Latest / The Learning Corner by Precursor / Episode #8: Bowery Farms, Sapphire Partners, Patricia Halfen Wexler

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Episode #8: Bowery Farms, Sapphire Partners, Patricia Halfen Wexler · The Learning Corner by Precursor

• 0:00
  Experience has been when people raise money, they spend it.
• 0:02
  And so I'm pretty sympathetic to teams who just say, gosh, whether you had $2,000,000 or
• 0:06
  $200,000,000, if only we could go back in time and spend less money on this thing.
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  It always seems to be the case.
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  It's the week of November 11th.
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  Welcome to the learning corner, a Precursor Ventures podcast.
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  Welcome to the learning corner by Precursor.
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  I'm Nia Farnham, and I'm joined by our GP and managing partner, Charles Hudson, where we'll
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  be talking through the articles and good reads that caught our teen's attention over the past
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  week.
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  We're lucky to be in a single setting this time, so we're excited to give it a go.
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  Kicking it off to topic number 1, wilted greens, how a leaf eating pathogen failed deals
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  brought down Bowery Farming.
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  Our first article this week is from PitchBook and the recent collapse of Bowery Farming, a
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  once vertical farming giant, despite the early hype from celebrities and VCs as a tech forward
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  solution to food scarcity.
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  In 2021, Bowery made headlines with its $300,000,000 series c led by Fidelity, valuing
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  the indoor farms network at $2,300,000,000.
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  Amidst the heavy r and d spend and unsustainable cash burn, it was actually a
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  challenge that was more esoteric, a pathogen that wiped out massive amounts of Bowery's
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  produce and was the final straw for the company.
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  Following the end of partnerships with massive retailers like Whole Foods and Albertsons, an
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  announcement was made to all employees at the end of October that all operations would cease.
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  I've been going down some rabbit hole, reading statements from previous Bowery employees from
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  the earlier days.
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  And there is some debate that if cash was better managed throughout the brighter days at
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  Bowery, while the pathogen definitely would be a setback, lenders or investors might have
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  gathered around the company to save it.
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  So from your perspective, Charles, and there's a couple nuances here and the differences of
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  how we invest and where Vowry sits, but how do you make the call as an investor to free up
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  reserves to invest defensively?
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  And when do you feel confident to make the tough call to not double down?
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  Boy, I mean, I don't know.
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  We've done a handful of these hardware investments that are, like, big r and d
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  project.
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  I think the hard thing is oftentimes, you have to build everything even if you're like, gosh.
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  I wish somebody else would solve this.
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  And it's easy to talk yourself into sort of building a full on and dense.
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  And I remember when I first heard about the vertical farming industry, I was like,
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  someone's gonna have to build all of this stuff from scratch.
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  And so that's no small feat.
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  And I can understand why they waste all of that money.
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  For me, the big takeaway was oftentimes the things that kill startups, particularly
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  complicated integrated systems startups.
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  It's not the hard thing.
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  You go in thinking, gosh, r and d, how are we gonna deal with irrigation, lighting,
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  scaffolding, and it ends up being pathogen.
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  And so it's also for me just a good reminder that most startups do it, I'd say, a pretty
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  good job of ensuring against things that are obvious risks.
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  And they spend a bunch of money on R and D.
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  But oftentimes by solving problems, you create other problems.
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  And by creating a really powerful closed loop system, you create a system where introducing
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  something harmful that's hard to get out.
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  I'm a big believer that startups tend to spend the money that they raise.
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  Everyone says, oh, we're gonna raise this big pile of money, but we're gonna pretend that it
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  doesn't exist and we're not gonna spend it.
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  My experience has been when people raise money, they spend it.
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  And so I'm I'm pretty sympathetic to teams who just say, gosh, looking back, we wish we'd done
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  something different with the capital when we had it.
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  I'd say that's true of 90% of the startups I talk to that don't work out.
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  They usually look back and say, whether you had $2,000,000 or $200,000,000, if only we could go
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  back in time and spend less money on this thing.
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  It always seems to be the case.
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  There's a lot to unpack in the Bowery Farms story, and I think I actually wanna talk a bit
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  more generally Yeah.
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  About the reasons that companies can fail and how some of these reasons to this exact example
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  can be almost impossible to foresee and prepare for.
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  So, Charles, how are you able to be realistic on what levers are easy to manage and control
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  versus the things that are truly out of your hands and might be a poor use of time for you
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  to mitigate or manage.
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  I think, overall, founders and VCs are actually quite good at identifying the things that are
• 4:01
  likely to go wrong based on what's known at the time that you invest.
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  The challenge is you have to continue to revisit those assumptions.
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  I'll just give you two examples of things that were hard to predict that, like, negatively
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  impacted our portfolio companies.
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  We had one company that was building a hardware device that was very dependent on an imported
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  part from China.
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  And when import tariffs on that particular product, which the founder argued was, like,
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  misclassified by the government and shouldn't have been subject to a tariff, it made the
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  whole thing uneconomic.
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  That part was so valuable and so critical that the increase in price essentially made the
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  hardware device uneconomical.
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  Now we had in the back of our head said, you know, it's possible that we won't get a Chinese
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  supplier.
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  We'll be able to the price you want.
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  No one around the table thought, oh, there will be a change in basically the tariff regime that
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  will make this product suddenly prohibitively.
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  And whose fault is that, I guess?
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  It's the same thing.
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  We've had a handful of companies where I just think about during COVID.
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  I'm sure every VC has a story like this, but we had a company that was doing really well.
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  They provided revenue optimization software for boutique fitness studios.
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  So think like high end yoga, spin, wellness.
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  If you think about the most dangerous place to be during the early days of COVID was a small
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  contained space sweating with other people.
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  I talked to that founder and I was like, we don't know how long COVID's gonna last.
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  But even more importantly, we don't even know if on the other side of this, the people who
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  own those wellness studios will be in a position to reopen them.
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  And I don't see how we save this business.
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  And again, of all the things we worried about, competition from Mindbody, competition from
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  ClassPass, the one thing we didn't know is there was gonna be a global pandemic that was
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  gonna wipe out 99% of its customers.
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  The thing I always ask myself is, as these businesses evolve, what are the new risks?
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  Like, we have a CPG company in our portfolio that had one really critical relationship with
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  a supply chain provider.
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  And when the company was small, that supply chain provider was a great partner, and there
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  was no existential risk.
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  But as that business started to scale, one day I talked to the founder.
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  I was like, well, if that one partner went away, we essentially have no plan.
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  So something that was not a risk and not a problem when we started the business and wasn't
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  even a problem or a risk a year ago is now kind of existential.
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  And that founder, her head was already thinking about this issue.
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  And they took a pretty bold step and decided to essentially vertically integrate into a part of
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  their business.
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  And I think for me, the big lesson was this isn't something you just do.
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  It's something you have to kind of continuously ask yourself.
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  Where are the dependencies in our business?
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  What are the things if someone took that thing away where it'd be hard to bounce back?
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  And I'm always asking myself that sometimes it's a key partner.
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  Sometimes we're totally dependent on one platform for user acquisition.
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  Sometimes you're dependent on a person in your organization who's got a bunch of secret
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  knowledge or has a bunch of expertise.
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  So I'm always challenging myself to say, like, given where the business is, what are 1 or 2
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  things that are existential?
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  But I don't know that the pathogen thing would have been a high bingo card.
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  Right.
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  One last point, I guess, before the pathogen issue within Bowery Farms, the cost of just
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  doing business were pretty expensive.
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  And so at one point in the journey, Bowery Farms identified a pretty niche market that
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  they were able to kind of own, which was within the kosher foods Yeah.
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  Industry.
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  And so I guess at that point, if you're an investor on the company, is that where you say,
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  oof, this is a lot smaller of a market than we anticipated?
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  And is that when you kind of pump the brakes and start asking, is this company worth the
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  amount that we all have it written up for?
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  What do we do as investors to get on the right track?
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  We're doing not.
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  It's really hard to do that.
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  I've I've been in those rooms.
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  Oftentimes, what happens and this was my this is my perception.
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  My sense was everyone said, wow.
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  This is gonna be a blockbuster opportunity.
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  Just think about the ability to grow food closer to where it's consumed without needing
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  land.
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  I mean, what a what a promise.
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  I'm sure the deck said, what if all the produce in a local grocery store were grown 5 miles
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  away indoors at night and trucked to you?
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  Good for the planet, less food weights, less transportation cost, less intensive use of the
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  land resources that we have.
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  And it turns out many good ideas turn out to be far more complicated and far more expensive.
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  And when you add in hardware, all you're really doing is just cranking up the difficulty level.
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  So I think sometimes you get into a business and you realize, oh, our current market is too
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  small.
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  In many cases, people say instead of pulling back, oftentimes people say, let's step on the
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  gas and find something that will justify kind of the valuation that we've assigned to the
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  company rather than accept that maybe this isn't as big of an opportunity.
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  Those things are tough.
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  I've been there before, and there's a couple calls that I wish I could take back.
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  Right.
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  If we could all fight hindsight bias.
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  Scott would be a lot easier.
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  So moving on to topic 2, titled dirty secret, venture reserves are not always a good thing.
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  It comes from Sapphire Ventures.
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  It's a deep dive into the world of venture reserves and argues that holding too much in
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  reserves can lead to a misalignment between VCs and founders.
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  Over reserving can result in a lack of follow on capital, and under reserving can force
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  difficult decisions about what companies to support.
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  So there was a quote here that near blew my mind.
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  Sapphire mentioned how for their early stage funds that are hovering around 5 x, they shared
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  that the top company in each fund's portfolio is held at an average of 90 x, with the 2nd
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  best company at around 25 x, and then the average benchmark for remaining investments in
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  these portfolios at one x.
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  I think there's this misconception that when you have reserves, it means you plan to invest
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  further across your entire portfolio when, in fact, if we follow these numbers, our reserve
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  strategy truly only pays off when you're doing it incredibly selectively.
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  So, Charles, we have over 400 companies across our fund Yeah.
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  Without dumping an incredibly complex question, curious to get your take on reserves.
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  And it's funny because I just recorded a video for our portfolio company telling them how we
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  think about reserves and the TLDR that was our reserves are for the top 20% of our portfolio.
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  And if I were to think about my own journey with reserves, when I started the fund, I was
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  like, listen.
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  We're gonna do these really early pre seed investments.
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  The checks are gonna be small, and the fund is gonna be small.
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  We're not gonna hold enough in reserve.
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  Like, we're gonna focus on deploying.
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  Think like 80, 20, 75, 25.
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  And a lot of LPs said, why aren't you 50, 50?
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  So many of the other seed managers we talked to are 50, 50.
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  And you're not gonna end up owning enough of your winners.
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  You're gonna get diluted down.
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  I think reserves and reserves in theory are essentially different.
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  I think you make the spreadsheet, you go, here's what's gonna happen.
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  We're gonna invest in some companies.
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  I, the all knowing VC, am gonna properly identify the winners in my portfolio.
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  And either through pro rata rights or through relationship, I will be able to continue to
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  invest as much money as I want in my best companies.
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  And the truth is, like, that doesn't happen for most people.
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  Unless you're a big multi stage fund that can take a 20% position and effectively box people
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  out in subsequent rounds.
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  What most people find is some combination of the following problems.
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  You are unable to identify your winners early.
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  2, you're able to identify your winners early, but you are not able to concentrate enough
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  money into those companies.
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  3rd, you identify companies that you believe are winners, but turn out not to be winners and
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  you end up over allocated into those companies.
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  I've always been the belief if you segment money, you will use it for its segmented
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  purposes.
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  So if you say we're gonna take 50% of our fund or we're gonna put it in reserves, you're gonna
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  think 50¢ on the dollar is set aside.
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  And I think the temptation is to use it.
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  Similar to what the the Sephir folks said, we just had our annual meeting today.
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  Top 10% of our portfolio is by far the value drivers in the fund, and the top 5 of the top
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  10% is really where all the action is.
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  To their point, the most important decision you can make is how much of your money in your fund
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  did you get into your very best companies.
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  And, you know, per the Bowery article, you will sometimes have a company that you think is a
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  winner that gets really far in its life and doesn't work out.
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  And there's no coming back.
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  So I'm of the mind that the best time to deploy reserves are when you know more about the
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  company than the next person.
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  And so I would say at pre seed, instead of waiting for the a or the b, I'm like, we should
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  deploy all of our follow on capital between the pre seed and the a because that's a period of
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  time where we have the most access to management, the most information about the
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  company relative to other people, and where we're most likely to actually get our dollars
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  in.
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  And I've had many conversations with LPs who said, what about the series b?
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  I'm like, well, we got in at 5, and the b was done at 200.
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  I have 2 choices with that marginal dollar.
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  I could try to put that marginal dollar into a company at 200 post with the beliefs that
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  there'll be some upside there, but there's less risk of duty.
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  Or I could take that same check and get 40 x of punching power at 5 post knowing that there's
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  still many things that could go wrong.
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  And my view has been that for our fund strategy, the best thing to do is keep most of
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  the dollars in the early stage and not worry about trying to buy into series b and c rounds
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  of companies where we're just not as close to the teams then.
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  And if I think about our evolution as a fund, in the beginning, my view was, oh, you should
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  always do your pro rata.
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  If a company's raising, you should do it.
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  Then I was like, maybe that's, like, not such a great idea.
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  Maybe we should instead be a little bit more selective, but when we do it, still write a
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  full size check.
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  And then based on some of the analysis that the team has done, when we started looking at,
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  well, this check was one we felt great about and felt like offense.
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  This was a check that felt not so great at his defense.
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  Maybe we shouldn't write the same check size.
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  So I think I've gone through this evolution of just always follow on whenever you're presented
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  with the opportunity to try to be a little bit more selective, to then try to classify, like,
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  what kind of check you're ready.
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  And in the end, I've landed kinda where this article is, which is the best thing you can do
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  is try to keep the majority of your reserves for the companies where you have the highest
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  confidence.
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  And if you do that, the probability that you'll end up concentrating more dollars into your
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  best company is much higher.
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  But it also means you have to have a lot more awkward, uncomfortable conversations with
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  people you've already funded.
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  And I think sometimes reserves are a way to avoid that conversation or to kick that can
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  down the road.
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  And I made the decision a couple years ago that if we're gonna be long term partners with
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  people, we have to be able to tolerate awkward conversations.
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  Going along the lines of targeting how to feel confident about following on, there's logic
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  around the value of reserves in that it allows investors to invest deeper into companies with
• 13:51
  more data points on the company, ideally derisking the entire investment when compared
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  to the first check.
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  For a fund that maybe comes in at the series a and then decides whether or not to re up for
• 14:00
  the b, there are tangible things Mhmm.
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  Like revenue, margins, cap, etcetera, that you can use to ground the judgment.
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  For a place like precursor, where we come in as early as you possibly could, in most cases
• 14:12
  between precede and seed, there are not the same types of metrics to, quote, unquote,
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  derisk the investment when the company just started to see revenue or the launch just
• 14:21
  happened.
• 14:22
  So at these earlier stages, how do you think about reserves and where it makes sense in our
• 14:27
  fund model?
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  I think the beauty is, as I tell people, the companies we invest in, they don't leave
• 14:32
  footprints.
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  And so the beauty is kind of the only way to figure out what's happened in that company is
• 14:36
  to have some kind of regular touch point with management and be able to say, alright.
• 14:40
  Are these people on track?
• 14:41
  You know, we do 30 to 40 new investments a year.
• 14:43
  As you mentioned, we made 400 investment.
• 14:45
  I think we're pretty good at determining where in the distribution is this company based on
• 14:49
  performance after our 1st year.
• 14:51
  And oftentimes, as you know, we'll evaluate companies 6 months in and say, hey.
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  This company has had money for 6 months.
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  We've worked together.
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  What have we learned?
• 14:57
  And I find the companies that are in that top 20% that you wanna put more money into, they
• 15:02
  kinda jump out.
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  And it's usually because they've made more progress than their peer cohort.
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  They've derisked the business usually more in a philosophical way.
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  Usually, there's some substantial question that they need to solve, and they've solved it.
• 15:13
  You learn more about management's ability to hire, to execute, to make good decisions.
• 15:17
  And they're just like, this is a company that feels like it's well run.
• 15:20
  It is headed in the right direction.
• 15:21
  And it is much more qualitative, which is I think our whole edge, which is, like, making
• 15:25
  sense of this qualitative information.
• 15:27
  So the other thing that was hard in the beginning for me to get RLP's head around was a
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  lot of the follow ons decisions we're gonna make are gonna be preemptive offers from
• 15:35
  precursor to put more money into company in between rounds or based on performance.
• 15:39
  It's not gonna be waiting for someone else to come.
• 15:41
  Because by the time we wait for someone else to come, there's usually enough external signal
• 15:45
  that this is something they should
• 15:46
  At precursor, I know we think about follow on checks in kind of 2 categories, offensive and
• 15:51
  then a defensive.
• 15:53
  Thinking about it defensively, which I'll let you elaborate on that, is there maybe an
• 15:58
  argument he made?
• 15:59
  Like, if you're making a defensive check, why make it at all?
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  I've
• 16:01
  had this argument with myself.
• 16:03
  Offense is we are running this check because we are unambiguously enthusiastic about the
• 16:07
  company, and we believe that there's a real opportunity to make money with this investment.
• 16:12
  There's little to no reservation.
• 16:14
  Defensive checks are usually checks where I'm like, you know, we're writing this into a
• 16:19
  bridge because we are confident or hopeful that the things the founder had told us will happen
• 16:25
  will come to pass.
• 16:26
  Or the company sort of hip product market fit fairly late in the game.
• 16:29
  And in order to turn over another card, we need to fund the business for another 6 to 9 months.
• 16:35
  Or in some cases, I'm like, the company is going through an m and a process, and they need
• 16:39
  enough capital to keep the team together and see the process through.
• 16:42
  And I believe that they will both be successful and that we will, at a minimum, get our money
• 16:46
  back with this check.
• 16:47
  And it turns out there's a couple of reasons to write defensive checks.
• 16:50
  Sometimes it's worth it to buy more time.
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  But for me, the big lesson from our our research project is when you write a defensive
• 16:55
  check, you should write a smaller check as possible to accomplish your objective.
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  And a few years ago, I was like, well, the answer for a defensive check can also be 0.
• 17:03
  And that was like a big mental shift for me to say, like, there are cases in which the right
• 17:07
  amount of money for us to offer a founder is 0.
• 17:10
  Moving on to topic 3, the future of venture industrialization or back to basics.
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  It's our last article for the week, and it's by Patricia Halvin Wexler on medium.
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  Wexler hypothesizes on the future of venture, one where top tier fund managers are those who
• 17:25
  have the unique skills, abilities, and ecosystem wide relationships to make bets that
• 17:30
  result in outsized fund returns versus AUM heavy funds with the ability to make bets
• 17:35
  wherever and at whatever pace and price.
• 17:38
  She shares the drawbacks of raising massive funds, calling out the fallacy of widespread VC
• 17:43
  beliefs that no longer stand as AUM balloons.
• 17:47
  Patricia actually makes an interesting comparison between the restaurant industry and
• 17:51
  the venture world.
• 17:52
  And in in this comparison, McDonald's resembles massive funds that can allocate checks or meals
• 17:57
  at incredible scale, and Michelin Star Restaurants are funds that take more time and
• 18:01
  care into each individual meal or investment.
• 18:03
  She goes on to argue that venture requires a Michelin star approach to make fewer bets that
• 18:09
  are incredible every time.
• 18:10
  I'm sure that massive funds would argue that they are equally scaling up team, operations
• 18:16
  platform, etcetera, to ensure that they are able to make surgical bets across industries
• 18:20
  and essentially be Michelin restaurants at scale.
• 18:24
  So curious to get your take on that view and and, I guess, the article as a whole.
• 18:28
  Perry's article is great.
• 18:29
  It echoed a lot of things that I've been thinking about myself.
• 18:32
  Just to be clear, I think running McDonald's is hard too.
• 18:35
  Yeah.
• 18:36
  It's not like a simple operation to consistently put out hamburgers and fries that
• 18:41
  taste the same across space and time.
• 18:44
  It's just different work.
• 18:45
  The way I think about it is ventures going through, I think, this big seismic shift where
• 18:51
  the biggest funds in our industry have gotten much larger than they used to be.
• 18:56
  I saw a chart.
• 18:57
  It showed the largest venture funds by AUM.
• 19:00
  Number 1 was Sequoia.
• 19:01
  Number 2 was Andreessen.
• 19:02
  And Andreessen's a 12 to 15 year old fund.
• 19:05
  And so I think in a world where the biggest venture funds were a $1,000,000,000 in size.
• 19:09
  If you think about it doing venture math, raising a $1,000,000,000 fund means you're
• 19:13
  gonna give your LPs back for 3 to $4,000,000,000 over some period of time.
• 19:18
  And if you own 20% of those companies that exit, which is very hard to do, we're talking
• 19:22
  about creating 20 to $25,000,000,000 in exits.
• 19:26
  That's no small fee.
• 19:28
  But that was sort of the realm of of what was possible.
• 19:32
  And the question is, like, well, how do you how do you do that?
• 19:35
  How do you return?
• 19:35
  And the only ways I can see is, one, you have to find companies where the terminal scale of
• 19:39
  those companies is 20 to $25,000,000,000.
• 19:42
  You have to find the Databricks and you have to find the Stripe.
• 19:45
  But those companies are, like, few and far between.
• 19:47
  And the question is, does the presence of more venture capital create more of those
• 19:51
  opportunities?
• 19:52
  And I'm on the mind that, like, great companies are created independent of the amount of
• 19:55
  capital.
• 19:56
  Otherwise, it'd be great if we just double the amount of capital, we'd double the amount of
• 19:59
  amazing companies, and we would just do that Mhmm.
• 20:01
  Forever.
• 20:01
  I don't think it works that way.
• 20:02
  It also means if you're running one of these big funds, the only way to have competitive
• 20:06
  returns is you must must must be in the most important companies in your category.
• 20:11
  I just think if you're an OpenAI I don't know many other $160,000,000,000 private companies.
• 20:17
  So if you're an OpenAI, you have an advantage from a return to performance standpoint that's
• 20:21
  almost impossible for your competitors to replicate unless they can find another business
• 20:26
  like that.
• 20:26
  And so I think about it.
• 20:28
  As a small fund manager, it's very comforting for me to believe what Patty say, which is
• 20:32
  like, hey.
• 20:32
  Like, this has gotten out of control.
• 20:34
  But I'd argue if you're a fund manager who can turn 5,000,000,000 into 15,000,000,000, your
• 20:38
  limited partners will continue to give you $5,000,000,000 every time, and you will stay in
• 20:43
  business.
• 20:43
  And maybe if you turn 5,000,000,000 into 7 and a half 1000000000.
• 20:46
  Those funds, I think, are solving for a bunch of different problems, And they're also frankly
• 20:50
  able to fund ideas that require 10, 50, a $100,000,000 to get scale.
• 20:55
  And small funds cannot do that.
• 20:57
  You know, there aren't many blocks I've seen in America where you have a McDonald's on the same
• 21:00
  block as a Michelin star restaurant.
• 21:02
  And most cities have more McDonald's than they have or McDonald's like restaurants than they
• 21:07
  have Michelin star restaurants.
• 21:08
  And my question is, like, well, what happens to our industry if LP dollars and AUM continue to
• 21:14
  flow to the big funds?
• 21:15
  What opportunities still make sense for small funds?
• 21:18
  And I'm still working through that myself, and it's a question I ask myself every day.
• 21:21
  But I do recognize it's very self serving for me to say, like, the thing I do is, like, the
• 21:26
  true venture capital.
• 21:27
  And, of course, I do believe this.
• 21:28
  I do believe that small artisanal funds have an important role.
• 21:31
  But I I talk to my friends at Big Funds, and I have a lot of respect for the challenges they
• 21:35
  face because, you know, if you're running a $5,000,000,000 fund, only 20% of a
• 21:39
  $1,000,000,000 company returns 4% of your fund.
• 21:41
  Just I wouldn't say it doesn't matter.
• 21:43
  Doesn't help you solve your existential math problem.
• 21:46
  I'm just picking 5,000,000,000 out of as a wrong number.
• 21:48
  We raised 5,000,000,000 and we wanna send 10 to 15 back.
• 21:52
  We can't do that $200,000,000 at a time.
• 21:55
  So I think we will either learn.
• 21:56
  There's a very small segment of our industry that's capable of raising multibillion dollar
• 22:01
  funds and generating returns that are sufficient to keep LPs interested and excited.
• 22:06
  2nd, those firms will morph to be something that looks less like a traditional venture firm
• 22:10
  and more like a multiproduct asset management firm, and they will generate returns that make
• 22:15
  sense with that structure, or it will turn out that you can't actually make good returns on a
• 22:18
  $5,000,000,000 venture fund.
• 22:20
  And we've overshot.
• 22:21
  I had no idea what the right answer is gonna be.
• 22:23
  One thing that I did also like what Patty said was drawing on your comment of respecting the
• 22:28
  larger funds that have massive amounts of AUM and the different challenges.
• 22:31
  You can have a McDonald's and you can have a Michelin star restaurant at the same time to
• 22:35
  expect the same results and what they're doing to be the same.
• 22:39
  That's what's actually a fallacy.
• 22:41
  If you think about it, if you're a gigantic pension and you're like, I have $250,000,000,
• 22:47
  it's more important to me that I get $250,000,000 back than I get $750,000,000 back.
• 22:52
  So I am willing to take a more compressed return, but I don't want the downside scenario
• 22:57
  where I give you 2.50 and I get 1.25 back.
• 23:00
  And I think we talk a lot about the outperform with the small funds.
• 23:04
  The left end of that tail is really bad.
• 23:05
  Yeah.
• 23:06
  The the probability that you'll get nothing back from a big fund is fairly low.
• 23:10
  But the chances you'll get a 10 x fund are also lower.
• 23:12
  So I do think there's 2 different products serving 2 different objectives for oftentimes 2
• 23:17
  different limited partner sets.
• 23:18
  I think the thing that makes me kinda sad is it used to feel like all venture capitalists with
• 23:23
  the same scale of outcome was good for all of us.
• 23:25
  And now I'd say for most sub $100,000,000 funds, a 1 or 2,000,000,000 company, it's a
• 23:30
  good outcome for you.
• 23:31
  And it just wouldn't matter to the biggest, the big funds.
• 23:33
  That's a that's a new thing.
• 23:34
  More to come there.
• 23:36
  Hopefully, we'll see in the next 10 to 15 years.
• 23:38
  We are all out of time.
• 23:39
  Thank you, Charles.
• 23:40
  And thank you to our listeners and viewers.
• 23:42
  Please like, subscribe, and share with your friends, and we will talk with you all next
• 23:46
  week.
• 23:46
  Thank you.