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And if you look at private equity, pull up that chart I had there. This is just stunning how big this industry is
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getting. You know, $5 trillion is what we're up to here. And it just keeps growing.
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I I think private equity is totally screwed. I I don't think Silver Lake or Infinity or this deal
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are screwed, but I think private equity in general is totally hosed. All right. Well, it's gotten huge just
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since 2015 and tripling in size. So why is this I guess my question for the gentleman here and for the audience why
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is private equity becoming so large and what impact does that have on society if
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people can't put EA into their retirement account? They can't put Stripe into their retirement account. If
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we take all the great companies and we start to privatize them, SpaceX never goes public. What impact does that have
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on people's retirement accounts? Okay, look I think I think the history of this is important. There was a
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long-standing belief that the best way to generate the best risk adjusted return. What does that mean? That means
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to manage through periods where the stock markets go down and to manage through periods of volatility. The best
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way to do that was to have what's called a 60/40 allocation. 60% to bonds and 40%
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to equities. Over many years, especially when we artificially suppressed rates at
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zero through Obama, a lot of people started to move their allocations away from 60/40 and they started to make more
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and more investments further out on the risk curve. The biggest beneficiaries of
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that were venture capital, private equity, and hedge funds. The thing with private equity is that
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because rates were zero, they had an infinite amount of borrowing capacity, had very little downside to them, and so
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they were able to manufacture returns much faster than venture capital and hedge funds could. So, as a result, you
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had an initial group of people that were defining the asset class, making a ton of money, and then you had all these
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fast followers that said, "Well, if they're doing it, I can do it, too. So far, so good." But then always what
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happens is then you have this flood of lagards that just flood the zone. And it's these lagards that make it very
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difficult to generate returns because they start overpaying for assets. They start mismanaging and undermanaging the
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assets that they do own. And so where we are is that private equity has seen a very consistent way of returning money
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to help improve that 60/40 portfolio. as a result they got a lot of money but then that created a lot of competition
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and so that's why you see this hockey stick graph Jason and when you see that kind of graph
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it doesn't matter what asset class it is the returns go to zero and so we've seen
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this in venture capital we've seen this in hedge funds and we're now going to see this in
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private equity too much money going in to be clear what you're saying means you kind of exit it
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right there's there's no returns and so again I've said in any of these alternative asset classes, there's only
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one thing you should always ask if you had to have one critical question. What are your distributions?
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Don't show me your IRRa. What is your DPI? The distributions on your paidin capital. And if the answer is zero,
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then it is a very challenged asset class. And what I will tell you in private equity is that over the last
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four or five years, distributions have been few and far between. So I think what's going to happen is
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that the money is going to come out of private equity and it's going to get concentrated into the few companies that
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know what they're doing of which Silverlake has generated over you know the last 15 20 years
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tens and tens of billions of dollars of distributions. They are just an exceptionally well-run organization.
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They've done these huge buyout deals successfully before. So, we need to go through that in PE. Where does the money
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go? The money's already leaked into private credit, which is the next big bubble that's building. It looks like
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this chart that you just showed, which is loaning businesses money. You know, it's super interesting because you
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make such a good point. What we're seeing in private equity is these continuation funds. Now continuation
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funds are coming chimoth to venture. So I've been getting pitched on these continuation funds where like hey take
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all your assets sell it to a new group of people and then reset the clock and then there's never an exit. The good
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news is I will say the last year we've seen a lot more activity for shares of our companies that are still private. So
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the secondary market freeberg is coming back in a major way. But I do get worried about these continuation funds
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because now you're just moving an asset from one class to the other and we need to have a functioning IPO market. How
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functioning is the IPO market today? Would we say it's completely dysfunctional?
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How dysfunctional is the IPO market? Let me say it another way. And and how do we
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correct that? And this leads into your new spec. Look, there are three ways to go public.
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There's the traditional way IPO, there's the direct listing, and then there's the reverse merger or the spa.
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Up until I floated IPO A in 2018, I think it was the first way was really the only way.
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I was involved in two direct listings, Slack and Coinbase. And in both of those, what I learned is
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that, you know, it has the same vagaries as the traditional IPO. So in the traditional IPO, you go to a bank, they
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underwrite you, they act as a gatekeeper, and they take six, seven, 8% fees as a result, and then they allocate
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what is essentially underpriced stock to their best customers. Then you see a one-day pop, maybe a two or three day
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pop. All of those customers tend to unload and then the stock tends to drift down. So the IPO is expensive and it
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typically is mispriced. The direct listing you have a different dynamic which is
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the first trade is always the highest trade and then it just goes straight down. That happened with Slack and it
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happened with Coinbase. So Spotify would be in that group as well. Yeah. Yeah. With Slack I remember like I I was
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like offside a billion dollars and I was like well I'm never letting this happen
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again. And so when I had the Coinbase thing, I sold it the first day. And I texted Brian. I said, "This is not a
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directional indication of your company. It's the dynamics of the direct listing because I learned it the hard way that
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the time to sell is on day one." So where does the spack come in, you know, especially now in version two? Version
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two being the the thing that I have been tinkering and refining with and am trying to push in in this new version.
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I think that it's creating an incredibly competitive vehicle where you can have a
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ton of money go into these private companies, take them public at a very, very low cost of capital. And I think
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that that's should be very enticing. So, you closed your financing. Can you just tell us what the capital raise was
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like as you went out and met with folks? What do you hear? Yes. You know, Nick, maybe you can find
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it. You know that image of the Raptor engines? Yes. super complex to being elegantly
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simple. Yeah. Nick, can you can you maybe just throw that up? What I would say is like
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Spack 1.0, of which I was, you know, right in the front of the parade, had a bunch of misfires and it was
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complicated, but it worked. There were some hot fires that worked, but then there were some clear misfires. And the
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whole point was to prove that you could create a competitive alternative to the IPO. The thing that I'm the most proud
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of quite honestly is for all intents and purposes I started a normalization of this vehicle that's
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now raised more than 1502 200 billion dollars for American companies. I am very proud of them. That's an important
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thing for the American capital markets. I think what we did in American exceptionalism is Raptor 2. It's not yet
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perfect, but I do think it tries to improve on the things that I noticed was not working in Raptor 1. And in that is
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a lot of the compensation and incentives. And so when I showed that to investors, they were quite excited. I
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think that they want a competitive IPO market that brings many many American businesses to the public market so that
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they can be owned by everybody, the transparency they like, and the fact that the incentives are such now where
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there's absolutely no compensation unless this thing really works. And historically they received warrants in
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the company typically with a strike price of 1150. So 15% above the issue price of the stock
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and founders shares that were basically and there was founder shares. But like did you have a reaction from them saying
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hey we want some warrants we we need a little extra kicker here like there's some sort of
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desire for that. No in fact it was the opposite. I think that the institutional investors and you
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know my investors in this 98.7 of the capital was allocated to these guys are the best of the best. You you know who
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they are. So they're every single blue chip A+ institutional investor and what they wanted was great companies. They
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want great companies to be public and the reason is the thing that Freeberg I think you mentioned this before. When a
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good company gets public, the amount of money that they can raise in the publics
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and then the amount of growth that they have in the publics far outclasses what they'll ever do as a private company.
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And so they want the simplest and cheapest way of great businesses to get out. Jamat, do you think that the
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transaction when you find a merger partner, the traditional spa has been announced as a merger concurrent with a
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pipe being done where new investors are underwriting the valuation of the deal and saying we like this company at this
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price cuz we are now going to write money in in the form of a pipe and historically the pipe was for common
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shares. So it kind of was like this is a good price and everyone felt good about
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it. Number one, do you anticipate that there'll still be a pipe being done in concurrent with the merger and this
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transaction? And then number two is do you think it'll look like a common pipe? Because after the spa frenzy died down,
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in order to get deals done, the pipe started to get done with convertible preferred securities. So they were
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senior to common and they almost were like dead. How do you think this is going to play out? because a clean deal
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has not happened in quite some time where a spa has announced a merger and simply raised money via common in the
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form of a pipe. It's a great question. I think it comes down to the underlying asset, but there
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are some incredible companies that are private that if they go public will be able to demand
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common pipe capital. I think that the future maybe just prognosticating and guessing what does Raptor 3 look like in
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this back. I think the Raptor 3 will look like where somebody a sponsor like me rolls everything up into one thing so
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that it's already pre-wired from the beginning where I'll just speak to a billion, two billion, three billion,
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whatever it is, flexible capital that can come in as common so that it's a totally pre-baked IPO
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at a very fair price. I think that I think that that's what the Raptor 3 version of a spa will look like.
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So more capital and then they they put their full trust and faith in the sponsor to run the deal. Well, no then
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no meaning then there's no conversion risk that all the money comes over right from day comes over right and so then
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you have to fully commit