Latest / trading places / TP5: Isomer Capital 🔬 | SpaceX $400B Valuation 🚀 | Nvidia 🤝 OpenAI | Revolut: Buy Sell or Hold? 🤔

Transcript

TP5: Isomer Capital 🔬 | SpaceX $400B Valuation 🚀 | Nvidia 🤝 OpenAI | Revolut: Buy Sell or Hold? 🤔 · trading places

• 0:00
  The strange discussion is, hey Dave, I really love your fund.
• 0:03
  I'd really love to buy into it at a 47% discount.
• 0:11
  Like wait, wait, wait what? What?
• 0:13
  You know what's cool, Dave? A billion dollars used to be
• 0:16
  cool. That they can have $300 billion,
• 0:18
  That's cool. All right, folks, welcome to
• 0:43
  another episode of Trading Places.
• 0:45
  We have a lot of news this week. Come on, big partnerships with
• 0:49
  NVIDIA, Open AI. There was an Open AI Oracle
• 0:52
  partnership that was, now it's not too long ago.
• 0:54
  We've got looks like approvals for Oracle and Byte Dance to
• 0:59
  manage TikTok or whatever the new TikTok app is going to be.
• 1:03
  Tether is raising at a $500 billion valuation.
• 1:07
  Wow. We've got AGP secondary deal
• 1:10
  that's only 400 million, three primary rounds for Aura and
• 1:15
  scale and figure which are all around a billion dollars each.
• 1:18
  But those are almost like, you know, we get somebody $100
• 1:21
  billion deals. We can't even spend time talking
• 1:23
  about billion dollar deals. Those are too small and we've
• 1:27
  had a couple of IP OS and we'll cover those, Those are Ethos and
• 1:30
  Fermi. So NVIDIA and Open AI are
• 1:33
  announcing $100 billion deal, $100 billion.
• 1:38
  I guess this doesn't start until 2027, but ten billion of that
• 1:42
  100 billion is happening as an investment.
• 1:45
  Now NVIDIA is putting money into Open AI.
• 1:49
  Open AI is buying data center capacity and chips with that
• 1:54
  money, I guess. But I think different from the
• 1:56
  Oracle deal here is Open AI would actually own and operate
• 2:00
  these data centers as opposed to renting those data centers from
• 2:04
  Oracle. The intended amount of power
• 2:06
  here is 10 gigawatts of power. I guess that's equivalent to
• 2:09
  peak capacity for the entire city of New York talking about a
• 2:13
  lot of power. Again, that's all happening
• 2:15
  right away, but it is planned to be happening in stages.
• 2:18
  That's just absolutely incredible in size.
• 2:21
  Well, good, good for them. But you know what, if I'm
• 2:24
  NVIDIA, I mean, it makes sense. I know it's $100 billion to buy
• 2:27
  equity and open AI, but you're helping them to build data
• 2:29
  centers and there's a strategic value to that.
• 2:32
  And guess how much NVIDIA stock went up on the 22nd when they
• 2:36
  when they announced the deal? I'm guessing it went up by more
• 2:39
  than $100 billion about it. Is that correct it?
• 2:42
  Went up at 3.9%, which on a $4 trillion company is like $160
• 2:47
  billion. So I guess what they just did is
• 2:50
  they issued stock or will issue stock worth, you know, more than
• 2:54
  what they just committed. And then they'll go turn right
• 2:56
  around and and get a bunch of open AI equity.
• 2:59
  So for them I can see how as long as that sounds like.
• 3:03
  A great deal. Yeah, if investors applaud the
• 3:06
  tie up, then that's that seems like a that seems like a smart
• 3:09
  business move for them. Again, you're investing in a
• 3:11
  company that's then going to buy capacity from you that hopefully
• 3:15
  will probably generate more in revenue.
• 3:17
  So this isn't really a crazy deal.
• 3:19
  I don't know about the valuation, but at least in terms
• 3:21
  of Nvidia's outlay, it probably makes sense.
• 3:25
  How, how do we compare this to the Oracle deal that was
• 3:28
  announced maybe a few weeks ago, which was a $300 billion deal?
• 3:33
  It was announced September 10th. Open AI contract with Oracle to
• 3:37
  purchase $300 billion in computing power.
• 3:39
  That's over. Five years, right?
• 3:41
  So let's call that one, you know, 60 billion a year and and
• 3:44
  again, there's a lot of strategic value and it starts in
• 3:46
  2027. So it's it's a multi stage deal,
• 3:50
  but again a a huge tie up between Oracle is a cloud vendor
• 3:54
  and open AI which obviously needs a capacity.
• 3:58
  And this also resulted in a huge jump in Oracle shares, right?
• 4:02
  That figure of 300 billion resulted in Oracle saying that
• 4:07
  they added more than 317 billion in future contact revenue.
• 4:12
  And so again, the amount of generated revenue is more than
• 4:15
  the announced amount of the deal.
• 4:17
  This was for about 4 1/2 gigawatts of capacity, which I
• 4:20
  guess is about half of the size of that NVIDIA announcement.
• 4:24
  But still, that's the equivalent of 2 Hoover Dams, or the amount
• 4:28
  of energy consumed by 4 million homes.
• 4:32
  That that's another deal where Oracle a month ago was a $600
• 4:35
  billion market cap company. Now they're over 800 billion in
• 4:39
  market cap. And so when you can, when you
• 4:41
  can essentially sign a contract like contract like this and then
• 4:45
  have a lot of that equity that you're issuing come right back
• 4:48
  to your PNL in sales, in revenues over a five year period
• 4:52
  and have a multiple valuation on your sales.
• 4:56
  Again, that's, you know, as long as investors are applauding that
• 4:59
  agreement, that's, that is a that is a smart financial move
• 5:01
  to lock in one of your best customers.
• 5:03
  So do you expect that we're going to see $100 billion deals
• 5:06
  or multi $100 billion deals announced every week?
• 5:09
  I, I feel like I can't even keep this straight in my head, how
• 5:12
  many different $100 billion deals are being announced?
• 5:15
  But I, I guess these really are pretty, pretty huge deals.
• 5:20
  Open AI is the leading AI company.
• 5:22
  NVIDIA is the leading chip producer for AI and Oracle is
• 5:26
  certainly in the top, you know, four or five companies that are
• 5:30
  doing data center hosting. Anything that we should be
• 5:33
  expecting from other data center providers, The pace of these
• 5:37
  deals just feels like it's off the charts.
• 5:40
  Yeah, I think what we're seeing is there's only it's a handful
• 5:42
  of players who are providing this kind of AI compute.
• 5:45
  I think it's really it's open AI and Frob, but there's maybe
• 5:48
  maybe a handful of others and then there's vendor and NVIDIA
• 5:51
  seems to be, you know, in the middle in the mix and everyone
• 5:53
  trying to compete with NVIDIA is is no stone unturned.
• 5:58
  So it's a it is a bit of a frenzy, but it doesn't seem
• 6:01
  sustainable either, right? Because some at some point the
• 6:04
  the ROI on the spend has to pay off.
• 6:06
  It certainly seems like everybody is spending money on
• 6:08
  data centers. That doesn't seem to be slowing
• 6:10
  down at all. Moving on, there was several
• 6:18
  news items related to Byte Dance and TikTok.
• 6:22
  Byte Dance is the parent company that operates TikTok.
• 6:25
  These deals were announced, I guess, by the the top deal
• 6:29
  makers you could possibly think of, which is President Xi and
• 6:32
  President Trump. But I guess more details now
• 6:35
  that Oracle is going to be significantly involved in
• 6:38
  managing the relationship. Alan, can you tell us a little
• 6:40
  bit more about how those deals are playing out?
• 6:43
  So remember we talked about TikTok, we made the, the byte
• 6:45
  dance valuation and we, we kind of concluded byte dance
• 6:48
  valuation kind of makes sense if you just believe the China
• 6:50
  business and what it's worth the international business and
• 6:53
  whatever the US is, is gravy. Like going off with my 14 year
• 6:56
  old daughter, I was like, there's no way that business is
• 6:58
  worth 0. The headlines here are that
• 7:01
  something like 43% of young Americans are getting their news
• 7:04
  primarily from TikTok. So.
• 7:06
  Bike Dance may still be getting a good bit of the revenue, but
• 7:09
  at least if you were concerned about data being controlled by
• 7:13
  foreign governments, maybe now that that's being addressed by
• 7:16
  Oracle and other local US folks. But it's all good now.
• 7:22
  I guess Trump is on the side of kind of moving this deal
• 7:25
  forward. Yeah, that provides some clarity
• 7:28
  for Bike Dance investors, I guess.
• 7:30
  Correct. Yeah, you, you, you when the
• 7:34
  press you often see that this is a it's described as a bike dance
• 7:37
  is a Chinese company that that among other things owns TikTok.
• 7:40
  That's kind of true. But remember in another domicile
• 7:44
  than China and the Chinese government has a a golden vote
• 7:46
  and governance over it. 60% of by dance is actually
• 7:50
  international investors including Silver Lake and
• 7:53
  Susquehanna and Brad Gersner's firm Altimeter and a few others.
• 7:57
  And so it is a international conglomerate.
• 7:59
  It it does turn out that is a part of this deal.
• 8:03
  The Chinese ND will reduce its ownership from 40% down to about
• 8:06
  20%. So they'll still own a big chunk
• 8:08
  of the company. Silver Lake, Oracle,
• 8:09
  Susquehanna, MGX out of the UAE will will increase their
• 8:14
  ownership. Bike Dance does get therefore
• 8:17
  20% of the profits of the US business on a go forward basis.
• 8:20
  That could be two $3 billion annually.
• 8:23
  So that's I think that was a win for Bike Dance.
• 8:25
  So it's, it's a non zero business to them for sure.
• 8:28
  And they have a 20% license fee on US algorithm revenues, which
• 8:31
  could also be 4 or $5 billion annually.
• 8:35
  So it's actually a pretty valuable win for them while
• 8:37
  solving some of those governance concerns you talked about.
• 8:40
  There was an announcement on Thursday that it valued the deal
• 8:42
  at 14 billion. I was kind of surprised to see
• 8:45
  if that came from JD Vance in the, in the, in the Oval Office.
• 8:48
  I'm quite convinced that number is wrong.
• 8:50
  I don't know where that number came from.
• 8:52
  It, it might be 14 billion going to Byte Dance in addition to
• 8:55
  these other revenue shares. In any event, it's a, it's a
• 8:58
  win. We, we had a valued AT0 in our
• 9:00
  model, Dave. And I think to have this thing
• 9:02
  be worth between 14 and maybe as much as 50 billion, if you're
• 9:06
  pressing value, all these pieces of the deal, it's definitely a
• 9:08
  win for for Byte Dance investors.
• 9:10
  So I guess everybody's happy with this deal, right?
• 9:13
  The Bytedance investors are happy because there's clarity.
• 9:16
  We already went over the fact that the Bytedance investors
• 9:19
  have a pretty reasonable valuation just on the Chinese
• 9:22
  and non, non-us, non China business alone.
• 9:26
  Now there's clarity on the US side of the business being worth
• 9:30
  certainly, you know, some money. Texas is a big winner here.
• 9:34
  Oracle is a big winner here. And your kids are happy because
• 9:37
  they're going to have some form of TikTok that's now authorized
• 9:41
  and approved by the US government.
• 9:43
  And I guess it's great for Oracle because they've probably
• 9:46
  been the number 4 provider for data centers after Amazon,
• 9:51
  Microsoft and Google. But maybe they can move up in
• 9:55
  the rankings now for data centers with all of us.
• 9:58
  What do we expect? They're going and certainly
• 10:01
  provides some big wins for Larry Ellison.
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  Now it secures a huge I'm sure TikTok was a multi billion
• 10:08
  dollar customer of their so it secures that that customers.
• 10:12
  Well, moving on to our next item here, Tether, the digital asset
• 10:15
  crypto company known for managing stable coins is raising
• 10:20
  15 to $20 billion and they're seeking a $500 billion
• 10:24
  evaluation. Does that sound reasonable?
• 10:26
  I'm on what do you, what do you think about that?
• 10:29
  You know, it puts them in the big leagues with 500 billion
• 10:32
  valuation, puts them with open AI and the, and the MAG 7.
• 10:35
  Basically in Broadcom, there's like one of the most, you know,
• 10:37
  top 10 most valuable companies in the world.
• 10:39
  I don't know. Here's what we know about
• 10:40
  Tether. They're a stablecoin issuer.
• 10:42
  That means that they took on assets and liabilities.
• 10:45
  So they are a company whose business model is they will take
• 10:50
  money in from investors and then they will issue stablecoin, but
• 10:53
  they have to have a reserve of like U.S.
• 10:54
  Treasury assets or something dollar denominated in the
• 10:56
  background. We don't know a lot about their
• 10:59
  financials other than at their last round, which was some of
• 11:01
  the 170, a 175 billion valuation.
• 11:04
  They have reserves of about 120 billion on their balance sheet
• 11:08
  and they're able to generate income reserves to get interest
• 11:11
  when when the dollar appreciates or when Bitcoin goes up, they
• 11:14
  can mark up those values. And so they did generate on
• 11:17
  paper at least 4.9 billion in profits in Q2, 5.7 billion in
• 11:23
  the first half of the year, 13 billion last year.
• 11:27
  So it's a profitable financial enterprise that has got a stable
• 11:30
  backing of of dollars. We're talking profits, not
• 11:36
  revenue in the 10s of billions of dollars.
• 11:39
  But you're saying that's also based on markups of assets, not
• 11:44
  necessarily free cash flow. Is that correct?
• 11:46
  That's right in in part. I think they're most, they've
• 11:48
  got probably 1 stable source of profits, which is probably
• 11:51
  couple billion billion a year, which is essentially all the,
• 11:54
  all the money that they're putting U.S.
• 11:55
  Treasuries pays interest. So that's that is profit.
• 11:58
  It's all the revenue, but it's profit free and clear.
• 12:01
  And the reason why there there's volatility in their profits is
• 12:03
  just because sometimes they'll mark stuff up that they're
• 12:06
  holding with Bitcoin and then sometimes they'll mark it down.
• 12:08
  So bitcoins had a great run last year and a half and that's been
• 12:11
  a tailwind. So I think it is a what I don't
• 12:14
  know about the 500 billion valuation is what do they do
• 12:17
  without that money? Is that all going to be
• 12:18
  stablecoin issued? And then that's going to be
• 12:21
  assets on their books. But then you have a liability
• 12:23
  because Dave McClure might come and say, hey, I've got the
• 12:25
  stable coin, but I want dollars back.
• 12:27
  And now they owe Dave McClure a dollar.
• 12:28
  So they've got liabilities that essential match their assets.
• 12:31
  So I don't know. But still they're leading in
• 12:33
  the, you know, the stable coin sort of market.
• 12:36
  I guess they're probably more than half of the overall volume
• 12:40
  of stable coin. Circle, which just went public a
• 12:43
  few months back, is probably a little bit less than half the
• 12:46
  size of tethered, about 74 billion.
• 12:49
  Yeah, they're a distant #2 I guess the Circle IPO is a good
• 12:52
  and their, their valuation maybe provides a, a bit of a basis for
• 12:56
  what Tether ought to be worth that.
• 12:57
  It does seem like a big valuation for a stable coin
• 13:00
  issuer though, to me. To me, putting it in the same
• 13:02
  league as Open AI or, or Broadcom or you know, one of the
• 13:06
  MAG 7, almost a MAG 7 company seems like a little bit of a
• 13:09
  little bit of a stretch. But I guess we'll see if the
• 13:10
  deal gets done. Seems like, seems like the
• 13:13
  market is underwriting stable coins is becoming, if not
• 13:16
  already a very, very big part of sort of the overall global
• 13:20
  economy certainly on the way there.
• 13:22
  So, and, and in a strange way, that's also I guess good for the
• 13:27
  US dollar. This is kind of what I think
• 13:29
  maybe people don't always recognize is when people are
• 13:32
  buying stable coin, they're also implicitly buying a dollar of
• 13:37
  U.S. dollar assets, right? Whether they're talking about
• 13:39
  bonds or something else. That is how the stable coins
• 13:41
  work, at least today. The the contracts generally say,
• 13:44
  I'm going to give you money. You have to you have to back it
• 13:46
  with U.S. Treasuries or you have to back
• 13:48
  it with some U.S. dollar denominated asset.
• 13:50
  So that creates demand for the US dollar as a world's reserve
• 13:53
  currency, at least for now and probably for this foreseeable
• 13:56
  future. Those rules could change.
• 13:58
  The stable currency rules could move to ambassador currencies.
• 14:01
  They could provide carve outs for other, let's say the euro or
• 14:04
  the yen or other currencies. But at least right now, that's
• 14:08
  not how much of these stable coins work.
• 14:10
  And so for now, it's providing a definitely retail demand for
• 14:12
  U.S. dollar assets. We have four or five other deals
• 14:16
  that are billion dollar deals, only $1 billion deals.
• 14:20
  We'll walk through some of those sort of quickly.
• 14:23
  On the secondary front, High Vista announced that they were
• 14:26
  doing AGP LED secondary deal across I guess seven of their
• 14:30
  funds and they provided over $400 million in secondary market
• 14:34
  liquidity. Evercore I believe was involved
• 14:37
  in in helping them with that deal.
• 14:40
  But still this is you know pretty significant amount of
• 14:42
  secondary market liquidity for just basically one transaction,
• 14:46
  right. I think $425,000,000 in net
• 14:48
  asset value across 7 different funds, there were 40 potential
• 14:52
  bidders. So seems like the secondary
• 14:54
  market is very, very active and and no, this is at the fund
• 14:57
  level, not at the direct secondary or company level.
• 15:00
  It's nice to see secondary activity continuing to pick up.
• 15:03
  It's been a hot category for a while and you know, that's
• 15:05
  that's a significant fund and a significant deal.
• 15:08
  OK. And then we have three different
• 15:10
  primary round deals which we're going to talk about very briefly
• 15:12
  here, starting with Aura. So Aura is the manufacturer of
• 15:17
  the Aura ring, which I've occasionally used as a customer.
• 15:21
  And this is a consumer deal and consumer hasn't really been in
• 15:24
  the news that much lately, but the company is raising I guess
• 15:29
  almost a billion dollars, $875 million series E round value in
• 15:34
  the company at close to $11 billion.
• 15:37
  And Aura itself is making about a billion of revenue a year,
• 15:42
  which was double the revenue they posted in 24.
• 15:46
  So is is consumer back about? Do you feel like this is a good
• 15:49
  story for consumer? I think that's a great sign.
• 15:52
  You you remember when hard things were hard.
• 15:55
  Do you remember when the Valley hated hardware?
• 15:57
  And now, now it seems like the vibe has shifted towards
• 16:00
  robotics. And through that combination of
• 16:02
  software and hardware, as you said, they've doubled in
• 16:05
  revenue. They're up.
• 16:06
  They're going to be a big 1 1/2 billion in revenue in the next
• 16:09
  12 months. It seems like they're a
• 16:11
  profitable enterprise and have been or at least close to it and
• 16:14
  seem like they've been a good job with the consumer
• 16:16
  technology. I don't know how sticky that
• 16:19
  product is or you know how, how, what the kind of recurring
• 16:22
  revenue is or what kind of a retention rates are if they're
• 16:25
  customers, but you know, A6 or 7X multiple in revenues is a
• 16:28
  that's a great sign on the company and I think a really
• 16:32
  helpful sign. Of a pretty healthy multiple for
• 16:34
  e-commerce, right? Normally we think about
• 16:36
  e-commerce companies being valued at two to three times
• 16:39
  revenue, perhaps correct. Yeah, 2 to 3 is probably where
• 16:43
  in the public markets that's kind of where these consumer
• 16:46
  products go. When I was the Chief Financial
• 16:48
  Officer at Sonos. And I think if we got into two X
• 16:51
  multiple on our company, given the revenues and the gross
• 16:54
  margins we had, then the growth that we had, you know, that
• 16:57
  would have been a pretty good deal.
• 16:58
  But I think in this case, the company's grown so quickly, 50
• 17:00
  to 100% year over year that they're in the high end of these
• 17:03
  multiples. Well, our next one is a company
• 17:07
  called N Scale and this is a British AI firm that's doing
• 17:11
  data centers and this one set a record for $1.1 billion Series
• 17:16
  B. That's the that's the largest
• 17:18
  European Series B deal that's ever been announced.
• 17:21
  It wasn't quite clear how much money the company is making, but
• 17:25
  again, this is kind of falling into the data center expansion
• 17:28
  sort of world. So people seem to be excited
• 17:30
  about data centers. They seem to believe that data
• 17:33
  centers are going to generate revenue.
• 17:35
  Does that sound crazy to you or sound all part?
• 17:37
  Well, this one had NVIDIA involved as well, right?
• 17:40
  This one of the one of the investors.
• 17:43
  Once again, Yep, exactly. NVIDIA and Nokia and Dell were
• 17:46
  some of the backers. I think we're back to NVIDIA
• 17:50
  issuing stock and bringing money into the company at a great
• 17:53
  valuation, taking that money and round tripping it into a an
• 17:57
  investment and then that that company will pay them and
• 17:59
  that'll show up his revenue on their books.
• 18:01
  Hey, presto. So I think there's a little bit
• 18:03
  of, I wouldn't, I wouldn't call it financial Ledger domain.
• 18:06
  That might be a bit financial engineering sounds better.
• 18:09
  But to see there's set a record for a Series B.
• 18:11
  You said this is a $1.1 billion Series B.
• 18:15
  Yeah. I don't know what the valuation
• 18:16
  is or what the financials are, but to have, you know, to have
• 18:18
  that relationship with NVIDIA and the others, you know, like
• 18:21
  Nokia and Dell, those are anchor investors and anchor customers.
• 18:24
  So I I will. I would bet there's something
• 18:25
  there. All right, so now let's talk
• 18:28
  about another billion dollar primary round raised a little
• 18:31
  bit more in the crazy category. So robotics startup figure
• 18:34
  raised a billion dollars at a $39 billion evaluation.
• 18:38
  And this is a company that literally had no revenue last
• 18:42
  year. Not sure how much if any revenue
• 18:44
  is happening this year. But how do you feel about a
• 18:47
  company raising a billion dollars at a $39 billion
• 18:49
  evaluation with no revenue? Is that is that insane or is
• 18:53
  that is that somewhat in the realm of reality here?
• 18:57
  I mean, we do have have robots in the field.
• 18:59
  I'm I, I believe that that maybe you know, and they have one or
• 19:02
  two major customers and BMW is one of them in the robots in the
• 19:05
  field. So I don't know what the
• 19:06
  revenues are this year, but they do have a legit customer and
• 19:09
  they have at least a significant set of contracts with this
• 19:12
  moving customer. But that valuation that did
• 19:15
  stand out to me as like being, wow, that is a, that is AI
• 19:18
  robotics. That is a bubble building in AI
• 19:20
  and robotics if I've ever seen one.
• 19:23
  This company was only valued at $2.6 billion last year, which
• 19:26
  you would have said was probably insane based on no revenue.
• 19:29
  But now it's 15 times, yeah, I think 15 times more expensive.
• 19:37
  Yeah, 15 next step up certainly in one year.
• 19:43
  OK, I'm not even going to try and figure out how that makes
• 19:45
  any sense. I'm just going to say good luck
• 19:47
  to those folks. Just seems crazy town.
• 19:51
  All right, we're going to wrap up here with a couple of IP OS
• 19:54
  Ethos is an IPO that was recently filed and this is an
• 20:00
  insurance backed company kind of on the smaller side for IP OS.
• 20:05
  This company had 30 million in net income on 183 million in
• 20:10
  revenue, but that's substantially up from last year
• 20:14
  when they only had 118. They had a revenue, so almost
• 20:17
  50% growth in the last year. You could sort of suggest the
• 20:22
  company's almost at a $400 billion run rate, but that's
• 20:24
  been on the low side of kind of the revenue requirements for
• 20:27
  most IP OS. Does this one sound on target
• 20:29
  Aman? Yeah.
• 20:30
  The last time they raised was 2021.
• 20:32
  And so that was crazy time, but there was a $2.7 billion
• 20:35
  evaluation. But they've got the black great
• 20:37
  investors who've given them a lot of cash and what a runway
• 20:40
  includes Excel and Sequoia and a few other a few other high
• 20:44
  quality companies. I think with that, but and
• 20:46
  they're growing at 55% year over year.
• 20:48
  So the first half revenue was 183 million, up 55%.
• 20:52
  That means they're probably on a run rate as I said for 400 plus
• 20:55
  new closer to 500. That does suggest that the bar
• 20:58
  for getting public in this market, which we thought you
• 21:00
  know before was 500 plus. There may be some dead now for
• 21:04
  very high quality middle market names, but I think that's a,
• 21:07
  this certainly qualifies as one. But the very strong technology,
• 21:10
  a lot of momentum and great backing.
• 21:11
  And so I think we're now seeing a much stronger and robust IPO
• 21:14
  market for those kinds of companies.
• 21:16
  Maybe one last IPO for this week.
• 21:19
  This one is for yet another data center, your buddy Rick Perry,
• 21:24
  who is a Texan and sometimes he can't remember the third thing.
• 21:28
  The third agency of government. I would.
• 21:30
  I would do away with the education, the commerce, and
• 21:38
  let's see, I can't. The third one, I can't.
• 21:41
  Sorry. Oops.
• 21:43
  But it seems to me that he's remembered that data centers are
• 21:46
  valuable and this company, Fermi, which is a REIT, is
• 21:50
  raising 550 million at a $13 billion valuation.
• 21:54
  Do we think data centers are a good bet?
• 21:56
  And is that a crazy or reasonable valuation?
• 21:58
  They're definitely a great bet. The demand seems to be off the
• 22:01
  chart from multiple sources, including some very well backed
• 22:05
  sources. I think it's it's healthy and a
• 22:07
  little bit of a little bit of irony that the guy couldn't
• 22:11
  remember a Department of Energy not only eventually ran the
• 22:14
  Department of Energy, but also seems now to be an energy
• 22:17
  captain of industry. So, so that's a that's a little
• 22:20
  bit of delicious historical irony.
• 22:22
  Oops. I think right now this is
• 22:24
  telling you that there's just no limit to the demand for data
• 22:26
  centers. And that is an investment
• 22:27
  project. That's just a great category to
• 22:29
  be in. And again, Texas is winning here
• 22:31
  because this will be an energy campus.
• 22:34
  It's centered in Texas. All right, Well, that's
• 22:36
  certainly been a crazy amount of news this week.
• 22:39
  You know, it's cool, Dave. A billion dollars used to be
• 22:41
  cool. That they can have $300 billion,
• 22:44
  that's cool. All right, folks, we're here
• 22:55
  with another episode of Trading Places, a very bad BC podcast
• 22:59
  about secondary. Our guests today are not very
• 23:01
  bad BCS they're very great BCS, Joe Schorage and Olada Auto BC
• 23:07
  from Isomer Capital. Joe and Olade, thank you guys
• 23:10
  for joining us today. Where are you calling us from?
• 23:12
  I'm in the Netherlands today and and Almadi is in London.
• 23:15
  Do you do a lot of different types of investments?
• 23:17
  But Isomer started out as a fund of funds, but now also has a
• 23:20
  secondary fund. Is that correct?
• 23:22
  Exactly. Yeah, In fact, within our funded
• 23:25
  funds, we've always done secondaries.
• 23:27
  So secondaries have been a key part of isomer.
• 23:31
  We just turning 10 years old this year.
• 23:34
  And so from the very beginning we did secondaries in a soft way
• 23:39
  sort of telling our GPS, you know, if you ever had an LP that
• 23:42
  needed to leave the fund or a founder that wanted liquidity,
• 23:46
  let us know. And so we've been doing that as
• 23:49
  part of our main fund, but but last year we launched A
• 23:52
  dedicated secondary fund to to double down on that.
• 23:55
  I wonder if we could take a few minutes to maybe hear both of
• 23:57
  your journeys to where you are today and anything in the back,
• 24:01
  you know, previous times that kind of made you come to some
• 24:05
  investment thesis or strategy around isomer or particularly
• 24:08
  around secondaries and. People always ask how did you
• 24:10
  get into VC and I always say don't take my route.
• 24:14
  It's a long windy Rd. I grew up in the USI studied
• 24:19
  electrical and computer engineering and like a lot of
• 24:23
  people in the getting out in the early 90s, I went into IT
• 24:26
  because the world was digitizing and worked in the banking
• 24:31
  industry and manufacturing industries.
• 24:33
  Basically running IT departments, managing software
• 24:36
  developers and trying to, trying to make businesses go faster,
• 24:41
  better, cheaper. I, I did an MBA and I learned,
• 24:45
  oh, there's people who build software not in the corporate
• 24:49
  world, but actually outside and, and build companies based on
• 24:53
  that. And there's a professional thing
• 24:56
  called venture capital that was very exciting when I first
• 24:58
  learned about it. That was in the early 2000s.
• 25:02
  I worked at Cambridge Associates as an investment consultant,
• 25:06
  private market specialist and being a tech guy, you know, my,
• 25:10
  my heart and interest was always in the VC side.
• 25:13
  But Cambridge is a great place because you see everything in
• 25:15
  the world. Yeah, buy out real estate and
• 25:18
  infrastructure and globally. So I learned a lot and, and was
• 25:23
  able to commit to lots of interesting funds all over the
• 25:26
  world. And I did a lot of venture at
• 25:29
  that time. And I did invest in secondary
• 25:31
  funds and fund fund the funds. Learned a lot about them.
• 25:35
  For folks who don't know, I think maybe you know, Cambridge
• 25:37
  Associates is what we, I think have heard as a gatekeeper, but
• 25:41
  they do a lot of different things.
• 25:42
  They're probably one of the most notorious folks in alternative
• 25:46
  assets, not just venture capital, right?
• 25:49
  Yeah, well, absolutely. They, they grew out of Harvard
• 25:52
  originally in the 70s and I think are one of the world
• 25:55
  leading firms for, for private markets of of all sorts.
• 26:00
  So it was a great, great place to be.
• 26:02
  I joined after Cambridge, Pomona capital, which is one of the
• 26:06
  oldest secondary funds. And then as as Europe, what you
• 26:10
  might call the, the explosion of tech, the Renaissance of, of VC
• 26:14
  took off. I started isomer and we really
• 26:18
  do those three things. We do primary commitments at the
• 26:20
  seed stage funds all over Europe and we we tell those same funds
• 26:25
  we'd love to Co invest with you and some of your star companies
• 26:28
  and we'd love to provide liquidity when those companies
• 26:32
  need it, when other LP's need it or or even occasionally when VCs
• 26:36
  need it. Maybe if we could give a lot of
• 26:38
  a chance to also talk about her journey into Venture and then
• 26:42
  kind of how you guys came together at Isomer.
• 26:44
  It's a much shorter one actually.
• 26:47
  So I grew up in Nigeria. I moved here over 20 years ago.
• 26:51
  And when you say venture, I feel like every Nigerian has a mind
• 26:54
  of venture in their head and thinking, oh, what does venture
• 26:58
  mean venture mean? It means that I'm basically
• 27:00
  founder. I actually began at Citi.
• 27:02
  I was in banking at Citigroup and then I moved on to
• 27:06
  corporate, corporate M&A advisory at Mizzou, the Japanese
• 27:09
  bank. Because of what I did at at
• 27:12
  Citi, I wanted to go into credit.
• 27:15
  And I thought the only reason was simple.
• 27:17
  It was basically because they do a lot of deals.
• 27:19
  So I was basically like, I want to do deals and I was speaking
• 27:23
  to the guy that placed me at Mizuho and I said to him, I said
• 27:27
  I want to move to the buy side. And he said what do you want to
• 27:30
  do? You've been doing corporate
• 27:31
  finance advisory. So the natural move is private
• 27:34
  equity. And I said, well, my friends
• 27:37
  have all moved into private equity, but they're not doing
• 27:39
  deals. They do one deal in like 2-3
• 27:42
  years, if any, right? And he said, have you heard of
• 27:45
  secondaries? I was like, what, what, what,
• 27:47
  what is secondaries, right? So I went home, did a lot of
• 27:52
  reading and this was really my entry into, into, into
• 27:56
  secondaries. And if you're, if you put on
• 27:58
  Google about secondaries, for some reason, color capital comes
• 28:02
  up right? So I I think.
• 28:05
  A lot of people's radar for sure.
• 28:07
  Exactly. And so therefore it was the very
• 28:10
  first place I applied to and that was my journey into, into,
• 28:14
  into, into secondaries. And you know, I spent.
• 28:19
  That's a pretty great place to get started.
• 28:21
  I have to say it's a great learning environment.
• 28:25
  So you really, and it's perfect from banking because you really
• 28:29
  learn about diligence, you really learn about asset
• 28:32
  allocation, you really learn about looking at different
• 28:36
  companies. But it's very different to, to,
• 28:38
  to what I do today because a lot of it is you're dealing with
• 28:42
  funds that have been around for years and you're dealing with
• 28:45
  funds that are raising billion dollars of, of, of money, right?
• 28:49
  And you're also dealing with companies with a lot of data,
• 28:53
  right? Which is of course different
• 28:55
  from from what I'm doing today. I think there's, you know, as
• 28:58
  you've mentioned a big difference between secondary and
• 29:01
  private equity and secondary in venture capital.
• 29:04
  It's almost like there's two different languages being spoken
• 29:07
  in those worlds. Maybe if you guys can talk about
• 29:09
  what's you know, what's similar or different and then maybe
• 29:12
  reflect that on how you guys are doing your own funder funds and
• 29:15
  secondary investment strategies at isomer.
• 29:18
  Whilst I was at color, the deals I did was over $1 billion and a
• 29:23
  lot of that was actually LP interest.
• 29:25
  So therefore you come with a lot of knowledge into an area where
• 29:29
  many don't have the knowledge of.
• 29:32
  We think of it as it, it allows us to basically buy growth,
• 29:35
  right. So you're buying a basket of
• 29:37
  assets and on, on the differences with private equity
• 29:41
  and VC, the way I think of it is the, the PE deals are more
• 29:45
  structured. So you're buying stakes in
• 29:48
  mature funds. As I mentioned, all companies
• 29:51
  with so much data. But most importantly, there's a
• 29:53
  lot of competition. So there are so many players,
• 29:56
  they're chasing the same broker deals, which meant I remember
• 30:00
  many days sitting in IC and we're discussing and focusing on
• 30:04
  pricing. So you're basically forced to
• 30:06
  compromise on price just to get the allocation you need.
• 30:10
  Whereas moving into VC secondaries, it's a completely
• 30:13
  different experience, at least for me anyway.
• 30:16
  I found it to be it's, it's more of an environment where as you
• 30:19
  may, it's, it's very uncertain. You know, today we're talking
• 30:23
  about XY valuation, tomorrow, it's completely different
• 30:26
  because of a tiny change in the market.
• 30:29
  So we craft our own deals. It's it's more relationship
• 30:33
  driven. So we're in a place where we're
• 30:36
  basically able to price in a way that works for our funds return.
• 30:40
  So you're not, you're, you're not competing.
• 30:42
  Most of what you're working on are things that you've derived,
• 30:45
  you know, from the, from your own portfolio.
• 30:48
  And I say portfolio because as as we mentioned, as as Joe
• 30:52
  mentioned, ISOMA is was originally a fund of funds,
• 30:55
  right. So still a fund of funds.
• 30:57
  Isoma has been around since 2015, you know, and in that time
• 31:02
  we now have what overnight funds in, in, in, in, in, in, in the,
• 31:06
  in the firm. And that may that basically
• 31:09
  means that looking at that alone, there's a lot of
• 31:12
  opportunities. I think one thing you pointed
• 31:15
  out that I also have experienced is, you know, the secondary
• 31:18
  market at least in venture capital and and certainly in
• 31:21
  funds secondaries, So very asymmetric information
• 31:24
  experience and very asymmetric sort of buying experience.
• 31:28
  I, I think one of the reasons that we also decided to focus on
• 31:32
  VC secondary and within that fund secondary is often times
• 31:36
  you're the only buyer. And I think that allows you to
• 31:40
  set a lot of interesting terms that you wouldn't be able to do
• 31:42
  in the primary market or, or even in other secondary markets
• 31:45
  where there's more competition, such as you mentioned in private
• 31:49
  equity. Joe, maybe if we could talk a
• 31:51
  little bit about, you know, how you think about strategy when
• 31:54
  you're thinking with your fund to fund hat on, when you're
• 31:58
  thinking with your, you know, Co investment hat and then you
• 32:01
  know, when you have the secondary angle as well.
• 32:04
  Are there are there different things that you're looking for
• 32:06
  in funds or companies? How do those strategies, you
• 32:08
  know, play together? To me, the it's an exciting
• 32:13
  moment in venture capital secondary is because we've got
• 32:16
  more great assets in the market than ever before, but very few
• 32:21
  buyers, very few liquidity providers.
• 32:24
  So that tension, the market really needs people who are
• 32:28
  doing what you're doing and and doing what we're doing.
• 32:31
  And it's relatively uncompetitive because there
• 32:34
  aren't a lot of players that they will come.
• 32:36
  Yeah. And to me.
• 32:38
  I sometimes say to people like there's probably as many
• 32:41
  strategies in secondary as there are in the primary market, but
• 32:45
  there's like 120th the number of firms.
• 32:48
  Well, exactly. And the history of secondaries
• 32:52
  really goes back to the late 80s and early 90s when groups like
• 32:56
  Pomona and Color got started. And you know, there's no
• 33:00
  liquidity provision, there's no redemption clause in an LPA.
• 33:04
  And that's the root of of all LP interests sales that.
• 33:08
  So over over the last few decades, the private equity
• 33:12
  market has come up with all kinds of structures and tools
• 33:15
  and very clever mechanisms to solve that liquidity problem
• 33:18
  that hasn't really been done so much in venture.
• 33:22
  Yeah, yeah, definitely. You notice that like in in
• 33:26
  private equity and in another secondary asset classes, it's
• 33:30
  like advanced physics and particle accelerators.
• 33:32
  And then over here in, you know, venture capital, we're like,
• 33:35
  looking at that apple falling from the tree and like, oh, how
• 33:37
  does gravity work? Well, and, and I'm a simple guy,
• 33:41
  so I like that simplicity to be, to be really honest, sometimes I
• 33:45
  think what we're really doing is, is just taking some of those
• 33:48
  tools that have been built in the private equity market and
• 33:50
  bringing them into venture. There's no magic to it.
• 33:54
  We didn't invent a lot of these things as Omaladi said, mostly
• 33:57
  on LP interest, but also on companies, also on GP commits
• 34:01
  carry stakes sometimes. And the big difference is of
• 34:04
  course in private equity you're, you're buying the assets are
• 34:07
  EBITDA profitable companies. So there's.
• 34:10
  Numbers to look at and it's unlikely the straight thing
• 34:15
  called profit, yes, that actually.
• 34:17
  You can. You can calculate EBITDA
• 34:19
  multiples and and it's unlikely that you're going to have a high
• 34:23
  failure rates in a buyout portfolio, right.
• 34:27
  So that just therefore dispersion of returns is much
• 34:29
  more narrow. And So what you see in that
• 34:33
  market is become intermediate intermediated pricing's really
• 34:37
  tight as as Omaladi was saying. And so returns over time have
• 34:41
  come down and normalized in venture.
• 34:45
  My, my feeling is buyer beware. So you're, you know, you're
• 34:50
  buying your. Growth, well, well, West, yeah,
• 34:53
  there's there's a lot out there happening and some of it's good
• 34:55
  and some of it's not so good. Yeah.
• 34:58
  So if you buy into something that's a rocket, you you ride
• 35:01
  that to some amazing adventure style returns, you may also buy
• 35:05
  something that trails and and you lose your money.
• 35:08
  And so there's there's the risk. So I believe asset selection is
• 35:13
  the most important feature, right?
• 35:15
  If one of my favorite sayings is if you if you buy a bag of
• 35:20
  rubbish, you know even at a 95% discount, it's still a bag of
• 35:24
  rubbish. Even even when it's free,
• 35:27
  because then you end up racking up cuts later to dispose of it.
• 35:31
  I think you're right, there's no discount that turns a bag of
• 35:33
  coal into a bag of gold. Yeah, that's, that's a great way
• 35:38
  to say it. And and you know assets that
• 35:40
  today our our call may go on to be great, but this is very much
• 35:44
  a point in time. So when you're a primary
• 35:46
  investor, you're really backing people right.
• 35:49
  When you back emerging managers as, as I know you do on the LP
• 35:53
  side, you're really investing in a, in an idea with, with great
• 35:57
  talent, you think can execute and, and uncover the next big
• 36:00
  thing and drive lots of returns. So that's really a, a bet on
• 36:04
  people. And then with Co investing, so
• 36:07
  there's kind of a timeline, right, Because Co investing is
• 36:09
  OK now the same guy or, or lady that you're back now is a great
• 36:14
  company, it's growing. Do you want to fund its growth
• 36:17
  curve? So you've got, you've got a, a
• 36:19
  product you can analyze a product market fit.
• 36:22
  You know, you have a bunch of metrics at least.
• 36:24
  You don't have profitability, you don't have a maybe they're
• 36:27
  creating a new market. So you know, you can't look at a
• 36:31
  lot of the things you you would in private equity still, but you
• 36:34
  have, you know, you're backing an activity, right?
• 36:36
  Secondary is then further along the line where, hey, the thing's
• 36:40
  working. Let's talk about the exit.
• 36:42
  When can you see that? You know, it's, it's more
• 36:45
  mature. We, we really focus on mature
• 36:47
  assets that that could exit in the next three to five years,
• 36:51
  which will have a lower risk profile.
• 36:53
  And is there a good price we could buy in at the, you know,
• 36:56
  that growth curve gives us a good return over a short
• 36:59
  duration. So it's a, it's a different
• 37:01
  logic, but the same asset, you know, And what's really fun is
• 37:04
  you may back the thing in the beginning, you may back it again
• 37:06
  and you may buy more of. It later yeah and I think that
• 37:09
  was great the way you sort of laid out the different time
• 37:11
  horizon there. My my guess is probably when you
• 37:14
  make that better an emerging manager and their fund, you
• 37:17
  know, they're typically deploying maybe precede and seed
• 37:20
  maybe some at a I'm guessing you probably take a look when those
• 37:23
  companies start getting to A&B or B&C, what what's the sort of
• 37:27
  time frame when you think about, you know, direct Co investment
• 37:30
  opportunities? Is that does that start at
• 37:33
  Series A for you or is it really more B&C?
• 37:35
  Yeah, it's what and and the definition in Europe is a little
• 37:38
  different than US, but, but we tend to start to look at Co
• 37:42
  investments when our VCs are running out of money basically.
• 37:48
  So that's that's often why they're.
• 37:50
  Not out of pro rata rights, right?
• 37:52
  I bet you they have pro rata rights but not the capital and
• 37:54
  that's an interesting type. Exactly.
• 37:57
  And I think there's this wonderful moment like if you, if
• 37:59
  you go too early, you're really taking too much risk and that's
• 38:02
  the role of of the seed funds in our portfolio.
• 38:04
  On the other side, if you're going too late, you're, you're
• 38:06
  paying very high prices and you know, not right buying a
• 38:10
  material position. So there's this one or two
• 38:13
  rounds in the middle, which may be called a or a plus or B or
• 38:17
  maybe even AC, But that's, that's generally where we're Co
• 38:21
  investing. And then others are coming
• 38:23
  later. Growth funds and bigger firms
• 38:26
  are coming in later. So there's this little moment
• 38:28
  where you know, we can be quite important helping out our our
• 38:32
  funds, but then the the companies are still at good
• 38:35
  valuations and you can underwrite a growth curve.
• 38:38
  And then when does sort of the traditional secondary or I guess
• 38:42
  it's a venture secondary get come down?
• 38:44
  I, I would guess that on that day for your math, it's probably
• 38:48
  companies. I don't know if you're looking
• 38:50
  at companies for secondary, but I would guess, you know, 3050
• 38:53
  million maybe more. And then funds, are these like
• 38:56
  710 year old funds or even older?
• 38:59
  We can mostly do LP interest. So about 7075% of our fund is on
• 39:05
  the LP interest, which is basically us buying stakes in
• 39:10
  other funds, right? And then on the company side, we
• 39:14
  can still do some direct, which is around what 2025% of our
• 39:17
  fund. And as you say, we also like to
• 39:19
  see companies that are showing traction.
• 39:21
  So you have revenues, you're close to profitability and most
• 39:26
  importantly, you're nearing exits like we need to be able to
• 39:29
  see a clear exit in the next five years, ideally 3 to 4
• 39:33
  years. But most importantly in all of
• 39:36
  these, as Joe mentioned, quality is number one, right.
• 39:39
  So here, this was AGP that we've followed for a long time.
• 39:42
  We've been looking at their fund.
• 39:43
  We priced it a couple of times. We we couldn't get to buy it
• 39:48
  because we were offered. And so when this opportunity
• 39:51
  came, it was, it was we, we were very quick to jump at it.
• 39:54
  But honestly, it was simply because we already had
• 39:57
  information, because it was already in the portfolio, which
• 40:01
  is helpful. I, I think probably in, in my
• 40:04
  mind, this is kind of like just copying somebody else's
• 40:07
  homework. You guys have already done the
• 40:09
  homework. In fact, it's your homework in
• 40:12
  the same way as when you make that initial investment in the
• 40:14
  fund manager, when you're looking at Co investments,
• 40:16
  you're kind of copying your homework maybe at series B when
• 40:19
  they've already done the homework at seed and A when
• 40:23
  you're doing the secondaries, you know, and both LP
• 40:26
  secondaries and directs, you're sort of copying the homework of,
• 40:29
  you know, baby Joe and that fund manager and how they've done
• 40:32
  over the last five to 10 years. And I think it's it's
• 40:36
  interesting because if you look in the US, probably Michael Kim
• 40:39
  at Sendana Capital came to a similar, you know, sort of
• 40:42
  conclusion. They started out as a fund of
• 40:44
  funds and then they also decided to do a secondary fund recently,
• 40:48
  I think in partnership with Klein Hill.
• 40:51
  And that vehicle was mostly just buying their own existing
• 40:54
  portfolios I I think. Yeah, the the deal that Omaladi
• 40:58
  is mentioning is a is a nice deal which is very collaborative
• 41:02
  with the GP and it's a good example of we were, we are
• 41:07
  primary in the the funds of this GP.
• 41:11
  I'm, I'm on the ELPAC as it, as it turns out and the funds are
• 41:14
  growing along well and we're in regular discussion with them and
• 41:18
  they said at some point, well, we're going out for fund four
• 41:21
  and we think some of our fun one LP's on 2 LP's, you know, would
• 41:26
  like some liquidity before they're giving us new capital
• 41:30
  for fund four. We said, OK, that's interesting.
• 41:32
  Well, how about? They like it.
• 41:34
  They might even require it. I required yeah that that that's
• 41:46
  been the volume has been turned up on that music lately, but.
• 41:49
  Quite a bit. Yeah.
• 41:51
  And, and, and so we said, well, why don't look, we, we love the
• 41:54
  fun. Actually, we've Co invested into
• 41:56
  one of the companies that's doing extremely well, several
• 41:59
  companies at 304050 million kind of revenue levels.
• 42:05
  And so we said, well, why don't we, why don't we price it up?
• 42:07
  And if you think this works for some group of LP's, you make the
• 42:11
  offer, a tender offer to all your LP's and there's a long
• 42:15
  tail of high net worth LP's and so on.
• 42:17
  And it's fun. And let's see, you know, maybe,
• 42:20
  maybe some people like to take half their stake off the table
• 42:23
  or whatever. And indeed, we had a, we had a
• 42:26
  very nice response. And I love this deal on, on lots
• 42:30
  of metrics. But one reason I really love it
• 42:32
  is the GP said, you know, this had a wonderful effect in my LP
• 42:36
  base. Some people sold and they were
• 42:38
  happy and they took, took some of their money off table.
• 42:41
  But even those who didn't sell said, I really appreciate you as
• 42:44
  AGP giving me the opportunity. You know, you're thinking about
• 42:48
  me, you're thinking about returning capital, you've
• 42:50
  brought in your partner Isemer to do it.
• 42:52
  But you know, hey, I really appreciate that.
• 42:54
  And it makes me feel more positive about your next fund
• 42:58
  and and the liquidity profile of the future.
• 43:01
  Could I ask you guys a little bit about the terms LP LED and
• 43:05
  GP LED? Because I think in the private
• 43:08
  equity secondary market, you hear those all the time.
• 43:12
  In fact, it's almost like those are two different asset classes
• 43:14
  from their perspective in venture.
• 43:17
  I think we're just starting to really hear those terms when
• 43:20
  we're talking about ventures, especially here in in the
• 43:23
  Valley, usually we're talking about direct secondary
• 43:25
  companies. So you really don't, you don't
• 43:27
  hear that term. You might hear it at the venture
• 43:31
  fund secondary level. But even even there, when I hear
• 43:34
  people say GP LED and LP LED, usually what I think to myself
• 43:38
  is, oh, those folks have done private equity before.
• 43:41
  It's, it's almost like it's a, it's a key where they say GP LED
• 43:44
  or LPLP LED. It's like you've, you've been
• 43:46
  looking at private equity secondary you're.
• 43:48
  Right. I mean, we never talk about GP
• 43:51
  LED or or LP LED in the venture space, right.
• 43:54
  And so if somebody says that, you know, they, they.
• 43:57
  Had a background. Like Omolades or whatever,
• 43:59
  right? However, as those terms suggest,
• 44:02
  what it means is who's who's trying to organize this deal,
• 44:06
  right? An LP has a problem in their
• 44:08
  portfolio or wants to rebalance while they're kind of leading
• 44:12
  the sale, Hey, I'd like to sell this right or AGP is trying to
• 44:17
  generate liquidity within their portfolio, so wants to do a
• 44:20
  strip or track, you know, doing one of these tender offers.
• 44:24
  I mean, the deal I described a minute ago technically would be
• 44:27
  AGP LED, although I don't like that term because we kind of do
• 44:30
  all the work but and but but that, that's a little bit the
• 44:35
  difference when. You think about GP LED or LP
• 44:38
  LED, are those different dynamics, particularly from a
• 44:41
  competition standpoint from maybe a single buyer versus a
• 44:45
  group of buyers? Are there different dynamics in
• 44:48
  that conversation? If it's an LP LED, as Joe
• 44:51
  mentions, an LP is the one that is basically the wants to sell.
• 44:54
  They're leading their sale process, right.
• 44:56
  If it's a GP LED, the GP is leading the sales process,
• 45:00
  right? Actually the interesting thing
• 45:02
  is when I was a caller, GP LED to us, we would call a
• 45:06
  continuation vehicle GP LED because at that time GPS were
• 45:10
  not leading any sale processes, right, Only the ones where it
• 45:15
  was continuation vehicle. But of course that's not what it
• 45:17
  is. What it is just was Joe as so we
• 45:20
  always think what is been sold. So we focus on the assets that
• 45:23
  has been sold and we focus on what is the edge for us.
• 45:26
  So the way we price it, it's looking at the assets.
• 45:29
  So we don't think oh, it's been sold by the LP, it's been sold
• 45:33
  by the GP. So we need to think about it
• 45:35
  differently. What is however different is
• 45:37
  that when it's AGP LED process, IE when it's a process like the
• 45:42
  transaction that we spoke about, we literally work in
• 45:45
  collaboration with the GP. So I feel like you have more
• 45:48
  honesty you, you know, we're helped and therefore you can say
• 45:53
  in a way that the pricing is probably more transparent in
• 45:58
  that sense, right? So because you're working with
• 46:01
  the GP, whereas if you're working, if it's the LP that is
• 46:04
  selling, you might get a few calls with the GP, but the GP
• 46:09
  does not have any real motivation to help because
• 46:12
  they're not driving it, right. So, and, and actually what is
• 46:17
  interesting that we didn't mention is this deal that we
• 46:20
  worked on with the GP, you know, it became a point where actually
• 46:25
  the GP was also interested in buying alongside us.
• 46:28
  So therefore you have alignment. I think alignment is a key thing
• 46:32
  one. Of the things we sort of think
• 46:34
  about is when it's an LP LED process, usually the psychology
• 46:38
  is just for that LP when you're talking to AG PS sometimes the
• 46:42
  psychology is on behalf of all of the LP's that that GP is
• 46:46
  thinking about. And I, I might say sometimes the
• 46:49
  pricing is a little bit more, you know, in reality when the GP
• 46:54
  is talking about it because they're trying to optimize for a
• 46:57
  bunch of their sellers and. Didn't negotiate when you're
• 47:00
  talking. Right.
• 47:00
  When you're talking to a single, exactly when you're talking to a
• 47:03
  single seller, you might have a, you know, a situation where that
• 47:07
  seller is really motivated for one reason or other to get
• 47:10
  liquidity or for diversification or some other reason.
• 47:14
  They might not always be selling at a market price.
• 47:17
  They might be selling at a price that's really, you know, because
• 47:20
  of their current situation. I think when you're talking to
• 47:22
  the GP, usually they're trying to make a decision on behalf of
• 47:25
  all of the LP's and their fund. They're not trying to, you know,
• 47:29
  optimize for someone who's more or less desperate or more or
• 47:32
  less required. They're really trying to, you
• 47:33
  know, get a good price. And I, I think they're, you
• 47:36
  know, you really have to know that it's probably not the
• 47:39
  discount that is your advantage. Maybe it could be if you're the
• 47:42
  single buyer, but you're, you're probably have to, you know, buy
• 47:45
  quality assets at A at a good price.
• 47:47
  Some Jeep is really also think about the price and in terms of,
• 47:51
  oh, is that what they really think about my fund?
• 47:54
  You know, like is this what it's worth?
• 47:56
  And you know, that plays into the psychology as well.
• 47:59
  On that aspect, it leads to many strange discussions because we
• 48:03
  only buy assets we like and believe will grow.
• 48:06
  However. If that assets being held at a
• 48:08
  very high price, well, we are looking for a significant
• 48:13
  discount to bring it back to reality.
• 48:14
  And so the strange discussion is, hey Dave, I really love your
• 48:18
  fund. I'd really love to buy into it
• 48:20
  at a 47% discount. You can see.
• 48:26
  Yeah. I thought you.
• 48:27
  I thought you loved my fun. Why are you asking for this big
• 48:30
  disc? I thought you love my baby.
• 48:32
  My baby is beautiful. It's beautiful at 53 cents of
• 48:35
  the dollar, but baby, not so pretty at $0.80.
• 48:37
  Of the dollar, yeah, a lot of these issues come back to access
• 48:41
  and data. So if you're, if you're,
• 48:44
  whatever the asset is, you're, you're trying to, we're always
• 48:47
  trying to figure out can we access the, the data?
• 48:52
  If it's a company, the management team, you know, if
• 48:54
  we're worried about the sales pipeline, can we talk to the,
• 48:57
  the head of sales, for example. And through the GP that's often
• 49:02
  possible. Through the LP that's often not
• 49:04
  possible. So that's where our primary book
• 49:07
  becomes very useful because sometimes we're, we're into
• 49:11
  companies through another channel and you can, you can use
• 49:14
  that network or access it. And, but my feeling particularly
• 49:17
  about venture secondaries is if you can't get direct access to
• 49:21
  the data and sometimes the key people, you shouldn't do a deal.
• 49:25
  So it's, it's the way you need to do a good analysis.
• 49:29
  And if you can't get that data, you know, you have to be honest
• 49:32
  and say we can't, we can't price this sensibly.
• 49:35
  I think about the analogy of like, if you're playing poker
• 49:38
  and you look around the room trying to find the sucker and
• 49:39
  you can't figure out who it is, it's you.
• 49:41
  And so maybe you should step back from that poker table.
• 49:44
  Could you walk us through a transaction so.
• 49:47
  Back to the GP collaboration, GP says.
• 49:51
  I think some LP's might want some liquidity.
• 49:54
  You know, I've I've heard those kind of noises that I last
• 49:56
  pretty. Sure, that's true for a lot of
• 49:58
  us. So it's OK, well why don't we
• 50:01
  price it up? And so we you know, went through
• 50:03
  a process together with the GP and our question in our in our
• 50:07
  modeling is if we acquire this asset today, what's, what's the
• 50:10
  likely progress over the coming years?
• 50:13
  What, what's the exit timing and pricing discount backed by your
• 50:18
  target return and and there's your bid price.
• 50:20
  And so we said, OK, here, here's our price in collaboration with
• 50:24
  the GP. They said, yeah, that's I get
• 50:27
  it, that's interesting. And they helped us think it
• 50:30
  through and so on. They then sent in a letter to
• 50:34
  all their LP's to say, you know, our friends at Isomer would be
• 50:38
  happy to buy a position. You, you probably know, I mean,
• 50:41
  in this case we were kind of insiders because we were
• 50:45
  primary. And, and so, hey, you may have
• 50:47
  met the Isomer people at, at that one of our meetings or
• 50:50
  whatever, they're interested to buy it.
• 50:52
  We had actually 24 sellers in total.
• 50:56
  OK, wow. You, you never know, could be
• 50:58
  one or two, could be 24. It was interesting because they
• 51:02
  didn't necessarily want to sell everything.
• 51:05
  Well, I'll sell half, you know, be great to take half my stake
• 51:09
  off the table and, and ride, ride half forward.
• 51:13
  And so we, yeah, went ahead and the couple of interesting
• 51:16
  aspects, one of our fellow LP's that I like that deal too.
• 51:19
  Can I buy some? We said OK, we we like to be
• 51:24
  friendly and try to help and then the GP to our to our great
• 51:29
  pleasure and amusement said oh can I buy some too?
• 51:34
  Actually, I came. To party around very quickly,
• 51:36
  yeah. So that was, you know, kind of
• 51:38
  we created the, the deal starts as an idea.
• 51:41
  You know, maybe some people want liquidity, then it goes into
• 51:44
  this process and then ultimately multiple buyers, multiple
• 51:47
  sellers. This fund was pretty much fully
• 51:50
  invested. It had a bunch of companies that
• 51:53
  had grown quite well. Not not much had exited yet,
• 51:56
  which makes it attractive because you're buying kind of
• 51:58
  the whole fund. Several of the companies we
• 52:01
  already knew well and we can, we can see an exit in the coming
• 52:05
  few years. And then there's a, of course, a
• 52:07
  long tail of, of companies we that are too early.
• 52:11
  So we bucket them, you know, a lot of work on the companies
• 52:14
  that drive the value less work on companies that you're not
• 52:18
  sure, and then no work on the ones that you just, we don't
• 52:21
  know right too early or we don't believe it or, or whatever.
• 52:25
  One thing I wanted to note was the companies themselves.
• 52:28
  So Joe mentioned, you know, the top companies, we do it deep,
• 52:31
  deep, deep into and at the bottom of right.
• 52:33
  So we were also lucky, which is not usually the case, that the
• 52:36
  top, top companies that were actually driving more than 70%
• 52:40
  of NAV, this specific manager was actually on their board.
• 52:45
  This basically meant that we, you know, we got you, you, we
• 52:48
  got as much data as could be possible, you know, in terms of
• 52:52
  being able to analyse these companies.
• 52:55
  So that was pretty, pretty, pretty useful and unique.
• 52:58
  It's not something you get often.
• 53:00
  And then one thing, one thing I also wanted to just mention is
• 53:03
  24, we bought from 24 LP's in D and it sounds like a lot,
• 53:07
  especially someone that is AP secondaries is watching this,
• 53:10
  they would think, oh, did the old fund sell?
• 53:12
  No, there was over 100 LP's in the register.
• 53:16
  So they have a lot of investment.
• 53:18
  And this was 24 that said yes, which is was still a very small
• 53:22
  part of the of the fund because of course if it was a big part
• 53:26
  of the fund that said yes, then we would probably be looking for
• 53:30
  ways to. People get nervous like, hey,
• 53:32
  why is everybody want to sell? Exactly.
• 53:34
  Exactly. This was not a huge discount
• 53:37
  actually this deal and why because our view of the future
• 53:41
  was that actually they were holding the companies a pretty
• 53:44
  sensible evaluations. Some rounds have been done a
• 53:47
  year or two ago and they've been a lot of growth since that
• 53:49
  wasn't reflected in the NAV. So we were able to offer a
• 53:54
  pretty good price. It was it 2022% if I'm
• 53:58
  remembering right. Yeah, just about 20.
• 53:59
  Cents. That's a relatively generous
• 54:02
  discount for. VC It sounds very low,
• 54:04
  especially for VC but. Well, either they're great
• 54:07
  assets or they were priced more reasonably.
• 54:09
  It's usually one of those two. So maybe you could talk about
• 54:12
  like two things. 1 is how do you think about the the discount to
• 54:16
  what the asset is priced at, but then what you think of as that
• 54:21
  real value and then how do you trade off whatever that discount
• 54:25
  is with the expected growth or projected growth that you're
• 54:27
  buying into? First of all, to me that our
• 54:30
  discount is derived it in. What I mean by that is it's the
• 54:34
  difference between what we're willing to pay today and
• 54:37
  whatever it's being held at. Yeah.
• 54:39
  So to be honest, I'm not really concerned if it's a high
• 54:43
  discount or low discount as a number.
• 54:45
  I'm more concerned are we buying into a growth asset at a good
• 54:48
  price and if we do that, we'll make a good return.
• 54:52
  And, and so the, we kind of ignore the NAV for a minute
• 54:57
  because it's, you know what is NAV right?
• 54:59
  If the round was priced 3 years ago in, in a, in a hype cycle,
• 55:04
  that's very different than if the round was priced 2 months
• 55:06
  ago. So we kind of ignore NAV really
• 55:09
  look at revenues and growth and and price on basic fundamentals
• 55:14
  come up with our price and only then do we really compare it to
• 55:18
  what that book value is. And that's where you see.
• 55:21
  So I think we bought things that, that deal we just talked
• 55:24
  about was the lowest discount and we bought things up to about
• 55:28
  a 70% discount. And and that's really reflecting
• 55:32
  the holding value, not our assessment.
• 55:36
  Our feeling is that in venture you have to buy growth.
• 55:39
  We're in a private asset business where growth is still
• 55:44
  not just important, but critical to get to an exit.
• 55:46
  When you guys are thinking about underwriting to, you know, some
• 55:49
  kind of IRR, is there a specific multiple or time frame that
• 55:54
  you're thinking about? Is there a specific IRR?
• 55:56
  Like setting aside the discount for a second, like, hey, I want
• 55:59
  to buy an asset that's growing at 30 to 50 cents, 30 to 50% per
• 56:03
  year, more or less. You know, what is, what's your
• 56:06
  bogey for sort of minimum performance for growth?
• 56:10
  Conceptual way I think about it is we have two dials we can turn
• 56:13
  one dial is how soon and how certain is the exit.
• 56:17
  So if, if the more certain and and the sooner it is, the more
• 56:22
  precisely you can, you can buy right and you don't need
• 56:25
  discount to control for on the unknown uncertainty.
• 56:29
  So certainty and timing matters. The other dial is then the
• 56:33
  diversity of the asset. If it's a single company, of
• 56:37
  course it's single company. If it's a basket of 40 companies
• 56:41
  with 20 that have value, that's a very different proposition.
• 56:45
  So we can tailor our our discount and our returns to
• 56:49
  those two things. And on one end would be a a
• 56:52
  highly volatile company that's going to be a superstar or
• 56:55
  toast. Well, you'd want a big discount
• 56:58
  to accommodate for that. On the other side, a rather
• 57:02
  balanced fund where they were 8 or 10 value drivers, say maybe
• 57:05
  you have 8 or 10 great companies and you know you're pretty
• 57:09
  confident of your return. Actually you could.
• 57:12
  So Omuladi within those dials or bars.
• 57:15
  What? What are you looking for for
• 57:17
  multiples and IRRS? So for single interest deals,
• 57:22
  which is basically a company right in my head, I'm like, do I
• 57:26
  believe that we can get at least three X?
• 57:30
  Yeah, that's the way I think about it.
• 57:31
  And I'm not really thinking. I think pricing to IRR is a very
• 57:37
  except you know for sure that this thing is exiting next year.
• 57:41
  Many have done it and many have failed.
• 57:43
  So I the. Minimum revenue number for
• 57:45
  companies that you need to think about.
• 57:47
  So the way we think of it is more do we believe that this
• 57:51
  company can grow enough to exit in the next three to four years
• 57:54
  and can we safely believe that the very minimum we can make 30%
• 57:59
  IRR. So we do have a number in our
• 58:01
  head. It's just what we're playing
• 58:03
  with. When we look at it, we keep
• 58:05
  turning those various doubts that Joe mentioned.
• 58:07
  So I think to myself for that for single company, at least
• 58:11
  three X at least 30% IRR. But most importantly, I, I want
• 58:14
  to have a view of exits. I want to have a feel that it
• 58:17
  will happen in the next in the near term and and to put into
• 58:20
  perspective it's. Like 3X in 30% in three years,
• 58:25
  you know is is kind of like the but to put to put in real
• 58:28
  perspective in three. Yeah, that's fair.
• 58:32
  We've, we're seeing so much. There's literally over what 400
• 58:36
  billion of assets in Europe right now and we see what 3 to
• 58:40
  5% of that being sold each year. That's a lot of billions.
• 58:44
  And for the size of fund that we're investing, we feel like
• 58:48
  we're in a position where we can be picky and we should be picky
• 58:51
  and we should be able to deliver what we're promising.
• 58:54
  The reason we're we're being a bit fuzzy on the returns is
• 58:57
  because we tend to buy blended portfolios.
• 59:01
  And you know, if you take an example with a fund, we had a
• 59:06
  fund with four value drivers accounting for four companies
• 59:09
  accounting for 80% of the value of the fund.
• 59:11
  And you walk through each of the four and then one company's
• 59:15
  already had acquisition offers from its competitor.
• 59:18
  So that you know, OK, there's something going on there and
• 59:22
  just you kind of start from scenarios and then you, you end
• 59:26
  up with this blended outlook, right?
• 59:28
  So unlike a single company where you, you have a blended outlook
• 59:32
  and therefore kind of a blended return profile, we model every
• 59:36
  company. But also knowing that within
• 59:39
  that model, there's such a high noise, you know, in the, in the
• 59:44
  signal. So, but in aggregate, they tend
• 59:47
  to perform pretty well and pretty much on average.
• 59:50
  So out of those four, one is going to go out sooner, one's
• 59:53
  going to take a bit more time and so on.
• 59:55
  I, I think that that's really kind of well laid out because I,
• 59:58
  I know when we look at deals, we think about kind of the same
• 1:00:01
  three things that you guys identified, which is, you know,
• 1:00:04
  what's the, you know, can I see the exit?
• 1:00:06
  Is that that's kind of like, you know, table stakes is I I need
• 1:00:09
  to get a return to have any return?
• 1:00:12
  What do I think the organic growth rate of the asset is and
• 1:00:15
  that might be a single asset or might be blended if I'm looking
• 1:00:18
  at a portfolio and then kind of what is the discount and and not
• 1:00:21
  just discount to NAB, but discount to what I think the
• 1:00:23
  true value is. And and I think something in our
• 1:00:26
  heads we've been trying to come up with what's that, you know,
• 1:00:28
  rough target for us. You know, I've sort of looked at
• 1:00:32
  models for three and five year sort of growth paths where it
• 1:00:36
  sort of feels like 150 is the number that I'm trying to fit
• 1:00:40
  and that's like the first three years of growth plus that
• 1:00:42
  discount kind of got to be at least north of 100, but
• 1:00:46
  hopefully closer to 150. If I'm looking at five years of
• 1:00:50
  growth plus discount, maybe it's more like 200.
• 1:00:52
  Those are kind of the numbers that I'm looking at where hey,
• 1:00:55
  I'd like to have a 30 to 50% upfront discount.
• 1:00:57
  I'd like to have 30% or better growth for those first three
• 1:01:00
  years. Does that sort of get me to add
• 1:01:02
  3X multiple that you were talking about?
• 1:01:05
  If I'm looking at a 5X5 year time frame, maybe I could even
• 1:01:07
  get to a 5X outcome in a five year time frame.
• 1:01:11
  Does that sort of fit the same, you know, math that you guys
• 1:01:14
  think about? Absolutely.
• 1:01:15
  And then also the the second consideration is how does this
• 1:01:18
  deal we're considering fit in the portfolio.
• 1:01:22
  So, OK, we're we are constructing A portfolio where
• 1:01:25
  you say, well, it'd be good to have some things that are
• 1:01:28
  exiting rather soon and then some things that you can afford
• 1:01:31
  to wait because the growth curve is really big.
• 1:01:34
  And so that's also what we're talking about in our deal
• 1:01:37
  meetings as well. You know, this probably isn't a
• 1:01:40
  great addition because we've got several things that are similar
• 1:01:43
  profile or this is the great addition because of the balance.
• 1:01:48
  Absolutely. And the distribution.
• 1:01:49
  We we, we had a distribution at six months into the fund's life
• 1:01:53
  and that's a wonderful surprise on the upside.
• 1:01:56
  But the reason was that we'd underwritten this particular
• 1:01:59
  company goes to IPO and we feel pretty comfortable.
• 1:02:02
  They've appointed an IPO bank. They they're they're in process
• 1:02:05
  great. It feels good.
• 1:02:07
  What we didn't know is that general Atlantic would come in
• 1:02:10
  and do a pre IPO round and also to buy some shares and say, oh,
• 1:02:14
  that's pretty interesting. So what we knew is buying a a
• 1:02:19
  good strong growth asset on its way to exit, but you know, good
• 1:02:23
  things happen along the way also.
• 1:02:25
  Things. Are coming good things.
• 1:02:29
  I'd be remiss if I didn't ask you guys about revolutes, 'cause
• 1:02:32
  that's in your back backyard. And they just announced a a
• 1:02:36
  pretty huge tender offer, I think at a $75 billion number,
• 1:02:41
  which is substantially up in the last secondary company, did I
• 1:02:45
  think even just earlier this year, correct?
• 1:02:47
  Yeah. Correct.
• 1:02:48
  So I don't know if you guys have exposure to Revolute, I'm
• 1:02:50
  guessing you do through some of your companies or funds, but how
• 1:02:54
  do you think about that number? Is that is that a number that's
• 1:02:57
  interesting to you as either a buyer or a seller?
• 1:03:01
  Well, I'm a seller. What about you, Amalada?
• 1:03:04
  I'm not, I'm not. I'm not going to repeat to you,
• 1:03:07
  Joe. So I would just say I am not a
• 1:03:09
  buyer at that price. OK, see, I love this.
• 1:03:12
  This is this is like the kind of takes that I I hope we get where
• 1:03:15
  this program was like when we we were talking about a company at
• 1:03:18
  a valuation. I always want to ask people, but
• 1:03:20
  are you buy, sell or hold at that price?
• 1:03:22
  And you have to remember, we focus on early stage, right?
• 1:03:26
  So there are not many companies in Europe that get to 75 billion
• 1:03:30
  valuation. So I think that's a wonderful
• 1:03:33
  opportunity. We do have some very early stage
• 1:03:35
  exposure up at high multiples. I think wonderful.
• 1:03:39
  And if there's a growth curve that that late stage investors
• 1:03:42
  can buy into, that's fantastic. Over to you.
• 1:03:46
  I'm I'm a seller on much smaller companies right now that it pops
• 1:03:50
  quickly and you know, remember we're living in three years of
• 1:03:53
  of light exit markets. So any fun that has an
• 1:03:57
  opportunity to sell right now should really consider it
• 1:04:00
  careful. Joe, any last minute predictions
• 1:04:02
  for Europe or the rest of the secondary market?
• 1:04:05
  Well, we are all pushing for exits and that's what's driving
• 1:04:10
  creative continuation vehicles, that's what's driving
• 1:04:13
  secondaries and that's great. The IPO markets in Europe stink.
• 1:04:19
  So, so to to use, to use one technical term.
• 1:04:25
  So we're all watching Klarna very closely how that experience
• 1:04:28
  goes in our own portfolio. We have a long queue of
• 1:04:31
  companies that look like they could be good IP OS and they're
• 1:04:35
  waiting, but they need to, they need to go out in New York
• 1:04:39
  where, you know, there's a deep, a deep bench of, of IPO buyers
• 1:04:43
  and and analyst coverage and so on.
• 1:04:45
  So I, I think and hope that window is opening up.
• 1:04:49
  Let let's see. But certainly also companies
• 1:04:52
  have a lot of cash on balance sheets.
• 1:04:54
  So I, I am getting a lot of exit activity or at least a lot of
• 1:04:57
  noise about exit activity, which I hope is the signal that we're,
• 1:05:01
  you know, coming back into normal M&A markets.
• 1:05:04
  Well, thank you guys for spending some time with us today
• 1:05:07
  and getting to hear what's happening in the secondary
• 1:05:09
  market both here in the US and also in Europe and and the Uki
• 1:05:15
  hope we get to have you guys back on again in the future.
• 1:05:17
  Seems like you guys have a a good handle on what's going on
• 1:05:20
  over there. Well, it's always great talking
• 1:05:22
  with you, Dave. Every time we talk, I learn
• 1:05:25
  something and I go away with an idea to think about it.
• 1:05:27
  So thanks a lot. Appreciate it.
• 1:05:29
  Actually, and I should mention, you know, one of the things that
• 1:05:32
  I, I always tell people was when we got started, when Ahmad and I
• 1:05:34
  were thinking about getting practical off the ground,
• 1:05:37
  originally we were thinking about a fund of funds platform
• 1:05:39
  as a micro BC platform. We started shifting into
• 1:05:42
  secondaries. And Joe, you were literally one
• 1:05:45
  of the first people I called and and asked like, hey, am I crazy
• 1:05:48
  or is this a decent idea? What do you think?
• 1:05:51
  And I blame you, Joe, You sort of said, yes, you should go do
• 1:05:54
  this. So like if we screw this up,
• 1:05:56
  it's all your fault. I I remember a beer in a certain
• 1:06:01
  pub in London quite a few years ago where it was like, yeah, I
• 1:06:05
  think secondaries are going to be a thing.
• 1:06:07
  I think we should do something about it.
• 1:06:08
  Yeah, I think we should too. Think.
• 1:06:09
  You were right. I think you were right.
• 1:06:25
  Hey, Dave. Hey, Dave.
• 1:06:29
  Hi, Dave. Dave Earth.
• 1:06:33
  Dave McClure. Sorry, one second Aman, I was
• 1:06:36
  just watching a little expanse here nerding out on some Mars.
• 1:06:40
  Oh, really? What's going on?
• 1:06:43
  That's perfect, Dave. That's actually a great tee up
• 1:06:45
  for what we're talking about today.
• 1:06:47
  What are we talking about today, Aman?
• 1:06:48
  Well. Welcome to Valuation Corner,
• 1:06:50
  Dave. We're going to talk about SpaceX
• 1:06:52
  and what do we think the value of SpaceX.
• 1:06:55
  Involves exploring the rest of the solar system and maybe Mars.
• 1:06:59
  Then it could be worth a lot. Well, that's the case we want to
• 1:07:02
  make today. We're ready to talk about what
• 1:07:04
  the business does. We're ready to talk about how to
• 1:07:06
  think about the valuations and and then what do we think of the
• 1:07:09
  new secondary deal, which is coming out at around $400
• 1:07:12
  billion. $400 billion. My goodness, that's a lot of
• 1:07:18
  money. Well, it is, but I want to make
• 1:07:20
  the case that this is actually a bargain at $400 billion.
• 1:07:23
  So just a reminder to folks, this is not investment advice.
• 1:07:27
  This is just our opinions. We're actually investors in
• 1:07:29
  SpaceX and have been for the past five years.
• 1:07:31
  So it is part of our portfolio, part of our book.
• 1:07:34
  So we know the company pretty well and it is currently valued
• 1:07:37
  at $350 billion. That was our tender offer at the
• 1:07:40
  end of last year. They're now rumored to be in the
• 1:07:42
  market for about 400 billion in in a new round that's going to
• 1:07:46
  close in Q3. So we'll talk a bit about what
• 1:07:48
  SpaceX does and how to value the the different parts of their
• 1:07:51
  business. Let's just go through a couple
• 1:07:52
  of facts about the business right now.
• 1:07:54
  They've raised about 10 billion in funding to date and with that
• 1:07:57
  are generating over 15 billion in revenue in 2025.
• 1:08:02
  That is pretty impressive. Yeah.
• 1:08:05
  It's a pretty impressive feat to think about how capital
• 1:08:07
  intensive space is. Just as a as a matter of
• 1:08:10
  comparables, the only other set of incursions into outer space
• 1:08:13
  on a similar scale were the Apollo missions back in the but
• 1:08:16
  60s and 70s. They cost in, in today's terms
• 1:08:20
  about $300 billion of SpaceX has gotten there with basically what
• 1:08:25
  when 130th of the amount of money raised.
• 1:08:28
  And of course, the Apollo missions never really generated
• 1:08:31
  revenue for anybody, although it was a useful project, I suppose,
• 1:08:34
  which we then stopped doing. SpaceX is made.
• 1:08:37
  Out of it, so SpaceX a lot more efficient.
• 1:08:40
  A lot more capital efficient. They're in fact a profitable
• 1:08:43
  business. They're using their own balance
• 1:08:44
  sheet to buy back their their own stock.
• 1:08:46
  So they're cash flow positive. And most of that is coming from
• 1:08:50
  their Starlink business. So they have a a launch business
• 1:08:53
  which puts rockets in spacecraft into outer space, but they also
• 1:08:56
  have a broadband satellite business in Starlink.
• 1:09:00
  So we got to talk about those two businesses and how they work
• 1:09:03
  together and what do we think that's worth.
• 1:09:05
  So on this page, this is from Sacra, the revenue for the
• 1:09:09
  business is on the left hand side and it shows if you're not
• 1:09:11
  watching this on on YouTube that the revenues have gone from
• 1:09:15
  around 2 to 3 billion a year in the mid teens, now at about 14
• 1:09:20
  to 15 billion a year in the last three years have essentially
• 1:09:23
  doubled the revenue for each of the past three years to achieve
• 1:09:26
  profitability. This year 12 of the 15 or 16
• 1:09:30
  billion revenue will come from the Starlink business.
• 1:09:33
  So that's their satellite communication.
• 1:09:35
  Seems like revenue has taken off since the Starlink business has
• 1:09:38
  grown in the last 3-4 years, right?
• 1:09:41
  Yeah, that is exactly that has been the principal driver of
• 1:09:44
  their recent, let's say the last three years that's been their
• 1:09:47
  commercialization. It's it's the business that
• 1:09:49
  essentially put satellites into space, uses that to sell
• 1:09:52
  broadband satellite connectivity to households and to businesses.
• 1:09:57
  Most of the business is actually not in the US now, it's in
• 1:09:59
  Europe, which is the their biggest segment.
• 1:10:02
  US is a fairly close second and that's on a run right now for
• 1:10:05
  about $12 million a year and and profitable.
• 1:10:08
  So it's 75% of the revenues. And tell me precisely what the
• 1:10:14
  is going on down there. I didn't realize Starlink was
• 1:10:18
  such a large component of the business.
• 1:10:19
  I knew it had taken over more than half, but now it seems like
• 1:10:22
  it's more than 3/4. And will probably be their
• 1:10:25
  priority for the next at least the next three years to about
• 1:10:28
  2030. So that is where most of their
• 1:10:31
  investment is going. That's what most of their
• 1:10:33
  investments going into. And so that's an important
• 1:10:36
  business to understand. What do you think Sterling is
• 1:10:38
  worth? And to talk about that, I want
• 1:10:40
  to go through a few different methodologies for how to how we
• 1:10:43
  could possibly value companies. On the left hand side is a
• 1:10:46
  discounted cash flow analysis. This is hard.
• 1:10:49
  We would normally start with revenue and revenue growth unit
• 1:10:52
  economics around what the business is selling and then you
• 1:10:54
  got to get to cash flow from everything they're doing.
• 1:10:57
  And that means how profitable is the is the thing for the company
• 1:11:01
  selling as a capital intensive? Is the technology that they're
• 1:11:05
  building defensible? Can the team actually pull it
• 1:11:08
  off like cash flows it with a really good technology, but in
• 1:11:11
  the hands of a a poor team, not as valuable.
• 1:11:14
  What's the old saying? The fool and his money are soon
• 1:11:16
  parted. That's an important discounted
• 1:11:18
  cash flow analysis because of a team can't defend a series of
• 1:11:21
  cash flows. That's not great.
• 1:11:22
  That's why we like recurring cash flows and contractual cash
• 1:11:25
  flows. And then you got to look at,
• 1:11:27
  well, how are they going to finance those cash flows?
• 1:11:29
  Like they if they have to raise more money in the future to
• 1:11:31
  build these things, that's something negative in their cash
• 1:11:33
  flow. So, so that's hard.
• 1:11:35
  It's difficult. It's one of really ways that
• 1:11:37
  auditors and valuation experts do things.
• 1:11:40
  The way that normally things work in private companies is in
• 1:11:43
  market comps on the right hand side.
• 1:11:45
  So you look at public or private comps that are similar
• 1:11:48
  businesses into similar space and then you benchmark it price
• 1:11:51
  to sales, price to earnings and you look for similarities or
• 1:11:55
  differences in the business. That's what we've done in the
• 1:11:58
  last couple of valuation corners, right?
• 1:11:59
  With Canva, it was a SAS basket, the emphasis on Figma.
• 1:12:04
  We talked about data bricks. Again, SAS business, easy to
• 1:12:08
  find in market comp with SAS companies.
• 1:12:10
  And then maybe 0 in on Snowflake or someone who looks like data
• 1:12:13
  bricks. This one, it's hard to find a
• 1:12:15
  market comp for Starlink. And sometimes they, when you ask
• 1:12:19
  me to value an animal and like, well, here's a bunch of animals
• 1:12:22
  over here, here's a bunch of Penguins, but here's a bear.
• 1:12:26
  And just because they're all animals doesn't mean they're all
• 1:12:28
  quite the same thing. Well, if you look at the logos
• 1:12:31
  on this page, you'll see a precise example of what's what
• 1:12:35
  happens when you compare bears and Penguins.
• 1:12:38
  Take Tesla for instance. Tesla is about a 4% share of
• 1:12:42
  market in the US based on cars sold.
• 1:12:45
  GM is by far the market leader here, 17 or 18% of cars sold,
• 1:12:48
  followed by Ford. The global leader in cars sold
• 1:12:52
  is Toyota. But Tesla trades in a 1 1/2
• 1:12:55
  trillion dollar valuation. It's worth more than all the
• 1:12:57
  other car companies combined. Toyota, Xiaomi and BYD and Honda
• 1:13:01
  and Porsche and Ferrari. Like none of those other car
• 1:13:03
  companies are worth more than a couple 100 billion even Even if
• 1:13:06
  I add them all up together, I'd maybe get to 1 1/2 trillion
• 1:13:08
  today. Tesla is like worth more than
• 1:13:11
  the entire market combined. Although they don't sell as many
• 1:13:14
  cars, right? They don't generate as much
• 1:13:16
  profits. So the market sees something
• 1:13:18
  very different in Tesla. It sees potential and the
• 1:13:21
  feature and the scalability and a technology that will displace
• 1:13:23
  and disrupt everything on the right hand side.
• 1:13:26
  So if I'd ever done a market comps for Tesla, I never would
• 1:13:28
  have been a Tesla investor And so I would have missed, I would
• 1:13:31
  have missed the Tesla boat so to speak.
• 1:13:34
  And I think the same problem hits you with Starlink.
• 1:13:37
  It is a very different business than Charter or Echostar or Vice
• 1:13:41
  AT which are all subscale networks.
• 1:13:43
  They don't have the same technology.
• 1:13:44
  They don't have, they don't have the same profitability, they
• 1:13:46
  don't have the same future potential that Starlink does.
• 1:13:51
  So now I think we have to go into, well, what does the cash
• 1:13:54
  flow of Starlink look like? And we have to do the work on
• 1:13:57
  what is their revenue, what is their profitability, what is
• 1:13:59
  their, what does their future look like.
• 1:14:01
  So I'm going to go, I'm going to take you through a spreadsheet
• 1:14:04
  and a model that takes you through the the Starling
• 1:14:06
  business and try to put some numbers on it.
• 1:14:09
  The first step in that process is to figure out what does the
• 1:14:12
  business look like over the next four or five years.
• 1:14:13
  And I'm going to start with three major assumptions.
• 1:14:16
  We'll talk about customers, like how many customers will they
• 1:14:18
  have? They are now at about 7.6
• 1:14:21
  million subscribers. They've doubled that in the last
• 1:14:24
  year. That's a double from the prior
• 1:14:26
  year. They're targeting 20 million
• 1:14:28
  subscribers in 2030. So that's one key assumption.
• 1:14:33
  Second one is what's the pricing of each customer?
• 1:14:35
  And I'm going to assume that they're about 120 bucks a month
• 1:14:38
  for their customers. They have a bunch of pricing
• 1:14:40
  plans. You can see them on their
• 1:14:41
  website. They range from 40 in the low
• 1:14:43
  end to 300. The average like Xfinity
• 1:14:45
  customer or Verizon customer pays around 1:20 to 1:50.
• 1:14:49
  I know that from personal experience and you may know that
• 1:14:51
  in the Bay Area outside of the US, pricing plans are usually a
• 1:14:54
  little bit lower, but with business plans that can be a
• 1:14:57
  little bit higher. So depending on how they
• 1:14:58
  scaffold the pricing for residences for businesses, this
• 1:15:01
  could go up or down. And the last major assumption is
• 1:15:05
  profitability. If I just use market comps today
• 1:15:08
  like Charter, 15 to 35% is probably the range for the
• 1:15:12
  salvage providers. SpaceX or Starlink is targeting
• 1:15:15
  60% internally. But I'm going to go with a more
• 1:15:17
  conservative profitability assumption and we'll see where
• 1:15:21
  they take us. Any of that seem kind of whack
• 1:15:23
  of you Dave? Or is that all seem reasonable?
• 1:15:25
  20 million subscribers seems very reasonable given that
• 1:15:28
  they've been growing at 100% for the last couple of years.
• 1:15:31
  I wonder if they might even exceed that number in the next 5
• 1:15:34
  years, $120.00 per month seems kind of manageable.
• 1:15:37
  I guess that could also maybe grow a little bit.
• 1:15:40
  I don't know about the margins that might be more optimistic,
• 1:15:43
  but all those seem within. Reason, well, that's perfect.
• 1:15:45
  That's what you want to start the model with is like what is
• 1:15:48
  what is within reason. And then we're going to play
• 1:15:49
  with some of these different assumptions to see.
• 1:15:51
  So if I just start, let me share my spreadsheet.
• 1:15:53
  We're going to make this DCF calculator available on our
• 1:15:56
  website so that you can just see just the discounted cash flow
• 1:15:59
  calculator for the Sterling business.
• 1:16:02
  It has probably about 9 model inputs.
• 1:16:05
  It can make a very complicated model with hundreds of inputs
• 1:16:08
  and scenario analysis and you need to get a little bit more
• 1:16:11
  accurate. But I think this is a 8020 like
• 1:16:14
  20% of the work gets you 80% of the value and the and the
• 1:16:17
  valuation scenarios and you can see what you have to believe in
• 1:16:20
  order to build Starlink at a 350 to $400 billion evaluation,
• 1:16:25
  which by itself will justify the current SpaceX business.
• 1:16:29
  All these yellow cells are cells that you can go in and and put
• 1:16:33
  your numbers in. So you can put in the number of
• 1:16:35
  subscribers today they're at 7.6.
• 1:16:37
  You can look at the ARPU, the average revenue per user that's
• 1:16:40
  based on their pricing. You can also look at their
• 1:16:44
  current revenue, which will that's the, the revenue is going
• 1:16:46
  to calculate from the number of subscribers and the pricing.
• 1:16:50
  You may want to override that. If you want to, you can throw in
• 1:16:53
  an EBITDA margin and all these yellow cells.
• 1:16:56
  And then I've got some toggles here up top where I'm just going
• 1:16:58
  to get the the growth rates. Now, the fun part of this model
• 1:17:01
  is see what really matters to the business.
• 1:17:05
  So let's assume that you thought, you thought, Dave,
• 1:17:07
  everything seems reasonable, but hey, maybe the growth rate,
• 1:17:10
  maybe even put the growth rate. So what if I increase the growth
• 1:17:13
  rate from low 20s and high teens right now, let's say bump that
• 1:17:17
  up to 30% in the next five years and to 30% and the next five
• 1:17:22
  years and 30% after that? Well, look at the valuation down
• 1:17:25
  here now in this blocks cell. We've now gone from the $300.
• 1:17:29
  1.2 trillion. Dollars 1.2 trillion, right?
• 1:17:34
  So is 30% growth rate reasonable?
• 1:17:36
  I don't know. You know, that seems like one of
• 1:17:37
  those things that you could play with.
• 1:17:39
  You can also look at. The next five years, I don't
• 1:17:41
  know about after that, but go ahead.
• 1:17:43
  Yes, sorry. That's a prior expiry.
• 1:17:45
  Let's, let's put in 30% for the next 5 years and and keep
• 1:17:48
  everything else the same. So it's now a $500 billion
• 1:17:51
  company. Well, if that's, if that's the
• 1:17:53
  case, what if their profitability goes up from they
• 1:17:56
  were targeting 60%, right. I've got them at 35% by 2032.
• 1:18:01
  Let's say they do get to 60%. There we go $900 billion
• 1:18:04
  valuation. So now between that higher
• 1:18:06
  growth rate and the profitability, you've got a much
• 1:18:08
  more valuable company. Let me show you one more cell
• 1:18:11
  that is actually even more impactful.
• 1:18:13
  Is it all surprising and counterintuitive to folks?
• 1:18:15
  But let's say that I change forget about in revenue and
• 1:18:17
  profitability, which are both important.
• 1:18:19
  The most important growth driver on this page is actually this
• 1:18:22
  weighted average cost of capital cell.
• 1:18:24
  You might ask me, hey, what is that?
• 1:18:25
  Well, remember what I said in the cash flow business, you have
• 1:18:27
  to raise money. When you raise money and you
• 1:18:30
  have to then invest in your business, the cost of that
• 1:18:32
  capital becomes a really important valuation driver.
• 1:18:35
  The more expensive the capital, the less valuable your business
• 1:18:37
  is. The WAC or weighted average cost
• 1:18:39
  of capital is what is the cost of money to SpaceX?
• 1:18:42
  It's some combination of equity debt.
• 1:18:46
  They could get grants and and prepaid contracts from
• 1:18:48
  government, which are even better.
• 1:18:50
  Obviously the company wants the cheapest cost of capital, right,
• 1:18:52
  which is going to be grants. It's going to be prepaid
• 1:18:55
  contracts with the government. It's going to be vendor
• 1:18:58
  financing debt. Today they can probably raise
• 1:19:01
  debt at six or 7% interest rates.
• 1:19:03
  Equity might be a little bit more expensive, maybe 12 to 50%,
• 1:19:06
  but let's say I take the weighted average cost of all
• 1:19:08
  that from 11 to 10%. Look what that did the valuation
• 1:19:12
  already back to 500 billion. Let's say I go to 9%.
• 1:19:16
  Well, now we're 800 billion in valuation.
• 1:19:19
  And if I add, if I add my 30% growth rate and add my 60%
• 1:19:23
  EBITDA margin, now we're talking about a 2.1 trillion dollar
• 1:19:27
  company. So hopefully this gives you a
• 1:19:29
  sense of what the drivers are, what the assumptions are.
• 1:19:32
  And just you can feel free to go to our website, download and
• 1:19:34
  play with the model, improve it if you want to see what we're
• 1:19:37
  missing and get a feel for what you think is a reasonable
• 1:19:40
  evaluation. But it does, it does strike me
• 1:19:41
  under a reasonable conservative set of assumptions.
• 1:19:44
  This is a 300 billion defined billion dollar company with
• 1:19:47
  potentially some upside. Well, you make a strong case
• 1:19:50
  there a month. I feel like that margin number
• 1:19:53
  might be optimistic, but the growth numbers seem very doable
• 1:19:57
  given what they've been growing at in the.
• 1:19:58
  Past. Those all seem like reasonable
• 1:20:01
  conservative numbers to me based on where the business has been.
• 1:20:03
  Obviously there's a lot of things that have to go, go
• 1:20:06
  right. But you know Sterling, this is
• 1:20:08
  got a lot of momentum right now and that's just the startling
• 1:20:10
  business we've been talking about.
• 1:20:11
  So that is only the communications business.
• 1:20:14
  That alone I think you can make a case justifies where SpaceX is
• 1:20:17
  today. But let's talk a bit now about
• 1:20:19
  the launch business, which as we said was a pretty small piece of
• 1:20:21
  the puzzle. It's only three to 4 billion in
• 1:20:24
  revenue out of a $15 billion opportunity.
• 1:20:27
  But that's only because they're really only running 1 spaceship
• 1:20:30
  right now or one rocket right now.
• 1:20:31
  That's the Falcon 9. They did 138 launches last year
• 1:20:34
  of the Falcon 9. This is their their two stage
• 1:20:37
  rocket. The first stage is the initial
• 1:20:39
  thrust. The second stage just puts the
• 1:20:40
  payload into pay into space. They have a couple launches a
• 1:20:43
  year of the the Dragon family that's mostly doing these
• 1:20:46
  International Space Station supply runs and lower Earth
• 1:20:49
  orbit. And they've also got 3 launches
• 1:20:51
  a year. 2 launches a year of the Falcon Heavy, which is their new
• 1:20:55
  rocket ship. That's going to be their heavy
• 1:20:57
  lift deep space capability. But they're working on a new
• 1:21:00
  rocket right now, which is now, which is the Starship.
• 1:21:03
  And this one is a game changer for SpaceX.
• 1:21:05
  This one will enable SpaceX ascend turn crude missions to
• 1:21:09
  Mars maybe as early as next year or 2027.
• 1:21:13
  It's also built for lunar landings.
• 1:21:15
  It's basically the spaceship that's building the
• 1:21:17
  infrastructure and the scaffolding to go into deep
• 1:21:20
  space, which is really where the launch business goes over the
• 1:21:23
  next few years. It's not the commercial priority
• 1:21:25
  until 2030 probably. But I think after 2030, this
• 1:21:29
  becomes really where the where the business really, really what
• 1:21:33
  the principal emphasis of the business is.
• 1:21:35
  You remember we talked about how we were struggling to find comps
• 1:21:38
  for SpaceX, right? And what does it, what does it
• 1:21:40
  really do? And it did strike me that no one
• 1:21:43
  is building scaffolding and infrastructure for space quite
• 1:21:45
  the way SpaceX is. And that's why I'm struggling to
• 1:21:48
  come up with a, a set of comparables.
• 1:21:50
  But they didn't hit me over the weekend that maybe there are
• 1:21:52
  comps for what SpaceX is doing and we're just looking in the
• 1:21:56
  wrong century. But if you go back in history,
• 1:21:58
  Dave, it turns out that there have been companies that have
• 1:22:01
  operated with Royal Charters and government mandates to go and
• 1:22:05
  colonize and settle the new world.
• 1:22:08
  This is a chart from a new book that I've got coming out in the
• 1:22:11
  fall that's called A Brief History of Financial Bubbles.
• 1:22:14
  And Chapter 2 talks about the most valuable companies of all
• 1:22:17
  time in inflation adjusted today's dollars.
• 1:22:20
  Do you know what the top three companies are of all time in
• 1:22:22
  terms of market cap and what they had in common?
• 1:22:25
  By looking at your slides, does look like these are all
• 1:22:28
  seafaring expansion companies that were looking into the new
• 1:22:32
  world. Very good.
• 1:22:33
  That's exactly right. The the number one company of
• 1:22:36
  all time was the Dutch East India Company, which connected
• 1:22:39
  the Netherlands to the New World.
• 1:22:41
  It was to the credit connections to China and Indonesia and
• 1:22:45
  Japan. The same was for the Mississippi
• 1:22:47
  Company did that for France by royal charter, and the South Sea
• 1:22:50
  Company did that and operated among other things of slave
• 1:22:53
  trade between Spain and the New World.
• 1:22:55
  And had that charter by Britain and all those three companies in
• 1:22:58
  today's dollars would have been worth 5 trillion or more, more
• 1:23:01
  than what NVIDIA is today. And each of these companies
• 1:23:04
  started with what you just said, which was essentially colonizing
• 1:23:08
  the New World and operating trade routes.
• 1:23:10
  But they went from there to a whole bunch of other things that
• 1:23:12
  the East India Company ended up not only supplying the New
• 1:23:15
  Worlds, but also they raised their own armies, they raised
• 1:23:19
  their own navies. They had to protect those trade
• 1:23:21
  routes. They conducted diplomatic
• 1:23:22
  missions. They actually ran territories
• 1:23:25
  and port cities for a while with a quasi governmental authority.
• 1:23:29
  They waged wars, they made treaties, they they punished
• 1:23:31
  criminals, they established colonies.
• 1:23:32
  And I think this is where SpaceX is headed because once we get to
• 1:23:36
  Mars, what what next? Like first of all, somebody has
• 1:23:39
  to do the work, right? Some somebody has to build the
• 1:23:43
  underground habitats and, and, and mine Mars and somebody has
• 1:23:47
  to find those minerals that and sources of energy that Mars has.
• 1:23:50
  Someone has to protect the people who go to Mars.
• 1:23:52
  They need defense forces, they need space suits, they need
• 1:23:55
  infrastructure to build the colony.
• 1:23:57
  Who's going to create local transportation for Mars?
• 1:24:00
  Like what how we're going to get around Mars once we're there,
• 1:24:02
  it's going to be flying cars. You know, we don't need, we
• 1:24:04
  don't need roads where we're going, but we do need to get
• 1:24:06
  around those new colonies. And I don't think it's anyone
• 1:24:09
  better situated than SpaceX and Elon and his companies, whether
• 1:24:14
  it's Tesla, whether it's the Boring Company to create and
• 1:24:17
  build that space infrastructure. So that is, those are really, I
• 1:24:21
  think the comps and for how to think about where SpaceX is
• 1:24:24
  going, it's really a company that's building a infrastructure
• 1:24:28
  to colonize a new world. And that's really how it should
• 1:24:30
  be valued in around the 2035 time frame.
• 1:24:34
  Well, that's a fascinating vision for the future there,
• 1:24:37
  Aman. So it seems to me like these are
• 1:24:38
  all businesses that are in the next 5 or 10 years.
• 1:24:41
  They're not, they're non 0 for sure.
• 1:24:44
  They I don't know if it's worth the Dutch East India company,
• 1:24:46
  but it's somewhere in between zero and $8 trillion.
• 1:24:49
  But I feel good about the Starling business itself
• 1:24:51
  providing the base case for SpaceX.
• 1:24:53
  And then whatever you think of this is great.
• 1:24:55
  Well, I think you make a pretty good case for at least a $400
• 1:24:58
  billion business and maybe if some of those other comps come
• 1:25:02
  to pass, it might be a trillion or multi trillion dollar
• 1:25:05
  business, but I think I'll take 400 billion for right now.
• 1:25:09
  Well, we'll post this stuff on our website.
• 1:25:11
  I'd love to hear feedback from anyone who has a different take
• 1:25:13
  on SpaceX. Either we're missing something,
• 1:25:15
  what are other evaluation scenarios, or just, you know,
• 1:25:17
  play with the model and prove it and then you know, offer send
• 1:25:21
  the feedback to practical VC without the top more.
• 1:25:24
  All right, well, that's all for this valuation corner.
• 1:25:26
  Thanks for giving us a peek into SpaceX and its valuation, Elon.
• 1:25:30
  Thanks, Dave. We can go back to The Expanse
• 1:25:31
  now. All right.