Latest / trading places / TP8: Phil Haslett EquityZen 🧘🏻‍♂️ | Goldman Acquires Industry Ventures 💰 | Deel at $17B 🤝

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TP8: Phil Haslett EquityZen 🧘🏻‍♂️ | Goldman Acquires Industry Ventures 💰 | Deel at $17B 🤝 · trading places

• 0:00
  I think it's kind of the case that NVIDIA is kingmaker from an
• 0:03
  AI chip perspective, but Open AI is at least one of two AI
• 0:08
  companies that are kingmakers from a software or AI
• 0:10
  perspective. I think it's a great strategy.
• 0:13
  I don't think it's a great retail investor strategy because
• 0:15
  it requires digging, right? It requires work.
• 0:19
  And then about a year later, Rippling said.
• 0:21
  Hey, we've, we've identified an attempt at corporate espionage
• 0:24
  that we think Deal is responsible for.
• 0:26
  They actually found a spy in their lawsuit, which was filed
• 0:29
  in multiple jurisdictions. Welcome to another edition of
• 0:54
  Trading Places, a very bad VC podcast about the secondary
• 0:58
  market and all things tech and VC.
• 1:01
  My partner Aman Virgie here with me.
• 1:04
  Aman What's been happening in VC and tech news this week?
• 1:07
  Well, looks like we have another busy week of stuff to talk
• 1:09
  about. Dave, why don't we start with
• 1:10
  some of the news items on Open AI?
• 1:12
  We covered them last week and some of the deals have been
• 1:15
  striking with NVIDIA and Oracle. And there were a couple of other
• 1:19
  deals that we can talk about. The new one is 1 with Broadcom
• 1:22
  and they have a deal with AMD as well, so they're definitely in
• 1:25
  deal making mode. All right, let's start with deal
• 1:28
  that was announced maybe a little over a week ago.
• 1:30
  This is the Open IIAMD deal, but it's not.
• 1:34
  What interesting about this deal is it wasn't just a partnership
• 1:37
  announcement, but Open AI is also taking a stake up to a 10%
• 1:42
  stake in AMD. That's kind of unusual, isn't
• 1:45
  it? I mean, it is for a vendor, if
• 1:47
  that's what you think of when you're dealing with a, a chip
• 1:49
  manufacturer. But I remember we talked about
• 1:52
  AMD and NVIDIA last week. And just as a reminder, if I go
• 1:57
  back like 3 years ago, both AMD and Evidia were making between,
• 2:01
  oh, you know, 15 to 20 billion in annual revenue.
• 2:05
  AMD is still around 30 billion in annual revenue and NVIDIA is
• 2:09
  closing on 200 billion. So they've just been AMD has
• 2:13
  just been left behind and the deal diff guarded open AI.
• 2:15
  Now it ties them up with I guess the leading purchaser of GPU.
• 2:19
  So that's, that's a big win. And it's $100 billion in chips
• 2:23
  over the next four years. It's 6 gigawatts, which is
• 2:26
  something on the US. Look, what it would take to
• 2:28
  light up, I don't know, between 4 1/2 and 6,000,000 households.
• 2:31
  So it's a tremendous lot of power that's going to be
• 2:32
  required and obviously GPS to deliver.
• 2:35
  But as you say, the, the, the give, I guess is AMD is giving
• 2:39
  up 10% of their equity plus warrants.
• 2:41
  If the deal scales, they can give up a lot more of their
• 2:44
  equity. So now they've got Open AI
• 2:46
  owning between 10 and up to 20% of the company, So very dilutive
• 2:49
  shareholders. Highly unusual, right?
• 2:52
  A private company is getting a piece of a public company's
• 2:56
  equity upside. That's like almost unheard of,
• 2:59
  right? Yeah, not to borrow a reference
• 3:02
  from Star Trek, but it seems like opening eyes, getting a
• 3:05
  piece of the action here with AMD.
• 3:08
  And. And as you said, AMD may have
• 3:10
  been left in the dust with Nvidia's, you know, amazing
• 3:14
  increase in market cap over the last three years.
• 3:17
  But AMD and Broadcom are still, you know, fairly significant
• 3:20
  players. Really.
• 3:22
  It seems like Open AI is trying to expand their options for who
• 3:26
  their partners are they, they have a huge deal with NVIDIA,
• 3:31
  but they've made these other significant announcements with I
• 3:35
  guess several different companies.
• 3:36
  I'll, I'll summarize. The AMD announcement was for six
• 3:39
  gigawatts, 10 billion. The Broadcom announcement was
• 3:43
  for 10 gigawatts. 50 billion. Yeah, the Vidya announcement was
• 3:46
  10 gigawatts for 100 billion. Yep.
• 3:49
  And the Oracle announcement was for 4 1/2 gigawatts, but 300
• 3:53
  billion. So varying degrees of capacity
• 3:55
  and investment and time frames, but kind of amazing to see a
• 3:58
  private company do this many deals.
• 4:00
  This is just in the last, you know, 3-4 months.
• 4:04
  We're talking about $500 billion worth of deal value, 30
• 4:08
  gigawatts of capacity. That's incredible in size.
• 4:12
  What do you think is unusual or not so unusual about all these
• 4:15
  deals that Open AI is doing? I think 1 unusual facet is that
• 4:19
  they're a kingmaker and they know it.
• 4:21
  So when they can go to AMD and say, hey, give me 10% of your
• 4:23
  equity, which dilutes existing shareholders.
• 4:26
  But my, my back of the envelope math based on this is they've
• 4:29
  essentially doubled AM DS GPU sales in let's say the next five
• 4:34
  years. So I guess, I guess if you just
• 4:36
  do one version of this math and you say, look, if they can add
• 4:38
  15 to $20 billion in revenues to AMDI don't know about the
• 4:42
  margins and how all that, how all that plays out.
• 4:44
  Let's assume it looks like the rest of the business, AMD is
• 4:46
  trading at a 10X revenue multiple.
• 4:48
  They might have added $200 billion to AM DS market cap and
• 4:52
  so AMD today is at 3:50. So taking 10% of that is sort of
• 4:57
  35 billion. So if I can add a couple $100
• 4:59
  billion market cap and and take 35 billion as a quid pro quo I
• 5:03
  get I guess that makes sense for AMD.
• 5:05
  Now the the downside what is also unusual.
• 5:06
  I think if I'm a AMD is like, well, open AI can't really pay
• 5:10
  for this stuff. Like they don't have the cash on
• 5:12
  the balance sheet or they're making 13 billion in revenue.
• 5:15
  How's it coming here if they can pay with it money that they have
• 5:18
  today, But given Sam's Wheeling and dealing, maybe you'd think
• 5:22
  you might be able to come up with that over the next couple
• 5:24
  of years. You're taking that's a chancy
• 5:27
  customer. That's what I would call a risky
• 5:29
  customer. It's a lot to bet on one
• 5:30
  customer who will be now 2/3 of your business and if they can't
• 5:33
  raise the money or Sam can't execute and you've built a lot
• 5:36
  of this capacity that that does strike me as a bet.
• 5:39
  The farm moment now for for AMD, it's I think that is unusual.
• 5:43
  Well, I think the farm we're talking about is AI data
• 5:46
  centers, and that's a pretty big farm.
• 5:48
  I read your point about who's kingmaker here is, is quite
• 5:51
  relevant because normally you would have thought NVIDIA is the
• 5:54
  kingmaker. They're the public company,
• 5:57
  world's most private public company, kind of like the de
• 6:00
  facto, you know, king of AI chips for sure.
• 6:04
  I would say, you know, Broadcom, AMD and others are are distant
• 6:07
  second or thirds compared to NVIDIA in that category.
• 6:10
  Open AI is interestingly A kin maker from AI software
• 6:15
  perspective. Seems seems like it's developing
• 6:17
  into a bit of A2 horse race between Open AI and Anthropic
• 6:21
  and maybe you know, Xai and some other folks have a have a play
• 6:26
  there. But in terms of revenue that's
• 6:28
  being generated right now, I, I think open the eyes in the 12
• 6:32
  thirteen $14 billion revenue category, Anthropics, maybe 567
• 6:37
  billion dollar revenue category. There's maybe a few others doing
• 6:40
  1 billion in revenue, but that most other folks seem to be
• 6:43
  quite distance in terms of the actual revenue that they're
• 6:47
  generating, the amount of usage. So I think it's kind of the case
• 6:51
  that NVIDIA is kingmaker from an AI chip perspective, but Open AI
• 6:57
  is at least one of two pureplay API companies that are
• 7:00
  kingmakers from a software AI perspective.
• 7:03
  Yeah, I think that's right. And they've got the lead and
• 7:06
  that that lead in customers and MA us is also growing and the
• 7:10
  shareholders love it, just like with the others.
• 7:12
  When when they announced a deal with AMD, sheriffs went up by 23
• 7:16
  percent or either between 9 and 22% depending on how you time
• 7:19
  the the move. But those stocks have definitely
• 7:21
  benefited by partnering up with Open AI.
• 7:23
  So why not? What do you think about the
• 7:26
  hosting, that data center hosting companies here?
• 7:29
  The major players there, you know, are Amazon Web Services,
• 7:33
  Microsoft Azure, Google, and then I guess Oracle's maybe a
• 7:37
  distant, you know, four or five in that race.
• 7:40
  But those top three, do they have deal making capability
• 7:43
  here? Are they becoming sort of
• 7:45
  commodities in this world? I think where they are now
• 7:49
  versus the next five years, that answer will be different.
• 7:52
  It just feels like that part of the supply chain will
• 7:54
  commoditize. I, I don't know if I think of
• 7:57
  other industries like semiconductors in the, in the
• 7:59
  80s, nineties and 2000s. Eventually that stuff became
• 8:03
  pretty commodity. And there was a, there was a, a
• 8:05
  moment when they were when they had enough of a niche or enough
• 8:08
  of a market to command value, but that didn't last more than a
• 8:11
  couple years. I don't.
• 8:12
  I don't really know why GPUs can be different over the next five
• 8:16
  years, but then a lot can happen over five years.
• 8:18
  That's where the game's being played right now is the next
• 8:20
  three to five years. I guess I've also heard that the
• 8:23
  constraints for power capacity or factory on everybody's radar
• 8:27
  now. So it's, it's not just the fact
• 8:29
  that NVIDIA has an angle on chips and that open AI has a an
• 8:34
  angle on software. It's also who has the power
• 8:37
  capacity to sort of build this all out.
• 8:39
  And there's some people who think that China actually has a
• 8:43
  a lead over the US, over all US players because of the potential
• 8:47
  for energy capacity. Is that something that plays
• 8:50
  into this, you know, sort of race as well?
• 8:52
  Yeah, absolutely. That's the limiter and that's
• 8:54
  the constraint over the near term.
• 8:55
  When we start talking about the power required for, let's take
• 8:59
  that the most recent deal, the Broadcom deal to be looking at
• 9:02
  10 gigawatts, that's like to light up 10 million to 12
• 9:05
  million households. That's like a couple of Hoover
• 9:07
  dams. That's like four or five nuclear
• 9:09
  power plants. And we don't we don't have those
• 9:11
  things right now. So I know the new
• 9:13
  administration's moving in that direction, but these are multi
• 9:15
  year bets as well. And and it's not just the USI
• 9:18
  guess it's the US and its allies.
• 9:19
  We have to find that kind of power.
• 9:21
  So I think all that does become a major rate limit or two.
• 9:24
  I mean, these deals are announced over 345 years for a
• 9:28
  reason, can't just turn on that much capacity in the next 12
• 9:32
  months. So it'll be interesting to see,
• 9:34
  you know, how that plays out and whether China has an advantage
• 9:37
  in power and chips and other software kind of remains we've
• 9:40
  seen. But I think, you know, we do
• 9:42
  have to start looking at all different factors of how this
• 9:44
  growth happens. What else is happening in the
• 10:03
  market at the moment? The Goldman acquisition of
• 10:07
  Industry Ventures. For those of us who are in the
• 10:09
  secondary market, this was a big deal.
• 10:11
  Goldman announced the acquisition of Industry Ventures
• 10:15
  for almost a billion dollars. Maybe lost a little bit in that
• 10:18
  shuffle was the fact that Goldman had bought a minority
• 10:20
  interest in Industry Ventures way back in 2019.
• 10:23
  But maybe also for comparison, Stepstone acquired a company
• 10:27
  called Greenspring Associates, which was the probably one of
• 10:30
  the top 2 VC secondary firms. Stepstone and Industry were sort
• 10:34
  of largely acknowledges the two big buyers of Venture Secondary.
• 10:38
  So is this a big deal? Goldman Sachs coming in to
• 10:41
  acquire the rest of Industry Ventures for a billion bucks?
• 10:45
  Yeah, I think so. It certainly is from in the
• 10:47
  secondary space. Industry's been a leader for a
• 10:50
  long time. I think what's notable about
• 10:52
  this one is it's the industry has what 7 or maybe $8 billion
• 10:57
  in AOM, So the acquisition price about 10% of AOM, which is this
• 11:03
  is a reminder on how we make money as firms.
• 11:05
  There's management fees and carry.
• 11:06
  If you're clipping 2 to 3% in annual management fees, I don't
• 11:11
  know exactly what industries profile looks like, but that's
• 11:13
  probably something like that revenue stream.
• 11:16
  And then they have carry to be able to monetize it at 10% of
• 11:19
  that. AOM is, is pretty generous and
• 11:22
  they're, they're a great firm and have been around for a long
• 11:24
  time and have established a, a long track record of
• 11:27
  investments. And maybe that carry is worth a
• 11:29
  lot. But I think it's a win for if
• 11:31
  I'm a Goldman client, that's a win for me 'cause I think the
• 11:33
  ability to invest in now whatever Goldman is offering in
• 11:36
  the private markets plus industry venture portfolio,
• 11:39
  maybe portfolio investments or funds is probably attractive.
• 11:42
  And I think Goldman gets access to, to companies that are now
• 11:45
  potentially on the IPO track as well.
• 11:48
  So it's probably a win for Goldman and it went for the
• 11:51
  clients. I wonder, Dave, do you have any
• 11:53
  insight as to why industry is willing to sell?
• 11:56
  You know Hans a little bit. Why does he want to sell other
• 11:59
  than it's, it's, you know, this, everyone's got a price.
• 12:02
  Yeah, I've, I've met Hans in the past.
• 12:03
  We had a few interactions with Industry Ventures when I was at
• 12:06
  500 Startups and I, I know a few other folks over at Industry
• 12:11
  Ventures as well. Open had a minority interest in
• 12:14
  Industry Ventures that was made back in 2019.
• 12:17
  I think they bought roughly 20% of the company.
• 12:19
  So it had already been notable that Goldman wanted to sort of a
• 12:24
  piece of the action again here in the secondary market.
• 12:29
  The other thing that I think happened back in 2021 was step
• 12:32
  zone buying Greenspring and again this was maybe a similar
• 12:36
  sort of storyline. I think the deal value there was
• 12:40
  about 185 million in cash, 540 in stock and earn out of
• 12:43
  75,000,000. So again, maybe around a billion
• 12:46
  dollars in total value for this deal.
• 12:48
  And I think what's kind of been happening, you know, with those
• 12:51
  times, 2019 and 2021, there's certainly a ton of secondary
• 12:55
  market activity. This was still when, you know,
• 12:57
  we were in that Zerp era venture go, go, go, and then we kind of
• 13:01
  had the crash in the last three years in value.
• 13:03
  But now maybe things are starting to accelerate again
• 13:06
  with all these AI deals and secondary market investment.
• 13:09
  So I think it recognition is again that venture is becoming a
• 13:14
  larger and larger asset class, but also that public market
• 13:19
  activity really is requiring a certain size of company to be,
• 13:23
  you know, 4500 million in revenue or larger.
• 13:26
  And there's a ton of these private companies that are a
• 13:30
  couple trillion in value, maybe even 3 or 4 trillion in value
• 13:33
  that are gonna be illiquid in private companies for, you know,
• 13:36
  5 to 10 years. And probably I think that's
• 13:39
  what's going on here is Wall Street is recognizing, hey, if
• 13:41
  we wanna get in on this action, you know, we really need to be
• 13:45
  having more visibility and understanding what's going on in
• 13:48
  the private markets before these companies go public.
• 13:50
  And you cooperate with us, and maybe we'll cut you in for a
• 13:53
  piece of the action. That's the acquisition of Green
• 13:56
  Spring by Step Stone, the acquisition of Industry Ventures
• 13:59
  by, by Goldman. I, I wonder if there's more
• 14:03
  secondary, you know, activity acquisitions that are waiting in
• 14:08
  the wings now that these two big deals have happened in the last
• 14:10
  three 4-5 years. I bet other investment banks
• 14:13
  see, see the benefit that you're talking about, like if I can get
• 14:15
  into companies a little bit earlier and I can also
• 14:19
  facilitate secondary market transactions and, and also make
• 14:23
  money off of that being an intermediary.
• 14:25
  Plus my clients, my private wealth clients get a chance to
• 14:27
  now invest in some of these companies like, you know, like
• 14:30
  Stripe and Canva and some of the ones we've talked about SpaceX
• 14:34
  and and Byte dance. That's that's good for your
• 14:36
  clients too. I think I bet the investment
• 14:38
  banks are all allowed looking for these types of tie UPS as
• 14:40
  well. I think these top ten 2030
• 14:43
  companies, you know, the Magnificent 7 in the private
• 14:46
  market are probably where the majority of that activity is
• 14:50
  happening. But at the same time, I feel
• 14:52
  like there's another, you know, 102 hundred, 300 companies that
• 14:56
  are maybe aren't on everybody's radar that are still big
• 14:59
  companies and, you know, collectively speaking again,
• 15:01
  might be a trillion or $2 trillion in market value.
• 15:06
  Any idea what the other top secondary firms out there that
• 15:08
  might be on the of a Morgan Stanley or a Citi deck or
• 15:11
  someone like that? I think it's a short list.
• 15:14
  There aren't like, you know, 100 other secondary firms out there
• 15:17
  that are of scale. I would say in fact, there's a
• 15:20
  few in New York and a few out here in Silicon Valley probably.
• 15:24
  You know, the ones that I would think are maybe notable, Klein
• 15:27
  Hill, which recently did a partnership with Sundana Capital
• 15:32
  for buying secondary 137 Ventures, which is run by our
• 15:37
  former colleague Justin Fisher and Wolfson think they have a
• 15:41
  couple billion dollars under management.
• 15:43
  There's a few others that I think are, you know, coming
• 15:45
  maybe from the private equity buyouts secondary markets out of
• 15:49
  New York and maybe London. But still it's a short list of
• 15:53
  folks that have more than a couple billion under management
• 15:55
  in VC secondary. There's certainly not more than
• 15:59
  10 firms out there that have that sort of expertise and that
• 16:03
  size and scale of capital. Definitely seems like more
• 16:06
  people on Wall Street are paying attention to venture capital,
• 16:08
  more people are paying attention to the secondaries.
• 16:11
  You want to know what time I woke up this morning.
• 16:13
  What time? Around 6:00, 7.
• 16:19
  Not too much on the IPO market this week, but one sort of
• 16:22
  notable deal was the XO insurance tech IPO public
• 16:27
  filing. I think there's going to.
• 16:28
  Be a couple of interesting IP OS coming up.
• 16:30
  The one that you mentioned is interesting because it's a
• 16:34
  insurance technology company. They are only about 108 million
• 16:38
  in LTM revenue. They mostly generate revenue
• 16:41
  from software sales and they're automating the stuff that
• 16:44
  insurance companies have to do a lot of the underwriting, the
• 16:47
  premium management and stuff like that.
• 16:49
  Their metrics are outstanding. So they're growing at 78% year
• 16:52
  over year. They're very profitable, which
• 16:55
  were a software insurance tech company, I think is a is a
• 16:58
  really good sign that's it's usually a bad sign when you're
• 17:01
  in the business of insurance and trying to make that up in
• 17:03
  volume. That's, that's probably not what
• 17:05
  that's funny here. But for a software company
• 17:07
  focused on the space making 40% margins is great and then
• 17:11
  growing at 80% year over year is, is also great.
• 17:14
  It looks like they're expecting a $2 billion evaluation, so
• 17:16
  about 20 times sales. But the fact that they can get
• 17:19
  out in this market or seem to be willing to brave the market and
• 17:23
  they're only 108 million in revenue and the median revenue
• 17:26
  for an IP Obel company this year, something north of 600
• 17:29
  billion right now. It was it was 831 a couple of
• 17:31
  weeks ago and we talked about it last.
• 17:33
  I think it's beginning to move, you know, edge down a little
• 17:36
  bit, but that's a good sign. I think it's a sign of
• 17:38
  normalization in in Q4, which is nice.
• 17:42
  The other IPO is what we're looking at.
• 17:44
  Neon is another SAS company that's a bit more down the
• 17:46
  middle throwing, you know, 30% year over year 600 million
• 17:49
  revenue. That's exactly where the market
• 17:51
  seems to want stuff right now, trading at 10 times sales.
• 17:54
  And then a fintech company called Bit Go, which is like a
• 17:56
  competitor to Coinbase, they do custodial stuff, a little bit
• 18:00
  more institutional than than Coinbase, but they do custody
• 18:05
  for crypto and that's another company that is expected to go
• 18:07
  out in the next couple of weeks. Well, I think that even though
• 18:10
  this is a company with less than 200 million in revenue, those
• 18:14
  80% you know, year over year growth rates and profitability
• 18:17
  and large margins I think are maybe unusual factors.
• 18:20
  I I would still say we're not likely to see a ton of companies
• 18:24
  doing less than 4 or 500 million in revenue unless growth is
• 18:26
  fantastic or profitability is fantastic.
• 18:29
  I think that's correct. Well, let's look at a.
• 18:31
  Couple of larger later stage private companies.
• 18:34
  Another AI company that's been rumored to be raising money
• 18:38
  right now is a company called Any Sphere.
• 18:39
  They produce the cursor coding platform cursor maker Any
• 18:43
  Spheres in talks to raise a billion dollars at a $27 billion
• 18:47
  valuation. Potential investors here are
• 18:51
  noted as CO2 and Excel. Excel has also been a backer of
• 18:56
  the Swedish coding platform Lovable, which may be a
• 18:59
  competitor to Any Sphere. Both are.
• 19:01
  Coding assistants. So Excel has made several bets
• 19:05
  in that in that space. That's quite a that's very
• 19:08
  that's a very rich evaluation. 27 billion.
• 19:10
  I don't I don't have much insight into I haven't really
• 19:12
  heard of this company before or seen how they work, but that
• 19:15
  seems like a huge valuation for them.
• 19:17
  I don't know if we. Have information on what any
• 19:19
  spheres revenue is? They haven't, really.
• 19:23
  Reported anything clear, but they're estimating as of June
• 19:25
  2025 to be over 500 million, but that is a recent data point.
• 19:29
  Last I heard about them, they were 100 million ARR in January
• 19:32
  of 2025. So they have made a lot of
• 19:35
  progress. And if they are indeed at 500
• 19:38
  million as of as of June of 2025, that means that they're
• 19:41
  growing at about, you know, five times every year they're doing
• 19:44
  5. 100 million in revenue, that's, you know, maybe 40-50
• 19:48
  times revenue, yeah. That's.
• 19:51
  Really the same name as like, you know, anthropic open AI sort
• 19:55
  of numbers, right? Yep.
• 19:57
  I guess that's right. If that's on the order of 400%
• 19:59
  year over year, that's that's anthropic ish in terms of the
• 20:02
  revenue growth. So I guess that puts them into
• 20:04
  that elite company. All right, one last.
• 20:07
  Primary round, which we're going to talk about here, which is a
• 20:10
  little crazy, but a company called Tembro, which is I guess
• 20:15
  a blockchain based payment platform is raising $500 million
• 20:19
  at a $5 billion valuation for a Series A Oh, good for.
• 20:23
  Them the 500. $1,000,000 Series A at a $5 billion valuation.
• 20:29
  This is led by, you know, Josh Kirchner's firm Thrive Capital
• 20:32
  and Green Oaks, But you know, there's also investment coming
• 20:36
  from Sequoia and Rivet Capital and Ron Conway's SV Angel.
• 20:42
  I guess Stripe and Paradigm are involved but not putting money
• 20:45
  in. But the Stripe is, you know,
• 20:47
  obviously a global payments giants and they've entered into
• 20:51
  a new partnership with Paradigm for producing, I guess, some
• 20:54
  kind of, you know, platform for crypto companies to be doing
• 20:58
  payments. Certainly sounds like, you know,
• 21:00
  crypto blockchain stable coins are now finding a new leg up
• 21:04
  from more traditional investors, not just crypto investors it
• 21:08
  doesn't sound like. Stripe is putting money in.
• 21:10
  I think it's actually a spin out from Stripe and Paradigm.
• 21:13
  It was, I guess it was incubated there really.
• 21:16
  So it's it's coming out of those companies.
• 21:19
  And yes, I said the investors include some A+ fintech
• 21:21
  investors between Sequoia Capital and I had the the honor
• 21:26
  of being on a company where Rabbit Capital and Nikki Malka
• 21:29
  was on our board. Those are those are very
• 21:31
  sophisticated investors. They know what they're doing.
• 21:33
  Tempo it does seem like a huge valuation for a series AI guess
• 21:38
  they've raised money before, but presumably that would have come
• 21:40
  from Stripe or maybe the collisons and some, you know,
• 21:43
  some people close to the incubation project.
• 21:46
  I think a very novel concept or one of the unique ones.
• 21:48
  It's a Ethereum compatible layer one network.
• 21:52
  And so if as long as it has the ability to scale for you know
• 21:55
  what stripes someone like Stripe is going to be very focused on
• 21:58
  like very high intensity, high frequency, high throughput
• 22:00
  payments and settlements. And if it can, if that, if it is
• 22:03
  a quality technology coming out of those guys, I guess that
• 22:06
  valuation, you know, kind of yeah, I guess it's justified,
• 22:09
  but that seems like a lot for a series AI think.
• 22:12
  It seems like we're seeing more validation of the stablecoin
• 22:17
  platform at the very least being a big story.
• 22:20
  And, you know, if the payments company like Stripe is kind of
• 22:23
  putting their stamp behind this on your hat in the ring.
• 22:26
  If, as it were, I think Patrick Hollinson's been writing a
• 22:29
  little bit about the stablecoin industry, and that's been
• 22:33
  dominated, you know, historically now by Tether and
• 22:36
  Circle. But there's some recent
• 22:38
  commentary about those two companies making a lot of money
• 22:40
  off the float. And I think Patrick Collison was
• 22:43
  starting to reference the fact that, you know, those that float
• 22:46
  has to be shared back with the customers in order for them to
• 22:49
  remain competitive. And there was some speculation
• 22:52
  that maybe the market isn't dominated as much by those two
• 22:55
  companies in the future, particularly as other folks like
• 22:58
  Stripe decide to jump in. That makes a.
• 23:01
  Lot of sense to me. I'd be very surprised if
• 23:03
  something like stable coins only had two, two or three long term
• 23:07
  leaders that market. It just seems like the barriers
• 23:09
  to entry and how that should work shouldn't shouldn't mean
• 23:11
  that there are that those kinds of economics can accrue only two
• 23:14
  or three players. It seems like it's going to be a
• 23:16
  lot more competitive in the future.
• 23:18
  Well, certainly this company jumping in immediately with a
• 23:22
  $500 million investment and a $5 billion valuation is kind of a
• 23:26
  shot across the bow. I guess we'll see if there's
• 23:29
  more news coming in the stable coin and blockchain payment
• 23:33
  space in the future. All right folks, welcome to
• 23:45
  another episode of Trading Places, a very bad podcast about
• 23:50
  VC secondary. Today we have with us Phil
• 23:52
  Haslett, one of the Co founders and Chief Strategy Officer at
• 23:55
  Equities End. Welcome to the show, Phil.
• 23:58
  Thanks for joining us. Thanks for.
• 24:00
  Having me, I'm very excited along with Phil.
• 24:02
  We have my partner in crime, Aman, Professor Virgie, Harvard
• 24:07
  and Stanford Reject, who's working on a book about
• 24:10
  financial collapses, and he's my very hair suit partner.
• 24:15
  I, I am the very bald partner. If you're looking at my left
• 24:19
  eye, I just got out of a meeting beating up one of my
• 24:21
  competitors. You should have seen the other
• 24:23
  guy. Perhaps the black eye will add
• 24:25
  to our views for this podcast. Phil Tougher.
• 24:31
  We are certainly tougher. We're ready to rock and rumble,
• 24:34
  Rock'n'roll here. Phil, could you tell us a little
• 24:37
  bit about your journey to Equizen, where you grew up?
• 24:41
  What's your what's your passions?
• 24:43
  How did you get to this stage of your career?
• 24:46
  Born in the Bay Area so maybe it was kind of in my blood.
• 24:48
  From Los Gatos but then ended up living in Tokyo and Singapore
• 24:52
  until college. Went into finance.
• 24:55
  Ended up on a prop trading desk within a big bank called
• 24:58
  Barclays. Thought it was really fun.
• 25:01
  Thought it was really cool. Money wasn't bad.
• 25:03
  Was living in New York and then after about 3 or 4 years really
• 25:09
  got disinterested. Kind of lost passion for it.
• 25:12
  If I ever had passion, I guess it's pretty.
• 25:14
  Too much boring stuff on Wall Street?
• 25:17
  Yep. Exactly.
• 25:19
  But what? Was the type and you were on
• 25:21
  Wall Street? What years?
• 25:22
  Well, I. Interned at Lehman Brothers in
• 25:24
  2008, the summer of 2008, which actually was very exciting.
• 25:29
  And then and then I was told I got a job and it was, which was
• 25:33
  in August of 2008. And then in September or
• 25:35
  October, I think the company went under.
• 25:37
  And so I applied for the Peace Corps because I was very nervous
• 25:40
  about what was going to happen to me next.
• 25:42
  And then fortunately, out of nowhere, I got a letter from
• 25:45
  Barclays, who basically bought Lehman and said, hey, Willie,
• 25:47
  find your name on some e-mail distro you interned here.
• 25:51
  Do do you want a job this summer?
• 25:53
  And I thought that would probably be a good idea to, to
• 25:55
  have a job. So I took it, but didn't know
• 25:58
  what I was going to land on. And I ended up in a, you know,
• 26:00
  pretty cool, pretty cool group within Barclays trading a lot of
• 26:03
  really illiquid asset classes, which didn't know it would be
• 26:09
  helpful until 2013 when I was fed up and looking around for
• 26:12
  what was going on. Crowdfunding was kind of just
• 26:14
  starting to come and Vogue Angel list was a thing and I
• 26:19
  reconnected with Atish and he's my Co founder.
• 26:23
  And the funny story is 1 friend introduced us about what a
• 26:28
  teacher's working on and like completely botched the pitch.
• 26:31
  They're like he's doing something with secondaries and
• 26:33
  VCs and and crowdfunding. I was like, wow, that's sounds
• 26:37
  like a horrible idea. And then another friend who is
• 26:40
  much smarter said, you know, you know a lot about illiquid
• 26:43
  markets, secondaries in the venture backed, you know, space
• 26:48
  are actually a big problem. Here's how I think about it.
• 26:50
  Atisha's building is starting this business.
• 26:53
  I was like, oh, that's actually really interesting.
• 26:54
  So met up with the Tish met up with tree who's at their Co
• 26:57
  founder of time made a lot of sense.
• 26:59
  And I was like, I know nothing about the venture capital space
• 27:03
  like 0, but I do know a lot about a liquid market
• 27:05
  structuring and then solving problems on liquidity.
• 27:08
  So maybe helping to build out kind of the infrastructure for
• 27:10
  it would be would be fun. And so that's kind of how I got
• 27:13
  into equities. And that was, we started it in
• 27:16
  May of 2013. We were accepted into the
• 27:20
  esteemed 500 Startups accelerator and that was
• 27:25
  probably October 2013. I lived in my grandparents
• 27:29
  basement in Sunnyvale for about four months.
• 27:32
  They're very kind of me. They put out food each day and
• 27:36
  been going ever since. So that's what, 12 1/2 years?
• 27:39
  Wow. Quite the story there.
• 27:40
  Yeah, I don't remember exactly the Demo Day experience, but I
• 27:44
  probably put you through pitch prep at least a few times.
• 27:48
  Oh, you did. You eviscerated.
• 27:50
  Atish it was enjoyable for me to watch as the Co founder I was
• 27:53
  you know, sometimes you're like man, I want the spotlight.
• 27:55
  This time I was like, yeah, no, this is a good spot over here.
• 27:59
  I'm good. Well, I think for those who are
• 28:03
  not familiar, I was somewhat notorious for trying to make it
• 28:08
  as uncomfortable as possible for people pitching so that they
• 28:11
  would get familiar with that environment.
• 28:13
  And I valuable insight for sure for yelling at people, throwing
• 28:18
  balls and objects at them, you know, from the back of the room,
• 28:22
  going louder and all kinds of crap like that.
• 28:27
  And I think you guys seem to have survived and you guys did
• 28:29
  pretty well. I remember I think Tim Draper
• 28:34
  was also an investor pretty soon after you guys got out of the.
• 28:39
  Yeah, so Tim, Tim Draper, Draper Associates ended up leading our
• 28:44
  Series B, our massive Series B of $3,000,000 and.
• 28:49
  I want to say. 20 Feb 2016 Yeah, OK, maybe it.
• 28:53
  Wasn't right after, I guess there's probably a couple years
• 28:55
  after, but I think it's set the. Stage for it, right?
• 28:57
  Yeah, I know you. Had raised a little bit of money
• 28:59
  when you were at 500, but you know when was kind of what was
• 29:03
  the progression from like getting the business started
• 29:06
  going through 500, raising seed and Series A etcetera.
• 29:10
  Yeah, raised a tiny bit of money right when we got started.
• 29:13
  People just like the idea. Honestly, a lot of Angel
• 29:15
  investors that were like, oh, yeah, I've had a position for
• 29:18
  nine years. It sucks.
• 29:19
  Like it'd be great if somebody solved this.
• 29:22
  It was. A problem 10 years ago not not
• 29:24
  was. Yeah.
• 29:25
  You know what I think is it's been a problem, but maybe you
• 29:29
  kind of just accepted it before, right.
• 29:31
  And then as the whole market cap kind of a venture, companies got
• 29:35
  bigger, became a bigger problem and it became a longer problem.
• 29:39
  So we raised some money. And then we raised, you know, we
• 29:41
  got Demo Day and that kind of kicked things off and we had
• 29:44
  some money to kind of keep going, make our first hires that
• 29:46
  kind of got us into 2014, 2015 wanted to go a little bit bigger
• 29:51
  to raise that massive, you know, $3,000,000 round.
• 29:54
  And that was probably because it was beyond just having kind of a
• 29:57
  website and a lot of customer calls and a little bit of tech,
• 29:59
  but actually like some what what I would consider product market
• 30:02
  fate, which is, you know, clients are coming back.
• 30:04
  We're getting investments done. We're kind of cracking this nut
• 30:08
  on the kind of building the tech infrastructure around these
• 30:13
  things. So rather than, you know,
• 30:15
  brokering trades like 1 to 1, you know, call a person here,
• 30:18
  call a person there, which is actually like a perfectly good
• 30:20
  business in our space. It's just not scalable.
• 30:22
  We were able to kind of build the actual like infrastructure
• 30:25
  so that you could take $10,000, check writers, you could help,
• 30:28
  $150,000 sellers. And we thought we could scale
• 30:31
  it. And if we could scale it, we're
• 30:33
  going to need some money. That was kind of the idea.
• 30:36
  So, Phil I. Just want to make sure that we
• 30:38
  covered who you guys actually see as your primary customers or
• 30:42
  maybe if you can give us the range of customers that you guys
• 30:45
  deal with between, you know, individuals, family offices,
• 30:48
  institutional. How much of each of those is
• 30:51
  your, you know, target customers and what's the main focus for
• 30:54
  you guys? Yeah, so.
• 30:56
  On the investor side, I'd say the biggest audience is kind of
• 30:59
  your high net worth investor, A2 legged individual and don't
• 31:03
  think of kind of like your ultra ultra high net worth investor,
• 31:07
  but more of the person that has three to $10 million in net
• 31:11
  worth that's looking to make investments in the private
• 31:13
  space. So what?
• 31:14
  Size check for those people who are kind of in the one to 10
• 31:17
  million net worth range, are you typically seeing?
• 31:20
  I think average these days is like 35 grand minimum is 5 to
• 31:25
  10. But then, you know, if somebody
• 31:27
  has conviction, like you'll see stuff go all the way up to
• 31:30
  quarter million, $1,000,000 at a time and.
• 31:32
  Then where I guess the family office crowd, is that another,
• 31:37
  you know, customer segment? Do you guys cover?
• 31:39
  Yeah, always hard to. Define is really a family
• 31:41
  office, but yes, we cover them. Yeah, as you know, right, each
• 31:45
  family office is a little bit different.
• 31:46
  Some of them are just a person, some of them are Michael Dell's
• 31:50
  family office that's very institutionalized.
• 31:52
  It's hard to build and perfect a distribution strategy to family
• 31:56
  offices. We found.
• 31:57
  Having said that, we've organically kind of built that
• 31:59
  up. They typically write larger
• 32:00
  checks, a little bit slower to move.
• 32:04
  And then beyond that Ras, right. So we we work with independent
• 32:09
  Ras that want exposure to the space.
• 32:12
  And on the institutional side, we also do work with tech Maries
• 32:14
  funds, VC firms looking to build out a position, VC firms looking
• 32:18
  to liquidate an old position. Yeah, I don't really see much in
• 32:22
  like the fast moving money like we used to see a lot more like
• 32:26
  hedge fund investors IN20151617. I feel like that kind of like
• 32:29
  came and went crossover funds though still pop up so I guess.
• 32:33
  Between that, you know, sort of small, medium, large group of
• 32:37
  investors, which I assume is large, medium, small in size.
• 32:42
  In the reverse, what's kind of the focus for you guys in terms
• 32:47
  of your typical customer? Yeah.
• 32:49
  I think it is a little barbelled.
• 32:50
  So we have a sales team of 10 people here, but most of them
• 32:55
  are focused on the retail side, right, Like 7 of them.
• 32:57
  And then two or three of us, like myself included, will spend
• 33:00
  a bit more time on the institutional side.
• 33:03
  And actually an area of focus that we're using that benefits
• 33:07
  kind of all the clients is a bit more on Co investment
• 33:09
  opportunities. Kind of just learned over time
• 33:11
  that of course, like equities ends core was to find sellers of
• 33:17
  shares that were existing shareholders, right secondary
• 33:19
  direct secondaries. But for some of the, you know,
• 33:21
  hardest access names like Co investment opportunities are
• 33:23
  actually like a great solution because ultimately you're 2
• 33:28
  legged individual that wants to put in a. 150 grand.
• 33:31
  Or 200 grand into Anthropic or Mistral or whatever.
• 33:36
  They don't really care if you source it via a direct
• 33:38
  secondary, whether you got it at by accessing the primary.
• 33:42
  And honestly, there's not much concern if you're going to do it
• 33:45
  through another layer, right through another managers called
• 33:47
  investment vehicle. Ultimately they'll care about
• 33:49
  fees. But we found that that the Co
• 33:52
  investment opportunity is something that we can be a
• 33:54
  really good partner for, for those GPS, right to kind of fill
• 33:57
  out those opportunities, but sounds like for most.
• 33:59
  Of those folks, the idea is really about access, you know,
• 34:02
  so they can get into what they consider to be, you know, top
• 34:06
  companies, maybe the hot top 2030 companies.
• 34:10
  I guess that that's an interesting, you know, sort of
• 34:12
  perspective that we've been coming across with most
• 34:15
  recently. It seems like the market is very
• 34:18
  concentrated in a small number of very visible names or at
• 34:21
  least a lot of the activity is in the top five to 10 names or
• 34:25
  at least the top 2030 names. Is that kind of true for what
• 34:27
  you guys see you can think of? In the past five years, you've
• 34:31
  had like 3 eras. In 2021, there was wide
• 34:35
  distribution of which companies people invested in, right?
• 34:37
  It wasn't just companies one through 10, it was companies one
• 34:39
  through 200 right there. There are, there are offerings
• 34:43
  we had in 2021 for companies that aren't around already
• 34:46
  exited. But like really nobody I think
• 34:48
  would pay much attention to now. 22 through 24 became very
• 34:52
  concentrated in five to 10 names because there were no new
• 34:55
  funding rounds. There's no data points on how
• 34:57
  the the other 990 unicorns were doing.
• 35:00
  Right, right. And, and and they all said we're
• 35:02
  doing great. We don't need money.
• 35:04
  And for like 90% of them like Figma, that was true.
• 35:07
  We're doing fine. And then there was a bunch that
• 35:10
  were struggling behind the scenes and the reason why they
• 35:12
  didn't need to go raises because they literally could not.
• 35:15
  There's a bunch of haves and have nots.
• 35:16
  And what I found in our spaces for retail investors, there's
• 35:19
  this idea about information decay and the longer it's gone
• 35:23
  since the last funding round or material data point and how that
• 35:26
  business is doing, the less and less interest there is there.
• 35:29
  So that brings you to 2025, which is certainly a couple
• 35:34
  names dominate the amount of capital raised, the press
• 35:38
  releases etcetera that are worth hundreds of billions of dollars
• 35:41
  each, but there but 7. Or their equivalent, whatever
• 35:45
  that's Magnuson 5 or something like that.
• 35:48
  Well, well, the private mag seven, I think was coined by
• 35:50
  Forge. So I, I don't think it's a great
• 35:52
  idea personally, but that's the. Yes, yeah, the equities end.
• 35:57
  Eight, Yeah, Yeah, we'll just throw one on there at the end.
• 35:59
  That's perfect. We've seen a wider distribution
• 36:01
  probably in the last six months. And I think that's because
• 36:03
  companies have been out in the market raising again and you
• 36:06
  also have some version of an IPO window.
• 36:09
  I don't think it's as wide open as people hoped, but you've had
• 36:13
  successes, right? You've seen that Scope, you've
• 36:15
  seen Karna, you've seen Figma. Though I'd say like the
• 36:17
  performance of those companies in the exception of Figma and
• 36:20
  Circle has like been kind of muted.
• 36:23
  That scope's trading flat, Chimes trading flat, Karna's
• 36:25
  trading flat. At least they got out.
• 36:28
  I guess, but they got out. Yeah, yeah, certainly been a
• 36:31
  lot. More activity in the IPO market
• 36:32
  in the last three months then maybe the last three years.
• 36:35
  True that true don't seem to be continuing.
• 36:38
  Although I think from our experience and watching what's
• 36:41
  going on, it seems like the bar for going public now is at least
• 36:46
  4 or 500 million in revenue. You know significant growth in
• 36:50
  least profitability on the horizon.
• 36:51
  So although the the window is open, it's open for a small
• 36:55
  number of companies with a large amount of revenue and that
• 36:59
  doesn't seem to be too many companies below 400 million in
• 37:01
  revenue going public lately. All right, launched.
• 37:04
  IP, OS, so you're right. I mean, the last six months,
• 37:07
  that's probably more IPO activity than we saw in the last
• 37:10
  three years if you went out early.
• 37:14
  Right, like. Coral Weave did great.
• 37:17
  Circle kind of crushed it. Figma absolutely knocked out of
• 37:22
  the park, but a lot of these been kind of muted right on
• 37:24
  their closing day. Another way of you.
• 37:26
  Crushed. It is completely mispriced, yes.
• 37:31
  But you know what's good this time, Dave?
• 37:32
  I'm the ones that were mispriced.
• 37:34
  The ones that were mispriced, particularly Figma, I think that
• 37:37
  I think that IPO was like 80% insider selling.
• 37:40
  A lot of it was like VC dollars. So I almost like feel in a weird
• 37:44
  way, I feel like better, right? That it was like like these guys
• 37:47
  were like, I want out and you're like cool.
• 37:49
  Well, the bankers want to price well.
• 37:51
  VC is. Losing a little bit of money,
• 37:52
  not necessarily the employees losing money.
• 37:54
  I don't know. Yeah, exactly.
• 37:56
  Employees are still locked up. Yeah.
• 37:58
  And then? Circle went and did a did a
• 37:59
  secondary IPO offering and I was like, oh, that's how you do it,
• 38:02
  that's how you do it. So what did?
• 38:04
  They do. They went out, they did their
• 38:05
  initial IPO, they saw the market price traded up a little bit and
• 38:09
  then did a secondary and then within the 180 day lock up, they
• 38:14
  did the secondary. That's right.
• 38:16
  Yeah, that's pretty healthy. That's a healthy sign for for
• 38:19
  that company. That's the way to do it.
• 38:20
  Like that move? Yeah.
• 38:22
  Someone that was. Notably poor performance was
• 38:24
  StubHub there, which we kind of knew wasn't necessarily the
• 38:28
  strongest IPO out of the gate. Their numbers were questionable.
• 38:32
  It still seems like the market is dominated by a small number
• 38:36
  of highly visible companies. That's that's still probably
• 38:39
  more than half of the trading volume, would you say?
• 38:41
  I think that's right. Yeah, I, I don't know if
• 38:44
  necessarily 10 companies or 50% of volume, at least for us, I
• 38:49
  would say 10%. Ten companies are probably 50%
• 38:51
  of investor interest like in the aggregate.
• 38:53
  But as far as like what actually ends up like trading or who
• 38:56
  actually end up investing in is a bit more widely distributed.
• 38:59
  OK. But but widely distributed might
• 39:01
  be 30 companies, 40 companies, it's not like 200 companies,
• 39:05
  right. So still still seem the market
• 39:07
  is dominated by if less than one page of names, maybe it's 1 1/2
• 39:12
  pages of names. That's right.
• 39:15
  It's not my. It's not.
• 39:15
  More than two pages of names that are dominating the trading
• 39:18
  volume. Now do you think?
• 39:20
  That there's a missed opportunity there because I, I
• 39:23
  sort of feel like, you know, the top of the market is 10/20/30
• 39:26
  companies, maybe more than that, but not much more than that.
• 39:30
  And then, you know, certainly at the bottom of the market,
• 39:33
  there's a whole bunch of busted unicorns, a whole bunch of slow
• 39:35
  horses that are not ever going to be large enough or fast
• 39:38
  enough growing to really, you know, get to an IPO or or even
• 39:41
  maybe an exit. A lot of those busted unicorns
• 39:44
  have preference stacks that don't make them viable even if
• 39:47
  they get to an exit. But somewhere in the middle
• 39:50
  there, it feels like there's at least, I don't know, 102 hundred
• 39:56
  300 companies that are maybe doing 50 to 200 million in
• 40:00
  revenue, decent growth, maybe not crazy value, crazy
• 40:05
  valuations, I mean, and not. A whole bunch of, you know,
• 40:10
  buyer interest. I I feels like those are
• 40:12
  bargains, or at least those. That's where we go hunting.
• 40:16
  I was going to say, isn't this what you guys do?
• 40:18
  Yeah, Well, I mean I'm. Talking my own book or my own
• 40:21
  strategy. I'm just trying to, you know,
• 40:22
  not lead the witness. Do you do you think we're crazy?
• 40:24
  Because like certainly like you know, those top 30 names, you
• 40:28
  have to pay for access maybe via multi layered vehicles.
• 40:31
  Certainly, you know, one or two, possibly even 3 layers of fees
• 40:36
  and carry and they're probably paying a premium on the way in.
• 40:39
  Seems like a lot of your value might get eaten up by, you know,
• 40:42
  that initial premium and any fees and carry if you're more
• 40:45
  than one layer deep. Yeah.
• 40:47
  And with the with that next group of companies, you know,
• 40:51
  maybe they're not growing as fast, maybe they're not as
• 40:53
  visible, but they're still solid companies and you can get in at
• 40:56
  a discount instead of a premium. You're not paying multiple
• 41:00
  layers of fees and carry and, you know, still large enough for
• 41:03
  those companies to go public and get acquired and, you know,
• 41:06
  hopefully not the same set of problems as you know, the busted
• 41:09
  unicorns of the slow horses. I think it's a great.
• 41:12
  Strategy, I don't think it's a great retail investor strategy
• 41:15
  because it requires digging, right?
• 41:17
  It requires work and going time to cover.
• 41:21
  Thanks for that. Commercial.
• 41:22
  I appreciate that. Yeah, yeah, I know.
• 41:23
  I mean, I mean, honestly, it's, it's, it's like, but, but I
• 41:27
  think you're right, right. Like if you were, if you were
• 41:29
  two people that wanted to like start building a, a book of
• 41:33
  secondary positions right now to generate returns, obviously,
• 41:37
  what are some strategies that would work?
• 41:39
  Well, one would be if you had incredible access to companies,
• 41:42
  you could make money because you could get access to things and
• 41:45
  charge on top right then. And that's actually a really
• 41:48
  lucrative business if you have the access, I think for.
• 41:50
  Smaller smallers also, you know, you can probably get some
• 41:54
  discounts that you might not be able to get if there was a
• 41:57
  tender offer going on or if you're in the middle of a
• 41:59
  primary round or if it's highly visible name.
• 42:02
  So like, what we found is between rounds, you know,
• 42:06
  there's less information, there's more of a discount.
• 42:09
  There's not as much coordinated selling by either the GP or the
• 42:13
  company. And in those scenarios, some
• 42:18
  sellers will, you know, probably be willing to accept a larger
• 42:21
  discount in order to get their, you know, first dollar out the
• 42:24
  door. You know, and, and many of those
• 42:26
  people are like, hey, I'm buying a house in Silicon Valley.
• 42:29
  I'm putting some kids through college.
• 42:30
  I have other, you know, situations that I might need to,
• 42:33
  you know, get liquidity more quickly for.
• 42:36
  Yeah, so. If we see other than larger.
• 42:40
  Dollars, I kind of feel like it's a little bit more of an
• 42:42
  auction process. You start looking more like a
• 42:44
  primary round or a tender offer and maybe not quite as many
• 42:48
  bargains available there if I started.
• 42:50
  A kind of small institutional fund right now and I didn't have
• 42:55
  the direct access to the anthropics and open AIS of the
• 42:58
  world. I would probably construct A
• 43:01
  portfolio around the space that you're talking about.
• 43:04
  I would do some deep dives on those couple 100 companies that
• 43:10
  are not actively traded right too much.
• 43:14
  I would do analysis on how they're performing.
• 43:16
  I would be able, if I'm able to underwrite some type of exit in
• 43:19
  a few years and buy it like a single digit multiple.
• 43:23
  Like I think it's a very viable strategy, but it does take work
• 43:26
  because you got to get in front of the companies and you got to,
• 43:28
  you got to sort through the liquidation preferences.
• 43:31
  Like I've seen there's plenty of companies we did deals in 2021
• 43:34
  that are actually exiting now, some of them very quietly.
• 43:39
  And like the, the headline numbers, not bad.
• 43:41
  They're like, oh, we're, you know, 7X revenue and, and you
• 43:44
  know, we had 100 million revenue and preference.
• 43:46
  Stack or not and or they even carving out anything for
• 43:50
  employees is there is the question then and then.
• 43:53
  We're explaining liquidation preference math to all of our
• 43:56
  clients, which it which is always fun.
• 43:59
  So I mean that is, I think that's a very viable strategy.
• 44:01
  And I was just pulling up that like actually overall we still
• 44:06
  see the majority of transactions we do are are at discounts,
• 44:09
  which is what I was trying to kind of highlight here And and
• 44:11
  you see some exuberance, right, Q4Q1 I think there was.
• 44:15
  A transaction number or by dollars average.
• 44:19
  Discount, we have 29% which is off the highs and certainly off
• 44:26
  the lows of Q 4/20/23 I would think A.
• 44:29
  Lot of. Dollars are flowing into these
• 44:30
  bigger, bigger names, which are often at or even a premium.
• 44:35
  Yeah. It's kind of what we had seen is
• 44:37
  that the reported average discount or premium, you know,
• 44:41
  has gone up either less, less discount or even a premium.
• 44:45
  But you're averaging in a lot of volume from in demand companies
• 44:50
  and maybe not a lot of volume from the large number of
• 44:53
  companies that are available to discount.
• 44:54
  But still total dollars in might be not so much compared to
• 44:59
  SpaceX. Open AI, Entropic, find out
• 45:03
  anything from the computer, nothing useful.
• 45:05
  Logic and practical information do not seem to apply here.
• 45:09
  You admit that to deny the facts.
• 45:11
  Would be a logical Dr. Well, beside those prognostications, I
• 45:17
  guess where, where do you see the market going in the next
• 45:21
  year or two given kind of what we know about what's going on?
• 45:25
  Maybe we should reference the recent acquisition I think
• 45:30
  reported just in the last 24 hours industry ventures being
• 45:33
  acquired by Goldman Sachs. I don't know if there were
• 45:36
  numbers reported. I heard like around a billion
• 45:38
  dollars, maybe some of it's, you know, or now 600.
• 45:42
  Million is what? They're saying for up to
• 45:43
  965,000,000 has been reported. 660.
• 45:46
  Five at closing and 300 million in a potential earn out based on
• 45:50
  revenue accrued through 2030. Not that I read through it all
• 45:53
  or anything, but yeah, well. Not very well reported was the
• 45:57
  fact that Goldman was already a minority investor in industry
• 46:01
  ventures from a transaction that happened in 2019.
• 46:04
  I don't think most of the articles I read did not
• 46:06
  reference that. In fact, I had to go look for it
• 46:08
  myself. Was like, I was pretty sure that
• 46:10
  they were a minority investor. I, I have a friend who used to
• 46:14
  work there and they had talked about that and I was like, yeah,
• 46:17
  they were already an investor. So I, I thought we were just
• 46:20
  like, they bought more of what they already own.
• 46:22
  You know the one. Person that did make it very
• 46:24
  clear in their announcement was Goldman Sachs, because they
• 46:26
  wanted to justify what they paid.
• 46:28
  They're like, you know, we actually already owned 20%, so
• 46:30
  we paid 660, we paid 660, right, But we already owned 20% of it.
• 46:35
  So it wasn't nearly that, but a. Bargain, I guess.
• 46:38
  I don't know, yeah, Whether I don't know if they paid a
• 46:40
  premium for that or not. The other trend transaction that
• 46:43
  was pretty notable back in 22 was Stepstone acquiring Green
• 46:48
  Spring, which I think was probably at the end of the
• 46:51
  height of the Zerp era. So I, I'm guessing that was
• 46:54
  probably a pretty good number for Green Spring.
• 46:57
  I wonder if Stepstone would have paid that much, you know, a year
• 47:01
  later or two years later. But those are.
• 47:04
  Both sort of acquisitions of notable secondary.
• 47:07
  I think those two probably are on most people's radars as the
• 47:10
  biggest VC secondary firms. Yeah, Greenspring.
• 47:15
  And now? Stepstone required Greenspring
• 47:16
  and Industry Ventures being they're both managing
• 47:19
  multibillion dollar funds, pretty large transactions like
• 47:23
  I'm guessing their typical transactions out of those funds
• 47:26
  were more in the 20, five, $50 million range or or even up
• 47:30
  higher from that. They are they.
• 47:32
  Are, I mean we actually we worked with Greenspring.
• 47:36
  In 20. 17 I can just say this because it's so long ago and
• 47:39
  they you know, they're they're now Stepstone.
• 47:41
  So I feel like it's the and the company they bought is public.
• 47:44
  So yeah, I think we did like a $10 million ticket with them and
• 47:47
  even then they were like 10 million OK, I guess we'll do the
• 47:50
  work on it. We're a four year, we're a four
• 47:52
  year old business, right? So we're like, yeah, it's like
• 47:55
  every morning everyone's like, how's it going?
• 47:57
  And I was like, I'm trying to get him on the phone.
• 47:59
  I think he's on vacation, but. We'll do it.
• 48:02
  Yeah, but I mean, we were, I'm curious to hear what you guys
• 48:05
  think. But one is it's kind of a shot
• 48:09
  across the bow, bow to pretty much every big financial
• 48:12
  institution, all the other banks that like you should probably
• 48:15
  have some type of like venture secondary strategy, right.
• 48:20
  That was P1, which you know, that's self-serving.
• 48:22
  But I I think it's true. And then there's there's one
• 48:25
  part. There are many.
• 48:26
  Other firms to go acquire like there's a list of less than, I
• 48:31
  don't know, 20 that are sizable, probably less than 10 that are
• 48:35
  sizable. I don't know, depends on how you
• 48:36
  measure size, but well, that was the second.
• 48:38
  Thing we thought about which was all right, well, Green Springs
• 48:41
  gone, industry's gone. Can we name another VC
• 48:45
  secondaries fund? VC secondaries fund with more
• 48:48
  than 2 billion in assets. I don't think there is one
• 48:52
  Klein. Hill 137, it becomes a shorter
• 48:56
  list after that. There's a bunch in New York that
• 48:57
  probably aren't on everybody's radar and they may combine, you
• 49:00
  know, VC secondary with some other stuff, but it's yeah, it's
• 49:03
  not a lot. 1 prime, which I think is not quite a billion
• 49:08
  dollars maybe. I'm not sure.
• 49:09
  I think they're more their most recent fund was like 300,000,300
• 49:13
  and 50 million see. And, and these names aren't even
• 49:16
  on a lot of other people's radar in Silicon Valley.
• 49:18
  Like we we have to think about it.
• 49:20
  Yeah, yeah, yeah. To compile all all 12 of.
• 49:24
  Us know about them, Yeah, yeah. I couldn't really think of any
• 49:27
  others. So it's kind of.
• 49:29
  You know, $5 billion secondary firms out there to be acquired.
• 49:32
  There's probably not even 10. So it's kind of like.
• 49:36
  What like what are, you know, what's going to happen next?
• 49:38
  But I mean, the overall, I was pretty excited to see it
• 49:40
  because, well, one fun story is when AT Sri and I started Equity
• 49:45
  Zen in 2013, we reached out to Hans.
• 49:49
  We were like, hey, you're like the godfather of secondary.
• 49:51
  It's like, what do you think? Actually, no, we didn't reach
• 49:52
  out. Sorry.
• 49:53
  This is better, Dave, you connected us.
• 49:55
  This is a better story, Dave, you connected us.
• 49:59
  It was. Because I had been Hans a while
• 50:01
  back and he actually started another secondary firm.
• 50:03
  So there's there's another one. They had approached us for a
• 50:06
  couple times about buying secondary positions in some of
• 50:08
  our winners. We were trying to get them to,
• 50:10
  you know, buy a position in the fund.
• 50:12
  Overall, it'd be, you know, being fun.
• 50:13
  But yeah, it's not a long list of folks.
• 50:16
  And even now, 10 years later, it's still not a long list of
• 50:19
  folks. Secondary is just not as sexy or
• 50:23
  exciting as the BlackBerry market.
• 50:25
  I mean, that's the. Thing is, like when we decided
• 50:28
  to start getting into secondary 5-6 years ago, everybody's like,
• 50:31
  well, why? Why do you want to do that?
• 50:32
  Dude, that's so boring compared to what you used to do.
• 50:34
  And I was like, well, might be boring, but we think it makes
• 50:38
  money, serves a market. There's alpha there.
• 50:40
  Yeah, my munch. Is that like for Goldman
• 50:44
  industry Ventures has so many LP stakes and therefore so much
• 50:48
  visibility into what's going on so that that's good and even in
• 50:52
  its own right, but the. 2nd. Part is if yeah, a lot of
• 50:55
  information and probably knows of all the Co investment
• 50:58
  opportunities that are going to come up that Goldman could
• 51:01
  potentially now route in through asset management because David
• 51:04
  Solomon, DJ Saul and Hans Williams can make some calls and
• 51:08
  they're like saw that you're doing this anthrop and Co
• 51:11
  invest. I think our clients would like
• 51:13
  to do 102 hundred $300 million worth.
• 51:17
  How does that sound? And everyone's like that sounds
• 51:19
  great. Well, I guess.
• 51:20
  I, I'm going to say what I think.
• 51:21
  I think that accelerates the top end of the market.
• 51:23
  Does it accelerate the middle portion of the market we were
• 51:26
  just talking about or not? Probably not, right, maybe a
• 51:30
  little bit of it, but no. I.
• 51:32
  Have like a good account, like if you talk to you know, I'll,
• 51:36
  I'll say them broadly rather than isolating one of them.
• 51:38
  But if you talk about the JP Morgan's UB s s Bank of
• 51:41
  Americas, Morgan Stanley's of the world about Co investment
• 51:44
  opportunities, like they're not really doing it for $20 million
• 51:49
  opportunities. And they're not doing it if like
• 51:51
  they've got to coach their advisors on what the company is
• 51:54
  and who they do a name that's. On their customers lips and a
• 51:58
  name that's already in the news. So I think again, this ends up
• 52:02
  just sucking all the oxygen and capital out of the room for
• 52:07
  anybody except the top. Again, choose your number
• 52:10
  10/20/30, maybe 50 companies, but it's not like a longer list
• 52:15
  than that. Top 30 to 50 companies.
• 52:17
  And and I think even more than that is it makes it tougher for
• 52:22
  the next 100 to 200 companies. Like it's not the same.
• 52:26
  It's like worse for those guys because all the attention is
• 52:29
  going to, you know, AI companies, defense companies,
• 52:31
  space tech companies that are doing, you know, 500 million
• 52:35
  plus in revenue or at least 200 million plus in revenue.
• 52:39
  Yeah, and but he only doing 50 to 100 million revenue.
• 52:42
  That's not in a sexy category. You're just not going to have a
• 52:45
  lot of attention. You could do what we.
• 52:47
  Did which basically like our space didn't get much attention
• 52:50
  after we raised money in like 2016 at least like at least
• 52:53
  being like venture backed, right.
• 52:54
  They're like we raised $3,000,000 in 2016 and then we
• 52:58
  haven't raised since. And I got to say when all my
• 53:02
  friends that had raised money were dealing with a lot of
• 53:04
  really tough calls in 22 and 23 about like, you got to keep
• 53:08
  growing, but fire everyone and had the board.
• 53:11
  And Amanda was like, what's what's your, you know, what was
• 53:14
  your crypto strategy? You know, what's your crypto
• 53:16
  strategy? We're going to think about
• 53:17
  tokenization. I was like, Oh my God, I am
• 53:20
  yeah, a teacher were like high fiving each other.
• 53:22
  I'm like, what's your crypto? Strategy.
• 53:24
  What's your AI strategy? Yeah.
• 53:27
  And then a teacher are like, should we wrap up our board
• 53:29
  meeting? Like, you know, like, like, all
• 53:31
  right, where else that you know, obviously we have more corporate
• 53:35
  governance than that. But yeah, it's like, you know,
• 53:38
  maybe maybe that's what happens. Maybe we have a bunch of people
• 53:39
  that just go heads down and build these businesses and
• 53:41
  they're great. But but yeah, overall I would
• 53:43
  say there there is like a barbelling.
• 53:45
  I feel like you guys have seen it on the venture side.
• 53:47
  Like there seems to be barbelling of like seed makes
• 53:50
  sense, pre seed makes sense, super late stage can work and
• 53:53
  the middle. Weird because I feel like the
• 53:57
  middle is reasonably priced and the rest of it isn't.
• 54:02
  But as you get close to IPOI think there is some segmentation
• 54:05
  into exciting, sexy companies and then just normal companies.
• 54:09
  I mean, if you think of that. List I just put up right, like
• 54:11
  there are companies like Heart Flow, you know, it's not like
• 54:14
  it's not open AI, it's not Klarna, but like people made
• 54:17
  money like like people did well. And so, and so I think we're,
• 54:21
  we're hopefully, you know, fingers crossed going to see
• 54:23
  some of those 2021 cohorts emerge in 2526 through the IPO
• 54:28
  calendar. I got to say there's a long list
• 54:30
  of companies that we did deals in 21.
• 54:32
  When you talk to the companies, they're like, Yep, we're, we're
• 54:34
  coming out in 26 and I'm like, I don't think you are because 8%
• 54:39
  top line growth is like not that exciting.
• 54:43
  Well. I know from the, you know, 500
• 54:45
  portfolio that I used to manage, there's, there's probably 30-40
• 54:49
  fifty companies in that portfolio that are doing, you
• 54:52
  know, again, north of 50 million in revenue, maybe even, you
• 54:55
  know, 20-30 that are north of 100 million in revenue.
• 54:58
  It's still going to take a while for those companies to get to
• 55:01
  the revenue numbers required to go public.
• 55:03
  You know, this was some math I was looking at on Chat TV the
• 55:05
  other day was like, hey, how long does it take a company
• 55:08
  doing 50 to 100 million in revenue that's growing at 30 to
• 55:10
  50% to get to, you know, large enough to go public?
• 55:14
  And the numbers were daunting. It was still five years for a
• 55:18
  lot of those companies, some of them more than five years.
• 55:21
  And I guess that's what I'm getting to is like, you know,
• 55:23
  you guys and to some extent Hive and Forge are all going after
• 55:28
  this middle market of companies that are between 50 to 500
• 55:31
  million in revenue. It's a lot of the market like
• 55:34
  it's it's a trillion dollars, maybe more than a trillion
• 55:37
  dollars of market cap. Yeah, I think it's right.
• 55:40
  Yeah, call it. I think you could say you know.
• 55:43
  SpaceX, open AI, Byte Dance, Anthropic by themselves, Stripe,
• 55:49
  throw a few others in there. Probably $2 trillion in market
• 55:52
  cap in just, you know, less than 10 companies.
• 55:55
  Yep, open AI and SpaceX might be trillion dollar companies
• 55:59
  themselves probably in the next few years.
• 56:01
  But like certainly that group of companies is probably half of
• 56:05
  the four trillion illiquid market.
• 56:07
  But then there's another 5000 companies that might
• 56:11
  individually be valued at, I don't know, quarter billion to
• 56:15
  $2 billion where, you know, collectively I think that's a
• 56:19
  good half trillion to trillion dollar market to go after that
• 56:21
  is growing and that probably will exit, but it might take a
• 56:24
  while. I think it's a good read.
• 56:26
  On it, I'm, I was just kind of thinking of two things.
• 56:28
  One is I know the person that has SpaceX allocation and access
• 56:32
  and they've built their own $100 million business just through
• 56:35
  syndicating out SpaceX, right? Yeah, right.
• 56:39
  Yeah, yeah. Yeah, right.
• 56:40
  Just just doing that 20. People like that.
• 56:44
  There's not like what? There's like a bunch of people
• 56:46
  doing just. There are.
• 56:48
  Which makes me question my profession or maybe who who I
• 56:51
  should hang out with more. And then and then of all I've
• 56:53
  I've met a broker that only does bite dance and he and he's
• 56:56
  probably done maybe not really happy a year, but really.
• 57:00
  Really happy at the last two weeks.
• 57:02
  Very very active. Mine and I were just doing.
• 57:04
  That, you know, evaluation, analysis a few weeks ago, we're
• 57:07
  like, yeah, this company is actually reasonably priced.
• 57:09
  Even if you think the US business is worth 0, it's
• 57:11
  actually a bargain. And it's why U.S. business is
• 57:15
  not worth 0. Hey, it's a it's a real
• 57:17
  screaming buy, a company that's doing as much revenue as
• 57:21
  Facebook as Meta, but valued at 1/5, maybe maybe not as
• 57:27
  profitable, but still those, those numbers seem way out of
• 57:29
  whack. That was just like, wow, this
• 57:31
  company should be valued so much more than that.
• 57:34
  I guess before we wrap up here, you know, where do you guys see
• 57:39
  your next leg up on growth? And is that coming from the
• 57:43
  retail market? Is it coming from these Rias,
• 57:45
  more institutional folks? Is it going to just be, you
• 57:49
  know, those top 30 names or do you see more opportunity coming
• 57:52
  as the IPO market, you know, warms up?
• 57:54
  Yeah. It's like a bit of all of that
• 57:56
  too, but I would say like the concentrated areas of focus and
• 57:59
  where we see the growth is probably just Co invest
• 58:02
  strategy, kind of working more with GPS on kind of the harder
• 58:05
  access names, you know, subject to like company sign off, which
• 58:09
  is a a cornerstone of of equities then.
• 58:12
  So that, that's one where it's kind of still in those top 20 to
• 58:14
  32 is I, I do think there are plenty of like, you know, these
• 58:20
  5 to $8 billion valuation companies that are coming, going
• 58:23
  to come to market and go public. And so that's like in that
• 58:25
  scope, that's like a classic example where like we all know
• 58:28
  the company, the world doesn't, it'll perform fine.
• 58:32
  And so we tend to see that as that, you know, as the Nets go,
• 58:35
  proceeds come back to our LP's, they will like recycle and
• 58:39
  redeploy. And then I generally think at
• 58:42
  some point, like a bunch of companies are going to start
• 58:44
  raising series BS and series CS. Like it's, it's not like a
• 58:46
  complete void, right? I know we talked about barbells,
• 58:49
  but when that happens, like you have signal, right, that you
• 58:52
  might want to invest in like a company that's, you know, at
• 58:55
  only a $5 billion valuation. But is an AI like it I, I got to
• 58:58
  tell you, like we, we've done some deals in, in, in AI
• 59:01
  adjacent companies that are just raised at 8 billion, right?
• 59:05
  And now we're doing a trade at 10 billion.
• 59:07
  The rationale for a lot of people is like, if that's the
• 59:09
  next one and it has any chance of being 150 billion in value,
• 59:14
  then like that's a screaming buy.
• 59:15
  And I was like, well, that's very simplified analysis, but
• 59:19
  you know. Valuation and how this lottery
• 59:25
  ticket, you know, and this might be my lottery ticket, not cash
• 59:28
  flow analysis comps, not like, you know, profitability and
• 59:32
  growth, which I feel like this is what Ahmad and I are doing
• 59:35
  every day on this show is like, hey, let's look at, you know,
• 59:38
  revenue and growth and profitability.
• 59:41
  And we're just like the boring old, you know, professors over
• 59:44
  here are trying to do, you know, constant cash.
• 59:47
  Lame. Yeah, yeah.
• 59:48
  No right. We're.
• 59:49
  No, fucking lame. And you know, all these other
• 59:51
  folks are like, hey, it's the next, you know, rocket ship.
• 59:54
  Get on board now. Price on the word up.
• 59:57
  It's hard. To asymmetry math like oh I can
• 1:00:00
  make 10X my money and I can only lose 1X my money so.
• 1:00:04
  Why don't I go in? You know, why don't I go all in
• 1:00:06
  based on those kinds of those kinds of parameters?
• 1:00:08
  It's hard to hard to argue with Sometimes you take.
• 1:00:11
  You take the mental approach of why a lot of people say they buy
• 1:00:13
  a lottery tickets, right? Which is I know the math is bad,
• 1:00:15
  but there's nobody else that offers me this type of
• 1:00:17
  asymmetric return. OK, let's.
• 1:00:19
  Buy a lottery tickets and so. Then you take the venture backed
• 1:00:23
  space for people that make investments in the public
• 1:00:26
  markets and they're like, you know, there aren't many things I
• 1:00:29
  can invest in the public market that will like 10X or 20X,
• 1:00:32
  right? Like they could.
• 1:00:33
  But if you have, you kind of look at our, you look at some
• 1:00:36
  venture backed companies, maybe take those swings and, and
• 1:00:39
  particularly now like, you know, you don't take like a 20X swing
• 1:00:42
  on cybersecurity, right? You take a 20X swing on the next
• 1:00:46
  robotics company or maybe even defense tech company because you
• 1:00:51
  can sign so many big contracts so fast.
• 1:00:53
  And so there is enthusiasm for that.
• 1:00:56
  So we follow that. We follow kind of like investor
• 1:00:58
  sentiment through this group called the American Association
• 1:01:03
  of Individual Investors. And you know, the first time I
• 1:01:05
  saw it, I was like, oh great, another survey I've been
• 1:01:08
  watching it for like AI in the name.
• 1:01:10
  Twice. It's got to be good.
• 1:01:15
  It's a a. Wow, that's twice as good.
• 1:01:20
  Presenting AI for accredited investors, it's basically, it's
• 1:01:22
  basically Equity Zen. So I watched it for a little
• 1:01:26
  bit, you know, and at first I was like, oh, cool, another
• 1:01:29
  investor survey like this is not going to be helpful.
• 1:01:31
  Actually this signal, having watched it for like the last six
• 1:01:33
  months, I think it's very reflective of how we see
• 1:01:35
  investor activity on Equity Zen's platform.
• 1:01:38
  Basically what it's kind of showing is there's like growing
• 1:01:40
  enthusiasm to make about to make investments in public market.
• 1:01:44
  And I think that translates over in our space, particularly
• 1:01:46
  because we have a big focus on retail.
• 1:01:48
  But yeah, Aaii, it's going to be hard to Unsee that now.
• 1:01:51
  Yeah, yeah. So I.
• 1:01:53
  Guess it sounds like for you the market might be expanding from
• 1:01:56
  the top 2030 to the top 50, maybe top 100.
• 1:02:02
  And these companies that are only doing 5 to $25 billion
• 1:02:07
  market cap, I guess, sorry, market cap revenue, but still
• 1:02:11
  we're talking, you know, 200 million to maybe a billion in
• 1:02:15
  revenue, couple billion in revenue perhaps, yeah.
• 1:02:18
  Yeah, we'll be doing those. And I would say like a lot of
• 1:02:21
  activity. It comes.
• 1:02:23
  Around new funding rounds, right.
• 1:02:25
  So particularly if companies are coming out and raising, Yeah,
• 1:02:28
  important point. Is that, you know, pricing
• 1:02:30
  opportunities happen during a primary round and so these
• 1:02:33
  probably look like tender offers or package deals, primary and
• 1:02:38
  secondary offers, yeah. And some secondary packaged into
• 1:02:43
  a public offering, which I think we you've seen that recently,
• 1:02:46
  right? I'm on.
• 1:02:47
  There were several IPOs that actually packaged some secondary
• 1:02:49
  sales into the. The company wasn't actually
• 1:02:52
  raising the entire float. It was their package of existing
• 1:02:55
  investors and employees that were offering some of that
• 1:02:58
  float. I think Figma and Karna were
• 1:03:01
  both like 80 to 85% secondary. They're IPOs.
• 1:03:06
  Yeah. Yeah, I guess they raised.
• 1:03:08
  What they needed and you know, we're we're profitable enough
• 1:03:11
  that they were just satisfying the demand for liquidity from
• 1:03:13
  early investors and employees and that was the catalyst for
• 1:03:16
  the for the IPO. Yeah, give.
• 1:03:19
  Get a bunch of people liquidity if they want as an option.
• 1:03:21
  Get a new get a new price because you don't need the
• 1:03:23
  capital yet. If the bankers screw up an under
• 1:03:26
  price and your stock flies, yeah you've got low float so it's
• 1:03:30
  going to fly anyways. Yep.
• 1:03:32
  You do a secondary offering. You raise money at true market
• 1:03:35
  value. The thing will inevitably tank.
• 1:03:37
  20% post lock up. It's fine, but but but when you
• 1:03:41
  net everything out, that's not a bad capital market strategy at.
• 1:03:45
  Least you got liquidity. I, I, I guess I want to zero in
• 1:03:49
  a little bit more before we wrap up on the seller, because I
• 1:03:53
  think you brought an important point here.
• 1:03:54
  We've been, we've been talking about who the buyers are.
• 1:03:56
  I don't know if we've always talked about who the sellers
• 1:03:58
  are. Are, are you seeing sellers that
• 1:04:00
  are mostly employees and founders?
• 1:04:03
  Are these early Angel investors? Are these small funds?
• 1:04:06
  Are they large funds or is it, you know, all across the board
• 1:04:09
  there? So, so one thing we track is
• 1:04:11
  like common stock versus preferred stock trading, right?
• 1:04:14
  And we use kind of preferred stock as a proxy for investors.
• 1:04:16
  70% is in common stock, 30% is in pref and within pref 25 of
• 1:04:22
  that 30 is probably seed in Series A, right?
• 1:04:25
  It's it's nominated. By employees and, you know,
• 1:04:30
  common shareholders and then within the preferred, it's still
• 1:04:34
  a lot from early investors, yeah.
• 1:04:38
  Exactly. And that's a little different
• 1:04:40
  from like I kind of said maybe 6-7 years ago when there's more
• 1:04:43
  what I would consider fast money, right?
• 1:04:45
  Hedge funds, crossover funds, you'd see Lyft Series D flipping
• 1:04:51
  around 2-3 times in three years, right?
• 1:04:54
  You don't really see that much anymore of that.
• 1:04:58
  But you do see seed funds that are, you know, at a crossroads.
• 1:05:01
  I'm sure you talk to them about strip sales and continuation
• 1:05:03
  funds and everything, right? Like a lot and.
• 1:05:06
  Those folks definitely need DPIA lot of 10 year old funds with,
• 1:05:11
  you know less than one XDPI, sometimes 0 DPI.
• 1:05:14
  Hell, a lot of 12 year old funds with limited DPI.
• 1:05:19
  I think a lot more people looking at continuity vehicles,
• 1:05:23
  you know, as ways to to start restructuring their own
• 1:05:26
  portfolios. One last thing was, you know, we
• 1:05:29
  had a conversation with one of your competitors, SIM Desai at
• 1:05:32
  Hive. He seemed to indicate that some
• 1:05:36
  number of companies were starting to consider training
• 1:05:39
  wheels IP OS in private. And you know, he sort of floated
• 1:05:44
  this idea of, you know, if if we got them to produce a limited
• 1:05:47
  set of financials, they could sort of run price discovery on
• 1:05:51
  private markets for a year or two, figure out what they're
• 1:05:54
  really worth before they go public.
• 1:05:56
  And then maybe not even do a traditional IPO listing, just do
• 1:05:59
  a direct listing so they they don't have to float anything.
• 1:06:02
  They don't have to pay a bank. Do you think that's a realistic
• 1:06:06
  vision of the future that that seems somewhat radical?
• 1:06:09
  I was, I was kind of amazed when he said that.
• 1:06:11
  It sounded attractive, you know, but I don't know is that is that
• 1:06:16
  reality? 1 I think.
• 1:06:17
  It'd be awesome and it would be an argument on, you know, it
• 1:06:21
  would be good for volume, but it also it would be like a
• 1:06:24
  testament to what you know, hive or equity Zander Forge could do.
• 1:06:28
  I think it's pretty unrealistic because the company.
• 1:06:31
  Unlikely to share their financials or other reasons?
• 1:06:34
  Unlikely. To share their financials
• 1:06:37
  private for a reason. You know, I think you get some
• 1:06:40
  companies that are a bit more dynamic or like risk taking that
• 1:06:45
  we're willing to do it. But you know, if imagine,
• 1:06:48
  imagine like you, you come back and you're like, hey, SIM gave
• 1:06:50
  me this great idea and you go to you go to like a founder, you go
• 1:06:52
  to your GC and CFO. You're like, he's going to help
• 1:06:54
  us with price discovery for our future IPO.
• 1:06:57
  Your CFO is going to have a connection, right?
• 1:06:59
  Being like, wait, is that does that count as is that testing
• 1:07:02
  the waters? Like what is that?
• 1:07:04
  Yeah. But I will say that like a
• 1:07:06
  version of this happened in the past and some may have alluded
• 1:07:10
  to this when from his time at his previous employer, but like
• 1:07:13
  Spotify kind of did this like Spotify went out and Spotify.
• 1:07:18
  And didn't Airbnb also do a direct listing?
• 1:07:21
  Yeah, but but. What's interesting is Airbnb
• 1:07:23
  didn't really allow secondaries at all.
• 1:07:26
  In fact. In fact, they, I think the CFO
• 1:07:28
  at the time called secondary platforms bottom feeders, which
• 1:07:33
  was, you know, a little little. Personal, but OK, yeah.
• 1:07:36
  Yeah, like, like. Yes, Sir.
• 1:07:40
  Do I have it? Bookmarked and look at it every
• 1:07:41
  once in a while before I work out.
• 1:07:43
  I don't know. But Spotify?
• 1:07:46
  Was like very open about secondaries.
• 1:07:47
  They were like here's our intake form, here's our transaction
• 1:07:50
  process. By the way, we're from
• 1:07:52
  Luxembourg, you know, or sorry, our company is domiciled in
• 1:07:55
  Luxembourg, so there's financial sitting over there.
• 1:07:58
  Oh, wow. And they're like, you just let
• 1:07:59
  us know who's buying and who's selling.
• 1:08:00
  We're like, OK. And we were closing secondary
• 1:08:02
  trans like submit and close like 3 days before the direct
• 1:08:05
  listing. You think Daniel?
• 1:08:07
  Is maybe a little bit more risk taking than you know the Airbnb
• 1:08:11
  guys so I. Think some companies will do it,
• 1:08:14
  but if you think about like the top 10 or 20 companies that we
• 1:08:16
  alluded. To I don't think those companies
• 1:08:19
  are doing that. Yeah, OK.
• 1:08:20
  Well, maybe that's a a different path for a certain group of
• 1:08:23
  folks. Yeah.
• 1:08:25
  Anything else you'd like to mention before we sort of close
• 1:08:28
  this out? And, you know, Congrats on
• 1:08:31
  everything that you guys have done.
• 1:08:33
  Certainly seems like you've found a a pretty frugal and
• 1:08:36
  profitable path for yourselves. Thanks.
• 1:08:38
  Even though you don't. Need us venture capitalists?
• 1:08:40
  We love you. We love you.
• 1:08:41
  Yeah. Any problem?
• 1:08:44
  I'm not. Doing secondaries for your
• 1:08:46
  spells. So you know, yeah, let us.
• 1:08:49
  Let us. Add value man, we're so good at.
• 1:08:54
  Any research reports? You want to highlight any new
• 1:08:56
  product launches coming out, you should be paying attention to, I
• 1:08:58
  think anything exciting in the equities end world you want to
• 1:09:00
  share with us, we launched our. Newest diversified fund so, so
• 1:09:05
  on top of being a, you know, a marketplace, we, we have kind of
• 1:09:07
  an asset management arm that we're spending more time on.
• 1:09:09
  So we so we launched our latest managed fund, fund 11.
• 1:09:12
  I think people can go into and look, we just put out our Q3
• 1:09:17
  report. So we always have, you know,
• 1:09:19
  quarterly reports out what's going on honestly your.
• 1:09:22
  Your website, the Q3 report, Boom Private company.
• 1:09:26
  Investment trends Q3 hot off the press from yesterday or from
• 1:09:30
  October 13th. So yeah, we have this on on our
• 1:09:32
  website. I think it's if you go to our,
• 1:09:35
  you know, our blog.equityzen.com, we put out a
• 1:09:37
  lot of things. We got an IPO tracker.
• 1:09:40
  I don't know if I have them, but we put little dynamic charts on
• 1:09:42
  how everybody did who made money, who lost money needs to
• 1:09:44
  the IP OS that's available too. We kind of just like the sleepy
• 1:09:48
  boring secondary's platform that just, you know, does these, does
• 1:09:52
  these deals and and we have fun doing it make the product a
• 1:09:55
  little bit better every day and it's very fun to be here.
• 1:09:58
  I'm pretty. Sure that after Goldman's
• 1:10:00
  acquisition of industry, it's not going to be so sleepy for
• 1:10:03
  the next 3-6 months. You you might have your phone
• 1:10:05
  ringing a few times. I'm excited this space has more
• 1:10:09
  eyes. Honestly, it's, I think it's
• 1:10:11
  generally good. It's it's, it's a good, it's a
• 1:10:13
  good sign for the industry. So we're excited to see it.
• 1:10:16
  All right. Well, thanks for spending some
• 1:10:18
  time with us and again, good luck with equities in the future
• 1:10:22
  and just let us know if anybody gives you a call to take you off
• 1:10:28
  to the next level. Will do, will do.
• 1:10:31
  Thank you guys both for having me.
• 1:10:41
  Aman, what's going on with DL this week?
• 1:10:44
  It's a deal. Just announced a new valuation,
• 1:10:46
  a $17.3 billion evaluation. This is a primary round.
• 1:10:50
  It's not a secondary round, but there may be some secondary
• 1:10:53
  shares that that come loose as is want to happen in some of
• 1:10:56
  these rounds. Just a a background or intro to
• 1:11:00
  deal. They're a pretty new company.
• 1:11:01
  They're only founded in 2019. Their initial focus was on
• 1:11:06
  international contractors, helping companies to recruit and
• 1:11:09
  then pay and manage international contractors.
• 1:11:12
  So in an interesting space, especially around 2019-2020,
• 1:11:16
  that became very, very hot because workforces were going
• 1:11:18
  global, they were becoming distributed, they were being
• 1:11:21
  remote. So, you know, perfect, perfect
• 1:11:23
  company, the perfect time. They've since broadened their
• 1:11:26
  remit a little bit to do stuff like payroll management, making
• 1:11:29
  sure that people get paid. So they're more fintech benefits
• 1:11:32
  management, just workforce management in general to just
• 1:11:35
  beyond recruiting and contractors.
• 1:11:37
  So they're now more, I guess you can call them an HR tech
• 1:11:39
  company. The valuation was led by Rabbit
• 1:11:41
  Capital, which is right here in Palo Alto.
• 1:11:44
  It's an A+ fintech firm. I had the Full disclosure, I had
• 1:11:47
  Rabbit Capital on the board of my last company, a small
• 1:11:51
  business lender in New York where I was CFO and Mickey Malta
• 1:11:54
  and Rabbit were on the board. I thought they were fantastic to
• 1:11:56
  work for. The others in this deal include
• 1:11:59
  A16Z and General Catalyst and CO2.
• 1:12:02
  Their last run was in 2022, so that was a $12 billion
• 1:12:05
  evaluation. And that one was right after the
• 1:12:08
  tech bubble was kind of popping or easing up kind of a it was
• 1:12:11
  not quite post reset, but it was just as the market was, was
• 1:12:14
  softening. But they still got a $12 billion
• 1:12:16
  evaluation back in 2022. Now they're up to 17.
• 1:12:19
  So it's a pretty big step up for them.
• 1:12:21
  I have to admit, I thought their evaluation when I saw the number
• 1:12:24
  was a little on the low side because I knew that they were
• 1:12:27
  over a billion. They're actually 1.1 billion in
• 1:12:30
  annualized runway now with very impressive unit economics and
• 1:12:34
  have been profitable. So I this company is, it's kind
• 1:12:37
  of a big deal. I'm kind of a big.
• 1:12:39
  Deal no pun. Intended.
• 1:12:43
  Right. It is kind of a big deal and the
• 1:12:45
  fact they got done at a 14 or 15 times, you know, sales multiple,
• 1:12:49
  I thought it was actually a pretty reasonable valuation for
• 1:12:52
  the company. Their their growth rate has been
• 1:12:54
  extremely good for the last couple of years.
• 1:12:56
  It's 70% year over year. This is based on Sacres
• 1:12:59
  estimates. A lot of the revenue I think is
• 1:13:02
  pretty sticky. I wouldn't necessarily call them
• 1:13:04
  a, a SAS company, although the the revenues and the way to make
• 1:13:07
  money are very similar to SAS. They're getting they're charging
• 1:13:09
  companies based on a, a monthly fee.
• 1:13:11
  For active contractors, there was a monthly fee per full time
• 1:13:15
  employee. So in that sense it is a
• 1:13:17
  monetized class business with a very familiar and high quality
• 1:13:20
  recurring revenue business model.
• 1:13:21
  I kind of like the business. I thought one useful way to
• 1:13:24
  compare it just to get a sanity check was, you know, what is 14
• 1:13:27
  or 15 times sales look like and what we've done in the past is
• 1:13:31
  compared to a basket of companies, maybe SAS or Fentech
• 1:13:34
  companies. There's an easy comparison to
• 1:13:36
  Rippling, which I think is informative.
• 1:13:39
  Rippling is, is an HR tech business been around a little
• 1:13:42
  bit longer. That's a Parker Conrad company
• 1:13:44
  that was founded about the about the same time or a bit before.
• 1:13:47
  Rippling also has a. $17 billion evaluation, they announced that
• 1:13:50
  in May of 2025, but look at the difference in the metrics.
• 1:13:53
  So deal is that 1.15 billion in ARR Rippling is half of that.
• 1:13:59
  So deal is is running at twice the scale, twice the revenue of
• 1:14:02
  Rippling and it's actually growing faster.
• 1:14:04
  It's growing at 70% year over year.
• 1:14:07
  Rippling is estimating around 30% year over year and then Deal
• 1:14:10
  is profitable and Rippling is not.
• 1:14:12
  So I feel like deal is kind of better across all dimensions.
• 1:14:16
  What are the metric that really stands out is a breakdown deals
• 1:14:18
  numbers, the net revenue retention there.
• 1:14:21
  It is a very competitive space, this payroll management
• 1:14:24
  processing space for smaller businesses.
• 1:14:26
  Someone like Paylocity in the public market has a 92% net
• 1:14:30
  revenue retention. That means if I just take all my
• 1:14:32
  customers from right now and and look at what they will do in the
• 1:14:35
  next 12 months, about 92% of the revenue I'm doing right now will
• 1:14:38
  get done in the next 12 months. So any growth has to come from
• 1:14:41
  new customers and additional customers and and that sort of
• 1:14:44
  thing. The deal is over 120%.
• 1:14:47
  So it is best in class. It is much better than like
• 1:14:49
  Paylocity. It means that their existing
• 1:14:51
  customers pay them more year over year and then you add new
• 1:14:54
  customers to grow even faster. So it feels like a very sticky
• 1:14:57
  business. I don't know where Rippling is
• 1:14:59
  at on NRR, but if they were, if they were north of 120%, I'd be
• 1:15:03
  surprised that would be that would be best in class across
• 1:15:06
  all SAS companies. So I don't know, Dave, what you
• 1:15:08
  think or what I'm missing, but it feels like if I had to pay 17
• 1:15:11
  billion for deal or 17 billion for Rippling and I was getting
• 1:15:14
  twice the revenue and twice the growth and a profitable
• 1:15:17
  business, it feels like deal is just a better deal.
• 1:15:20
  No, Well, I I agree. With you, there's something a
• 1:15:23
  little bit questionable there given all the metrics and why
• 1:15:26
  those companies are valued close to the same.
• 1:15:29
  I think maybe something not lost.
• 1:15:32
  I don't know if this was part of your analysis, but these two
• 1:15:35
  companies were involved in a bit of a, a news scandal 612 months
• 1:15:39
  ago. They were trying to steal
• 1:15:41
  customers from each other. There was someone who even
• 1:15:43
  masqueraded as a potential customer here.
• 1:15:46
  I, I don't know, like what happened in all of this.
• 1:15:48
  It seems to have like fallen off the news cycle, but that was
• 1:15:51
  kind of a big deal for a while, right?
• 1:15:54
  It was. Spicy Dave, anytime you get 2
• 1:15:56
  high profile companies and founders suing each other and
• 1:15:59
  alleging conspiracies and corporate espionage, it's it's
• 1:16:05
  at the very least entertaining. Yeah, you we, I'll, I'll recap
• 1:16:08
  some of the facts that came out six months ago and I guess it's
• 1:16:10
  fair to say it's still in litigation so we don't know
• 1:16:12
  where this where this comes out, but this is a reminder rippling.
• 1:16:16
  It's an HR fintech company it's Parker Conrad's company.
• 1:16:20
  Parker himself had founded Zenefits, and Zenefits was a
• 1:16:25
  great company and and the fastest it's.
• 1:16:28
  True, right? It was for a.
• 1:16:29
  While the fastest growing SAS company ever in the HR space.
• 1:16:33
  And then he had like all kinds of issues and scandals that
• 1:16:36
  really revolved around it became an SEC investigation and Parker
• 1:16:39
  had to resign. They were essentially caught
• 1:16:42
  creating software that allowed insurance companies to cheat
• 1:16:44
  state insurance exams and and licenses and and became quite a
• 1:16:49
  scandal and and then that company basically imploded.
• 1:16:52
  And so this is Parker's second act.
• 1:16:55
  And, and in Rippling, they had a contract with the deal for a
• 1:16:58
  while and then this deal began to encroach on their space and
• 1:17:01
  going a bit more from international contractors to
• 1:17:03
  being an HR fintech company. Ripling said, Hey, that's, you
• 1:17:07
  know, we're, we're done. We're going to eliminate, we're
• 1:17:09
  going to end the contract and terminate the relationship.
• 1:17:11
  And then about a year later, Ripling said, Hey, we've, we've
• 1:17:14
  identified an attempt at corporate espionage that that we
• 1:17:17
  think deal is responsible for. They actually found a spy and
• 1:17:21
  their and their lawsuit which is filed in multiple jurisdictions
• 1:17:24
  is 1 in Ireland, one in California.
• 1:17:26
  I'm not sure why. Maybe this person was located in
• 1:17:28
  Ireland and so there's Irish jurisdiction.
• 1:17:31
  He's only named as as BS. But this, this employee was
• 1:17:35
  stealing customer information, leads pricing information,
• 1:17:39
  pricing strategy and trying to help deal poach employees.
• 1:17:44
  And this, this alleged spy was communicating to Diehl's CEO.
• 1:17:48
  And so Ripling filed suit and said for hundreds of millions
• 1:17:51
  and said basically, you're, you're trying to steal
• 1:17:54
  information from our company and engaging in tortious
• 1:17:57
  interference. So I looked into the I looked
• 1:17:59
  into the filings and it looked like just a couple of things.
• 1:18:02
  Deal. First of all, the CEO, Alex
• 1:18:05
  Boise's, he denied the allegation.
• 1:18:08
  The next thing in the filing is the CFO and board chair Philip
• 1:18:12
  Boise's denies the allegation. Do you notice anything strange
• 1:18:16
  about the names of the CEO and the CEO that was?
• 1:18:20
  Feels like a family affair there, huh?
• 1:18:23
  Bingo. It turns out the CFO and board
• 1:18:25
  share deal is the father of Alex Boises.
• 1:18:27
  So I'm like, Oh my God, this, this seems OK, this seems
• 1:18:31
  interesting. So yes, they captured a suit for
• 1:18:32
  defamation and I'm not sure what's been proven, but there's
• 1:18:35
  a lot at the allegations are very, very substantial.
• 1:18:39
  It's from the filings, they're very substantial.
• 1:18:41
  There's a lot of evidence that there was some issue there was.
• 1:18:44
  You know some fire where that all that smoke was, Yes, Yeah, I
• 1:18:48
  think I. Think that's my read of it And
• 1:18:50
  the fact that you got the CFO and board chair being the father
• 1:18:53
  of the CEO also makes me wonder whether it's this, whether I
• 1:18:58
  really want to buy this company. That seems like a governance
• 1:19:00
  issue, but it's all ongoing litigation and maybe that maybe
• 1:19:03
  these are the issues that are making the, you know, the
• 1:19:05
  valuation a little bit more reasonable.
• 1:19:08
  If you can get. Comfortable with the litigation
• 1:19:10
  and the out risk. I guess the downside is there's
• 1:19:11
  maybe hundreds of millions of liability here and and I don't
• 1:19:14
  know that that's a, you know, any ending situation.
• 1:19:17
  So I still feel good about deal, but there's there's definitely
• 1:19:19
  some some hair on this dog. Interesting.
• 1:19:23
  Well, I guess we'll we'll keep track of those two companies and
• 1:19:27
  see how they're progressing. But they they are both on the
• 1:19:30
  radar for, you know, top 2030 companies that are private
• 1:19:33
  companies getting a lot of attention both in the primary
• 1:19:36
  market and in the secondary market.
• 1:19:38
  I wonder, David. 5 minute startups, did you ever have a
• 1:19:40
  company that was in the middle of a litigation like this and
• 1:19:43
  then still was successfully raising money and and and able
• 1:19:47
  to attract investors? Not successfully.
• 1:19:49
  I mean, out of maybe 2000 companies, we did see occasional
• 1:19:54
  fraud. I, I know that doesn't sound
• 1:19:57
  like too wonderful, but you know, when you invest in 2000
• 1:20:01
  companies, I think it's not surprising that you run across 3
• 1:20:03
  or 4 situations that are definitely a little sketchy.
• 1:20:07
  Probably two or three notable situations where a company was,
• 1:20:12
  I guess I don't know whether they were fraudulent, but they
• 1:20:14
  were working with insurers to, you know, do a lot of billing
• 1:20:17
  that was inflated. Another one where, you know,
• 1:20:20
  someone had basically, I guess cooked some numbers and even
• 1:20:23
  though venture capital investors had, you know, bought in later,
• 1:20:26
  it turned out some of that revenue was was very suspect.
• 1:20:29
  So I do think you see fraud happen even in, you know,
• 1:20:32
  venture where there's a lot of trust going on.
• 1:20:34
  Probably, I don't know if it happens at the rate of single
• 1:20:37
  digit percentages, but certainly, you know, some number
• 1:20:40
  of companies out of several thousand you, you run into those
• 1:20:43
  situations. But I think that scale in size,
• 1:20:47
  I, I don't know, like the largest we probably saw there,
• 1:20:50
  there was a company that was in the microbiome space that had
• 1:20:53
  been valued at maybe half a billion dollars.
• 1:20:55
  And unfortunately the, you know, the company got, you know,
• 1:21:00
  investigated and was and was shut down.
• 1:21:02
  The founders moved to Germany, I think to escape extradition.
• 1:21:07
  That that situation. We we had been seen investors in
• 1:21:10
  the company. There were several others that
• 1:21:12
  were investors at Series A&B that were more involved and on
• 1:21:15
  the board. But it does happen, yeah.
• 1:21:18
  Well, fraud and cooking the books is probably where I'd
• 1:21:20
  rather live as an investor, you know, being accused of corporate
• 1:21:23
  espionage. And maybe this is, again, we
• 1:21:25
  don't know if this is proven or not, but this does seem like
• 1:21:28
  potentially some bad behavior, but I don't know if it's quite
• 1:21:30
  on that on the scale of an existential risk.
• 1:21:33
  It may not be great for Alex if he actually is the CEO and he's
• 1:21:36
  in in contact with somebody who's been spying on his
• 1:21:38
  competitor. Maybe it's a huge governance
• 1:21:40
  issue, but it's instead the systems feel like an existential
• 1:21:43
  risk for the company to me. Just more of a a governance and
• 1:21:45
  maybe ACEO issue that's going to get resolved.
• 1:21:48
  Feels like a little bit of The Dirty tricks, you know, sharp
• 1:21:52
  elbows sort of story. But I guess my my guess is both
• 1:21:56
  businesses have real business there, which is why people were
• 1:21:59
  interested in stealing the customers.
• 1:22:04
  But I guess remains we see in which company ends up taking the
• 1:22:07
  lead and kind of the HR tech space, but they both seem to be
• 1:22:10
  doing quite a bit of revenue and growth.
• 1:22:12
  Yeah. For sure.
• 1:22:14
  All right, Well. Thanks for that analysis and I
• 1:22:16
  guess we'll keep watching to see whose deal is rippling better.
• 1:22:23
  Very good, Dave. Well done.