The LP Perspective: Beezer Clarkson and Chris Douvos

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everybody torbert cofounder partner village global network driven venture firms and this is richard stories podcast covering topics related to tech business with world leading experts hey everybody welcome to another episode of venture stories by village global here today joined by two very special guests beezer clarkson and chris dubose the money behind the money to people don't really need that much of an introduction has welcome to the podcast thanks for having us this is her first lp episodes i'm hoping i can set the tone fermented income first how do you describe the work that you do chris perhaps we could start where you sure well my name's chris davis an i run eighty investment vehicle called holy capitol most what we do is funded funds but we're also starting to see more and more direct investments particularly in deep tech beezer how describe you sure so i'm beezer clarkson with sapphire ventures end sapphire is eight two and a half billion investment firm that does two things both direct investments in gross stage company that's not the work that i do but that's the majority of the money on are pot from goes into and i mentioned side of the business that does investing in early stage center fence or i manages had the business that does he work all chris you mentioned you're starting to go direct a little bit talk more about that how that evolution progressing and what does that mean for you sure so so it's interesting because my investors were the ones who kind of pounded on me until we started doing direct investments because they were like you're here in silicon valley you kind of are bird dog an a you must be in the way of you know a lot of interesting companies and and i said yeah ashley yeah we do kind of share by a lot of things in a we have these great trusted really should cause part of the voodoo that i do is i like to put people in business right so i was the first investor in fresher on capitol hill to the friends and family fun back in two thousand six before i introduce josh to you know princeton and yell and northwestern notre dame virginia and others a more recently a person veteran data collective an you know with each one of these what i said you know today i doing a favor for you in sunday i'll ask for a favor in return and sure enough they suddenly become much older i'm ashley channeling my dad handling veto corleones so but anyhow so it's it's actually been awesome because being here in it for a long time a you know as as collapsing with one of my managers and so getting kind of being being up to speed i found myself in the way of of a lot of interesting stuff i will say though that there are mornings when i kind of you know kick myself because the very first real co investment opportunity that i was like hitched actively was a you know my dear friends at first round i and i were sitting around one day andy when liberals in the house and i sitting there had josh is like look you know we battle alexis parada if you wanna come you know we could do little or some some and then you just said but the valuation is six hundred million dollars and i'm like say it's preserve us who would pay six hundred million dollars value puts money values or whatever it was at the time i you know kind of guessing at that number is still in the hundreds of millions and billions of dollars i like i like that was you know in retrospect that was like yeah i didn't have a vehicle out of which should do it but you know with you know kind of twenty four months in hindsight as like why we gotta start doing this and we've been lucky defined early in some some pretty interesting things so yeah zooming back out a little bit why do funds the funds even exist in the first place could first round not have gotten to those endowments or maybe a little history and context for why why undefined survey unique role the market share so they're all you know a ton of reasons why people might see gotta find the funds but most notably if you look at it you know venture is either about access or about audacity in so there are some people for him and there's some people who have you know some fundamental have incredible access great kind of roster of brand names an those institutions that might you know bob's colleges knowledge and service a station graduate school you know they might not have access to x y z fun but they want access to to venture so they go through fun and they they pay extra layer fees for that at access i find myself and he audacity bucket right which is i'm basically doing this shit the ear investment committee won't let you do right so first round capitol in two thousand seven was a non obvious that data collective in twenty eleven is a non obvious that some of the stuff i've done more recently like how fund at berkeley or fourteen at mit t m u those were not obvious bets i'm super excited about and they might work out they might not but it's hard for those guys especially at the fun size you're there deploying for others to a larger institutions access them in any kind of meaningful way a and so we can also by the way than a help them spread around the risk by investing in a bucket of these risky manager's so they don't have to speak rifle shots i wanna underscore something that chris was saying it's i don't have great data on this because it's not collect it anywhere when couldn't really find given olive e m confidentiality agreements that could find out who invest in who but when you go through and you look at the newer managers you typically see family offices and fund the fund putting them in business so a bit of a chicken and egg but part of the reasons why these vehicles exist is because people need them to exist without them a lot of emerging managers would not happen because there is just really hard for some of these larger platforms with larger checks established managers they continue to be backing sufficient number of the new managers come to market and there is no fifty eight eighty new manager's every year coming to market and most of them are seven hundred million probably significant percentage that fifty million in that just isn't gonna work if you after right a fifty million dollar check right you know and it's been great has a couple of my investors have basically used are fund is tuition right so so we do charge you know we have very reasonable economics and very well aligned economics which is more important but nonetheless it is an extra layer fees but people will will make that trade for education they get asset class sometimes we have several people who kind of come in we introduced in the manager's and then they go off and build their own program people say well hey city are gonna put yourself out of business and i'm like well you know what if i plug demand the people in those people have been successful then my returns will be great which you know keep me in in business out of the challenge of the fund of funds and this is something that's a little different caesar's world the challenge of the fund of funds is that you're constantly refreshing you're l p base you know not necessarily with every funnier we've had great kind of persistence but often you have kind of people coming and going and so there's a lot of optionality investor level it is interesting though you know king of something beezer said that fund the fund and in family office put a lot of merging manager's in business and look i was at princeton down for a while and it is the rumors are true we did actually shit chocolate ice cream in fart rainbows guy i mean it was we could get access to a lot of things because we had the big pr chest in so these guys have it yeah there's a little bit of a conceit not in a negative value neutralize the conceit you can get into things and funds funds three four five although i think that people bull overestimate their ability to do so i think that's reserved for the you know the u s news and world report kind of top twenty five and be on that you know by the time you can get indus by the time it's obvious enough for somebody to get a really excited because cause a most people look at performance and performance is a lagging indicator not leading indicator you know by the time it's obvious the funds either too late or you know long in the tooth enough that the gp's have called in rich yeah so if you look at b venture landscape you have you know from a very different approach is different you know these these different eat those look at you know from like issues horowitz verse from like founders fibers from like benchmark very different indie fund the world's or their lp's differentiating on approach or thesis east coast in a way that creates a good conversation for for for venture it's interesting question i don't know if lp's think about different they're probably ways a different piece giving who they are think about what they invest in but that's much i think that it has probably smaller levels of change between whether you're an endowment or a foundation or an asset manager i mean i i do think there is some opportunities you can take advantage of when you are looking to be first in verses if you're i income income in eight or ten years later but i don't think i don't know if they really are radically different people are investing to make strong financial returns and that's gonna be the lens that kind of coal lessons to a point where i i have a question 'cause you're so much fry like literally wanna be a sponge from information beezer 'cause 'cause you are like you know at the top of your game do you have like a little i have my own little watchword which which i'll share but like what what is the prism through which you look at managers like i would be very curious like when you wake up in the morning you say i'm looking for this type of footprint i have the catchphrase how do i say it all the time it's super during a why you oh interesting because we find out about ourselves because there's obviously why do people pick us and why are we in this business but it's the lens it helps us and say what are you doing as an investor what why are you here why is it you why is it you're team why is it this opportunity set of entrepreneurs while they pick you why will you make money except allows you to sort of go do the levels of team market opportunity portfolio construction and we have a belief that if you are investing in something that's authentic to who who you are and what you're going after good things follow it just it's just a natural you'll be differentiated in a way that is super super hard to compete west and all of that kind of gets bubbled up into the why you were underrated overrated answers to that question you know ashley hearty answer then people think because is that there's some great quote that i can't remember but i'm gonna stall and then you will remember about self reflection by like plato where somebody unexplored life means nothing whatever it is yeah christmas my be examined life simulate yes yes so usually christmas litter turned out in order knowledge expert malign him for the latin phrase are sound engineer the deepest while actually's not an insignificant question that's right and so i think it's harder for people the answer then they think and i will posit that for a lot of people and this is definitely an answer and lp would give the thinking about the fundraising is not the primary thing that most feces think about because they're thinking about their deals which is a logical and his exactly in many cases what should be happening but then the time isn't taking the think of how do i then explain why us to somebody who doesn't have to choose a i i'll start by saying this be there is a lot nicer than i am right like she's actually a better human being which is why she could ask this question you why you and i believe that she asks it with full inquiry in increase the advocacy scale it's it's all in cray i come from crankier place in my my kind of angle is like this is ashley my presence give me a robust nonconformist with the courage of their convictions long catchphrase it's along i might not remember all that and i think about the people i've back in its some days i think my portfolio is a little bit of like land of misfit toys because i over index on really a robust nonconformist who by their very nature kind of have like sharp edge is an inner are quirky in ways that maybe don't make them ideal for the cocktail party circuit but get them real residents entrepreneurs beezer knows exactly who i'm talking about so i won't use his name but there's one guy that a the we both invested in an i once went to say and i'm gonna totally give it away by saying that i went to like a data scientist meeting and literally like i walk walk in and the you're the first guy is like he looks like hog read from harry potter and he's wearing like a slayer t shirt and iron maiden t shirt and has like two phd is one from you know cmu any other from cambridge in philosophy right like yeah this guy is like you know a savant an you start talking about this guy in us's several years ago and he goes finally goes look he's not gonna work you're kind of people he's like you're money people money people won't understand them but what are people he's part of the trump has like oh he's part of the tribe boom this is my guy in so so literally that was the moment when the lights like what do you mean that you know none of it is that you can't fake that kind of authenticity it it's just you just can't it comes in all these different forms like you could argue that kitchen green at four runner maybe has data scientists slayer t shirts on it who knows but like she's got that same and the team has that same sort of linear idea of like here's what we do here's what we think any entrepreneurs flock to it right jason lumpkin sastre like they're these people that are just so notable in how they how they move around beezer do you believe in love at first sight like with a manager he asked that question the prologue i've known beezer but do you get love at first sight is built i think we've experienced both yeah there's definitely times there's immediate connection and you're like oh this just lambs yeah that's true and there's other times when the more you go back and you're like oh this is like you you leave the meeting that was interesting and i'm sure this is the exact correlation between vc's and entrepreneurs and a week later you're still like that that's really interesting question right and so we were looking at new york metropolitan area and we had a question around technology and how deep is attack and we kept running around it and running around it and run around and i loved about this because that's when we ended up violating are rules around not doing smaller fund and we did notation did i just couldn't kick the question that they were trying to go out out of our heads end and it and it just it just landed right move quickly like when we first met them but it was something about their thesis that we thought was just a disease is what they'll be the company's new york and the villa boxer so following the trend line around the technologist leaving spinning out of existing companies and ecosystem and doing companies based on a real technology backbone and it could be any kind of company that wasn't predetermine like what it would look like but the system had started but that and that's what they're looking for and we had the same question are minds of has a new york ecosystem reached that state now 'cause i started my career in two thousand in dc slash incubator in new york in the meatpacking district right at all just leveled after the big downturn and so how deeply ecosystem had it rebuilt with a question that we are really hopeful the answer would be yes but didn't know and again like the surf questions keep coming up in your mind so versus somebody other funds with matt collectively the crest we've we've worked together and occasionally every now and again you know it's funny i asked the question because i actually i'm a little bit of a love at first sight kind of guy i think most is like when i met josh koppelman at the conshohocken mary out outside of philly for the first time in two thousand five or six literally walking out of that meeting i john we were in the lobby and i said josh if you didn't exist i'd have to invent you and then he's a defensive you didn't exist at after the venue and i felt like so romantic than i thought about are friend wis a with the the data scientists say you know that was kind of love at first sight but as i as i thought about it as you're answering the question thoughtfully you know sometimes these gp's like get under your skin they wear a unique like don't wanna love him and then all of a sudden you're like yeah there might be something there and then you know that's actually i just telling a story is hell story but like actually i stumbled into like the the the take away from that is a great mentor of mine when i drink public markets stuff for business school said a great analyst has no ego and you know it's funny a lot of people invest his ego and i felt like you know myself when i had the change my mind you really have to talk you you go away and that's a that's a real you know it's it's a real challenge an and i think you know as a result you have to invest of humility an unwritten really it's like a in a sense of labor of love you to invest with love and vulnerability and all that stuff and that's hard strong convictions weekly held yeah it's not supposed to be speaking of a of humility you know we talked about you know first round we talk about data collective the bash brothers you guys have hit you know from the beginning put people in business what is the ones but what something you've you've messed that you miss right a signal or you just you don't you know going back to said oh i wish if i saw this obviously even hindsight's twenty twenty but tell a story of something amiss so are platform as seven years old which in some respects it's wonderful because it allowed surrey image some things that we think about and if you don't start fresh and kind of we create yourself in a way that's very flexible and and we've really tried to use it to be in service to are gp's but it means you just weren't around forty years ago right so what's harder is and you wanna look back in time to seven years there's actually just said if we invest in a fun in two thousand twelve most of them start be the data starts coming insufficiently between six and eight so we looked at two thousand twelve and be like oh what happened in that vintage but before then it's it's harder for us the answer that but there's tons like first round right or benchmark that that ship is the lp's are in it that is an awesome ship to be in right but it's much harder for someone who's not part of that initial crew there's lots of activities like that and you know our goal is to to make sure we catch them for the future so that were there but going backwards i could list a long list of names if he sees where occasionally if you build a relationship and hang around the hoop affectively you can get in because to chris's earlier comment there they're almost always are chefs and they'll be base for for a whole host of reasons that if gp's wanna hear about why it's actually not gonna be the same way today is is twenty years from now her happy to talk about and we've been fortunate to sometimes take that advantage and to work with somebody may i new the us but not new to the world but generally speaking it's tougher 'cause there's it's just the performance data in seven years is really brief you know it's funny as part of the group said no to the xl at princeton new you're gonna show this i mean this actually's mystery man talks action or have any regrets about it we said no the aca valerie anyway well i mean oh not that i'm not gonna tell that story then i got to test and we said no yet in that became the face looks on site i said no twice race to the you know one of the best funds of the decade and it's funny 'cause that's playing golf a few years later once it became obvious with a guy who's a modest top of the midas let's kinda guy who i won't name andy he said as i did what did i miss you miss absolutely nothing you did exactly what a well trained institutional investor would do given the data you had at the time right in and those around reenact sellers now axelle but at the time you know kind of two thousand three two thousand four i'd a lot of friends who had like this shit moment where they were like begging begging begging the get in and then you know everybody who's bailing out say the chance you get in and then they got the the books with the they're like oh shit and so you know fended last and and you know i mean there's there's a lot going on but they they turn around and this this becomes from me like you know the secret six years yes i once asked the yellow guys what what their secrets success in in venture is an tim sullivan who were in primary there for a long time a really great dude said a we get off the bus one stop too early rather one stop to late now is always my philosophy and then boom get kicked in has by excel so but i'll tell you whatever that was that was what it was i don't have any regrets about that the one i do have regrets over steve anderson and it was two thousand eight and he's spending baseline out and i spent and it was really nice because i've done a lot of things in the ecosystem by then ident first round in a tv and an a floodgate and a bunch of others by then a and i went and met with steve i see that she reached out 'cause 'cause he'd gotten a few calls recommending you had this great meeting total meeting of minds he's such an amazing guy such a smart guy and i went back to my investment committee and i said yeah i'd like to do baseline an there's a guy who shall remain on name on the committee very good public market investor who's the damage cia oh he goes devos i think what you're doing with these seed funds is a triumph of hope over experience he's like i don't you know i don't believe it i just don't believe it anymore like i've had enough and he was like what you could do it but this is like a you know a career risk kind of move hand it kinda like fuck took my world view a little bit 'cause i was like wait what i like i'm like here to invest without the fear of being wrong alone 'cause if you're afraid of being wrong on you'll never be writing alone in that like see the doubt you know kind of when my head and then i kinda slow roll steve and then end up saying now and i don't think you know i i don't think he's ever looked at me the same way again which is really too bad because alad steve's standing investor upstanding guy in has had amazing success in that's the one that got away well and you're question is something we think about a lot today because ironically there's not as many funds in the market now is there were back when i started in two thousand there were over six hundred funds in the market and about i some of the number down here somewhere about a call it seventeen percent of that were first time fun so there is a huge number of potential investable funds back then so now we only had like a little over two hundred every year now gets done many more first time funds as a percentage but still we'll give any avalanche of opportunity that's coming at it by all these folks were starting new funds end or i'm sure the right word is if we the remaking of many funds as people moving between existing platforms looking like mbh free agency a little bag writer and you're like how is who's the next anderson how're you gonna know because you could spend all day long just meeting west these seven hundred micro funds that are out there and that doesn't even touch these series eight series be seriously portion of the market and so that the giving inbounded the velocity of movement right now in the market makes you really wonder what's what is gonna get messed or not no time a like a decade from now we can look back and no but it's something we think about a lot is how do we actually managing the ecosystem instill spend are existing manager and show up well so i should double clicking on that mentor of mine a who's public markets guy goes well you know what do you do when you're you know by then i was at princeton and doing you know a fund the fund strumming in a diamond is basically a fun tons of client and he's like so what do you do right when you're picking funds what do you do and i go well look i'm trying to strip out skill from luck right hand i've thought about that and then i see the number of goofballs who did the one deal like the number of clowns veteran company x or y who were has given birth to a lot of fun i who's gonna say hoover but i one point i don't wanna let anyone but like there's a lot right there's any funded any any company that's hadn't extraordinarily high up ramp in tv p i even better if it's dp i but yeah well just keep waiting on that one right and there's probably be what fifty investors a hundred investors even more angels so you just like be the network network effect but it's not really network effect it's like the off ramp of everybody is just in mesa well and you know the people ask me i've been doing this for eighteen years now and people ask me what is changed you know what has changed since city are cast aside money that's an you know the thing that's changed for me is is the proliferation liberation of angel activity in so anybody can you write fifty checks and all you're trying to catch lightning in a bottle once and then that's credibility enough to find some quasar institutional pools capital to give you money it seems right and this this actually suggests to me and by the way you i call it delivered on capitol right there just a ton of people who have yo there they've entrepreneurial experience and they're you know you know founder friendly and all these things and they've got their you know angels portfolio an you know the garden you know do one great deal and they think they can go out and reasons to capitol not understanding that being an investor is a trade craft unto itself and so i feel like the sophistication level there's a great entrepreneurial energy that's that'd be upside the entrepreneurial energy in the funds business is way up and i think that's a very positive thing but these sophistication is way any amount of time i personally span lecturing people berating people haranguing people about portfolio construction issues is remarkable and by the way you know you're always so smart and johnny on the spot with a data how many new funds closed i haven't even gone last year how many fund or raise last year not pull a lesser number but it definitely not that different from this year so where is this pitchbook number yeah about two hundred and thirty two this year and i put my laptop and give you lost his number i just did have a certain down on but it wasn't that much more than last year 'cause we've been it's been pretty solidly over two hundred for the last two years i guess it's kind of at a good steady state but so here's a question right like they're a lot of institutional peas who defined victory is being top core tile i call this tyranny of the relativist right like you can be a winner and be tucker when they're two hundred funds the fiftieth fund is top core tile i think the fiftieth fund is gonna struggle to you know even you forget matched the s and p five hundred might even struggled to to return capitol in a distributed you know vpi basis right i think that's a big challenge i i i'll get on my soapbox like what you said about the entrepreneur activity in ventura because we've been thinking through about innovations in venture and then some levels industry like being the nature of venture capitalism like as a venture capitalist is a job and l he has a job secondary that is is actually hugely on changed right good at math you put money in you get money back like it just boundary because it unless we get a theoretical math pretty restrictive but when you think about how funds have changed changed over time and trying to differentiate mb customer in this bull market where there is no shortage of capitol right like we might not be as they could always be more but there is it's a great time to be an entrepreneur there's just a ton of money there right and how do you differentiate so so funds like village global are doing interesting things first round it was super different and change the industry injury some probably not the first people to think through doing value added services but like god did sandhill road react when they showed up right that was like big bertha something it happened and you see like thesis coming up and pieces you see all these ways of saying like how do we actually stand out in the field where money is just yes money as softbank vision fund show if you have enough of it i guess it's a differentiator but unless you're a hundred billion dollar her category the rest of us mere mortals it is it's by definition fungible so you have to do something besides that pick you're pick your poison and that sort of interesting 'cause it has sort of poke people entity thinking through like the why you and what he's gonna do and i think it's probably a net benefit entrepreneur or maybe it's confusing and there's annoys the venture capitalists but having more people trying to be better at their job sounds like an ecosystem benefit if there's i think there's a i put in three different buckets of how firms differentiated into one is what you invest in as christian green informant you know picking a theme in owning that theme to is where what specific pool you invest in so it's house fun in berkeley earth notation and a in nick charles and alex in new york or it's how you operate is maybe in terms of how you add valued entrepreneurs which is you know in a general capacity or how you source companies a village with mahler injuries in the first round at cetera so with that in context which of those cinematic geography based or sort of platformer novel approach are you most excited about in raleigh how do you guys think about emerging manager's heavy brush it generally well we are guilty of like any geek out over the data and they can tell you that we haven't found an easy answer saying do acts and money will ring on your head but we'd like to find that out so i don't think we're super super prescriptive did as far as it should be x y and z but we do look at the totality if you're trying to approach a certain market like so we've been longtime fans of union square like one of the originator of jesus putin were the first ones to thesis based investing but they certainly have done a really bad ass job of but right but is it into the mix of space investor gonna be amazing hopefully but no there's no guarantee you can't pick a model and just say my model is gonna have a top down saying hey we're looking for vancouver base runner were looking for a mill you know rumors what would say is if you are in a certain area and that could be geography in some situations what's going on in that market and how do you play against it and then sometimes have done things so we do usa europe in israel where we've made that's on funds and other geography is that we wouldn't necessarily have made in the bay area because there's advantages to being there with a plate and so it's like we were pretty straight down the road series they invested in the majority of the time in the bay area and loving u s but in europe we've done some seed funds and the vendors are putting a fair bit of capital into because of lafayette fundraising is also faster we think it's a competitive advantage in europe and giving what they're playing at and what they're doing and as a place of the market that we had a strong thesis the surrounding but would that have played the same if they're in the bay area who knows right you know my favorite latin phrase is it'd be pani cd pottery where there is bred there's my country than the person who 'cause pizza reference exactly i i've got a gluten problem i'm on the high gluten diet anyhow this is actually like i think about very often think about where am i wrong band i have had first a one eighty and now maybe a second one eighty to make a full circle back when i started saying we shall not see sort of exploration dumpster having a literary well you know by the way speaking geography you know part of the reason i love california is a red walt whitman song of the redwood tree a when i was in high school and he said you know in california i see the genius of the modern the child of the real any ideal and i think that's like the essence of what do it right in in you know you whitman says i see populace cities and the latest inventions what as eighteen fifty dude housing rating disability and also great stories based out here any a whole movement out west right is not awesome lp's literature that top tier podcast see as a as a history major so you know these guys like you know all these like cs guys from stanford like they're a lot smarter than me but but i have good cocktail party conversation so i was early in my career very excited about alternate ecosystems keeping my as a one oh two on at princeton we did ignition up in seattle a bio for as a big investment drone up in seattle had looked to a whole bunch of other places and a done some investments in in had a second tier geography is in those investments the ones i mentioned if have been fine of worked out fine but the ecosystem is a whole haven't developed and i think about seattle in particular which i get his final the drone you guys have done really well as that'd be mission guys but it hasn't flourish the way i thought i would it would flourishes a startup ecosystem necessarily maybe it is starting to now but it's i think because the essence of silicon valley is is you know a legacy of failure right like you have all these be asper as often firm failed companies right that actually creates this kind of dynamism is people whereas people get stuck at amazon is a great place to be but there's not a lot of flow in and out of amazon for a while the the the most engineers per capita ler over in boise a because i think micron those up there but there's no big ecosystem in boise 'cause everybody went to micron and stay there forever right now hp at a big office there when i worked at hp boys who is where the printers where i said is that right and so i really got excited about some his alter ego systems in in in one day house talking you know excitedly to i felt like you know in my memory i'm like a little boy in shorts wearing like a little cap with a propeller on it you know talking to a dad who is david swinson a yell and a sense of mr since i've got this great idea alternate geography is any just you know he's like all of us why do you think that hand a here we go again as he goes what do you think that like oh well you know a there's you're kind of lower costs of talent oh you this great talent just start with great technology is lower cost you know less competitive intensity you know i i ran through this this whole thing and i said you know in seattle it costs you know fifty eight percent a would have does a you know the bay area they got a company the first revenue whatever whatever static throughout and he goes dubose you're playing a value hand in the gross game and again that like gobsmacked me man i was like whoa maybe maybe i need to be more momentum oriented end and and that kind of change i changed my perspective and then the a lot of the funds that are you know is tracking ended up being like really kind of unfulfilling there a lot of great people around the country you do good work but there's no there's not as much you kind of stupid headspinning optionality this captured and i created a thesis round why that is an for like seven or eight years that was thesis and then you see like you know a lot of hoops using the geographic arbitrage tries like finding companies offering bringing them to the bay area to kind of blitz scale here and the whole blitz scaling lillian hoffman like you know those guys kind of changed my world view and more recently i'm just like wow it's so frigging expensive here tonight only start a company but to retain people look you know somebody the other day said to me like the unemployment rate in the bay area for engineers is negative like you could actually isn't engineer hold two jobs and nobody will dare say anything to you for fear that you'll leave in so it's like crazy and the you know and that gets that is not true and yelled world so anyhow i started to like rethink my a my berry bay area centrism around around 'em a clusters of excellent so where is it that there is you know kind of a particular cluster of critical mass of technology in a certain vertical a year that could be interesting you know is there hey you know people talk about whatever it is i sixty five cluster right like with with you know kind of healthcare in some stuff going on there you know is there a you know what's going on in austin what had ordered his particular attributes that that's you know where i'm kinda underweight now it's interesting because we believe and i don't think there's i think everything in my life reinforces the term of one is that innovation knows no boundaries right so the fact that the world is more transparent and you can see things and the whole cost of doing you could create so much more on your owning your backyard all of that would increase the likelihood of great companies starting really absolutely anywhere but there is something about the health the health but the layers and ecosystem that are necessary to build a company and who the managers are gonna come in at different stages and what she experience that and that seems to be a member of a read a book by i wish i could remember the professors named as chris would remember a few is me but it was called setting the table and it went through all these things sound super boring like regulation and tax and all the stuff needs to be true for people to switch jobs and jobs at once like all of a sudden these other ecosystem ws state by state in other countries like just turn the dial 'cause people say to me don't we need to help promote bringing venture twin ecosystem i'm like yeah yeah let people make money right now any legal ways like you know do all the right things but like people will find opportunities and maybe they move them maybe they don't but if you facilitate business creation in de creation if you allow people to fail 'cause a lot of countries are much more they really punish you if you go bankrupt and he was is somewhat unique in this respect and that's part of why were more fertile place to start and stop businesses so this fluidity of a particularly people but you know kind of economic fluidity as as you said it's kind of unique to the united states but what has caused me it'd be like historically so california focus is the california supreme court has been over and over and over you know steadfast that any kind of non compete restraint of trade right is is is a you know an might not feel about carried interest don't get me started by a i i bet kate interest is gonna get taxed before i ever see a dollar so out there but at the v you know kind of a non enforceability of non competes is a is a real you know kind of a competitive advantage i think for california particularly and then you talked about kind of cultural stuff which is why is always so cynical about new york because new york felt like a bonus culture whereas california was felt like an equity culture but you know thinking like what's changed my own kind of view like why why am i more optimistic and it's there's just so much more information right like if you think about venturing eighties is a dark art right like you know reid dennis and you know these guys on you know burden version all these guys on sandhill road would like more ha ha you know they've got this you'll bubble bubble toil and trouble right it was like this this cauldron that they had and now you listen to podcasts like this in you you brad cells in amazing job like a you know josh complement any early days yeah we could go and now everybody's you know blogging in podcasting and there's just so much information out there that a but i think it's really flat in the world well the one thing that i don't know when it's gonna tips officially the changed ecosystem but i worry about a lot of things and just add this to the left is you're talking about the bonus culture vs equity pretty culture and as companies stay private longer and layer layer the value of people's options at what point are we gonna flip and then people will be basically salary in bonus the same way i was back in the old days at age pay right which is totally fine and tradition the way it was and i even had a pension being accumulated and like all the goods that's not the start of industry in the venture industry had did their math based on the map changes at the somewhere in the middle but not the top of the bottom line is that gonna be a real challenge and all that's being triggered by this you never have to really accident or if the folks that are accepting arrests in layer and or maybe it's going down sufficiently down the stack and that's gonna keep things healthy but i think were watching those dynamics i think it really makes a difference for it and or employee and a start up that may i may not be getting a deal they thought they were and i i worry about her industry i worry about that because if people don't wanna work at startups that's the biggest problem it's i don't worry about venture capitalists i don't worry about all tees like that then it's people in the companies that are gonna be the the where the focus should be it's i've had a couple of friends recently asked me about joining certain startups and i tell you gotta get a sense of the cap table in the preference that 'cause if you're gonna come in with an option package you need to know where you are in that line and i think you're exactly right like there's this magic right that the people think they they think about this this in fact i would say you know in the venture industry in the start in the start up world we use a lottery slogans of ivy league veneer so you know optionality the same thing as hey you gotta be in it to win it in so hey you never know right like is is the same thing as asymmetrical eight outcome you know we've got this whole you know it all takes his a dollar and a dream and maybe you know maybe some some preferred shares anyhow so a i i do i that's that's a big huge worry in my few questions one is how do you guys think about dependability with adventure adventure as they they've all do they actually build real possibility the only brand is something else i think i feel different ways on the different days to be the brutal honesty sometimes you look at some the permanent and they are part of the preservation of most permanence of brand is amazing is right and kerry farms through some tough times in cement that's great and sometimes people will come and say something like have you caught up on the news lately like not not entirely sure that firm stands for what it stood for before that about kleiner island in also gonna ask about firm reinvention you mentioned earlier when excel when fended life excel ideas about qena from connor whether that be at the same place but they were can they rebuild how do you look firms that have lost their way but people have left and now it's just a changing of the guard kaiser my favorite christie versus quote my crystal ball is in the shop i mean i mean the amazing thing about venture is like and that's why it's so in constantly tree is it is constantly changing and you i mean unless there's some there's some things go so horribly wrong and this isn't necessarily come at any particular from and you're like oh that's gonna be tougher right 'cause they haven't had a historical performance they don't have be installed base about peas teas and we can talk about how in leverage is that how do we thought about putting up he's into you're firms such that you increasingly odds of having them coming back this'll be like okay this is clearly time the they're gonna have a hard time raising but other times like you know give the example that facebook is great one company can change the stars for the next twenty five years and if we could call a company that was we have all sorts of other opportunities what's your take on that now but i still you're quote no you you you stole it and made it better maybe her own i love it i think that one of the truisms in finance is these assets presley elevator button at the end of the day and walk out the door end it amazes mazes me that firms like benchmark actually have been able to save the top of their game where they rotating you know group of people and i think in that case right there is some cultural elements and the way structure themselves in the you know the way they you know they create themselves were there other firms where the founding partners called and rich and the next generation sucks right and so it really is idiosyncratic which i think is why beezer and i on a daily basis says you know earner pay because staying on top of you know these are people businesses and understanding these folks in their behavioral footprints in there you know kind of change over time in a very intimate way is is kind of key to the new do the we do i am always puzzled when people start their evaluation of the fund was tracker because by the time something becomes apparent the people people that did it you know wearing a very different place in their live you know had a different behavioral footprints potentially you know what is it they say like every seven years you're you're body is entirely different on cellular basis there no cells earlier break you obviously you as as the romans newman semper ask the spirit is always there damn more line vicky something part it's so amazing is still the there is there is a great place to go to learn i mean the these podcasts things are wonderful but when people say like i you meet entrepreneurs who sort of life before facebook didn't really exist and yet there is a long history there and sort of maybe a relevant but sometimes talk about companies that affirmed did you're like well that actually's and the people that are there or somebody new is comment it's changing the dynamic of the firm in a positive way are negative way like it depends but they the ability to do homework on this is really limited because everyone only knows certain range of people and if you wanna be entrepreneurs it could be a firm changes it stripes it and what they invested and that could be great news not great news and they might attract a whole different kind of entrepreneurs of the folks over there and it's it's so interesting mishmash of that i'm with chris only it's it really isn't that is maybe the super high level there are some firms like sequoia benchmark that's even have amazing management of succession over the generations but i would posit there is i would be surprised if there is a baker's dozen of funds the magic session at by am i say that even though track record is a leg indicator ed had multiple three acts net funds through different people making those decisions 'cause it is probably the hardest thing to do and venture have you seen from those at the top of their game and then dropped out of and maybe maybe it's you know further coffee great mayfield or august china do something then get back into the top or it's is it pretty hard to do that wasn't interesting question it is really hard succession is extraordinarily difficult for huge huge number of human reasons and also i i really wanna get a phd in organizational behavior some of their own where this comes from i actually think that venture firms there's no reason why a lot of the good business books at applied companies that make widgets don't apply venture yet i think most people think about their job is to invest capitol not and building a firm and that's that might work at a site a certain size but when you have twentyfive fifty people in an entity and you wanna be a lot around for forty years we believe that it matters and if people are focusing on that it's gonna they could by virtue of investing in hoover make a ton of money and it's a relevant 'cause wants money starts raining down nobody care the details go away right it's a great absolve or of did you actually show and treat employees well which is also part of dynamic aventure which makes it really hard but it directly aren't that many amazing companies it then come back into a refund if there were there'll be a lot higher the top core tile would actually much bigger numbers and like what is it two two point one one point seven right it's indicative of it's not it's not really there in the industry so therefore how you get super hard but the date against this but i we have a belief that how you manager firmed when you got these sort of mold more bodies and just a couple in succession successive fun really does matter and it's gonna help you write it doesn't just matter and some weenie way but like an eight ono like you get better returns if this is true and you'll opie stick with who joined the tough times 'cause there can be like nobody had a great return in two thousand and two in two thousand three it was is that right like you just like it's just bad news but who's gonna stick with you is also part of their relationship was actually a great point v management of venture firms is so unsophisticated in either the the the thing that somebody said to me once when i was very early actually's same collella a who's at verson longtime ibp guy that everson sam said you know a lot of great venture firms are managed like basketball teams but a lot of the majority of firms act like tennis teams where everybody's playing their own match in so v dynamics associated with that are very different terms of you know kind of partners confusion in or out as opposed to a bunch of different items in what is amazing is up he's actually have a lot more visibility because by the way as he's one of the things in her job descriptions we have to be really good gossips in so we jabber about gp's all day long i mean we know about all yours shenanigans guys what surprises me is how quickly lp's are willing to abandon firms when performances bad and the people are nasty an arrogant so there's a from right now that's raising an i was talking to a a decent size investment firm and they said they're they're gonna pass and i said what's going on because of the performances so so but we really hate dealing with the sons of bitches hand like wow that's actually like that's hard core is that's hardcore unlike language that's like nightly oh that's like but in a world right now were you know one group i talked to the l p a and institutional investor is that a soon damage type investor their nineteen percent in avian venture and they're targeting seven right in all of a sudden when you're like at that level you can actually start to care about if gp's treat you like shit now i don't have any ego about it like i don't care if you know you know if doug liotta comes over and sticks in my i'd still say pizza my time square swell guy but a but i could you know imagine you're the whole long line of people exactly but i think you know if you treat lp's like that how do you treat entrepreneurs right there is like there is like a you know a a level of humanity that you know that that is court at this business right understand people's behavior footprints is kind what we do and a when people are you know really arrogant really dismissive not thoughtful about their business and just you know kind of you know him a cancer gray lock a one of the greatest investors a of his era said he wants he goes devos when capital becomes cheap a in time is expensive lookout used venture works really well when time is cheap and capitals expensive and so a is and when you have the reverse you know look out and i feel like time has gotten really expensive and i think that you know as as a as the tigers at will actually see who's swimming naked right is there too much money and that's a class or how should we think about anthony or if you're an entrepreneur no bring it on river from her perspective how should we think about it isn't interesting balancing act i don't think there is i don't know how you drop the hammer of like oh there's only so many good ideas and they only need this much money so it's servant unknowable but it does feel like what's happening happening is with the money all going at the growth rounds we actually have this conversation this morning which is everybody looks at the same pitchbook numbers crunch base pick your data source and the the majority of the money that's going into venture and this is you estimates in europe probably true in israel haven't seen the numbers yet is going at the later around and there's fewer see deals and there's fewer series day so maybe if you're trying to get seed money it's not as great as time i do find is confusing 'cause he had always new fund starting they tend to be small so i haven't yet square that but it did make us think this morning like this could be a really good time to be a series they invest or like a like a leader seed 'cause everyone's trying to write their fifty million dollar check into this growth round and there's fewer companies coming out or like i mean yes this is self serving we've invested the series i but we do try to keep stress testing sting it and saying like are we in the right portion of stack which is a long winded way of saying in some respects there's never enough money and there's other times where as a human and as they geek a phd ob behavior if you dumped hundreds of millions of dollars into a system that doesn't how to handle it because they haven't been asked they handle it don't be surprised if things break we haven't even gotten the crypto yet in her like if you handed us like any human here is like a hundred times the money you're budget calls for good luck like as an organizational process standpoint like it just that yes extrordinary people will figure it out but for a lot of just humans doing human things that's just the companies could be less successful one could argue then if they actually had him they need it right that's my play dancer now christmas gonna stay that way more cranky i think you know i i just go back to buffets equation which is a opportunity eagles value mind his perception right and what's happened is you know we've gotten to the point where you can shine such spotlight's on companies at the perception really blows out the values you know not you know doesn't grow a necessarily is quickly as a result the the opportunity shrinks right and the problem is that it works in a closed system like venture but at some point we gotta put moulay in the cooler right so we've gotta get these companies we gotta find the greater fool to buy this and it's either you know in may a transaction or in the public markets in have any public mark i know right crickets archer government comeback god don't get me started by my one editorial is 'em trump's wall is you know fourth century solution for twentyfirstcentury problem i hear his latest requisition fergie air force he's after a bunch of by planes same thing right like old fleet onto you're covered for there's multiple multiple lp's it i know who are saying well i have x y and z in my portfolio and now it's gonna go public and that will relieved ability to use money to distribute something else like i dunno children like the hospital like all sorts of stop plus reinvest back into venture and if this if none of the courage to like this could be this could be painful right on so many levels in so many ways but industry what's kind of counting on some liquidity coming through this is my you know kind of exit sinker yes analogy right like the we keep stuffing the snake and stuffing's making this the thinkers tight you know and we just the snakes just getting bigger and the you know the poop isn't coming out the back into fertilize the new feels right but but it lp nirvana is when you're you know recycling distributions it's a it's a circular an you know as we have disruptions enough in the flow of funds and especially now and you know everybody is so far out over the everybody who's got a mature program so fred over their skis because funds have been coming back faster and bigger in any of these have been ballooning and the money hasn't been coming out the back end in you know they will look back our listeners podcast again in five years and will you know then be able to judge whether this is just a passing phenomenon or a harbinger of of a more kind of sand in the gears of the you know the the system over start giving into the system will have to chef well that that's right but then there's like a bit more questions and we have time for 'cause they kind of it's like well why would you set up a system that uses a high velocity asset and you dividends 'cause that's what already exist in a sort of slower growth world so that the two don't seem align but sharpton my pencil the figure out how to make it work you know but back to the kind of is there too much money question i'm actually in a sense optimistic about it in the following way like there should be secondary exit transactions in the way that the buyout ecosystems segmented into micro cap buyouts small you know lower middle market and some of these companies get traded up the stack and maybe we start to see that we've seen you know private equity firm vista he had all the time which is great so some more capital in that way is great the thing i caution i tell my gp this all the time you know you gotta worry about the clientele effect and what i mean by that is who is coming in around in water you they return expectations and i don't think a lot of people are very thoughtful about that and i think they realize it when fidelity comes in around their return hurdle is a lot lower than yours mr scenes from mrs seed stage fund in as a result you that you need calibrate that every dollar demands a return but some people's dollars demand a larger trend in mind demand a really big yes maybe what is closed where's your work you'll be moving a what have you guys been been trying to do work and we expect it to go where do we want to go great question catelli origin story please so they origin stories i think that's probably the diner in play the creamery in palo alto 'cause you i've been known vilifying christian i there on occasion and we were talking about how people wanna know lp's after say apparently 'cause as chris said there's a lot of gossip to be had we think he probably slightly more but evidently any level of like be a pay city in the system is opening up entrepreneurism vc's thanks to all the blogging all that so chris said and they wanna give credit where credit's due we should have a hashtag so people could follow it on twitter and then we were dating around it and i had a team that could help me work on us and then we put together a website and you are out there could be an open l p and then we went through it to are friends or lp's at do blog do tweet and just collected so it's you could go to the website and it just is a collection of where people have put materials somewhere else on a lot of lp's are registered investment visors city scc cares how you talk and when you talk to you have to make it a compliant platform and then for those folks like chris the tweet a lot there's a hashtag and then people can follow it and so this is the mechanics but the idea really wants to increase transparency threw out the ecosystem because then again are perspective is e l p world is relevant point of intersection and it hadn't been super transparent and this doesn't mean violation of confidentiality agreements in sharing basic information of how does the whole three sixty of capitol slow so we just want to do that and industry in it seems pretty six have gone about and it's actually one of our two thousand nineteen question is what do we do next so i don't know what you wanna do podcast tv show that would be amazing i think he's spot on like transparency is is kim formulas like almost a little bit more commercial commercial a tournament for practical because the number of gp's the command in start pitching me undisturbed trump blasting away and have no idea you know what i want to hear about her what i need is amazing and either like rule number one when you're making a sale is like no you're customer incised pushing back on the sec is he came in and just start planning and i'm like you have no idea about you know what i'm interested in or whatever and he's like well how would i and i'm like well i blog right like in tweet so you could pick that up but you know but it's not about me it was about kind of you know broadening the perspective to ashley spur better conversations because we spent so much time you know kind of bullshitting in each other's directions without area say educating but okay data puts out a but notice really like we could spend a lotta time educating slash bullshitting about how she works because it's super hard like i had a friend today who is like i wanna talk to a family offices where do i go find out about them and i was like oh like not my forte but here's somebody who is in a family office who's happy to talk to you about the ecosystem and it's that's why open lp's they're the big question is do you create something that people can self published to that sort of open ended question 'cause they did get more and more people sharing there's a lot of good vc's that right like are basically basically lp perspectives or how do you x y and z and i pull all this stuff into that folks have a resource awesome beezer chris it's been a great episode thank you for coming on educating her audience if you for people who want more follow them on twitter reader blogs guys thank you so much for

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