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kotou is one of the most successful hedge funds of the last two decades the largest startup Fund in the
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world right now they are very discreet started with $50 million and now you're managing roughly 50 billion
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from C to Thomas leant what separates the truly exceptional companies is to realize that
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actually sales and product are different sides of the same coin there was a Confluence of trends that made us feel
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like we needed to be president the valley the reason we decided to kind of get into this business is to find great
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entrepreneurs and find great [Music] companies all right thank you everybody um so my name is Thomas I work at CO2
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I've been a day one listener of the all-in podcast so when they called me and they said would you be willing to
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present I said you know absolutely tell me when then they told me well you're going
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to have the graveyard shift the absolute last slot I said I can handle it no problem then they said by the way we are
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going to put Mark Benny off the goat of enterprise software right before you the return of TK and some guy who
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figured out how to fix aging I still got it and the reason is because what I know
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is that to me the besties are a band and they have what all great bands have which is number one is they have
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talent but number two they have chemistry and you can't teach either but you need both to be great and they're
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great but also like all bands we know they like to have new albums and experiment with new producers in a new
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sound so I think we've heard a lot about the new sound it could be geopolitics or
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free speech and look I know those are important issues but being a day one listener I
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love the old album the first tracks we ever heard to me those are the ones that Will
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Go On The Greatest Hit album and so I knew that if I came I would bring you back to the old days and to me
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um I love the new stuff too don't get me wrong but it's fun to play some of the classics and what I love so much is
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listening to each bestie give their point of view about Venture Capital about IPOs about technology and
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so what I aim to do here is a bit kind of level set on the conversation and they'll join me afterwards and lucky me
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I get to jam with the band for a bit so um all right so let's dive in I hope that this presentation kind of informs a
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little bit about what we see in the Unicorn economy so let's start at the top let's just look kind of at funding
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and what we can see in this slide is that funding is still actually pretty healthy now it's normalized post a covid
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bubble but it's still if you compare it to historical averages it's still quite healthy but if we look at exits which is
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Define of the cash that's returned we see a bit of a different story where actually we're at pre
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levels Without Really any substantial increases since all of the capital that went into during
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Co and one of the main reasons for that is that the three kind of traditional exits for companies are blocked
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today so if you look at private equity for example very um sensitive to interest rates and so there's been kind
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of fewer buyouts despite record amounts of dry powder for that asset class if we look at IPOs well we're
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going to dig deeper into that peel the onion a little bit so I'll talk about IPOs in a minute and since um your know
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political issues have been so present here we know that regulator has had a major impact on company's ability to buy
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other companies ironically and I think somewhat perversely one of the byproducts of constraining big companies
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from buying small companies is it hurts small companies first of all it makes them less valuable
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because if an investor you think that big companies can't buy small companies anymore you may adjust what you think
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that company's worth but to me even more importantly small companies can create a true sense
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of urgency in big companies if you're sitting at Amazon or Google and you're meeting these small companies now you
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don't have to worry about your competitor buying that company because you know that the government will make
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it really hard that gives you time and we think that urgency is really important so we certainly hope that
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whoever wins uh the election they will rethink this strategy because we think it's really important to have a healthy
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ecosystem and m&a is a really big part of that so if you put all of that together
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you see that in fact you wouldn't be surprised by this chart which shows that the distributions from VCS back to their
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investors are essentially at alltime lows almost back to um Financial kind of Crisis
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levels so if you think about our industry is a business now and we looked at the cash flow statement of the
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Venture Capital industry it probably wouldn't look too good we've raised a lot of
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money and we've given very little back we are bleeding cash as an industry and it's ironic because many of us as
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investors have told on companies they need to get fit they need to generate cash
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but we as an industry haven't done that yet so what's left well what's left actually is still a very substantial
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economy what we call kind of the Unicorn economy there's about 1,500 companies by our count that are private
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companies with a last round of greater than a billion Gavin Baker who's another great
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investor who I follow actually came out with a statistic that said there's more private companies in
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Tech that are worth more than a billion than public ones which is kind of an incredible
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statement to kind of think about on top of that if we just kind of look at um employee growth which I kind
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of think is a decent proxy for how this ecosystem is doing we can see that there
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has been a significant slowdown post the digital uh transformation of Co and you can see that employee growth and by
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the way this is xai um which is an important statement and we'll get to AI in a bit but you can
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see that basically the lowest levels of employee growth for this cohort um you know in almost 15
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years that obviously also impacts their financing so if you look at the average company in kind of a um preco era they
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would tend to raise around generally less than 600 days and Bridge rounds and down rounds were about 30% of the total
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rounds well in today's market you can see something very different you can see that it's now greater than 100 days and
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you can see that the mix of down rounds and Bridge rounds as a percent of total rounds is up to almost
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63% so even when they do get a financing the financing look very different and so if you look at what
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that means on a cohort basis and this is one of my favorite charts because I think it kind of tells the story of this
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era in one slide you can see that the 2016 cohort the way to interpret this is the 2016 cohort which is the top slide
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the green line after about 13 quarters 80% had either raised the new round or exited
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so 80% you can see that in the 2021 cohort that number is down almost in half so significantly below and if you
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see at the 22 cohort which is the most recent cohort that we track because obviously you need to give companies at
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least a year to make the analysis useful you can see that those companies are tracking even below the 21
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cohort now we can't BL blame the public markets you know the NASDAQ is at almost
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an all-time high the NASDAQ has had a massive uh performance but the index doesn't tell
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the whole story and I think we need to kind of go one layer below to really kind of understand what's going
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on so if you look at the recovery which is the piece that I kind of focus on since Co you can see that the index
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actually had very strong performance right up almost 122% right since 2019 but if you look at the two buckets
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that I've highlighted which I've kind of created two unprofitable Tech is one and SAS is
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the other the reason that I chose those two is I think that they best mirror potentially the Unicorn economy in the
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private markets you can see actually that those are down the most from the co high and have recovered the least since
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20 2019 significantly kind of trailing the index now you might say look this is a
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bunch of really bad companies so it makes sense my argument to you was be there's incredible companies in this
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cohort and I've just picked three but let's look at these three door Dash block and Shopify three incredible
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entrepreneurs Tony from door Dash Jack from block and Toby from Shopify you can see that these companies have incredible
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scale if you just look at the um the gmv and the revenues you can see that over this
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period of time they got significantly more profitable but you can see that on a PE
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basis the multiple shrank significantly and the growth just wasn't fast enough to kind of offset the lower
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multiple now if we look at IPOs this chart basically one way to look at it is of all of the IPOs since
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2020 if you look at the value created or destroyed from their IPO price you can see it as as a
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cohort we've destroyed almost 225 billion in market cap offset by the value creation of 84 so net negative as
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a cohort this slide every time I look at it I still quite can't believe what it says so we had to quadruple
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the facts but it is the fact is that since 2022 both in 22 23 and 24 we had fewer
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IPOs than in 2008 and 2009 the depths of the financial crisis in 2001 and 2002 post the
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greatest bubble in history in Tech I mean I remember in 2008 you know sitting at my desk and we would get
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reports that Morgan Stanley and Goldman Sachs were going out of business that's how dire those times were there were
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still more IPOs in that environment than in today's environment so I was talking yesterday
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to um a late stage uh founder very large valuation a very kind of well-known company and he was asking
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for the difference between private investors and public investors and what I told them is I said by and large your
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private investors only compare you to companies that are very similar to Yours by which I mean if you're a venture
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investor you look at a Silicon Valley um uh named fund back company and you compare it probably to another company
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backed by another Silicon Valley fund Etc and you try and pick the best as you see fit from those types of
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companies very similar to yours but the public markets work really differently and it's really important to
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understand for CEOs that public markets have options those investors may look at the
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risk-free rate 5% to be able to earn with literally no risk whatsoever they may look at depending on
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how you want to bucket it the Magnificent 6 or seven these are the largest companies in the world
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incredible businesses with cosos like Mark Zuckerberg and you get to own that cohort at a pretty cheap earnings
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multiple for companies that even at the trillion dollar scale are growing in excess of
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15% pretty amazing oh and on top of that there's a new type of company the AI company and those companies are growing
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at incredible scale and they're growing sometimes at 50 60 or 100% And you get to back a Founder like
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Jensen at Nvidia who many people don't know but is the longest tenear founder CEO in Silicon
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Valley and I can also buy those companies at pretty reasonable earnings multiples and finally just in case you
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think oh I'm only talking about big companies you actually get to buy also an incredible set of smaller companies
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we just had Travis on from Uber but whether it's door Das or instacart or block you can see that even great new
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companies like those are available at pretty reasonable multiples so it's really important for CEOs to
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understand who is the competition for the capital that you're trying to raise and the public market can be tough
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and this is one of those moments where the public market is tough because what essentially the public market is telling
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you is that we want it all we want you to be profitable we talked about that already we want you to grow so you have
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to be in a big market and have a big Trend but by the way we also want you to have
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scale that's a lot to ask for but the good news is within this cohort of unicorns we've already
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identified a good list of companies we're lucky to be investors I think in about eight or nine of them that match
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that criteria and I think all of these companies on this slide will one day make for incredible public
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companies so what it make of all this well I kind of wanted to end uh I only have two charts left but I wanted to
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kind of end on this chart um this chart is from Andrew McAfee who has an incredible substack which I encourage
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all of you to follow what this chart looks at is it looks at the average age of the top 50 US public
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companies weighted by market cap okay so average age of the top 50 US companies by market cap so what do we
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see in this chart and by the way he goes back to 1926 it's hard to get data that
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goes back to 1926 believe me we tried so what this shows actually is you can look from 1926 through to almost the
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late 80s the biggest companies are the oldest companies and they keep getting older
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which means that the biggest chance of you becoming a big company was to have been a big company in the
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past so you can see that that kind of can atrophy but it doesn't take a mathematician which I'm not to see that
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something kind of happens in the let's call it mid 90s the average age starts to reverse
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what happened technology happened technology is the great resetter of the business World it can
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take an incredible company and turn it into dust just ask Blackberry or Nokia or other companies that have been on the
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wrong side of a trend and what you see in this chart is you can see that actually the past 25
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years have been really good for young companies which is why another inverse way of looking at it is what is the
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average founder year of that cohort of companies and you can see that that cohort of companies is getting
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younger so the reason why I'm still an incredible optimist about our industry and about technology is because
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technology is still the most disruptive force and we haven't even talked about Ai and robots and all of the incredible
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things that are kind of happening so I kind of wanted to put it all together and kind of use the
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concrete examples um this is one of my favorite charts what this shows is the valuation of two companies that are kind
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of competing with each other um their Enterprise data companies they make essentially a way to store
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data in the cloud so you can see the blue line is snowflake it's a public company today
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and you can see that the red line is data bricks and it's kind of interesting to
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see what do we take from this chart while we can see okay a lot of volatility in the public markets
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valuation going up then down kind of a rise in the private Market but there's other ways to kind of
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look at this you can see that data bricks there's been a lot of talk of founder mode right the the besties
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talked about it on the podcast last week data bricks is a founder-led company snowflake was more of a managerial Le
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company maybe that's one way to kind of interpret what happened maybe another is
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to say if you're a public company and you need to be profitable for your shareholders and your biggest competitor
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is private and can incinerate and burn a lot of money maybe makes a difference though when I mentioned to Ali the co of
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data breaks that I was um using this chart he told me please remind the audience that I'm growing in excess of
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60% so I put that that while I'm burning money I'm actually getting much more efficient so
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I said that I would obviously say that and he also gave me a a non-public data point around his Cloud business which is
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now 500 million of a RR which was almost zero a few years ago so I kind of Lent to in on that
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because I think that um what I love the most about technology and markets is you
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can't be complacent you always have to stay on the um on your toes and part of why I
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love the podcast so much is it always makes me rethink my assumptions and I'm really grateful um to the besties for
00:19:49
that so with that I think they'll come on and we'll chat about this and I think all the other topics that you guys want
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to talk about wow thank you so much for that that was amazing than con gra you thanks brother
00:20:03
that was great thank you J moth uh sent someone to Sax's house to steal Wine Not Ste did you go to which seller
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did you go to the secret seller or the the seller the main seller the main seller or the house seller which one
00:20:18
they they know not to go to any other seller but the the Reser the real seller the real seller I think probably the
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best moment that you and sax had around wine was he poured a wine at a poker game that
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you did not like and I kid you not Troth took his glass it and went like this and poured
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it on the floor in David Sax's house when was that really we weren't outside on the lawn this was in Sax's living
00:20:50
room honestly stop stop the that happen or not I'm going to get from Nat for that story it was in my basement
00:20:57
poker basement and it was not we're it was not an in is not a typical basement you shouldn't use that term but there
00:21:03
was no rug this was a marble floor to be clear not true wherever m is it could be
00:21:08
clean it was more like okay Thomas let me ask you a question um actually after that oh my God stop
00:21:15
thas what happened after guys we got we got on Jam raided my wine seller and found all the latash oh he did that's
00:21:22
right oh my God that is true and then I yeah CU you hit it I think they went through uh a case lash yeah start to
00:21:29
come out don't stop on my behalf sit here all day let's talk let's talk to Tom just so if you invested in the cues
00:21:37
in the NASDAQ and held it for 10 years you make 7.5x um this is a couple months old if
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you invest in the top 10 by market cap companies in the queue you make 8.7 so 9x if you invest in the S&P over 10
00:21:51
years you make 3.2x um and sorry sorry if you invested in the um yeah I'm sorry that was
00:21:59
incorrect if you invest in the top 10 of the cues you make 8.7x and if you invest
00:22:02
in the cues you make 5.2 so 5x 9x why would I invest in Venture at all as an Institutional Investor is and is that
00:22:11
going to shift because you have to be in basically the top two funds five funds to beat the
00:22:18
returns you make just by buying an index of the NASDAQ and how how do institutional investors rationalize
00:22:25
investing in Venture funds at all given how much much value is acing to public companies in technology versus the
00:22:32
private companies have you tried the mtet Thomas just te up a softy for me right
00:22:37
to to te me off um first I ask myself that question all the time right and because we sit in
00:22:45
both public and private markets we bit have this unique ability to kind of look at both and try and use one to make
00:22:51
better decisions than the other I think what's implicit in your question is is what happen has happened over the next
00:22:57
decade going to happen over the next one yes right because I also remember a time
00:23:02
where um and I think this was roughly call it the 2010 period where Google was like flat for seven or eight years right
00:23:10
um from like 07 to I think the next seven or eight years right and that's how the market was digesting Facebook
00:23:17
and kind of things like that so I think the question you have to ask yourself is
00:23:21
we have now multiple multi-trillion doll companies right um three trillion doll companies with app and Nvidia are those
00:23:30
companies going to 10 trillion um and so you know to me it's not necess as obvious maybe it was
00:23:37
obvious you know 10 years ago and we all should not have invested in Venture 10 years ago because we should have just
00:23:43
owned Apple and Google and meta and others you know the question is as investors we get paid to think about the
00:23:50
next decade right and so I think the question for you know all of us and is well what do we think's going to happen
00:23:57
in the next decade and to me it's not as clear just because those big companies are so big now right
00:24:05
um is are we going to see the same pattern occur I mean sometimes law of large numbers and other things like that
00:24:10
would say no there's another I think part of this which is when you invest you have to get some risk premium
00:24:18
for where you're investing and you know the the complicated thing with Ventures when I started my business I think when
00:24:25
David and Jason started his actually also when you started um your investment business we typically thought 7 to 10
00:24:34
years were going to get out of these businesses and return Capital to shareholders and then all of a sudden
00:24:38
it's doubled and now to your point you have wars in Europe you have wars in the Middle East you have this potential
00:24:47
thing sort of Damocles hanging over us in China and Taiwan there's risk everywhere and theoretically what is
00:24:55
supposed to happen is you're supposed to get paid a risk premium to be IL liquid
00:24:59
and not be able to get out over periods of time where any of that stuff could happen right so how does that start to
00:25:06
play into the mindset of the investor that was giving all this money in the first place how does that change you
00:25:11
know it's a great question I was talking to one of the partners of a leading seriesa firm a brand name that that all
00:25:17
of you would know and what was interesting about their business is that buying large their average funds were
00:25:23
were doing the same but the problem is at the time liquidity had doubled and so if if you just think about it on an irr
00:25:29
basis all of a sudden I'm down half half right yeah so that's a huge problem and
00:25:36
I think part of the reason I kind of wanted to to to bring this up is I do think it's a problem that we need to
00:25:44
kind of address as an industry and I think it starts with boards and it starts with Founders right and investors
00:25:50
I was chatting with Bill Gurley um you know in the green room before and he he told me he said well look Thomas you
00:25:56
know you're you guys are part of the problem kind of doing this and I said you're right you're absolutely right we
00:26:02
contributed to it interrupt what what did he mean by that that we were giving liquidity to uh secondaries and Founders
00:26:09
and you know companies that should be public by giving them private Capital we were essentially enabling them to stay
00:26:16
private longer making the problem worse correct is that true yes but if that were true wouldn't wouldn't value
00:26:23
creation acre to those private companies and the performance of can I just go back and just add a Nuance to that but I
00:26:30
said Bill realize that also you guys are also part of the problem because you're
00:26:34
on the boards that are also letting this kind of happen right so we have as an ecosystem right I don't think like to me
00:26:42
the IPO chart is kind of an existential one for our industry right I mean if we don't get these companies to go
00:26:49
public um in my opinion we are um as an industry going to have to face really hard questions
00:26:56
with the ultimate funders of of our industry who by the way are not our funds but are the investors in our funds
00:27:03
right and eventually they are going to demand from us right um Capital back well sorry Tom and Thomas just to build
00:27:10
on your point it's actually not even those nameless faceless people because so much of that money for example in
00:27:15
Sovereign wealth funds and Pension funds theoretically come from these citizens who will at some point need the money
00:27:21
because all of these other existential issues that they're dealing with and so these these pension systems and others
00:27:27
will really have to just justify um while you know they say I'm going to swing for the fences here to
00:27:32
make up for my deficits but with those deficits aren't actually made up and you've paid 2% a year for 13 years and
00:27:39
you burned through a quarter of your capital in fees and you have nothing to show for it the jig is going to be up I
00:27:45
think I mean that's totally right and look I think it's going to be um my biggest other fear you guys can tell I
00:27:53
have a lot of fears so um but my other one good investor yes is that we're creating a worst cohort of
00:28:00
companies because of this right because at the end of the day I do believe that you guys all sit on a tons of boards
00:28:07
right I do think that it can be I think part of why the all-in podcast got so popular is there was a sense that you
00:28:14
guys were saying to uh the public what people were afraid to say in public or what actually you were saying Behind
00:28:22
Closed do right and I think it can be very difficult in boards to go against a founder or a CEO even just propose
00:28:31
something a different path right you know the high school I went to San high school in Brooklyn had a a sign above
00:28:37
the the door when we walked in every morning the truth shall make you free and I think a big part of what we have
00:28:44
to realize in an industry is staying private and giving the founders massive amounts of secondary not modest modest
00:28:51
we all agree um and keeping these P companies public too long um and then private too long uh
00:28:58
you know it's just bad hygiene and bad discipline allowing Founders or telling Founders the VCS are the enemies like
00:29:06
Paul Graham essentially does um saying governance isn't cool um you know most of the companies I've invested when they
00:29:13
fail and they don't have governance say to me if only somebody cared enough to help us solve our problems and I say
00:29:20
well remember I said would you like to start board meetings quarterly for one hour and I'll come to it and they said
00:29:26
yeah and we got advice from people don't have board Mee me ings you know at some
00:29:29
point we have to have discipline and we have to accept the truth and the truth is you know on a on a societal level 40%
00:29:38
of the country does not own equities and they believe that everybody's getting rich but them and they're voting for
00:29:44
socialism and they're voting to not let these companies merge and grow which is now going to freeze the system and if
00:29:50
the system freezes because of Lina KH who was picked on a strictly political basis because she's anti-tech and
00:29:57
because that gets votes from a bunch of socialist voters uh who feel disenfranchised now we got to solve the
00:30:03
disenfranchised problem um but we also have to create jobs and we have to create the next companies and I I
00:30:10
encourage people who maybe who are anti-tech who are anti- capitalism to imagine a world in which we didn't have
00:30:17
Google Apple Tesla Facebook Microsoft Uber door Dash as our companies in our country and you know what that looks
00:30:26
like that looks like Europe and that looks incredibly slow growth and and it looks like all the growth comes from
00:30:31
government ask question yeah and I know but I mean we have to be adults in the room here and tell the truth age I'd
00:30:37
like to ask Thomas a question before I'm sorry it's the montet talking clearly I mean it's amazing I think you
00:30:46
bring up something that again is something that it's the quiet part said out loud which is maybe we have this
00:30:50
cultural issue and I actually have a lot of empathy for where this cultural issue
00:30:55
came from your seoa and you've done it a certain way but then now you're andreon
00:31:01
or your Social Capital your craft you have to decide how you're going to disrupt and you say the thing that the
00:31:06
other person is not saying but then it the it just gets out of control what do we do to fix the problem
00:31:15
um how do we collectively identify a set of solutions what do we do I I think to
00:31:22
me the the most obvious is we have to take our companies public because to your point Jason the public market is
00:31:29
the great disinfectant the public market doesn't care that you're a CEO and you're going
00:31:34
to give a referral to the other investor and so you have to become friends and you know that whole thing or the brand
00:31:40
of your investor is X or your prior company did y you know at the end of the day the public market will look at your
00:31:46
business and so I think encouraging entrepreneurs to go public is really important right let me ask you a
00:31:54
question the traditional go model is an IPO you raise capital and you list your shares at the same time those are two
00:32:02
separate activities people don't realize they're actually separate your Shares are available for sale on a public
00:32:07
market and you're raising capital in the process and you create demand through the capital raising process such that
00:32:12
your shares will go up as they start to trade the model of the direct listing is
00:32:16
you just list your shares they start trading they're going to go up they're going to go down we've seen a couple of
00:32:21
these in the past few years they're like as soon as it hits the market it goes down it goes up and but the market
00:32:26
values the company once the company's been valued and the market stable maybe then you raise Capital at whatever the
00:32:32
market tells you the valuation is however there is a very big aversion to direct listings in Silicon Valley and it
00:32:39
seems like there's either a failure of the business or it's one of these businesses that are such an outlier of
00:32:43
success that it doesn't matter they're like I don't care I'll just direct list should direct listings become the kind
00:32:48
of deao model because otherwise everyone talks about the IPO window being closed
00:32:52
the big institutional investors that build the IPO book are all sitting on the sidelines right now they're like I'm
00:32:56
not investing in any new stuff for a quarter or two quarters so the IPO windows closed and you can't go public
00:33:01
should we not kind of push all up Silicon Valley that like this direct listing might be a better model and I
00:33:07
know some have tried to motivate this this transition but it's why isn't it gotten legs and is it a better way so
00:33:15
what I would say to that and trath you you kind of hit on this with some of the work that you've done here but I do
00:33:21
think that the recipy to go public is different first of all I can tell you is i' you know we've looked at buying IPOs
00:33:26
over 20 years I mean probably thousands of them we couldn't care less whether it's a traditional IPO or whether it's
00:33:34
um a direct listing like we care about the business and the price and the mechanics are completely irrelevant to
00:33:39
us right um so that's kind of number one but I do think Founders have to understand that the public market itself
00:33:45
has changed okay being an active investor in the public market over 20 years has been a really bad business we
00:33:53
are fighting the machines first of all right so uh Ken Griff Citadel Renaissance you know all of these you
00:34:01
know quants and algorithms and that's number one we're fighting the indices right massive move away from active
00:34:08
investing to passive so being in the quote money management business I mean just look at the chart of tro price and
00:34:15
others it's not been a great business so the public business has changed and I think why is this relevant to Founders
00:34:23
because I think there's another big constituency that's really important as an example retail
00:34:28
right and so if you can tap into a retail investor base and convince a retail base that your business is
00:34:34
worthwhile that's maybe something that 20 years ago you might have said I don't think that's a good use of time I think
00:34:39
this year is a really good use of time so going on podcasts right going on CNBC going out and educating the public about
00:34:47
your business so that you're not just relying on a frankly shrinking pool of investors in the public market I
00:34:54
remember when I started in the late ' 90s early 2000s you had small cap mutual funds in Kansas City and other places
00:35:02
their whole business you may remember was taking small companies and bringing them to the public market those they're
00:35:08
gone today they're gone today there there's none left right so we need to adapt and I think those are the
00:35:15
conversations that we need to be having I hope that some of the companies that we listed right you guys know these
00:35:20
companies you're investors in a bunch of them they're generational opportunities
00:35:24
I hope some of those kind of go public right and that we kind of get the do think I just want to build on this um it
00:35:32
is one of the most systematically broken things and just even be more specific what happens in Silicon Valley
00:35:38
boardrooms is you have folks that are playing a very establishment Insider game and whenever I see that I I just
00:35:47
get offended just at at a core level and it's about a certain set of Banks and it's about a certain set of Privileges
00:35:55
and conferences and it's a cabal of and this is what convinces these very impressionable people all
00:36:03
kinds of spirous data to say what it is that they want which is not that the company goes public or not public but
00:36:12
that they have ball control to help them influence that decision and that's the game and you can look at all the major
00:36:19
investment Banks and that's how the game was played and every time there's been an attempt at an innovation people push
00:36:26
back severely the the most impressive one that I remember I mean I was part of one version of that just a few years ago
00:36:33
with these backs they had a very checkered obviously set of outcomes um but it was courageous to try and the and
00:36:40
when I remember I worked with credit s when I was launching this first one the reason I picked credit s you know why
00:36:47
because they were the ones that were totally blackballed in 2004 for doing the Google listing and do you know why
00:36:52
what Google did they completely pushed back on the IPO they completely restruct red it from first principles they
00:36:59
decided how to do it and when I looked at it and I read the filing documents I was like this is courageous and
00:37:05
incredible because if other people follow this it'll unlock money but what happened to that whole model people put
00:37:12
it on the side and they were like if you go to credit s this will happen that will happen so the infrastructure pushes
00:37:19
back on you so I think part of what we need to do is make people open to realize direct listings work now for
00:37:26
example I went through a direct listing with slack what we did not learn is that the
00:37:32
best price is the day one price so if you have investor pressure the thing that I should have done it was a
00:37:37
probably a$ 1.2 billion $1.24 billion mistake I know it because I distributed too late I should have sold every
00:37:46
share I didn't know that it was very hard to know that so I think the point is that there is this system of weird
00:37:53
incentives that have everything to do with what Barry Weiss yesterday called prestige
00:37:58
and nothing to do with what you said which is disinfecting a business and just let it win or lose yeah
00:38:08
so very well said and then I I know you um we'll move on after this but to me Jason there's one other big thing which
00:38:16
is cosos need to understand that it's okay for their valuation to go down right there you know it's like this bet
00:38:24
Noir in the valley that my God if for some reason your valuation goes down 10 or 15% it's the end of the world guess
00:38:31
what it isn't it's the craziest concept I I public stock only goes up right it doesn't like it's like so in Silicon
00:38:38
Valley if your Stock's not always going up it's like it's a imature yeah it's so
00:38:42
immature yeah and there's these people that perpetuate that because then they have ball control and it's just
00:38:50
not who's in a relation who's married okay we'll give it the final question just okay how many have you been in a in
00:38:55
a marriage where at some point the marriage was not always the best you can't ask that and then ask people to
00:39:00
raise their hands my point is relationships go up and down correct friendships go up and
00:39:06
down businesses go up and down I mean like this is real life well so just this will be our last question yeah just just
00:39:13
to wrap things up so I really wanted Thomas to give this speech because I thought this is the nitty-gritty of what
00:39:18
we deal with in the Venture your slides are incredible by the way we'll make them available by the way to everyone so
00:39:24
so this is really the Straight Dope on what the Venture Capital industry is dealing
00:39:33
with because we had this massive bubble in 2020 and 2021 especially the second half of 2021 where you know we all know
00:39:42
that the FED cut interest rates to zero and the federal government air dropped trillions of dollars on the economy and
00:39:48
the way that affected the tech ecosystem is we had a bubble like probably the biggest bubble in 2021 that we had since
00:39:55
the do bubble and and since then 2022 23 24 we've been dealing with the Fallout and The Hangover from that and I think
00:40:05
that's what your if I was to kind of TDR your slides it's basically we had this incredible bubble now we're in this sort
00:40:12
of workout period there's a lot of facets that we double the payback period that's a real problem yeah so that's so
00:40:20
and so there's more to work out at the same time I think that we've heard at this conference that some of these
00:40:26
emerging Tech Trends are are going to be the biggest we've ever seen Benny off talked about agents of the Enterprise
00:40:31
Elon talked about robots so at the same time that I think the tech industry is feeling this huge hangover and it's you
00:40:39
know frankly if you're like doing all these workouts with the companies it's pretty miserable but we're seeing these
00:40:43
upward trends that could be the biggest yet D David and I said something backstage I just curious what you think
00:40:49
of this we were looking at your slides the one that said the 2022 cohort was below the and uh the comment was and you
00:40:57
can just say yes or no but um that's probably where the best companies are going to emerge because they will have
00:41:05
the most darwinian risk of demise yeah does that kind of counterintuitively make sense to you or it's not and look
00:41:12
it fits within a framework that I really believe which someone kind of told me in
00:41:16
the context of China but I think it's appropriate which is you know um dictatorships double down and democrac
00:41:22
is self-correct you know markets self-correct right so I'm a big believer in our ability as a market to kind of
00:41:29
self-correct it's kind of why I wanted to show the the slide about the age of companies right because it kind of
00:41:34
crystalized what we all believe which is that technology is fundamentally changing the world of of business and
00:41:39
markets and kind of I still really believe that so David I 100% agree I just hope like take the AI um Trend as
00:41:49
an example right part of also why like talking about this stuff is so we don't just repeat some of the same mistakes
00:41:54
right because I always you my role as an investor first and foremost is a version
00:42:00
of the hypocritic oath just Do no harm don't make things worse right um maybe you can't help but at the very least
00:42:08
don't like make things worse right and my one worry I kind of said it a little bit before is that some of this stuff is
00:42:15
actually making things worse so let's kind of stop doing what we think makes things worse and let's try to focus on
00:42:21
again the incredible value creation that will come we have the chart that shows it over 30 years we know that technology
00:42:29
creates incredible new companies let's just kind of let that process play out ladies and gentlemen very much thank you
00:42:35
Thomas F thank you that awesome thank you thank you