_00: Right?
• 37:25
  SPEAKER_00: I mean, uh in Mountain View, of uh a one-bedroom apartment, 5,000, 7,500?
• 37:32
  SPEAKER_00: A month, not a year.
• 37:34
  SPEAKER_00: It's a month.
• 37:36
  SPEAKER_02: And then you have 40% tax.
• 37:40
  SPEAKER_00: And then you have the wonderful streets and on the road.
• 37:43
  SPEAKER_00: Anyways.
• 37:44
  SPEAKER_02: Yeah.
• 37:44
  SPEAKER_02: Yeah, so you're right.
• 37:46
  SPEAKER_00: It uh uh it is becoming more one-sided.
• 37:49
  SPEAKER_00: It's becoming one sided.
• 37:50
  SPEAKER_00: Uh it's becoming, yeah, it's becoming where uh it's uh a society of the halves, which we need to somehow change.
• 38:00
  SPEAKER_00: And it's not government policy that's gonna change it, that the United the California government is trying to do.
• 38:04
  SPEAKER_02: Yeah.
• 38:06
  SPEAKER_02: But I I think uh overall, because the the larger uh amount venture capital funds raise, let's say ten, ten billion dollars, their incentive is to put let's say half a billion dollar per company.
• 38:18
  SPEAKER_02: Yeah.
• 38:19
  SPEAKER_02: Not put two or five million dollars per company.
• 38:22
  SPEAKER_00: They can't.
• 38:23
  SPEAKER_00: And and that's another reason why they're ceding some of these early stage funds um because for dealful.
• 38:34
  SPEAKER_04: Yeah.
• 38:35
  SPEAKER_00: Right?
• 38:36
  SPEAKER_00: And if I have a manager that leaves me and that I know is a good manager, he or she, and the fund has a tendency to now put money into that manager with the new fund that she or he has.
• 38:49
  SPEAKER_00: We just mentioned uh Connect.
• 38:51
  SPEAKER_03: Yes.
• 38:51
  SPEAKER_00: Uh same thing.
• 38:52
  SPEAKER_00: Two high octane, high growth, high-performing GPs, one from Lightspeed, one from uh CAA, started a new fund um called Connect.
• 39:02
  SPEAKER_00: They raised uh a lot of money, if I'm correct.
• 39:04
  SPEAKER_00: They raised about$250 million in the first close of a$500 million raise, and four VCs have put money into it besides me.
• 39:12
  SPEAKER_00: Uh the Lightspeeds, the general, I'm sorry, the Sequoia, um, I think it was NEA and also CAA.
• 39:19
  SPEAKER_00: So they're putting money into amazing managers that are uh that have decided to start their own shop is because of the deal flow, is because they know the quality of the deals that the person is coming with.
• 39:31
  SPEAKER_00: And if not today, get the deal.
• 39:33
  SPEAKER_00: Okay, let's get it tomorrow.
• 39:34
  SPEAKER_02: Yeah.
• 39:36
  SPEAKER_02: Because their incentive is now more and more to create a$10 billion company.
• 39:40
  SPEAKER_00: So yeah, exactly.
• 39:43
  SPEAKER_00: When you're managing a$200 million fund and you put$10 million at a even at a$50 million pre, it's okay to get acquired for$250 million.
• 39:52
  SPEAKER_00: Yeah.
• 39:53
  SPEAKER_00: Right?
• 39:54
  SPEAKER_00: That but today that's that's you don't want to do that.
• 39:59
  SPEAKER_00: I I have heard even from young entrepreneurs, they they don't even want Deca Corns.
• 40:03
  SPEAKER_00: They want I'm sorry, unicorns, they want Deca Corns.
• 40:05
  SPEAKER_00: Yeah.
• 40:05
  SPEAKER_00: Or megacorns.
• 40:07
  SPEAKER_00: That's what they're aspiring to, which is not a great, I mean it's a great uh it's a great aspiration.
• 40:10
  SPEAKER_00: But guess what?
• 40:11
  SPEAKER_00: Not all those companies will become that.
• 40:12
  SPEAKER_04: Yeah.
• 40:13
  SPEAKER_00: So from investors like me, right?
• 40:16
  SPEAKER_00: If I'm making a six X six X return in a year, hey, let's figure out how we're gonna exit this.
• 40:24
  SPEAKER_02: Yeah.
• 40:25
  SPEAKER_02: So for example, uh today you mentioned that you would be sitting on what 20x plus on anthropic on some of these companies.
• 40:32
  unknown: Yeah.
• 40:33
  SPEAKER_00: Well that's a that's a that's a megacorn.
• 40:34
  SPEAKER_00: I mean, we have to come up with a new term for trillion companies.
• 40:38
  SPEAKER_00: Trillicorn?
• 40:40
  SPEAKER_01: Trillicorn.
• 40:41
  SPEAKER_01: On today we have announced trillicorns.
• 40:45
  SPEAKER_01: Could be.
• 40:46
  SPEAKER_02: Um so uh uh where do you think uh the next one year is going, right?
• 40:52
  SPEAKER_02: Uh there's obviously there's IPO for some of these companies which are speculated.
• 41:00
  SPEAKER_00: I'm very excited.
• 41:02
  SPEAKER_00: Um for a few reasons.
• 41:04
  SPEAKER_00: One reason is that these companies are actually real companies that are generating amazing uh amazing amazing revenue, top line revenue.
• 41:15
  SPEAKER_00: We don't know the bottom line revenue, but it's right now growth, growth, growth.
• 41:20
  SPEAKER_00: Everyone's spending money back into the growth.
• 41:22
  SPEAKER_00: If you don't spend money on the growth, you lose you lose your mover advantage, whatever the first mover or well, your top mover advantage is.
• 41:30
  SPEAKER_00: Uh another reason I'm excited is because those companies, I believe there's going to be a significant amount of exits.
• 41:35
  SPEAKER_00: First exit, at least I saw this year was this.
• 41:38
  SPEAKER_00: That was an amazing exit.
• 41:39
  SPEAKER_00: And I believe that if you if you think entropic.
• 41:42
  SPEAKER_02: And let's say, for example, if you can share on every dollar invested in this, what was the kind of outcome that you saw?
• 41:47
  SPEAKER_02: Like$10,$15,000.
• 41:49
  SPEAKER_00: So uh uh Yeah, so at the first fund uh first first uh check I wrote was a two, it was 16x.
• 41:55
  SPEAKER_00: So as a blended for me was to about 8x, 9x.
• 41:58
  SPEAKER_00: And the second was 88 billion.
• 42:00
  SPEAKER_00: So it was not bad.
• 42:01
  SPEAKER_00: Uh in two years, three years?
• 42:02
  SPEAKER_00: Yes.
• 42:03
  SPEAKER_00: Um I I I'll take that anytime.
• 42:06
  SPEAKER_00: I I will I I will take that rather than 20 years on a on a Reddit or on a Palantir with a 20x return.
• 42:18
  SPEAKER_00: Right?
• 42:19
  SPEAKER_00: But don't forget, Palantir made more money for their investors post-IPO.
• 42:23
  SPEAKER_00: Yes.
• 42:23
  SPEAKER_00: They went IPO at$9.24, they touched$40, went back down to$6, and now it's$130,$340.
• 42:31
  SPEAKER_00: So don't forget also that most of these companies uh they make more money post-IPO than they make pre-IPO.
• 42:38
  SPEAKER_00: Same as Tesla, same as Amazon, same as any company that you look at, any of these unicorns or decacorns or megacorns or whatever, Trillicorns that is out there.
• 42:49
  SPEAKER_00: Um so it's good to invest in the early stage, get your feet wet into this.
• 42:55
  SPEAKER_00: But if you find the right company, Palantir is only one of the many companies that can hit it off the ballpark.
• 43:01
  SPEAKER_00: I can think of Palantir, I can think of Arista, and maybe a handful of more companies, but that's it.
• 43:05
  SPEAKER_00: But there's five times the companies which are out there, ten times which are companies out there that are public that haven't gone anywhere.
• 43:13
  SPEAKER_00: And might not go anywhere.
• 43:15
  SPEAKER_00: I might not go anywhere.
• 43:17
  SPEAKER_00: Yeah, we might not go anywhere, exactly.
• 43:19
  unknown: Yeah.
• 43:20
  SPEAKER_02: And uh what are the things that you see will change, right?
• 43:24
  SPEAKER_02: Like we discussed about what change has happened, but what are your predictions for the changes that you are going to see in venture and in case how these companies behave?
• 43:32
  SPEAKER_00: I I think um the big will get bigger.
• 43:35
  SPEAKER_00: This this momentum is uh is here to stay.
• 43:39
  SPEAKER_00: Um if you just look at light speed, they closed seven and a quarter in 2022.
• 43:44
  SPEAKER_00: They just closed about 10 billion last year.
• 43:47
  SPEAKER_00: Um General Catalyst, they were trying to close, I think, six six billion two years ago in 2014.
• 43:54
  SPEAKER_00: They closed eight billion.
• 43:55
  SPEAKER_00: Actually, today's their AGM, so I'm after this, I'm heading there.
• 43:59
  SPEAKER_00: Um So they might close another 10 billion.
• 44:02
  SPEAKER_00: Okay.
• 44:03
  SPEAKER_00: Also, what's happening is that uh these these venture funds have looked at uh uh a private equity model like a KKR uh uh where they can go potentially public like a Blackstone, like a Black Rock, you know, and become a complete financial institution, not just providing early stage access, but access to the whole venture funds.
• 44:27
  SPEAKER_00: And you see this a little bit because uh many venture have become RIAs.
• 44:32
  SPEAKER_04: Yeah.
• 44:33
  SPEAKER_00: So what the VCs are saying is, hey, I know Mr.
• 44:36
  SPEAKER_00: LP, I know what you're doing, I know what to do with your money better than what you need to do with your money.
• 44:41
  SPEAKER_00: So they're moving up the food stack, yeah.
• 44:44
  SPEAKER_00: And they're building a whole financial uh juggernaut.
• 44:48
  SPEAKER_00: And I this is a I mean, I've not had conversations with people, but I think they're looking to take their companies public um and keep it as a public entity.
• 44:58
  SPEAKER_02: That's why they don't have to raise money.
• 45:01
  SPEAKER_01: Well, they will always have to raise money.
• 45:03
  SPEAKER_01: Money is money, is uh it's a double-edged sword.
• 45:06
  SPEAKER_01: You you have to use it, but at the same time, you have to raise it.
• 45:08
  SPEAKER_00: And even for the funds, and these models, besides the private equity firms, because private equity firms also raise comp uh what do you call it?
• 45:15
  SPEAKER_00: Uh funds, private funds as well, to invest into private.
• 45:18
  SPEAKER_00: Like, I'm just investing into a BlackRock uh growth fund.
• 45:21
  SPEAKER_00: It's a public company, but it's a it's a private fund investing into uh investing into again those later stage high octane companies, which I like to say.
• 45:30
  SPEAKER_00: And um the models have been there.
• 45:34
  SPEAKER_00: This year it was private equity, but I remember the first time I saw this model was uh during the internet boom and bust.
• 45:40
  SPEAKER_00: You had companies like At Ventures, which was a CMGI product, and then you had another company called ICG.
• 45:47
  SPEAKER_00: You probably never heard of it, why?
• 45:48
  SPEAKER_00: Because they're dead.
• 45:50
  SPEAKER_00: They went public.
• 45:51
  SPEAKER_00: I think each of them were worth 100 billion.
• 45:53
  SPEAKER_00: At that time, 100 billion meant a lot, uh, valuation.
• 45:57
  SPEAKER_00: And then during the internet bust, they all busted.
• 46:01
  SPEAKER_00: They have they were a venture fund and they were also um a holding company.
• 46:05
  SPEAKER_00: And the reason the model there is you own more than 51% of the holding company or of the holding company.
• 46:11
  SPEAKER_00: I'm sorry, reverse.
• 46:12
  SPEAKER_00: The holding company invests 51% of the um of the startup or of the baby company when it goes public, then they write those, um, they consolid their their revenues into the holding company.
• 46:24
  SPEAKER_02: So and what the IRR you have means seeing for your family office and red word from these investments?
• 46:33
  SPEAKER_00: So I don't look at IRR.
• 46:34
  SPEAKER_02: Okay, then what do you look at?
• 46:35
  SPEAKER_00: So the reason I don't look at IRR is because it's based on uh uh on time.
• 46:39
  SPEAKER_00: Right?
• 46:40
  SPEAKER_00: Everything is based on time.
• 46:41
  SPEAKER_00: Today, if you invested into Anthropic, luckily, which actually one of two funds actually uh I backed together in were one of the late stage, or sorry, it came in late into the$180 billion valuation for uh for Anthropic.
• 46:56
  SPEAKER_00: I back together in, by the way.
• 46:59
  SPEAKER_00: And um their IRs are like 500, 600%.
• 47:03
  SPEAKER_00: Wow.
• 47:04
  SPEAKER_00: But they just started a year ago.
• 47:06
  SPEAKER_04: Yeah.
• 47:06
  SPEAKER_00: Right?
• 47:07
  SPEAKER_00: When you mark up 20x, 30x, 40x, 50x in in one investment.
• 47:12
  SPEAKER_00: So I don't look at necessary IRRs at the early stage.
• 47:16
  SPEAKER_00: I look at um, well, DPI is a is a far-fetched uh phenomenon that very few VCs have have come to.
• 47:25
  SPEAKER_00: But really the T VPI, but the the quality of the T VPI in terms of what companies are there in those in those calculations to really figure out if they're really.
• 47:38
  SPEAKER_02: You mentioned proprietary deal flow is what you you are looking at.
• 47:40
  SPEAKER_00: And the last thing is proprietary deal flow.
• 47:42
  SPEAKER_00: That's from a from a from a deal perspective.
• 47:44
  SPEAKER_00: But just to conclude on the on the previous point, is that if you have a SpaceX part of the TVPI, if you have an anthropic doing the part of the space, if you have one of these high-performing companies, you feel pretty comfortable on return on capital and making some more some more money.
• 48:03
  SPEAKER_00: Um but coming back to your question, that is leering into what I was saying is what is a proprietary deal flow that the venture fund has that I don't have, and that's the reason I'm willing to give my two in 20 away.
• 48:18
  SPEAKER_00: At the end of the day, the two in 20 is my money.
• 48:20
  SPEAKER_00: Yeah.
• 48:20
  SPEAKER_00: Whatever money I put in.
• 48:21
  SPEAKER_00: Yeah, that's the reason I'm I'm willing to give it away.
• 48:25
  SPEAKER_00: And um these big, bigger, larger funds, the GCs, the lightspeeds, the Kleiners, the Sequoias, they have amazing deal flow.
• 48:33
  SPEAKER_00: Yeah.
• 48:34
  SPEAKER_00: And also another challenge that small LPs like I have, or I small challenges like small uh that I have, is even no matter what check I write.
• 48:46
  SPEAKER_02: A million or a five million.
• 48:48
  SPEAKER_00: Five million, ten million.
• 48:49
  SPEAKER_00: If if I go to Anthropic in the$100 million round, I'm like, hey, I'm writing a$10 million check.
• 48:54
  SPEAKER_01: Can you uh I'm knocking on the CEO's door?
• 48:56
  SPEAKER_01: He's like, We show there's five lines.
• 48:59
  SPEAKER_01: That's the$100 million line, there's already 100 people in it.
• 49:03
  SPEAKER_01: The$50 million line, there's 500 people in it.
• 49:06
  SPEAKER_01: The 10, oh, you want to put 10 million?
• 49:08
  SPEAKER_01: Oh, you have to wait in there's like 20,000 people in there.
• 49:12
  SPEAKER_00: So uh pick a line.
• 49:13
  SPEAKER_00: So that's another reason why these VCs investment works is because I can get a check into them.
• 49:18
  SPEAKER_02: Yeah.
• 49:19
  SPEAKER_02: Like today, all family offices want a piece of anthropic, right?
• 49:22
  SPEAKER_00: Everyone else.
• 49:22
  SPEAKER_00: I mean, I get calls.
• 49:24
  SPEAKER_00: Michelle, can you give me 500 million?
• 49:26
  SPEAKER_00: I'm like, wow, that's a lot of money.
• 49:28
  SPEAKER_00: Can you give me 200 million?
• 49:29
  SPEAKER_00: I'm like, wow, that's a lot of money.
• 49:31
  SPEAKER_00: At a trillion dollar valuation, yes, we want to get in.
• 49:34
  SPEAKER_00: And there's a lot of domestic family offices and also international family offices that are wanting to put in.
• 49:40
  SPEAKER_00: Someone told me that someone put their stake up on Twitter and it was marked up like 4x.
• 49:46
  SPEAKER_01: They had like, I don't know, pick a number,$10 million of anthropic, and the guy and they're they're saying that uh some guy was willing to buy it for 40 million.
• 49:55
  SPEAKER_00: It's just this exuberance is is is is my heart.
• 49:59
  SPEAKER_00: But don't forget, something, I mean, I'm an investor in in anthropic, but um um hot today is not hot tomorrow.
• 50:06
  SPEAKER_00: What was hot yesterday?
• 50:07
  SPEAKER_00: Open AI.
• 50:08
  SPEAKER_00: A few things came out of it, didn't work so well.
• 50:12
  SPEAKER_00: Um but they could come out of it, right?
• 50:14
  SPEAKER_00: I mean, whatever they can come out of.
• 50:15
  SPEAKER_00: In this lawsuit, right before we started this, uh, there was an alert, right, that uh Sam Altman is uh starting his testimony and uh in the Oakland trial.
• 50:25
  SPEAKER_00: So you don't know what's what's what's gonna happen.
• 50:27
  SPEAKER_00: Yeah.
• 50:28
  SPEAKER_00: Uh first I was saying, first mover advantage is not necessarily a winning strategy.
• 50:35
  SPEAKER_02: Yeah, and we don't know, like, because even uh clawed by anthropic is only made by popular by consumers.
• 50:42
  SPEAKER_00: Yeah.
• 50:43
  SPEAKER_02: If consumers suddenly prefer something else over it, then they might displace Anthropic also.
• 50:49
  SPEAKER_00: So you so the strategy is like in any thing.
• 50:52
  SPEAKER_00: They do have um enterprise strategies.
• 50:54
  SPEAKER_02: Yeah, the enterprise revenue is also a result of a lot of developers inside an enterprise jumping from uh let's say other coding platforms to cloud.
• 51:06
  SPEAKER_02: Yeah.
• 51:06
  SPEAKER_02: Right.
• 51:07
  SPEAKER_02: Uh and that's why and this switch happened in six months, right?
• 51:11
  SPEAKER_02: Or or less than six months.
• 51:13
  SPEAKER_02: So what is the guarantee that they will not jump in another six months?
• 51:17
  SPEAKER_00: You you exactly, you don't know.
• 51:19
  SPEAKER_00: Then you have companies like Mistral that's just focusing on uh enterprise, European, but enterprise uh markets and stuff like that.
• 51:26
  SPEAKER_00: But so the this this is the thing I've always said.
• 51:29
  SPEAKER_00: So um technology does not have boundaries.
• 51:31
  SPEAKER_04: Yeah.
• 51:32
  SPEAKER_00: Both physical boundaries, meaning I can sell whatever I sell today to uh you here in Palo Alto, or I can sell someone in Bangalore.
• 51:40
  SPEAKER_00: Same product, same service, same solution.
• 51:42
  SPEAKER_00: I might water it down depending on pricing and all that, but the same solution.
• 51:47
  SPEAKER_00: Also, it's not a first mover advantage.
• 51:51
  SPEAKER_00: You can go into enterprise and switch over into consumer.
• 51:54
  SPEAKER_00: Sure.
• 51:55
  SPEAKER_00: It takes time, but going into enterprise, or going to consumer, you can also switch back into enterprise.
• 52:01
  SPEAKER_00: That is not a competitive advantage necessarily.
• 52:04
  SPEAKER_00: It's your solution, it's your product, and what's makes people buy your product.
• 52:10
  SPEAKER_00: I don't I it's it's the solution itself at the end of the day.
• 52:18
  SPEAKER_00: It's not first to market, it's best to market.
• 52:21
  SPEAKER_00: Right?
• 52:22
  SPEAKER_00: I don't think Apple has been first to market in anything.
• 52:24
  SPEAKER_00: In anything.
• 52:26
  SPEAKER_00: Laptops, I'm sorry, computers, no.
• 52:28
  SPEAKER_00: Laptops, no.
• 52:29
  SPEAKER_00: Um, the little thing, the iPods, no.
• 52:31
  SPEAKER_00: Uh iPhones, no.
• 52:33
  SPEAKER_00: Um, but they're the best.
• 52:35
  SPEAKER_00: Easy to consume, easy to look, easy, easy, easy, easy, easy, easy.
• 52:40
  SPEAKER_00: Yeah.
• 52:40
  SPEAKER_00: Especially on the consumer side.
• 52:42
  SPEAKER_00: And that's what Anthropic is.
• 52:43
  SPEAKER_00: It's made it easy for consumers to search.
• 52:47
  SPEAKER_00: And then I've been asked before, I was like, why is if you look at it, what was the craze before?
• 52:57
  SPEAKER_00: If you remember the craze before was crypto.
• 52:59
  SPEAKER_04: Yeah.
• 53:00
  SPEAKER_00: Right?
• 53:00
  SPEAKER_00: You and I could buy for$1.2 million a digital real estate next to Snoop Dogg on the sandbox.
• 53:07
  SPEAKER_00: For$1.2 million.
• 53:08
  SPEAKER_00: It's like that was cool shit, man.
• 53:10
  SPEAKER_00: That was cool.
• 53:12
  SPEAKER_00: But that's gone.
• 53:14
  SPEAKER_00: I mean, that but the industry is still there.
• 53:16
  SPEAKER_00: Yes.
• 53:17
  SPEAKER_00: I mean, blockchain, uh, Bitcoin is still at$80,000.
• 53:20
  SPEAKER_00: All these other technology or the cryptos are still doing well.
• 53:23
  SPEAKER_00: But it's the new craze.
• 53:25
  SPEAKER_00: It's AI.
• 53:26
  SPEAKER_00: What's going to be the new craze?
• 53:28
  SPEAKER_00: We don't know.
• 53:28
  SPEAKER_04: Yeah.
• 53:29
  SPEAKER_02: So you have a, you know, we talked about the large funds, some of these companies, the megacons or billion dollar companies.
• 53:36
  SPEAKER_02: Trillicons.
• 53:37
  SPEAKER_02: Trillicons.
• 53:38
  SPEAKER_01: Trillicons.
• 53:41
  SPEAKER_02: But who are these funds that will become the light speed of tomorrow?
• 53:44
  SPEAKER_02: Because they'll be generating the alpha or because everything has a cycle, right?
• 53:50
  SPEAKER_00: And you're saying who are the next funds?
• 53:53
  SPEAKER_02: Who are the next funds that will generate returns like light speed?
• 53:55
  SPEAKER_00: Well, hopefully the um the company the funds I've invested into.
• 53:58
  SPEAKER_00: The merging I've invested into.
• 54:00
  SPEAKER_02: But but they're not really emerging.
• 54:01
  SPEAKER_02: They come from it's almost like investing into light speed again because the access light speed is what?
• 54:08
  SPEAKER_02: A collection of 10 GPs.
• 54:10
  SPEAKER_00: Or more now, yeah.
• 54:11
  SPEAKER_02: Or 20 GPs, right?
• 54:12
  SPEAKER_02: So it's like the individuals that are sourcing these companies.
• 54:15
  SPEAKER_02: Yeah.
• 54:16
  SPEAKER_02: So the sourcing then remains the same, right?
• 54:18
  SPEAKER_02: The sourcing doesn't become different.
• 54:21
  SPEAKER_00: So yes and no, when um when someone leaves a large fund, they leave their their sourcing with them, right?
• 54:28
  SPEAKER_00: In terms of not with the fund, they leave the sourcing with them.
• 54:31
  SPEAKER_02: Yeah, the sourcing, individual sourcing comes along with them.
• 54:34
  SPEAKER_02: Yeah, exactly.
• 54:35
  SPEAKER_00: Yeah.
• 54:35
  SPEAKER_00: Yeah.
• 54:36
  SPEAKER_00: So so uh to I don't know if I can take a I'll try to take a stab at your your question.
• 54:41
  SPEAKER_00: Um the funds that have that are the next generation are the ones that are gonna have to be ahead of the curve.
• 54:50
  SPEAKER_04: Yeah.
• 54:51
  SPEAKER_00: Especially where they are at.
• 54:53
  SPEAKER_00: So the bigger funds, they can just because of the muscle power, because muscle power meaning the money that they raised, they can pivot as the industry pivots or as the technology pivots.
• 55:04
  SPEAKER_00: Yeah.
• 55:04
  SPEAKER_00: So for instance, if something, if a fund started just focusing on AI and tomorrow it changes into something.
• 55:16
  SPEAKER_00: I'm sure that's gonna be an industry.
• 55:18
  SPEAKER_00: Um the big companies, the big funds have the dry powder to maneuver around it.
• 55:24
  SPEAKER_00: The small funds perhaps do not.
• 55:26
  SPEAKER_00: I've seen this a lot firsthand also, is if you miss a cycle, the fund is not there.
• 55:31
  SPEAKER_00: Even in a startup or even in a company, even uh if you miss a technology cycle, the company might not be there.
• 55:38
  SPEAKER_00: The fund might not be there.
• 55:39
  SPEAKER_02: Especially You mentioned you're missing one of those cycles and investing in in the funds, right?
• 55:45
  SPEAKER_00: So no, I what I was mentioning was if the fund continuously invests money every year in the in uh um by raising new new money, yeah, I cannot put money continuously over and over again into the same funds if it's a if if the if the cycles are every year.
• 56:05
  SPEAKER_00: Uh I'm when when I started investing, it was five years, plus or minus, more or minus, but then it became three years.
• 56:12
  SPEAKER_00: Now funds are raising in a million, I'm sorry, one to two one to three years.
• 56:16
  SPEAKER_00: Yeah.
• 56:17
  SPEAKER_00: Which is um which is mind-blowing.
• 56:19
  SPEAKER_00: Yes.
• 56:20
  SPEAKER_00: Why is it mind-blowing?
• 56:21
  SPEAKER_00: Is because do you really have that quality of deals that are there on the on the on the pipeline.
• 56:27
  unknown: Yeah.
• 56:27
  SPEAKER_00: And even if you have those quality of deals, those those amazing entrepreneurs are not going to be waiting for you until you raise the money to you, so you put the money in my fund or my company.
• 56:37
  SPEAKER_00: So it's just a this this trickle-down, this circular rotation of money.
• 56:45
  SPEAKER_00: And um, and that's where also Silicon Valley Bank came into play, right?
• 56:49
  SPEAKER_00: Silicon Valley Bank gave a lot of uh lines of credits and debt to GPs when they saw, oh shoot, there's an amazing founder that's there.
• 56:57
  SPEAKER_00: It's gonna take me at least 20 days to get my money from my LPs.
• 57:01
  SPEAKER_00: I gotta write a check right away.
• 57:02
  SPEAKER_00: So let's do a credit line credit.
• 57:04
  SPEAKER_00: They already have the line of credit, they give the money right away, boom, and then they replenish the line of credit with the the capital cost achievement.
• 57:12
  SPEAKER_00: So that's a very just to your original question, I think that's a very tough question to answer, mainly because um I'll answer it differently.
• 57:22
  SPEAKER_00: If a fund is only looking for one vertical industry to go after, an AI, a blockchain, or whatever, that's gonna be very hard just from a risk appetite.
• 57:31
  SPEAKER_00: But if there's a fund that has a horizontal look view and a vertical look view, horizontal meaning different technologies.
• 57:40
  SPEAKER_00: You're doing healthcare, you're doing AI, you're doing whatever.
• 57:43
  SPEAKER_00: And don't forget AI is not, it's a it's it will become a commodity.
• 57:48
  SPEAKER_00: It's a tool.
• 57:50
  SPEAKER_00: Correct?
• 57:51
  SPEAKER_00: So uh this brings me back to a memory where when the first wave of the internet started in the late 1990s.
• 58:00
  SPEAKER_00: Do you remember HTML?
• 58:02
  SPEAKER_00: Yes.
• 58:02
  SPEAKER_00: Anyone who knows how to write a spell HTML got$400 an hour.
• 58:07
  SPEAKER_00: And uh why do they get$400 an hour?
• 58:09
  SPEAKER_00: Because it was the cool thing at that time.
• 58:10
  SPEAKER_00: Yeah, right?
• 58:11
  SPEAKER_00: It was the the deal, it was the the buzz of the year or the buzz of the of that generation.
• 58:16
  SPEAKER_00: And and the it was the buzz because you you're like, hey, I go to a dinner party, like, hey, I make websites.
• 58:21
  SPEAKER_00: Like, oh my god, that's so cool.
• 58:23
  SPEAKER_01: You make websites.
• 58:26
  SPEAKER_01: Then the next dinner party you go to like, wow, you can do e-commerce?
• 58:29
  SPEAKER_00: I can buy stuff on your I can buy diapers on your website?
• 58:31
  SPEAKER_00: Oh, that's so cool.
• 58:33
  SPEAKER_00: So, what I'm trying to tell you is that AI is gonna it's gonna be there for forever.
• 58:37
  SPEAKER_00: Yeah, um, and I always kid around is that uh there are a lot of experts in AI, especially people who know how to spell AI.
• 58:44
  SPEAKER_04: Yeah.
• 58:45
  SPEAKER_00: Because everyone's an expert in AI.
• 58:47
  SPEAKER_00: But don't ask me how to spell artificial intelligence.
• 58:50
  SPEAKER_00: I don't know how to spell artificial.
• 58:51
  SPEAKER_00: Um but uh but but coming back, it's it's from the fund manager perspective, as long as you're ahead of the curve, whatever the curve is, we cannot tell the curve today.
• 59:02
  SPEAKER_00: Uh they will be doable.
• 59:04
  SPEAKER_00: And I'm really hopeless there's some of my managers that I put money into.
• 59:08
  SPEAKER_00: And I think they will be because they already got some amazing managers underneath them.
• 59:12
  SPEAKER_02: So got it.
• 59:17
  SPEAKER_02: And like you are invested in some AI companies, cybersecurity companies, defense tech companies.
• 59:23
  SPEAKER_02: Any other areas that you think like you once once you mentioned roll-up, why don't you tell about it?
• 59:27
  SPEAKER_02: What are these funds doing in the roller company?
• 59:29
  SPEAKER_02: Which one?
• 59:29
  SPEAKER_02: Oh, the roll-up.
• 59:30
  SPEAKER_02: Yeah.
• 59:31
  SPEAKER_00: So what these funds are doing, um, I've invested into two, which I'm actually going through right now, so I can't disclose who, but um it's it's very simple.
• 59:41
  SPEAKER_00: We have been spoiled.
• 59:42
  SPEAKER_00: The whole ecosystem of Silicon Valley has been spoiled because of the unconscionable growth that some of these companies have gone through.
• 59:48
  SPEAKER_00: We mentioned those companies' names from an anthropic to an open AI and whatsoever.
• 59:53
  SPEAKER_00: So the new standard of venture style risk or venture style return has changed drastically, right?
• 59:59
  SPEAKER_00: If I'm not making 55 times my money, even investing at a$20 billion valuation, something's wrong.
• 1:00:06
  unknown: Right?
• 1:00:07
  SPEAKER_00: I mean, this is the new the new mindset.
• 1:00:10
  SPEAKER_00: Before it was, oh my god, how did this happen?
• 1:00:13
  SPEAKER_00: Now it's like I need I need it.
• 1:00:15
  SPEAKER_00: Yeah.
• 1:00:16
  SPEAKER_00: Otherwise, it's a failing company.
• 1:00:18
  SPEAKER_00: So there are companies that are growing traditionally at a 40, maybe 50, maybe even doubling every year, but that's not necessarily now venture star risk.
• 1:00:28
  SPEAKER_00: All the oxygen, oxygen meaning the mindset, the the know-how, the thought leadership, and most importantly the money has gone into the uh companies that are growing extraordinary.
• 1:00:39
  SPEAKER_04: Yeah.
• 1:00:40
  SPEAKER_00: But there's this pool of companies that are there.
• 1:00:45
  SPEAKER_00: I don't know how many there are, I would say at least a hundred that are growing.
• 1:00:51
  SPEAKER_00: That the valuations and maybe not the growth uh projectory, but has reduced.
• 1:00:56
  SPEAKER_04: Yeah.
• 1:00:57
  SPEAKER_00: VCs have put together, uh, and the two funds I've invested into, or I'm putting money into, are are roll-up funds where they're gonna gobble these companies up, merge say a hundred million dollar company, three of them.
• 1:01:11
  SPEAKER_00: Now that's a$300 million company.
• 1:01:13
  SPEAKER_00: Yeah.
• 1:01:13
  SPEAKER_00: Now you're in a better position for growth, in a better position for an exit.
• 1:01:18
  SPEAKER_00: So, and nothing runs without capital.
• 1:01:21
  SPEAKER_00: So, and you can cut the gunk out of it.
• 1:01:24
  SPEAKER_00: So, it's gonna be a pseudo-private equity deal.
• 1:01:27
  SPEAKER_00: And many funds are doing this now, and even smaller funds are doing this.
• 1:01:32
  SPEAKER_00: Right, yeah, and they're focusing on specific areas travel or or or uh software and travel, sure, or AI or or whatever the things, right?
• 1:01:43
  SPEAKER_00: So I think that that is a good move.
• 1:01:46
  SPEAKER_00: That is a good move.
• 1:01:47
  SPEAKER_00: Why?
• 1:01:48
  SPEAKER_00: Because we have seen this, you know, the the way the uh Americans say we have seen this rodeo before, right?
• 1:01:54
  SPEAKER_00: Yeah.
• 1:01:55
  SPEAKER_00: Actually, I never seen a rodeo, so I know I never seen a real rodeo.
• 1:02:00
  SPEAKER_00: Um, but um when the exuberance happened, which is happening right now, yeah, what happens?
• 1:02:06
  SPEAKER_00: The the leaders come to the front, the the followers, consolidation happens.
• 1:02:13
  SPEAKER_00: Or even consolidation happens, the companies will merge.
• 1:02:16
  SPEAKER_00: Or the bigger the the leaders will buy up some of the um some of the companies that aren't at the same level, and the rest will die.
• 1:02:24
  SPEAKER_04: Yeah.
• 1:02:25
  SPEAKER_00: Right?
• 1:02:26
  SPEAKER_00: We are at that stage.
• 1:02:27
  SPEAKER_00: And someone told me some statistics which I couldn't believe.
• 1:02:32
  SPEAKER_00: They were saying that it's already 80% of the companies, of AI companies are already dead.
• 1:02:36
  SPEAKER_00: Because we haven't heard of it.
• 1:02:40
  SPEAKER_00: Because we haven't heard of these companies.
• 1:02:41
  SPEAKER_00: They're already dead.
• 1:02:42
  SPEAKER_00: Everyone heard of the big ones.
• 1:02:43
  SPEAKER_00: Yeah, and we're hopefully investors in the big ones.
• 1:02:46
  SPEAKER_00: So and I think that's a great model in terms of consolidation.
• 1:02:50
  SPEAKER_00: Why?
• 1:02:50
  SPEAKER_00: Because last last point is uh because the exits are near, hopefully.
• 1:02:55
  SPEAKER_00: If you consolidate a bunch of companies together,$100,$100,$100 million companies, now you have three, four hundred million dollar companies and one company where you can potentially exit it and cut the gut out.
• 1:03:05
  SPEAKER_02: And you have seen these many financial cycles, right?
• 1:03:08
  SPEAKER_02: Of exuberance, then fallout, then denial.
• 1:03:15
  SPEAKER_01: Denial is a big one.
• 1:03:16
  SPEAKER_01: No, no, it's gonna go back up.
• 1:03:18
  SPEAKER_01: It's gonna go back up.
• 1:03:19
  SPEAKER_01: Sid, trust me, it's gonna go back up.
• 1:03:22
  SPEAKER_02: What's been your experiences living through three through three two to three financial cycles?
• 1:03:27
  SPEAKER_00: Yeah, I think it's about four cycles, man.
• 1:03:28
  SPEAKER_00: Um I thought I told your audience how old I am, so I think it's four cycles.
• 1:03:32
  SPEAKER_00: Yeah.
• 1:03:33
  SPEAKER_00: Um I think you just gotta be smart.
• 1:03:35
  SPEAKER_00: Take cash off the table.
• 1:03:37
  SPEAKER_00: But the thing is, when is that table?
• 1:03:39
  SPEAKER_02: Yeah, when is that table going to turn?
• 1:03:41
  SPEAKER_00: We don't know.
• 1:03:42
  SPEAKER_00: Um I'm actually slowly taking, at least on my public markets, uh out a little bit because they're at the highest level.
• 1:03:50
  SPEAKER_03: Yeah.
• 1:03:51
  SPEAKER_00: Google's at the highest level, and Nvidia's at the highest level.
• 1:03:55
  SPEAKER_00: Uh AMD went from 150 to 450 in less than a month.
• 1:03:59
  SPEAKER_00: It just mind-blowing.
• 1:04:01
  SPEAKER_00: You have Micron, you have Sandisc.
• 1:04:03
  SPEAKER_00: These were all companies that were struggling two years ago.
• 1:04:07
  SPEAKER_00: Now they're the top of the top of the dream of and and in especially in hardware, uh it's always uh there's a cycle.
• 1:04:16
  SPEAKER_00: And we are at the top of the cycle.
• 1:04:18
  SPEAKER_00: I don't know, maybe it might be still going up.
• 1:04:20
  SPEAKER_00: But in any stock, any company that's growing without justification on fundamentals, I should say.
• 1:04:30
  SPEAKER_00: Not justification.
• 1:04:32
  SPEAKER_00: Without fundamentals, be aware.
• 1:04:34
  SPEAKER_00: I think uh some of the winners are gonna be Google, because Google's vertically integrated.
• 1:04:39
  SPEAKER_00: Yeah, right?
• 1:04:39
  SPEAKER_00: They have the user, they have they have the AI, they have the the they have the back end.
• 1:04:48
  SPEAKER_00: I mean well, well, these other companies some don't have the back end.
• 1:04:53
  SPEAKER_00: Some have the back end, they don't have the front end.
• 1:04:55
  SPEAKER_00: So um but but I think time will tell.
• 1:04:58
  SPEAKER_00: I mean, if if I had a crystal ball, we would be having this in my uh this podcast on my island somewhere next to Richard Branson.
• 1:05:06
  SPEAKER_00: But we're having this in Palo Alto.
• 1:05:08
  SPEAKER_00: Yeah.
• 1:05:08
  SPEAKER_01: Maybe next time.
• 1:05:12
  SPEAKER_02: Thank you so much, Michelle.
• 1:05:13
  SPEAKER_02: Really enjoyed our conversation.
• 1:05:14
  SPEAKER_01: Oh, okay.
• 1:05:15
  SPEAKER_01: Learned a lot from you.
• 1:05:16
  SPEAKER_01: Great, thank you for the invitation.
• 1:05:18
  SPEAKER_02: And I appreciate your candidness.
• 1:05:20
  SPEAKER_02: Okay, good.
• 1:05:22
  SPEAKER_02: Thanks, thank you.
• 1:05:23
  SPEAKER_01: Enjoy it.
• 1:05:24
  SPEAKER_01: Looking forward for it.