David Frankel

I would say reserves and how to do the reserve thing is actually one of the most challenging aspects of venture. Still think of like pro-rot as like the original sin against entrepreneurs. You own your own destiny by minding your monthly burn. I think that DPI could be dead. LPs are looking at this asset class right now, I think, and going, where is the DPI? Those guys were just like a casino.

I would say reserves and how to do the reserve thing is actually one of the most challenging aspects of venture. Still think of like pro-rot as like the original sin against entrepreneurs. You own your own destiny by minding your monthly burn. I think that DPI could be dead. LPs are looking at this asset class right now, I think, and going, where is the DPI? Those guys were just like a casino.

So down to the last draw. And in fairness to them, some of these enterprise clients are still giving them hope. If you do this, this, this, you get $100 million contract.

So down to the last draw. And in fairness to them, some of these enterprise clients are still giving them hope. If you do this, this, this, you get $100 million contract.

I would say generally founders who've had enormous, enormous success and exits come to the next opportunity with some degree of hubris. I speak about this personally. I sold my first business and I thought I could conquer anything. And they look at any vertical and you kind of go, I'm going to disrupt that. I'm going to be the one that's going to show them a lesson.

I would say generally founders who've had enormous, enormous success and exits come to the next opportunity with some degree of hubris. I speak about this personally. I sold my first business and I thought I could conquer anything. And they look at any vertical and you kind of go, I'm going to disrupt that. I'm going to be the one that's going to show them a lesson.

And generally speaking, that hasn't worked out well for us. Versus entrepreneurs who tried their asses off, raised money, and for some reason or another, it didn't work out. They come back hungrier. They come back, they want that prize. They want to prove, chip on the shoulder. And if they can bring back the team somehow. So second time entrepreneurs where they failed and they come back for more.

And generally speaking, that hasn't worked out well for us. Versus entrepreneurs who tried their asses off, raised money, and for some reason or another, it didn't work out. They come back hungrier. They come back, they want that prize. They want to prove, chip on the shoulder. And if they can bring back the team somehow. So second time entrepreneurs where they failed and they come back for more.

Tom Lease at Motorway is an unbelievable example. I was on the board with Sonali Durekar of Top 10. They build an unbelievable product in the travel space, but they get crushed in that vertical. Try to outspend Kayak in the other place, spending $100 million a month, Google's single largest advertisers. You can have the best product you want,

Tom Lease at Motorway is an unbelievable example. I was on the board with Sonali Durekar of Top 10. They build an unbelievable product in the travel space, but they get crushed in that vertical. Try to outspend Kayak in the other place, spending $100 million a month, Google's single largest advertisers. You can have the best product you want,

tail between their legs, go off, they lost all of our money. Brings back the team and starts motorway, billion dollar valuation. They're great people to back. The trick is you got to get them to come back and speak to you because sometimes- They didn't.

tail between their legs, go off, they lost all of our money. Brings back the team and starts motorway, billion dollar valuation. They're great people to back. The trick is you got to get them to come back and speak to you because sometimes- They didn't.

So, you know, that is to say, look, you failed for all the best reasons. You failed. It's not because you didn't try your ass off. It's not because this team isn't thoughtful. And the clock cycle, the frequency at which you got stuff done was enormous. The context was just impossible. Come back to me. My bad on steroids, right? That I didn't say that. And I've learned that the hard way.

So, you know, that is to say, look, you failed for all the best reasons. You failed. It's not because you didn't try your ass off. It's not because this team isn't thoughtful. And the clock cycle, the frequency at which you got stuff done was enormous. The context was just impossible. Come back to me. My bad on steroids, right? That I didn't say that. And I've learned that the hard way.

Every time there's a failure and I love the team and generally that's the nature of this business. Like, you know, I put teams before themes all the time. It doesn't work out and I love that team. Like I have to say to them, come back, please. Not because I'm an options junkie, but because I want to be in business with those people.

Every time there's a failure and I love the team and generally that's the nature of this business. Like, you know, I put teams before themes all the time. It doesn't work out and I love that team. Like I have to say to them, come back, please. Not because I'm an options junkie, but because I want to be in business with those people.

I still think of like pro-rot as like the original sin against entrepreneurs. You asked me earlier, is there stuff that entrepreneurs don't understand about VCs? If I said to you, Harry, I've got an option to, I don't know, you know, anything, right? Like, why would you give me a free option? Why would you give me a free option?

I still think of like pro-rot as like the original sin against entrepreneurs. You asked me earlier, is there stuff that entrepreneurs don't understand about VCs? If I said to you, Harry, I've got an option to, I don't know, you know, anything, right? Like, why would you give me a free option? Why would you give me a free option?

If I said to you like, you know, for $10 million, like give me an option to buy 10% of 20 VC and I can decide if I want to do it or not. You wouldn't in a million years, right? But you've had to learn that. The amazing thing about entrepreneurs is they give pro rata. It's like the superpower thing for VCs. And I think it is terrible, terrible for entrepreneurs. You're selling options against you.

If I said to you like, you know, for $10 million, like give me an option to buy 10% of 20 VC and I can decide if I want to do it or not. You wouldn't in a million years, right? But you've had to learn that. The amazing thing about entrepreneurs is they give pro rata. It's like the superpower thing for VCs. And I think it is terrible, terrible for entrepreneurs. You're selling options against you.

So standard operating procedure is, you know, later stage VCs look at it and they go, go to the market, test the market, see what the market will bear. That's code for like, I don't want to price you, you know, go out. The market's going, I'm a stalking horse. Like, why would I be a stalking horse for X, Y, Z?

So standard operating procedure is, you know, later stage VCs look at it and they go, go to the market, test the market, see what the market will bear. That's code for like, I don't want to price you, you know, go out. The market's going, I'm a stalking horse. Like, why would I be a stalking horse for X, Y, Z?

And if you're doing great, if your revenues, if your rule of 20 is like, your rule of 40 is off the charts and you're doing great, amazing. Pro rider doesn't matter. If you're struggling, pro rider is terrible. Why is it terrible if you're struggling? Because you go to the market, you're a stalking horse for XYZ lifetime fund that's on your cap table already.

And if you're doing great, if your revenues, if your rule of 20 is like, your rule of 40 is off the charts and you're doing great, amazing. Pro rider doesn't matter. If you're struggling, pro rider is terrible. Why is it terrible if you're struggling? Because you go to the market, you're a stalking horse for XYZ lifetime fund that's on your cap table already.

Everybody's going, I'll price this thing, they'll come in at that price only. It's just very difficult, I think, to get deals done. By the way, then you find, unless you're killing it, So I remember, I think of Coupang and Coupang went to Sequoia and said, look, it's a 4 billion pre. BlackRock will put in a billion. You don't get your pro rata.

Everybody's going, I'll price this thing, they'll come in at that price only. It's just very difficult, I think, to get deals done. By the way, then you find, unless you're killing it, So I remember, I think of Coupang and Coupang went to Sequoia and said, look, it's a 4 billion pre. BlackRock will put in a billion. You don't get your pro rata.

When you're doing incredibly well and you're hot as anything, you can do it. When you're not, even the later stage investor goes, I want 20% ownership. And your cap table saying, no, no, no, no, we're doing our pro rata. And then you get into that struggle of, well, I've got to dilute more than I thought I would. So in good and bad, I don't think pro rata is great for entrepreneurs.

When you're doing incredibly well and you're hot as anything, you can do it. When you're not, even the later stage investor goes, I want 20% ownership. And your cap table saying, no, no, no, no, we're doing our pro rata. And then you get into that struggle of, well, I've got to dilute more than I thought I would. So in good and bad, I don't think pro rata is great for entrepreneurs.

I think it's a good signal to investors early if that happens. Like, do you want to be in business with that entrepreneur? It happens to everyone. But I'd rather it happens early to me than later on because it was pretty clear that that individual was totally transactional. Josh Kopperman, there was a time where he would say, I'll give you $2 million uncapped note ahead of the next round.

I think it's a good signal to investors early if that happens. Like, do you want to be in business with that entrepreneur? It happens to everyone. But I'd rather it happens early to me than later on because it was pretty clear that that individual was totally transactional. Josh Kopperman, there was a time where he would say, I'll give you $2 million uncapped note ahead of the next round.

A lot of this was in his portfolio already where he went like, what's the quadrant that's really killing it? What first round used to do is in the quadrant that they thought was like amazing, they would go to those founders and say, here are literally uncapped checks.

A lot of this was in his portfolio already where he went like, what's the quadrant that's really killing it? What first round used to do is in the quadrant that they thought was like amazing, they would go to those founders and say, here are literally uncapped checks.

And what we're doing is your initial founders are showing such enthusiasm for your company that that can only be great as a selling point when you do the next round. So that's a different take on it. But I think you can do that. You can do it in the opposite direction where you just show unbridled enthusiasm. And in a way, that's testimonial marketing for the founder.

And what we're doing is your initial founders are showing such enthusiasm for your company that that can only be great as a selling point when you do the next round. So that's a different take on it. But I think you can do that. You can do it in the opposite direction where you just show unbridled enthusiasm. And in a way, that's testimonial marketing for the founder.

I would disagree with Nick because I would say prefs are fundamental, saying you should give your investor their money back before you kind of distribute the spoils to everybody. I think that's a fair tenet. I think most entrepreneurs would go, yeah, giving them their money back is fair. I remember in Uber, by the way, we had preferred shares.

I would disagree with Nick because I would say prefs are fundamental, saying you should give your investor their money back before you kind of distribute the spoils to everybody. I think that's a fair tenet. I think most entrepreneurs would go, yeah, giving them their money back is fair. I remember in Uber, by the way, we had preferred shares.

Eric was the first investor, was one of the first in the first round on Uber. And I remember one of our LPs saying, you've got Common. And Eric went, no, no, no, they're preferred. And our investor said, no, no, you've got Common. And Eric was like, what are you talking about? Like, they're preferred. He said, well, you're under a stack of so much prefs. You're under like $5 billion of prefs now.

Eric was the first investor, was one of the first in the first round on Uber. And I remember one of our LPs saying, you've got Common. And Eric went, no, no, no, they're preferred. And our investor said, no, no, you've got Common. And Eric was like, what are you talking about? Like, they're preferred. He said, well, you're under a stack of so much prefs. You're under like $5 billion of prefs now.

It's equivalent to Common. And so I think there's another way of looking at that, of going, when companies raise so much money, if you're in the very beginning, right, do you really have prefs? You're under that whole pref stack, unless you got kind of pari passu. And I think that's changing in this environment now. How's that changing? Well, I think the terms are getting tougher.

It's equivalent to Common. And so I think there's another way of looking at that, of going, when companies raise so much money, if you're in the very beginning, right, do you really have prefs? You're under that whole pref stack, unless you got kind of pari passu. And I think that's changing in this environment now. How's that changing? Well, I think the terms are getting tougher.

You know, there's so much capital out there, but later stage capital can call the shots a lot. And it depends on how well the company's performing. But when tougher performance companies raise money, the terms are getting tougher.

You know, there's so much capital out there, but later stage capital can call the shots a lot. And it depends on how well the company's performing. But when tougher performance companies raise money, the terms are getting tougher.

as well. And the pref stack, like Perry Pesu feels like something of the past. There's a real pref stack coming.

as well. And the pref stack, like Perry Pesu feels like something of the past. There's a real pref stack coming.

Well, the listed markets change completely. So if you look at SAS multiples in 21, 20, where that was 20X, and then you look at those SAS multiples as five, six X, that trickles down. So later stage investors that invested in private at a billion and expected that rule of 40 to be at least profits and huge growth all the time, and that hasn't materialized.

Well, the listed markets change completely. So if you look at SAS multiples in 21, 20, where that was 20X, and then you look at those SAS multiples as five, six X, that trickles down. So later stage investors that invested in private at a billion and expected that rule of 40 to be at least profits and huge growth all the time, and that hasn't materialized.

They're looking at those same companies who are going out for top-up rounds and they're going, why would I top out at the last valuation? Or they're saying, again, go to the market, see what the market will bear. We've seen down rounds in companies that got valued enormously, hugely. Goes back to at any point, you own your own destiny by minding your monthly burn.

They're looking at those same companies who are going out for top-up rounds and they're going, why would I top out at the last valuation? Or they're saying, again, go to the market, see what the market will bear. We've seen down rounds in companies that got valued enormously, hugely. Goes back to at any point, you own your own destiny by minding your monthly burn.

I think that DPI could be dead, right? And let me clarify that. But I think a lot of LPs look at 2018 plus funds and they go, where's the DPI? And I think that what happened there was a perfect storm. Our fund three is a 2018 vintage, no DPI yet. And what happened is if you look at fund one, fund two, five, six years in, we were giving DPI.

I think that DPI could be dead, right? And let me clarify that. But I think a lot of LPs look at 2018 plus funds and they go, where's the DPI? And I think that what happened there was a perfect storm. Our fund three is a 2018 vintage, no DPI yet. And what happened is if you look at fund one, fund two, five, six years in, we were giving DPI.

It wasn't even our biggest hitters, but we were giving through companies like Cruise or Desktop Automation that you've never, Desktop Metal in fund two, right? Through companies like Datalot and InfoScout, we were already giving significant DPI. That's way before we got to Uber, Trade Desk, Coupang. And we haven't given DPI, by the way, at all in companies like SeatGeek, Airtable.

It wasn't even our biggest hitters, but we were giving through companies like Cruise or Desktop Automation that you've never, Desktop Metal in fund two, right? Through companies like Datalot and InfoScout, we were already giving significant DPI. That's way before we got to Uber, Trade Desk, Coupang. And we haven't given DPI, by the way, at all in companies like SeatGeek, Airtable.

But you look at 2018 plus funds, and the problem is it was this perfect storm. So we were preparing, we were getting involved in companies that had lots of potential. And then 2019, 2020, Zerp comes along, day trading at home over COVID. And 10 on 40, 10 on 40, 20 on 80. Tiger looks at A16Z and goes, you know, they have 10 on 40, we'll do the 20 on 80. SoftBank. And that was the apotheosis.

But you look at 2018 plus funds, and the problem is it was this perfect storm. So we were preparing, we were getting involved in companies that had lots of potential. And then 2019, 2020, Zerp comes along, day trading at home over COVID. And 10 on 40, 10 on 40, 20 on 80. Tiger looks at A16Z and goes, you know, they have 10 on 40, we'll do the 20 on 80. SoftBank. And that was the apotheosis.

But at every stage, the money was just going out like crazy. Did we do founders favors? Like, no, no, no. That's the 2018 plus vintage. So LPs at every stage, I think, are looking at this thought for LPs. And they still want to get into good funds. So they're not being as direct with the managers. But they're looking at this and going like, show me the DPI.

But at every stage, the money was just going out like crazy. Did we do founders favors? Like, no, no, no. That's the 2018 plus vintage. So LPs at every stage, I think, are looking at this thought for LPs. And they still want to get into good funds. So they're not being as direct with the managers. But they're looking at this and going like, show me the DPI.

Harry, we've got no DPI in fund three yet. We've got an LOI in a vertical SaaS business right now. LOI, we haven't got, this is not there yet. The company's done tens of millions. It's got a good valuation. It's PE, it's all PE. There are still PE players who are now looking at a vertical and going, I like that vertical. And they seem to be quite disruptive in that vertical.

Harry, we've got no DPI in fund three yet. We've got an LOI in a vertical SaaS business right now. LOI, we haven't got, this is not there yet. The company's done tens of millions. It's got a good valuation. It's PE, it's all PE. There are still PE players who are now looking at a vertical and going, I like that vertical. And they seem to be quite disruptive in that vertical.

And I can tie them into XYZ company where I'm amalgamating a whole lot of companies and they're the tech play. So we've got PE in this company with us and they're going to ultimately sell to like a bigger PE and they've got a 1X Lickpref and they won't take, they'll literally shunt it into the bigger company because they think their outcome could be better.

And I can tie them into XYZ company where I'm amalgamating a whole lot of companies and they're the tech play. So we've got PE in this company with us and they're going to ultimately sell to like a bigger PE and they've got a 1X Lickpref and they won't take, they'll literally shunt it into the bigger company because they think their outcome could be better.

That's how M&A and DPI is going to start to happen now.

That's how M&A and DPI is going to start to happen now.

Yeah. You know, there's the saying, like, one swallow doesn't make a summer. And I kind of like think, no, no, no, no, no, no. One swallow can make a summer. So think about this optimistically. One good IPO and everyone will go, IPO markets are open again. I think pre-election in the US, IPOs are pretty much closed for now.

Yeah. You know, there's the saying, like, one swallow doesn't make a summer. And I kind of like think, no, no, no, no, no, no. One swallow can make a summer. So think about this optimistically. One good IPO and everyone will go, IPO markets are open again. I think pre-election in the US, IPOs are pretty much closed for now.

I think post-election, one or two or three great IPOs, every single, you're going to have like the swarm of JP Morgan and Goldman Sachs bankers coming to tell you like, it is open. It needs to be a magnum. And Instacart won't do it. No. There are tons of four, five, six billion ones. SeatGeek's been IPO ready for two years. But that doesn't do it. No, that doesn't move the needle.

I think post-election, one or two or three great IPOs, every single, you're going to have like the swarm of JP Morgan and Goldman Sachs bankers coming to tell you like, it is open. It needs to be a magnum. And Instacart won't do it. No. There are tons of four, five, six billion ones. SeatGeek's been IPO ready for two years. But that doesn't do it. No, that doesn't move the needle.

Yeah, the minute that happens, IPO will be open.

Yeah, the minute that happens, IPO will be open.

LPs are pissed off at the moment. LPs are looking at this asset class right now, I think, and going, where is the DPI? And they did unbelievably well. And some of them are scared to sit it out. And it depends what kind of LP you are. If you're an endowment or you're like a parastatal or something, you've got to be in this asset class. And your allocation can still be tiny.

LPs are pissed off at the moment. LPs are looking at this asset class right now, I think, and going, where is the DPI? And they did unbelievably well. And some of them are scared to sit it out. And it depends what kind of LP you are. If you're an endowment or you're like a parastatal or something, you've got to be in this asset class. And your allocation can still be tiny.

But I think LPs are looking at this right now and going, where is the DPI?

But I think LPs are looking at this right now and going, where is the DPI?

I think vintage matters so much. I look at our 2020 fund and I go, that's actually gonna be okay. 2018 fund, I go, I'm much more worried about that. We need DPI there. I agree with you. By the way, I think what we've seen is like the more polarization than I've ever seen in my career before.

I think vintage matters so much. I look at our 2020 fund and I go, that's actually gonna be okay. 2018 fund, I go, I'm much more worried about that. We need DPI there. I agree with you. By the way, I think what we've seen is like the more polarization than I've ever seen in my career before.

We've seen this completely binary outcome thing where companies are losing it and companies are doing very well. And to return these seed funds, you can't just have these huge, it's great for PR, it's great for your story to say like I was in XYZ great company, but actually fund returners, you need four or five good companies. If we sell four companies at $250 million each, we can return a fund.

We've seen this completely binary outcome thing where companies are losing it and companies are doing very well. And to return these seed funds, you can't just have these huge, it's great for PR, it's great for your story to say like I was in XYZ great company, but actually fund returners, you need four or five good companies. If we sell four companies at $250 million each, we can return a fund.

If we sell 10 companies at 100 million each, Like nobody cares about that we can return a fund. And if you don't have that, you're in trouble again.

If we sell 10 companies at 100 million each, Like nobody cares about that we can return a fund. And if you don't have that, you're in trouble again.

Look, Harry, I will be infinitely grateful to have been in Uber. My gratitude to Eric knows no boundaries. Can I ask, how many times did Uber return the fund? I mean, Uber is just in itself. Yeah, it's just it's just that's incredible. Tradesk was a bigger outcome for us. Coupang returned the fund and multiple times.

Look, Harry, I will be infinitely grateful to have been in Uber. My gratitude to Eric knows no boundaries. Can I ask, how many times did Uber return the fund? I mean, Uber is just in itself. Yeah, it's just it's just that's incredible. Tradesk was a bigger outcome for us. Coupang returned the fund and multiple times.

If I look at and then we've got in SeatGeek and Airtable potential fund, you know, fund returners again in fund one. But but Harry, here's the thing is PillPack returned fund two. I am so grateful to Elliot and TJ. PillPack returned fund two. Yeah.

If I look at and then we've got in SeatGeek and Airtable potential fund, you know, fund returners again in fund one. But but Harry, here's the thing is PillPack returned fund two. I am so grateful to Elliot and TJ. PillPack returned fund two. Yeah.

Yeah. I mean, we were in at the beginning of PillPack, right?

Yeah. I mean, we were in at the beginning of PillPack, right?

Entrepreneurs need to do the math on that as well. Entrepreneurs need to be doing the math on that. It goes back to our point is, if you take 20 million from a billion-dollar fund, do you move the needle for that? What does it take for you to move the needle there?

Entrepreneurs need to do the math on that as well. Entrepreneurs need to be doing the math on that. It goes back to our point is, if you take 20 million from a billion-dollar fund, do you move the needle for that? What does it take for you to move the needle there?

And if entrepreneurs get a $10 million check from XYZ large-scale fund, and a partner doesn't join the board, that is not a good signal. I think if a partner says, I'm putting in $5 million and I'm joining your board, right? Like everybody goes like, you know, multi-stage firms or a seed. I think there are other ways.

And if entrepreneurs get a $10 million check from XYZ large-scale fund, and a partner doesn't join the board, that is not a good signal. I think if a partner says, I'm putting in $5 million and I'm joining your board, right? Like everybody goes like, you know, multi-stage firms or a seed. I think there are other ways.

If a partner at a multi-stage firm, billion dollar firm says to Harry, five on 20, and I'm going to join your board, I would say that's a strong signal. That's very tough for me to compete against. They're saying to you, I'm going to spend time here.

If a partner at a multi-stage firm, billion dollar firm says to Harry, five on 20, and I'm going to join your board, I would say that's a strong signal. That's very tough for me to compete against. They're saying to you, I'm going to spend time here.

But some of them show up. Some of them show up. And I just want to give credit where credit's due. There are people who show up. Then there are people who are very disciplined and say, like, I'm not investing. Again, percentage of the fund and what it takes to return that fund is very indicative of whether you'll get time or not.

But some of them show up. Some of them show up. And I just want to give credit where credit's due. There are people who show up. Then there are people who are very disciplined and say, like, I'm not investing. Again, percentage of the fund and what it takes to return that fund is very indicative of whether you'll get time or not.

Yeah. I think for entrepreneurs and for LPs, size of fund, check in company versus size of fund tells you everything.

Yeah. I think for entrepreneurs and for LPs, size of fund, check in company versus size of fund tells you everything.

They are dialed back. They've dialed back a little. But I think they'll always go, look, we have to have 1% or 2% or 3% in VC. Oh, way more. Or more. So I'm going minimum. Absolutely. Totally. If you look at the Swanson model, VCP, it was more like 30%.

They are dialed back. They've dialed back a little. But I think they'll always go, look, we have to have 1% or 2% or 3% in VC. Oh, way more. Or more. So I'm going minimum. Absolutely. Totally. If you look at the Swanson model, VCP, it was more like 30%.

Yeah. Well, so you've seen high net worth family offices pull back even more. I think the vintage just matters a lot. And some of the large LPs will be scared of sitting out vintages. It's kind of like the Excel Fund 7 era. So I sat out and I missed Facebook. So I think sometimes if you think you're as an LP in a great fund, But you got to keep up your track record. You got to be a great fund.

Yeah. Well, so you've seen high net worth family offices pull back even more. I think the vintage just matters a lot. And some of the large LPs will be scared of sitting out vintages. It's kind of like the Excel Fund 7 era. So I sat out and I missed Facebook. So I think sometimes if you think you're as an LP in a great fund, But you got to keep up your track record. You got to be a great fund.

Do you mind LPs bowing out in those cases? We're so small that in some cases we welcome LPs bowing out. So in our last fund, in fund five, we had one fantastic family office. We love and adore them. Say if it's less than 10 million, we're out. And we went, it's less, your allocation's less than 10 million. They're out. Our fund's small. We don't mind.

Do you mind LPs bowing out in those cases? We're so small that in some cases we welcome LPs bowing out. So in our last fund, in fund five, we had one fantastic family office. We love and adore them. Say if it's less than 10 million, we're out. And we went, it's less, your allocation's less than 10 million. They're out. Our fund's small. We don't mind.

Harry, we spend a very, very small amount of time on fundraising. If you ask me, I spend truly 95% of my time on finding good companies and supporting good companies. I think I spend 3% of my time on fundraising. But it doesn't mean I don't care about our LPs. I'll talk to our LPs any day of the week, and I love spending time with them, but I'm not out there fundraising.

Harry, we spend a very, very small amount of time on fundraising. If you ask me, I spend truly 95% of my time on finding good companies and supporting good companies. I think I spend 3% of my time on fundraising. But it doesn't mean I don't care about our LPs. I'll talk to our LPs any day of the week, and I love spending time with them, but I'm not out there fundraising.

I'd say the first thing is secondary is so elusive. Like if I think of the secondary we've had over a career, I can count it maybe on two hands. So secondary tends to be in your, and by the way, do you mean companies or do you mean funds?

I'd say the first thing is secondary is so elusive. Like if I think of the secondary we've had over a career, I can count it maybe on two hands. So secondary tends to be in your, and by the way, do you mean companies or do you mean funds?

Yeah. So, you know, it's elusive like in your high flyers. So in your really well-known companies, there's a real secondary market. Try to get secondary in your smaller private company. It's almost impossible. So I found secondary to be very, very difficult. Where we've done secondary, they've been pre-IPO, really high flyers, the secondary markets all over them, and then you fall off a cliff.

Yeah. So, you know, it's elusive like in your high flyers. So in your really well-known companies, there's a real secondary market. Try to get secondary in your smaller private company. It's almost impossible. So I found secondary to be very, very difficult. Where we've done secondary, they've been pre-IPO, really high flyers, the secondary markets all over them, and then you fall off a cliff.

It's funny. You think about product market fit as in the early stage only. But if you don't maintain product market fit and you don't maintain growth, it just becomes... Well, most of them never had it. Yeah. Well, the ones who didn't have product market fit, they're being abandoned. At some point, their boards start to abandon them or they just get incredibly frustrated. Yeah.

It's funny. You think about product market fit as in the early stage only. But if you don't maintain product market fit and you don't maintain growth, it just becomes... Well, most of them never had it. Yeah. Well, the ones who didn't have product market fit, they're being abandoned. At some point, their boards start to abandon them or they just get incredibly frustrated. Yeah.

Some of them, frankly, you know, it's at every single stage, late stage. Some of these companies have IPO'd even, right? And then, you know, you really kind of, you really know what that looks like because the market walks away from you. In some respects, being private then is a luxury, particularly if you've got a lot of money. But if you're burning it fast, it's just a matter of time, Ari.

Some of them, frankly, you know, it's at every single stage, late stage. Some of these companies have IPO'd even, right? And then, you know, you really kind of, you really know what that looks like because the market walks away from you. In some respects, being private then is a luxury, particularly if you've got a lot of money. But if you're burning it fast, it's just a matter of time, Ari.

I do.

I do.

I think it's for the entrepreneur, there comes a point where it's like you can have, it goes back to your earlier question, you can have words, you can have as many discussions. If the business is just not working out, do you expect your investors to be around? That comes back to relationship, I think. That comes back to some degree of sentimentality.

I think it's for the entrepreneur, there comes a point where it's like you can have, it goes back to your earlier question, you can have words, you can have as many discussions. If the business is just not working out, do you expect your investors to be around? That comes back to relationship, I think. That comes back to some degree of sentimentality.

And if you're purely commercial about this, the investors are moving on. down the whole ecosystem. Just like the LPs are moving on, they invest in those companies. If I invest in you and we're personally still involved and I'm going like, Harry's going to get this right at some point, maybe it's this abundance of faith. Maybe it's crazy and sentimental.

And if you're purely commercial about this, the investors are moving on. down the whole ecosystem. Just like the LPs are moving on, they invest in those companies. If I invest in you and we're personally still involved and I'm going like, Harry's going to get this right at some point, maybe it's this abundance of faith. Maybe it's crazy and sentimental.

If I believe in the call option of Harry may just still get this right, maybe I'll stick around.

If I believe in the call option of Harry may just still get this right, maybe I'll stick around.

I have to channel one of our LPs, Tim Blyamtas, who is the CIO of WeatherGage. And I remember around Uber, Coupang, some of the situations where we had shares to distribute, speaking to Tim and saying what we should do. And Tim said, whatever you do, you're going to be wrong. And of course, like the answer to that is you sell prematurely and you didn't capture the upside.

I have to channel one of our LPs, Tim Blyamtas, who is the CIO of WeatherGage. And I remember around Uber, Coupang, some of the situations where we had shares to distribute, speaking to Tim and saying what we should do. And Tim said, whatever you do, you're going to be wrong. And of course, like the answer to that is you sell prematurely and you didn't capture the upside.

You don't sell and think tanks and you didn't preserve value. And frankly, it gets more complicated than that. Some investors want to give the shares to their foundations and they get pissed off with you for cashing out and giving them cash instead of shares. Some investors say to you, LPs say like, I don't know what to do with that share. Like I've never heard of the trade desk.

You don't sell and think tanks and you didn't preserve value. And frankly, it gets more complicated than that. Some investors want to give the shares to their foundations and they get pissed off with you for cashing out and giving them cash instead of shares. Some investors say to you, LPs say like, I don't know what to do with that share. Like I've never heard of the trade desk.

Why didn't you make the decision for me? The answer there typically has been with big distributions where large positions, so fund movers or it's half the fund, we distribute and we say it's up to you. With smaller positions, when it IPOs, so desktop metal, for instance, it got to the point where it was like, I don't know, worth $10 million, we sold and we take the cash and we distribute the cash.

Why didn't you make the decision for me? The answer there typically has been with big distributions where large positions, so fund movers or it's half the fund, we distribute and we say it's up to you. With smaller positions, when it IPOs, so desktop metal, for instance, it got to the point where it was like, I don't know, worth $10 million, we sold and we take the cash and we distribute the cash.

So I would say quantum or size versus the fund size is pretty much how we decide around that. Now, what our LPs did with their stakes, so TradeS 25X, Uber 150 billion. I don't even remember what the IPO price was. But Harry, that is, if I look back, I go like never sell a single thing. If you could, and people have to live and people have various desires, but if you could, never sell a share.

So I would say quantum or size versus the fund size is pretty much how we decide around that. Now, what our LPs did with their stakes, so TradeS 25X, Uber 150 billion. I don't even remember what the IPO price was. But Harry, that is, if I look back, I go like never sell a single thing. If you could, and people have to live and people have various desires, but if you could, never sell a share.

And I know we've gone through up and the down cycle, but great companies, companies with real moats, right? Like you want to be in those companies forever. That's when we get into Buffet land, right? And like, we're not good at that.

And I know we've gone through up and the down cycle, but great companies, companies with real moats, right? Like you want to be in those companies forever. That's when we get into Buffet land, right? And like, we're not good at that.

Well, I think the timing was problematic, right? Clearly. But I think the theory that they had, I'm impressed with them that they thought about that and they executed on it. I think the timing was unfortunate.

Well, I think the timing was problematic, right? Clearly. But I think the theory that they had, I'm impressed with them that they thought about that and they executed on it. I think the timing was unfortunate.

One call to John a tiger, like 20 on 80, no problem.

One call to John a tiger, like 20 on 80, no problem.

And then the companies still have to be extraordinary, right? So the company's in there and you could argue that they had those. So I think the strategy there was actually sound.

And then the companies still have to be extraordinary, right? So the company's in there and you could argue that they had those. So I think the strategy there was actually sound.

Oh, Harry, this is a subject I can keep you here all day on. But LEACH is Lethargic Economic Extractor Causing Harm. These are these legacy companies. A great example of them is the PBMs, the Pharmacy Benefit Managers. Companies that were very innovative 40 years ago. So a PBM connects the pharmacy to the insurer. You know, 40 years ago or 30 years ago, they were great companies, right?

Oh, Harry, this is a subject I can keep you here all day on. But LEACH is Lethargic Economic Extractor Causing Harm. These are these legacy companies. A great example of them is the PBMs, the Pharmacy Benefit Managers. Companies that were very innovative 40 years ago. So a PBM connects the pharmacy to the insurer. You know, 40 years ago or 30 years ago, they were great companies, right?

And the insurance codes and how much you should pay out for your meds, great. And then you have the whole internet and you've still got hundreds of billions of market cap, hundreds of billions adding no value. And the problem is that these incumbents use every trick in the book. Capitalism's so beautifully set up for them.

And the insurance codes and how much you should pay out for your meds, great. And then you have the whole internet and you've still got hundreds of billions of market cap, hundreds of billions adding no value. And the problem is that these incumbents use every trick in the book. Capitalism's so beautifully set up for them.

I mean, I think you still can. I'm going to appeal to the inner McKinsey consultant in you. I know it exists. But if you think of right-wrong consensus, non-consensus, you don't have to only do kind of right non-consensus, but that's where you do do well. And there's lots of ways of still being non-consensual, I think. So if you think of non-consensus, founders...

I mean, I think you still can. I'm going to appeal to the inner McKinsey consultant in you. I know it exists. But if you think of right-wrong consensus, non-consensus, you don't have to only do kind of right non-consensus, but that's where you do do well. And there's lots of ways of still being non-consensual, I think. So if you think of non-consensus, founders...

So they use lobbying, they use lawyers, they use PR to say that the challenges are illegal. That's like job number one. I have had this... time and time again. And in one way I go, it's a badge of glory, right? Like to actually like rouse a leech, like unbelievable you're doing, you know, because the incumbent is now pissed off or worried about you. It's a badge of glory.

So they use lobbying, they use lawyers, they use PR to say that the challenges are illegal. That's like job number one. I have had this... time and time again. And in one way I go, it's a badge of glory, right? Like to actually like rouse a leech, like unbelievable you're doing, you know, because the incumbent is now pissed off or worried about you. It's a badge of glory.

But I think going through that, what it takes to take on these leeches is tremendously underestimated.

But I think going through that, what it takes to take on these leeches is tremendously underestimated.

I'll tell you, SeatGeek, I actually gave testimony to a panel of lawyers for the Department of Justice. Russ D'Souza is the co-founder of SeatGeek. He says to me, come on a sales visit with him. So I go to TD Garden in Boston, which is like Madison Square Garden. We meet with the manager. She's awesome. She says, we turf Ticketmaster in a heartbeat and go with SeatGeek.

I'll tell you, SeatGeek, I actually gave testimony to a panel of lawyers for the Department of Justice. Russ D'Souza is the co-founder of SeatGeek. He says to me, come on a sales visit with him. So I go to TD Garden in Boston, which is like Madison Square Garden. We meet with the manager. She's awesome. She says, we turf Ticketmaster in a heartbeat and go with SeatGeek.

We love your ticketing policy. We love the open thing. We can't give up Ticketmaster. I look at her, I go... But hold on, you're like, there's no other venue like you in Boston. This is this covered arena. It's beautiful. It's where all the basketball and ice hockey takes place. When you two comes to town, where else are they going, right? She goes, no, no, no, no, it's not that.

We love your ticketing policy. We love the open thing. We can't give up Ticketmaster. I look at her, I go... But hold on, you're like, there's no other venue like you in Boston. This is this covered arena. It's beautiful. It's where all the basketball and ice hockey takes place. When you two comes to town, where else are they going, right? She goes, no, no, no, no, it's not that.

She's like, Live Nation straight out said to us, you two will come to Boston. You'll have one night in Boston instead of three nights. I make like a million or $2 million net profit a night. I literally gave testimony to the Department of Justice telling them exactly what I've just told you. And what you've got is you've got, you take vertical after vertical.

She's like, Live Nation straight out said to us, you two will come to Boston. You'll have one night in Boston instead of three nights. I make like a million or $2 million net profit a night. I literally gave testimony to the Department of Justice telling them exactly what I've just told you. And what you've got is you've got, you take vertical after vertical.

So Live Nation, Ticketmaster, that merger should never have been allowed. But once it's allowed, we will occupy, monopolize that position all day long. Harry, we've got it right now. I had it in my business in terms of taking on the legacy telcos in my startup, like impossible. And we can talk about some of the strategy around that.

So Live Nation, Ticketmaster, that merger should never have been allowed. But once it's allowed, we will occupy, monopolize that position all day long. Harry, we've got it right now. I had it in my business in terms of taking on the legacy telcos in my startup, like impossible. And we can talk about some of the strategy around that.

Yeah, yeah. We've seen this again in Suno. So Suno is a fund for company. The recording industry has just gone wild against Suno. And often it's exact same playbook. But I think this is a place where VCs can add a ton of value is it's the same playbook. So they're lobbing their ass. The recording industry like first says, you're illegal. Like what you're doing is illegal.

Yeah, yeah. We've seen this again in Suno. So Suno is a fund for company. The recording industry has just gone wild against Suno. And often it's exact same playbook. But I think this is a place where VCs can add a ton of value is it's the same playbook. So they're lobbing their ass. The recording industry like first says, you're illegal. Like what you're doing is illegal.

And OpenAI and lots of people have that same legal challenge, although it's slightly different. So the OpenAI challenge is on the output, right, the LLM. Suno, the challenge is on the input. And Suno's going back and saying, we're training on the open internet. That's like Harry learning to play the piano and listening to the Rolling Stones. Is that okay?

And OpenAI and lots of people have that same legal challenge, although it's slightly different. So the OpenAI challenge is on the output, right, the LLM. Suno, the challenge is on the input. And Suno's going back and saying, we're training on the open internet. That's like Harry learning to play the piano and listening to the Rolling Stones. Is that okay?

But the first thing is legal and you go, what's this actually about? And sometimes the answer is, I don't want you in business. I do not want you in the sector and I'm going to use all my heft. And then sometimes it's about like, I want my pound of flesh. But I do think this is an area where VCs, by any stage VC can add a lot of value. So if you go, look, this is going to happen to you.

But the first thing is legal and you go, what's this actually about? And sometimes the answer is, I don't want you in business. I do not want you in the sector and I'm going to use all my heft. And then sometimes it's about like, I want my pound of flesh. But I do think this is an area where VCs, by any stage VC can add a lot of value. So if you go, look, this is going to happen to you.

Here are, this is the way the game is played. Here are the lobbyists, here are the lawyers, here are the PR consultants, and here's how you're going to have to use your money. I don't know. It's like war. Air, land, sea. And that's how you win. So you take TJ speaking to Mikey Shulman at Suno going, this is the playbook. This is the only way you resolve this.

Here are, this is the way the game is played. Here are the lobbyists, here are the lawyers, here are the PR consultants, and here's how you're going to have to use your money. I don't know. It's like war. Air, land, sea. And that's how you win. So you take TJ speaking to Mikey Shulman at Suno going, this is the playbook. This is the only way you resolve this.

People who come from less traditional backgrounds, people who come from secondary schools, right? That like mainstream is not going to back. That still very much exists. Frankly, founders who've had, who failed, right? You haven't done well. And like, you know, the mainstream is kind of like, wouldn't touch that. Founders who've been orphaned.

People who come from less traditional backgrounds, people who come from secondary schools, right? That like mainstream is not going to back. That still very much exists. Frankly, founders who've had, who failed, right? You haven't done well. And like, you know, the mainstream is kind of like, wouldn't touch that. Founders who've been orphaned.

Do these companies inherently need to have more cash then? They do. They do. By the way, you can have all the cash you want, you can have all the strategies you want. The first thing you need is customers that absolutely love and adore you. If you don't have customers that love you, what are you doing this whole thing for?

Do these companies inherently need to have more cash then? They do. They do. By the way, you can have all the cash you want, you can have all the strategies you want. The first thing you need is customers that absolutely love and adore you. If you don't have customers that love you, what are you doing this whole thing for?

So if you don't have actual, and I would say this is SeatGeek, PillPack, Suno, Like every one of those companies had customers, their revenues were increasing because, and that's why they're a pen in the ass to the incumbents is the incumbents go, oh my God, like customers are actually going there. Like what's this thing about? And usually they don't have their shit together, right?

So if you don't have actual, and I would say this is SeatGeek, PillPack, Suno, Like every one of those companies had customers, their revenues were increasing because, and that's why they're a pen in the ass to the incumbents is the incumbents go, oh my God, like customers are actually going there. Like what's this thing about? And usually they don't have their shit together, right?

So the incumbent is like playing for time or just like going like, I want this to happen when I want this to happen.

So the incumbent is like playing for time or just like going like, I want this to happen when I want this to happen.

And actually, you could say, really, what is Spotify? It's just another distribution mechanism. In some ways, that's just another way of distributing music. The recording industry, the publishers, the owners, they didn't love when CDs disrupted LPs or when tapes happened to CDs. And in a way, all Spotify, it's a Herculean outcome.

And actually, you could say, really, what is Spotify? It's just another distribution mechanism. In some ways, that's just another way of distributing music. The recording industry, the publishers, the owners, they didn't love when CDs disrupted LPs or when tapes happened to CDs. And in a way, all Spotify, it's a Herculean outcome.

But if you look at how much of their revenue the record labels actually take, Suno is something very, very different. This is where AI is fascinating and really interesting. It allows Harry, basically it's the breadth of your creativity. If you're creative, I will give you the most professional tools that the best DJ in the world has. You've got that on your phone now.

But if you look at how much of their revenue the record labels actually take, Suno is something very, very different. This is where AI is fascinating and really interesting. It allows Harry, basically it's the breadth of your creativity. If you're creative, I will give you the most professional tools that the best DJ in the world has. You've got that on your phone now.

This is really, really problematic. Now, is the recording industry going away? Is Spotify going? None of them are going away. In fact, in some way, the biggest threat is if Spotify does this with their incredible distribution, you've really got an interesting competition on your hand. But the incumbents don't go away, but their share of the market can change dramatically.

This is really, really problematic. Now, is the recording industry going away? Is Spotify going? None of them are going away. In fact, in some way, the biggest threat is if Spotify does this with their incredible distribution, you've really got an interesting competition on your hand. But the incumbents don't go away, but their share of the market can change dramatically.

you know our view is kind of teams versus themes. And even in AI, like the teams have to get some kind of product market fit, some before. I think that can still be done reasonably capital efficiently. I think after that, if you look at the capital required to scale and to distribute, you look at like, Josh Kushner's 1 billion at 100 billion open AI. And I go, would I take that bet or not?

you know our view is kind of teams versus themes. And even in AI, like the teams have to get some kind of product market fit, some before. I think that can still be done reasonably capital efficiently. I think after that, if you look at the capital required to scale and to distribute, you look at like, Josh Kushner's 1 billion at 100 billion open AI. And I go, would I take that bet or not?

So founders who come back and go, you know, I took money from one of those large funds. They went through the distance. They had to feel the pain, right? They said, I took money from one of those large funds. And man, like I got orphaned. They left me, they come back. So non-consensus founders, non-consensus market still.

So founders who come back and go, you know, I took money from one of those large funds. They went through the distance. They had to feel the pain, right? They said, I took money from one of those large funds. And man, like I got orphaned. They left me, they come back. So non-consensus founders, non-consensus market still.

All things being equal, I probably would take that bet. If you said to me, you have to, are you for or against? I would say, is Josh in the winner there going to make 2x and maybe much more than that, but bet against the 2x? I wouldn't bet against the 2x. I think his LPs will make 2x on that. But at some point to play in that, that's a whole different world.

All things being equal, I probably would take that bet. If you said to me, you have to, are you for or against? I would say, is Josh in the winner there going to make 2x and maybe much more than that, but bet against the 2x? I wouldn't bet against the 2x. I think his LPs will make 2x on that. But at some point to play in that, that's a whole different world.

If you want to play in the hyperscaler game, wow. you're going to need ridiculous amounts of capital. And by the way, we're seeing like what's a TLM, like tiny language models, which run on the mobile phone, basically make things like scanning or translation very realistic and on your phone, even when you're not connected to the internet.

If you want to play in the hyperscaler game, wow. you're going to need ridiculous amounts of capital. And by the way, we're seeing like what's a TLM, like tiny language models, which run on the mobile phone, basically make things like scanning or translation very realistic and on your phone, even when you're not connected to the internet.

You need capital for that as well, because the programming overhead of that, the number of engineers you need to create something tiny is huge.

You need capital for that as well, because the programming overhead of that, the number of engineers you need to create something tiny is huge.

We're off-piste. We're non-consensus. We're contrarian. So when I see those rounds, if I see a round at 5 on 20, that's in our hitting range. When I see those rounds at like 25 on 100, pretty much we're out. We're pretty much out. Again, team versus theme. So there are rare instances where we see someone who's just like, you cannot ignore.

We're off-piste. We're non-consensus. We're contrarian. So when I see those rounds, if I see a round at 5 on 20, that's in our hitting range. When I see those rounds at like 25 on 100, pretty much we're out. We're pretty much out. Again, team versus theme. So there are rare instances where we see someone who's just like, you cannot ignore.

You wake up in the morning, you go, oh my God, like, how can I not be involved? But for the most part, 99% of the time, we're not involved. But you just can't make money in a seed fund, those numbers. I don't see how you can make money.

You wake up in the morning, you go, oh my God, like, how can I not be involved? But for the most part, 99% of the time, we're not involved. But you just can't make money in a seed fund, those numbers. I don't see how you can make money.

Yeah. Overall, I admire your discipline. I think rear view mirror on this, you can't build a fund on this. Rear view mirror, you can think about that one that you missed, and they're one or two in a generation. There are these generational companies, or maybe there is one a year. And if you're in that company, awesome. But can you build a fund strategy? I don't think you can. Not at Seed.

Yeah. Overall, I admire your discipline. I think rear view mirror on this, you can't build a fund on this. Rear view mirror, you can think about that one that you missed, and they're one or two in a generation. There are these generational companies, or maybe there is one a year. And if you're in that company, awesome. But can you build a fund strategy? I don't think you can. Not at Seed.

Everyone says you gotta be right in non-consensus, but I often think, well, what do you mean by non-consensus? So you've got, if you were really early in new markets, 2009, the best bet, like everybody was like chasing, I don't know, nanotech. Bitcoin had to have been the greatest investment in 2009. 2015, Ethereum. I know everybody is chasing DTC, right? That's where the whole market's going.

Everyone says you gotta be right in non-consensus, but I often think, well, what do you mean by non-consensus? So you've got, if you were really early in new markets, 2009, the best bet, like everybody was like chasing, I don't know, nanotech. Bitcoin had to have been the greatest investment in 2009. 2015, Ethereum. I know everybody is chasing DTC, right? That's where the whole market's going.

Well, if you break the rules and you're right, you've done unbelievably well. By the way, again, if you broke the rules and it was a 10 post and you broke the rules and it was like, you know, 250 million post, like the return to you and your fund is infinitely different. So I think you break the rules and you get right on 250 million post and you get a 10X, That's why I go Josh on a billion.

Well, if you break the rules and you're right, you've done unbelievably well. By the way, again, if you broke the rules and it was a 10 post and you broke the rules and it was like, you know, 250 million post, like the return to you and your fund is infinitely different. So I think you break the rules and you get right on 250 million post and you get a 10X, That's why I go Josh on a billion.

If he makes two X there and you go like, that is the company. That is the company. Would you bet against OpenAI right now? No way. So it depends on the customer base for OpenAI. If they distribute well and more and more people say, look, ChatGPT, it's on my phone, download that, start using that.

If he makes two X there and you go like, that is the company. That is the company. Would you bet against OpenAI right now? No way. So it depends on the customer base for OpenAI. If they distribute well and more and more people say, look, ChatGPT, it's on my phone, download that, start using that.

Like, you know, when my wife and my kids start to use it and like go, oh my God, like I'm going here before Google. I'm not sure that Microsoft can think of it only as their plaything. If people are leaving OpenAI and OpenAI is not scaling and not creating more and more revenue, you may be right. But if OpenAI continues to grow the way it is, I don't know that Microsoft can ignore them.

Like, you know, when my wife and my kids start to use it and like go, oh my God, like I'm going here before Google. I'm not sure that Microsoft can think of it only as their plaything. If people are leaving OpenAI and OpenAI is not scaling and not creating more and more revenue, you may be right. But if OpenAI continues to grow the way it is, I don't know that Microsoft can ignore them.

I think in some ways Microsoft are going to have to say, this is terrible because we wish we owned 100% of it, but this is our play. And who knows? The next thing could be a merger between OpenAI and Microsoft. I don't know that they want that. I think there's a lot of regulatory heat around this that you may kind of do well to avoid at the very beginning.

I think in some ways Microsoft are going to have to say, this is terrible because we wish we owned 100% of it, but this is our play. And who knows? The next thing could be a merger between OpenAI and Microsoft. I don't know that they want that. I think there's a lot of regulatory heat around this that you may kind of do well to avoid at the very beginning.

I start now. So I have a range of tools. But if you say to me, where do you start? I start on ChatGPT. I don't go to browser. That's where I start.

I start now. So I have a range of tools. But if you say to me, where do you start? I start on ChatGPT. I don't go to browser. That's where I start.

I think there's short term and long term. So I think in short term, we're going to be, you know, underwhelmed right now. I think if you look at like the amount of CapEx that's being spent and you look at the actual earnings that will be generated in the short term, there's just no way it makes sense.

I think there's short term and long term. So I think in short term, we're going to be, you know, underwhelmed right now. I think if you look at like the amount of CapEx that's being spent and you look at the actual earnings that will be generated in the short term, there's just no way it makes sense.

And I think, by the way, all the way through the ecosystem. So it's not just the hyperscalers, right? It's like downturn. David said it well, like down to the data centers, down to the steel, down to the chips. I think in the short term, it's going to disappoint. I think in the long term, Harry, every one of these waves, by the way, it reminds me of like self-driving cars.

And I think, by the way, all the way through the ecosystem. So it's not just the hyperscalers, right? It's like downturn. David said it well, like down to the data centers, down to the steel, down to the chips. I think in the short term, it's going to disappoint. I think in the long term, Harry, every one of these waves, by the way, it reminds me of like self-driving cars.

I remember taking a bet with Eric and he said, self-driving cars in five years. And I said to him, the last 5% is very difficult. And like, we're getting to self-driving cars now. So it takes forever to...

I remember taking a bet with Eric and he said, self-driving cars in five years. And I said to him, the last 5% is very difficult. And like, we're getting to self-driving cars now. So it takes forever to...

And now it's like Waymo, if you get into a Waymo in California, like your mind is blown. So I think to discount AI in the next 10 years, man, you've got to be crazy. Like I think it's going to have profound, profound changes. The difficulty is it's always Hollywood. There'll be one in a thousand. companies that will be off the charts and there'll be like one in a hundred that's amazing.

And now it's like Waymo, if you get into a Waymo in California, like your mind is blown. So I think to discount AI in the next 10 years, man, you've got to be crazy. Like I think it's going to have profound, profound changes. The difficulty is it's always Hollywood. There'll be one in a thousand. companies that will be off the charts and there'll be like one in a hundred that's amazing.

And that will launch so much capital. Being involved in that, we're too disciplined to be involved in figuring out which is the one in a hundred. I remember this with Eric, and this is just like the height of humility. An LP at one of our annual dinners leans conspiratorially over the table and says to Eric, how did you know? Talking about Uber, going like, how did you know?

And that will launch so much capital. Being involved in that, we're too disciplined to be involved in figuring out which is the one in a hundred. I remember this with Eric, and this is just like the height of humility. An LP at one of our annual dinners leans conspiratorially over the table and says to Eric, how did you know? Talking about Uber, going like, how did you know?

I literally see this in my mind's eye. And Eric looks at them straight in the eye and goes, I didn't know. The company before, it was so easy in that moment to retrofit how smart I... And he said, I had no clue. He said, the company before was just as interesting and the company after, he said, I had the same high hopes. And I think we're not smart enough to figure out the one.

I literally see this in my mind's eye. And Eric looks at them straight in the eye and goes, I didn't know. The company before, it was so easy in that moment to retrofit how smart I... And he said, I had no clue. He said, the company before was just as interesting and the company after, he said, I had the same high hopes. And I think we're not smart enough to figure out the one.

You've got to be around and you've got to hoist a flag and say, I'm interested in these great teams. We don't know how to do this.

You've got to be around and you've got to hoist a flag and say, I'm interested in these great teams. We don't know how to do this.

You go Ethereum. So new markets, non-consensus, you can still do very well. And then old markets, non-consensus. Harry, do you know one of the best portfolio companies that I'm on the board of right now? Smalls. It's cat food. Dude, it's cat food. Nobody likes cats. Like dogs get all the love. DTC is dead. Nobody will touch DTC. We try to raise money for this business, Smalls, right?

You go Ethereum. So new markets, non-consensus, you can still do very well. And then old markets, non-consensus. Harry, do you know one of the best portfolio companies that I'm on the board of right now? Smalls. It's cat food. Dude, it's cat food. Nobody likes cats. Like dogs get all the love. DTC is dead. Nobody will touch DTC. We try to raise money for this business, Smalls, right?

You're reminding me again of Eric, right? Where Eric has this lens. It's so simple. We look at a company and go, can we 10x that? Can we 10x? And if we can't 10x... then we shouldn't invest. And I think that is alignment with the entrepreneur. So much flows from that, like the economics, the size of the deal, the size of the valuation. If we can't, with high conviction, 10x, we shouldn't invest.

You're reminding me again of Eric, right? Where Eric has this lens. It's so simple. We look at a company and go, can we 10x that? Can we 10x? And if we can't 10x... then we shouldn't invest. And I think that is alignment with the entrepreneur. So much flows from that, like the economics, the size of the deal, the size of the valuation. If we can't, with high conviction, 10x, we shouldn't invest.

That's how we create the alignment. That is Eric's rule entirely.

That's how we create the alignment. That is Eric's rule entirely.

Small fund, you can do that. Small fund, four companies at 10x, we return the fund. Easily.

Small fund, you can do that. Small fund, four companies at 10x, we return the fund. Easily.

I just think it's insanity. I think you market those winners. And again, it's great PR fodder. It's great to attract the investors in the next fund. But I think it's insanity to go. It's like that huge... People don't even use the word unicorn anymore. It's that huge company or bust. I think it's insane. By the way, I also think it's boring.

I just think it's insanity. I think you market those winners. And again, it's great PR fodder. It's great to attract the investors in the next fund. But I think it's insanity to go. It's like that huge... People don't even use the word unicorn anymore. It's that huge company or bust. I think it's insane. By the way, I also think it's boring.

It doesn't take you in a whole range of fascinating directions where at the beginning you go... Look, these guys are crazy. But could this be a 10x? Yeah, it could be a 10x. I think that just provides this much easier on-ramp into these very interesting situations.

It doesn't take you in a whole range of fascinating directions where at the beginning you go... Look, these guys are crazy. But could this be a 10x? Yeah, it could be a 10x. I think that just provides this much easier on-ramp into these very interesting situations.

But I think it's the most unfair feature of capitalism, Harry. The most you can lose is all your money. The most you can make is 3,000x, unlimited. If you just look at that, it is such an unfair feature of capitalism. And my LPs maybe go, I don't want to lose money for anyone. But I sometimes think exactly the opposite.

But I think it's the most unfair feature of capitalism, Harry. The most you can lose is all your money. The most you can make is 3,000x, unlimited. If you just look at that, it is such an unfair feature of capitalism. And my LPs maybe go, I don't want to lose money for anyone. But I sometimes think exactly the opposite.

I don't even know what it is now. We have definitely lost companies. And we've lost, you know, there's good losses and there's bad losses. The bad losses are where you look back and you go, my judgment wasn't good.

I don't even know what it is now. We have definitely lost companies. And we've lost, you know, there's good losses and there's bad losses. The bad losses are where you look back and you go, my judgment wasn't good.

So if I look back and I go, I love the what, I never really loved the who, I've really learned this the hard way. It's, Koppelman called them, are they like red button or green button entrepreneurs? They call it like 7 p.m. just before you're having dinner with your family, do you take the call?

So if I look back and I go, I love the what, I never really loved the who, I've really learned this the hard way. It's, Koppelman called them, are they like red button or green button entrepreneurs? They call it like 7 p.m. just before you're having dinner with your family, do you take the call?

Well, if it's you and I go like, I love this guy, I'm taking the call and I'll say like, I'll call you back after dinner. But if it's red button, oh, you made a mistake. I look at that and I go, do I want to have lunch or dinner with that entrepreneur? That's a big mistake for me. When I look at it and I go, I fell in love with the what?

Well, if it's you and I go like, I love this guy, I'm taking the call and I'll say like, I'll call you back after dinner. But if it's red button, oh, you made a mistake. I look at that and I go, do I want to have lunch or dinner with that entrepreneur? That's a big mistake for me. When I look at it and I go, I fell in love with the what?

Like I fell in love with the what, but I really didn't love the entrepreneur at the beginning. And I wasn't, you know, the chemistry wasn't there. That's a mistake. When I look and I go, look, that was just such an extraordinary entrepreneur. That person was so compelling. I was so energized by that person. And, you know, the context was wrong. We were too early.

Like I fell in love with the what, but I really didn't love the entrepreneur at the beginning. And I wasn't, you know, the chemistry wasn't there. That's a mistake. When I look and I go, look, that was just such an extraordinary entrepreneur. That person was so compelling. I was so energized by that person. And, you know, the context was wrong. We were too early.

Doing 50 million ARR. Try to raise money in December. Nobody would look at us. Nobody would look at us. Because people hate cats, full stop, right? Cats get no love. And everybody then looks at like, this didn't work, farmer's market, whatever, didn't work in dogs. You can be in old markets, right? You can still be non-consensus.

Doing 50 million ARR. Try to raise money in December. Nobody would look at us. Nobody would look at us. Because people hate cats, full stop, right? Cats get no love. And everybody then looks at like, this didn't work, farmer's market, whatever, didn't work in dogs. You can be in old markets, right? You can still be non-consensus.

Like we gave it our best shot, but the incumbents just killed us. I never look back at that and go, that was wrong. I look back and I go like that comes, you chop a lot of wood, you're going to get splinters.

Like we gave it our best shot, but the incumbents just killed us. I never look back at that and go, that was wrong. I look back and I go like that comes, you chop a lot of wood, you're going to get splinters.

I think it's a great test. I'm very impressed. Sometimes if you love the deal and there's heat for the right reasons, to take a smaller amount is doable. So I think the problem with that comment is it ignores the context and the context matters. So in a vacuum, that's a fine comment and I agree with it.

I think it's a great test. I'm very impressed. Sometimes if you love the deal and there's heat for the right reasons, to take a smaller amount is doable. So I think the problem with that comment is it ignores the context and the context matters. So in a vacuum, that's a fine comment and I agree with it.

But in the context of there are lots of other people interested, including some collaborators, you may go, I actually want them in this deal with me. And by the way, that is under pressure when people have got funds that are too big and the deals and there's less collaboration. But I think there really are people who you want alongside you because they're smarter and more experienced than you.

But in the context of there are lots of other people interested, including some collaborators, you may go, I actually want them in this deal with me. And by the way, that is under pressure when people have got funds that are too big and the deals and there's less collaboration. But I think there really are people who you want alongside you because they're smarter and more experienced than you.

If you're having to throttle down a little bit for that, I have no problem with that.

If you're having to throttle down a little bit for that, I have no problem with that.

In fact, in an ideal situation when there's insane heat and something that we've gotten earlier, like that's a great moment to take secondary if you can. Sometimes you can't. But if I speak to teams about this all day long, so like. You've got a billion dollar valuation and you're doing 50 million or 40 million revenue. Forget like you're losing money.

In fact, in an ideal situation when there's insane heat and something that we've gotten earlier, like that's a great moment to take secondary if you can. Sometimes you can't. But if I speak to teams about this all day long, so like. You've got a billion dollar valuation and you're doing 50 million or 40 million revenue. Forget like you're losing money.

This is an awesome time for you to take some money off the table. And in certain situations, we've had the founders say to us, look, there's a little leftover because there's such heat here. There's 20 million to go between, do you want to take some money off? And we have been able to take a third of, but do we get that right all the time?

This is an awesome time for you to take some money off the table. And in certain situations, we've had the founders say to us, look, there's a little leftover because there's such heat here. There's 20 million to go between, do you want to take some money off? And we have been able to take a third of, but do we get that right all the time?

Well, the answer was, you only know that in the rear view mirror. I won't mention the name of the company. We did take a third off the table. We were right over there, but we've got it wrong as well. We took secondary in some of our biggest names. We shouldn't have sold a share.

Well, the answer was, you only know that in the rear view mirror. I won't mention the name of the company. We did take a third off the table. We were right over there, but we've got it wrong as well. We took secondary in some of our biggest names. We shouldn't have sold a share.

Well, Trade Desk, I regret every single share I sold. Uber, I regret every single share I sold. Hindsight is just the most precise science. These are great moat companies. Why would you bet against those?

Well, Trade Desk, I regret every single share I sold. Uber, I regret every single share I sold. Hindsight is just the most precise science. These are great moat companies. Why would you bet against those?

My rule of thumb is there's a hot big deal going down. Again, this feels anachronistic because this was happening on steroids three, four years ago. I'm seeing less of it. But if you take less, 10% or less off the table, nobody's going to really mind too much.

My rule of thumb is there's a hot big deal going down. Again, this feels anachronistic because this was happening on steroids three, four years ago. I'm seeing less of it. But if you take less, 10% or less off the table, nobody's going to really mind too much.

If things go south later on, then LPs look at it and investors look at it and go like, I wish Harry didn't take $5 or $10 million off the table. But I don't mind if Harry took a million or two million. By the way, I always say the first million dollars, like when the first million dollars makes, it's binary, it makes all the difference. It's partially selfish.

If things go south later on, then LPs look at it and investors look at it and go like, I wish Harry didn't take $5 or $10 million off the table. But I don't mind if Harry took a million or two million. By the way, I always say the first million dollars, like when the first million dollars makes, it's binary, it makes all the difference. It's partially selfish.

It sounds like I'm so generous in saying, take as much money as you want, but it's actually very self-serving as well. If that founder's going home and worrying about the mortgage and under pressure from their wife or husband or whatever it is or partner, we alleviate that pressure in giving them secondary and encourage them to take secondary.

It sounds like I'm so generous in saying, take as much money as you want, but it's actually very self-serving as well. If that founder's going home and worrying about the mortgage and under pressure from their wife or husband or whatever it is or partner, we alleviate that pressure in giving them secondary and encourage them to take secondary.

So I'd say it's self-serving for the investors as well. Next thing you've taken some secondary, the mortgage or whatever the issue is. And of course, if you're like in your early 20s and you don't have these problems, the context matters.

So I'd say it's self-serving for the investors as well. Next thing you've taken some secondary, the mortgage or whatever the issue is. And of course, if you're like in your early 20s and you don't have these problems, the context matters.

Yeah. We had this. The biggest sin of the last era has been the huge amounts of capital. These like boatloads of capital. I'm going to meet later with Sam Franklin from Otter. Great founder. Lovely business. And I remember. The other investors were talking about 10 on 40, right? Like one call to John a tiger, right? 20 on 80, no problem.

Yeah. We had this. The biggest sin of the last era has been the huge amounts of capital. These like boatloads of capital. I'm going to meet later with Sam Franklin from Otter. Great founder. Lovely business. And I remember. The other investors were talking about 10 on 40, right? Like one call to John a tiger, right? 20 on 80, no problem.

And Sam at the moment thought I was like the superstar investor of all times. He was like a seed investor across the, biggest name investors involved there. And like in a second did that. In retrospect, what a sin, what a sin.

And Sam at the moment thought I was like the superstar investor of all times. He was like a seed investor across the, biggest name investors involved there. And like in a second did that. In retrospect, what a sin, what a sin.

When the whole swarm, when the whole herd moves in a certain direction, great. Like, seed is not dead. And so then you see the pricing adjust for those deals, correct? You do. I mean, you've still got to, like, market to market. You know, I think if you're going to be like, I want a 4 million pre, you're like totally anachronistic.

When the whole swarm, when the whole herd moves in a certain direction, great. Like, seed is not dead. And so then you see the pricing adjust for those deals, correct? You do. I mean, you've still got to, like, market to market. You know, I think if you're going to be like, I want a 4 million pre, you're like totally anachronistic.

What a sin even for me to like, and I was caught up in the moment, but to... So he called me on that deal.

What a sin even for me to like, and I was caught up in the moment, but to... So he called me on that deal.

Yeah. Oh, man. Those guys were just like a casino, right? Like it was insane. John was doing, I kid you not, we did a 20 on 80, two weeks. We did one the one week and we did one another week. And Otto was one of them. But in retrospect, you go... How do those founders know what to do with that money?

Yeah. Oh, man. Those guys were just like a casino, right? Like it was insane. John was doing, I kid you not, we did a 20 on 80, two weeks. We did one the one week and we did one another week. And Otto was one of them. But in retrospect, you go... How do those founders know what to do with that money?

And they have that money and they're going, no one would have like expanded in the US if you didn't have that money. But you go and you open an office in the US and you go, before your model's working beautifully in the UK, you're trying it over there. So the sin, like the last era, like the boatloads of capital, like that's the sin of the era.

And they have that money and they're going, no one would have like expanded in the US if you didn't have that money. But you go and you open an office in the US and you go, before your model's working beautifully in the UK, you're trying it over there. So the sin, like the last era, like the boatloads of capital, like that's the sin of the era.

I think it's the haves and have-nots. So I think if you have AI, right, like it's changing. I think, again, if you're a vertical SaaS company doing $50 million, right, the multiples or the listed multiples are constraining you. You're not getting a 20x multiple, dude, because that listed company that I own shares in is at 6x, 7x. That's the multiple.

I think it's the haves and have-nots. So I think if you have AI, right, like it's changing. I think, again, if you're a vertical SaaS company doing $50 million, right, the multiples or the listed multiples are constraining you. You're not getting a 20x multiple, dude, because that listed company that I own shares in is at 6x, 7x. That's the multiple.

And the fascinating thing there is like, it's like goes back to the Andreessen, you know, like Andreessen said, software is eating the world. Like I have this, like the haves and the have nots around data. And you look at some of these vertical SaaS companies or horizontal SaaS companies, the truckloads of data they have, it's theirs to lose.

And the fascinating thing there is like, it's like goes back to the Andreessen, you know, like Andreessen said, software is eating the world. Like I have this, like the haves and the have nots around data. And you look at some of these vertical SaaS companies or horizontal SaaS companies, the truckloads of data they have, it's theirs to lose.

So Mark Benioff, Salesforce, you write that off at your peril because the amount of data they have, they throw in these AI tools, they're doing their own stuff, right? Their opportunity is enormous. And I've seen this in some of our vertical SaaS plays. If we give the customers enriched data, if we don't enrich the data, we're out of business.

So Mark Benioff, Salesforce, you write that off at your peril because the amount of data they have, they throw in these AI tools, they're doing their own stuff, right? Their opportunity is enormous. And I've seen this in some of our vertical SaaS plays. If we give the customers enriched data, if we don't enrich the data, we're out of business.

But we enrich the data we have, and you look back, you're like, whose opportunity actually is this in terms of AI? If you've got data and you drop the ball, only blame yourself.

But we enrich the data we have, and you look back, you're like, whose opportunity actually is this in terms of AI? If you've got data and you drop the ball, only blame yourself.

I think there is a market and there's a market clearing price and you pay that price. But these are not AI prices. This is not AI deal where I go 5 on 20, that guy's unbelievable. Next thing, you know, I'm on a Zoom and he's in San Francisco in a hotel room and I just come off that Zoom and I say to my associate, I say, we're dead. There's going to be 100 million pre. This is real, by the way.

I think there is a market and there's a market clearing price and you pay that price. But these are not AI prices. This is not AI deal where I go 5 on 20, that guy's unbelievable. Next thing, you know, I'm on a Zoom and he's in San Francisco in a hotel room and I just come off that Zoom and I say to my associate, I say, we're dead. There's going to be 100 million pre. This is real, by the way.

I think short-term defensive. Short-term defensive. If you enrich that and you're the one to do it and you retain your customers and because of the enrichment, you increase your revenues and you increase your customer base. Look at the great companies. Tesla, I don't know. Look at Netscape, right? At some point, freemium. It's like freemium on steroids.

I think short-term defensive. Short-term defensive. If you enrich that and you're the one to do it and you retain your customers and because of the enrichment, you increase your revenues and you increase your customer base. Look at the great companies. Tesla, I don't know. Look at Netscape, right? At some point, freemium. It's like freemium on steroids.

I think the right play is defensive to start. And then once you retain those customers and you've enriched the data, I think there's a lot you can do.

I think the right play is defensive to start. And then once you retain those customers and you've enriched the data, I think there's a lot you can do.

I don't agree with that. I think some of the tools are actually very commoditized. So I think that the vertical SaaS or horizontal SaaS or data owners will be able to access the underlying tools reasonably cheaply at some point.

I don't agree with that. I think some of the tools are actually very commoditized. So I think that the vertical SaaS or horizontal SaaS or data owners will be able to access the underlying tools reasonably cheaply at some point.

And you may disagree with that, but I think if you look at some of the open source software around this, it's going to become more and more commoditized, the underlying tools. So you could go and say, well, why can't every single company do that? I don't think you can, but I think there are going to be software providers that enrich their tool set that are going to do unbelievably well.

And you may disagree with that, but I think if you look at some of the open source software around this, it's going to become more and more commoditized, the underlying tools. So you could go and say, well, why can't every single company do that? I don't think you can, but I think there are going to be software providers that enrich their tool set that are going to do unbelievably well.

Yeah. You remind me a little bit of when I started our ISP with my co-founders and we went to like the biggest banks and we offered them internet service and hosting and all sorts of like e-commerce options. And then we went to like the national kind of railway owner and they said, look, I've got a network. I own a network. I've got fiber on every single railway.

Yeah. You remind me a little bit of when I started our ISP with my co-founders and we went to like the biggest banks and we offered them internet service and hosting and all sorts of like e-commerce options. And then we went to like the national kind of railway owner and they said, look, I've got a network. I own a network. I've got fiber on every single railway.

I own a network that like just dwarfs you, right? I can do all of this, like what I need you for. And I remember like, it was like, okay, like walk out, right? Six months later, they'd done nothing. You know, a year later, they're done. Two years later, the answer is there'll be the short-term thing where again, everybody goes like, I don't need you.

I own a network that like just dwarfs you, right? I can do all of this, like what I need you for. And I remember like, it was like, okay, like walk out, right? Six months later, they'd done nothing. You know, a year later, they're done. Two years later, the answer is there'll be the short-term thing where again, everybody goes like, I don't need you.

Like, is there a business in terms of smart software solutions? And yeah, that's all over the place still.

Like, is there a business in terms of smart software solutions? And yeah, that's all over the place still.

Too kind.

Too kind.

Well, I think you have to have that economic alignment to start off with. So I don't think you should ever take a board seat where you own too small a percentage or the size of that potential outcome vis-a-vis your fund is too small. So I really think you have to have that economic alignment because it means every time you sit down, it's like us.

Well, I think you have to have that economic alignment to start off with. So I don't think you should ever take a board seat where you own too small a percentage or the size of that potential outcome vis-a-vis your fund is too small. So I really think you have to have that economic alignment because it means every time you sit down, it's like us.

Look, if you kick off and you own on a board less than 15% of that company, I think it's problematic. Certainly in terms of our fund structure, the capital and the cash is infinite in a way, or has been in this era. Your time is not infinite. And at some point, you're gonna think very seriously about your time. To be patient, you need that economic alignment with the founder.

Look, if you kick off and you own on a board less than 15% of that company, I think it's problematic. Certainly in terms of our fund structure, the capital and the cash is infinite in a way, or has been in this era. Your time is not infinite. And at some point, you're gonna think very seriously about your time. To be patient, you need that economic alignment with the founder.

So if the founder owns 95% and you own 5%, problematic. Every time you sit down, you go like, I'm working for this guy. de facto. If there is more alignment in terms of ownership, then I think it works better. Harry, if things are going like ballistically, then it doesn't matter. So that always breaks the rules. I'm talking about 99% of the time. You've got to sit down and go, it's our company.

So if the founder owns 95% and you own 5%, problematic. Every time you sit down, you go like, I'm working for this guy. de facto. If there is more alignment in terms of ownership, then I think it works better. Harry, if things are going like ballistically, then it doesn't matter. So that always breaks the rules. I'm talking about 99% of the time. You've got to sit down and go, it's our company.

What do you do in that scenario? I mean, we have to bow out. In that situation, I broke every rule under the sun and we put in a 100K check, right? I broke my rules, but we don't do that. Why would you do a 100K check then? Because I like the individual so much.

What do you do in that scenario? I mean, we have to bow out. In that situation, I broke every rule under the sun and we put in a 100K check, right? I broke my rules, but we don't do that. Why would you do a 100K check then? Because I like the individual so much.

We're in this together.

We're in this together.

We don't think about dilution much. We really don't. Our MO has been we dilute alongside the founder. As a seed stage fund, we get involved at the beginning and it's been a strategy and we don't think about dilution. We think about time and we love the alignment of coming in very early and hopefully being economically aligned with the founder.

We don't think about dilution much. We really don't. Our MO has been we dilute alongside the founder. As a seed stage fund, we get involved at the beginning and it's been a strategy and we don't think about dilution. We think about time and we love the alignment of coming in very early and hopefully being economically aligned with the founder.

And then it's the exact same strategy, exact same thinking is we'll dilute alongside the founder. By the way, I can't afford in my fund If I've done my job right and you are, you know, raising your next set of capital at 3x or 4x, I just can't afford to actually maintain my percentage ownership.

And then it's the exact same strategy, exact same thinking is we'll dilute alongside the founder. By the way, I can't afford in my fund If I've done my job right and you are, you know, raising your next set of capital at 3x or 4x, I just can't afford to actually maintain my percentage ownership.

In a career, I've been through one bankruptcy, one bankruptcy. So in hundreds of investments, I've had one bankruptcy. And Micah Rosenblum, my partner's father, Lou Rosenblum, was one of the best bank, he's out of Chicago, one of the best bankruptcy lawyers. And I remember thinking, oh my God, I do not know what has hit me here. This is like a freight train.

In a career, I've been through one bankruptcy, one bankruptcy. So in hundreds of investments, I've had one bankruptcy. And Micah Rosenblum, my partner's father, Lou Rosenblum, was one of the best bank, he's out of Chicago, one of the best bankruptcy lawyers. And I remember thinking, oh my God, I do not know what has hit me here. This is like a freight train.

There was an enormous fraud in the company. The CFO committed suicide. The CEO is still in jail. I mean, like huge story, right? Like they were literally fraudulently putting KPMG on fraudulent financials. I remember that moment when Micah said to me, Lou's going to take you under his wing. I'd been paid out a couple of million dollars.

There was an enormous fraud in the company. The CFO committed suicide. The CEO is still in jail. I mean, like huge story, right? Like they were literally fraudulently putting KPMG on fraudulent financials. I remember that moment when Micah said to me, Lou's going to take you under his wing. I'd been paid out a couple of million dollars.

The first thing Lou said to me is, you're going to give back every last cent. You're going to be the first person who gives back all the money and all the other investors are going to hate you for it. But that's the first thing you're going to do. So I had taken secondary. It was four XR investment on the secondary, gave every cent back. But here's the thing.

The first thing Lou said to me is, you're going to give back every last cent. You're going to be the first person who gives back all the money and all the other investors are going to hate you for it. But that's the first thing you're going to do. So I had taken secondary. It was four XR investment on the secondary, gave every cent back. But here's the thing.

The degree to which I felt taken care of by this guy who was an expert, I think sometimes... And I think he felt great that here was this helpless capitalist hit by a freight train in terms of this bankruptcy. If we can do that once in a while, the joy of that, right? Sometimes... This is about financial returns, and it sounds like completely ridiculous to say it's not.

The degree to which I felt taken care of by this guy who was an expert, I think sometimes... And I think he felt great that here was this helpless capitalist hit by a freight train in terms of this bankruptcy. If we can do that once in a while, the joy of that, right? Sometimes... This is about financial returns, and it sounds like completely ridiculous to say it's not.

But sometimes the gift of that, right, and the chemistry that that unlocks, you know, we'll do every company together after that.

But sometimes the gift of that, right, and the chemistry that that unlocks, you know, we'll do every company together after that.

I think they could come out. Harry, I think the era gave rise to that, unfortunately.

I think they could come out. Harry, I think the era gave rise to that, unfortunately.

I was thinking about this. I actually just wrote down matchmaker here. Like the small fund versus the big fund. And the concept of like the big fund, the lifetime investor fund really has no incentive to matchmake for you. They have this incentive.

I was thinking about this. I actually just wrote down matchmaker here. Like the small fund versus the big fund. And the concept of like the big fund, the lifetime investor fund really has no incentive to matchmake for you. They have this incentive.

Okay. So when you're a small fund and you're not going to invest round after round, right? Like whole MO is make introductions all day long. If you think of like a lot of what I'm doing is making introductions to other funds. I'm like a glorified matchmaker.

Okay. So when you're a small fund and you're not going to invest round after round, right? Like whole MO is make introductions all day long. If you think of like a lot of what I'm doing is making introductions to other funds. I'm like a glorified matchmaker.

If you're my partner, I can't tell you what you would throw at me. Because my partners look at that and they go, that was utter insanity and stupidity.

If you're my partner, I can't tell you what you would throw at me. Because my partners look at that and they go, that was utter insanity and stupidity.

So some of the thought over there was, what's the difference between, and maybe it's stage specific funding, but like what I get from you, what I get from Sequoia. Well, Sequoia will never ever send you, will never matchmake for you. Sequoia will, if you take your check from Andreessen, Sequoia, Axel, you name them. They will never, they have no incentive to matchmake.

So some of the thought over there was, what's the difference between, and maybe it's stage specific funding, but like what I get from you, what I get from Sequoia. Well, Sequoia will never ever send you, will never matchmake for you. Sequoia will, if you take your check from Andreessen, Sequoia, Axel, you name them. They will never, they have no incentive to matchmake.

They have no incentive to take you to another fund at some point because at every stage, right, they either want their pro rata and they want their pro rata. This is the difference between kind of totally financial investors. And I'd say a lot of the ecosystem has become that. It's like, I have my pro rata. Let me wait for you and go to the market, whatever.

They have no incentive to take you to another fund at some point because at every stage, right, they either want their pro rata and they want their pro rata. This is the difference between kind of totally financial investors. And I'd say a lot of the ecosystem has become that. It's like, I have my pro rata. Let me wait for you and go to the market, whatever.

And if you're hot, I'll invest at the market clearing price. And if you're not hot, I'll get a deal. And otherwise, I'll just won't invest at all. Or orphan you. Right? So it's basically like call option time all day long. Whereas if you look at us, if you look at seed funds, a whole incentive is to get you funded.

And if you're hot, I'll invest at the market clearing price. And if you're not hot, I'll get a deal. And otherwise, I'll just won't invest at all. Or orphan you. Right? So it's basically like call option time all day long. Whereas if you look at us, if you look at seed funds, a whole incentive is to get you funded.

Harry, I promise you, I imagine a lot of your time is like, oh, think about that fund. Think about that fund. Think about that partner. To the point that over 15 years, we've operationalized this. Like our software, I don't care if you use Monday, Airtable, we use Airtable.

Harry, I promise you, I imagine a lot of your time is like, oh, think about that fund. Think about that fund. Think about that partner. To the point that over 15 years, we've operationalized this. Like our software, I don't care if you use Monday, Airtable, we use Airtable.

But our Airtable and the number of people in our organization who are just like full-time dedicated to this, to like finding you not to the right fund, but find you to the right partner, right? All we do, like I'm like a glorified matchmaker on steroids.

But our Airtable and the number of people in our organization who are just like full-time dedicated to this, to like finding you not to the right fund, but find you to the right partner, right? All we do, like I'm like a glorified matchmaker on steroids.

Totally. So you need the science and you need the art. You need the science of going, I'll take you to the right partner. Because of course, hit rate with the wrong partners and happens all day long is like, Harry's busy, you're on a deal, you're not that particularly interested in that vertical or whatever, done, finished. But there's the art as well, right? And ideally, this is sales, right?

Totally. So you need the science and you need the art. You need the science of going, I'll take you to the right partner. Because of course, hit rate with the wrong partners and happens all day long is like, Harry's busy, you're on a deal, you're not that particularly interested in that vertical or whatever, done, finished. But there's the art as well, right? And ideally, this is sales, right?

This is testimonial sales. I'm saying Harry is awesome. Harry is awesome. Like it's not Harry going, oh, I'm awesome, right? It's me saying Harry's awesome. And by the way, I have to believe that for that to be really authentic.

This is testimonial sales. I'm saying Harry is awesome. Harry is awesome. Like it's not Harry going, oh, I'm awesome, right? It's me saying Harry's awesome. And by the way, I have to believe that for that to be really authentic.

So that's why like our testimonial sales with our better companies, with our companies that are performing are better than, you know, when we're trying to kind of sell a company that's not performing. So it comes down to performance.

So that's why like our testimonial sales with our better companies, with our companies that are performing are better than, you know, when we're trying to kind of sell a company that's not performing. So it comes down to performance.

It depends on the context again. It depends on how hot the deal is. I think you're describing a hot deal in a tougher time, like halitosis is better than no breath at all. So, you know, like if you're doing your buddy a favor and that person's putting $5 million into my deal and I have struggled to fundraise, like bring it on.

It depends on the context again. It depends on how hot the deal is. I think you're describing a hot deal in a tougher time, like halitosis is better than no breath at all. So, you know, like if you're doing your buddy a favor and that person's putting $5 million into my deal and I have struggled to fundraise, like bring it on.

I've never heard that statement before. Do you do market sizing? We do. I've seen a bunch of times where funders will look at TAM and they'll walk away from a deal and they'll say because the TAM wasn't big enough. One of my favorite examples of this is MediaRadar. I was in it with Bain Capital, pre-founder collective.

I've never heard that statement before. Do you do market sizing? We do. I've seen a bunch of times where funders will look at TAM and they'll walk away from a deal and they'll say because the TAM wasn't big enough. One of my favorite examples of this is MediaRadar. I was in it with Bain Capital, pre-founder collective.

It's one of the biggest vertical SaaS plays, if not the biggest in the world in media now. How much is it worth? It's worth billions today. It's another company I wish I'd stayed in. Todd Kreiselman. Unbelievable business. So we showed it to, I don't know, Bain, Flybridge, Bessemer. I remember this like it was yesterday. The Bessemer team did all the market sizing.

It's one of the biggest vertical SaaS plays, if not the biggest in the world in media now. How much is it worth? It's worth billions today. It's another company I wish I'd stayed in. Todd Kreiselman. Unbelievable business. So we showed it to, I don't know, Bain, Flybridge, Bessemer. I remember this like it was yesterday. The Bessemer team did all the market sizing.

They went newspapers and magazines. That's dying, right? The damn shit. Couldn't really argue with them. Like just kept going. I'd looked at newspapers and magazines as the angel investor and gone, you know, so that's a couple of hundred million dollars, not billions of dollars. Okay, next thing media radar goes into Facebook, Google, everything online needs them.

They went newspapers and magazines. That's dying, right? The damn shit. Couldn't really argue with them. Like just kept going. I'd looked at newspapers and magazines as the angel investor and gone, you know, so that's a couple of hundred million dollars, not billions of dollars. Okay, next thing media radar goes into Facebook, Google, everything online needs them.

Next thing they're going to Netflix, Apple, Amazon, everything that is being screened needs them. And the TAM just was like infinite. So I've seen the mistake made where you really undersize the TAM. It sounds very seductive and logical in the moment. But like, do I think of TAM? TAM matters.

Next thing they're going to Netflix, Apple, Amazon, everything that is being screened needs them. And the TAM just was like infinite. So I've seen the mistake made where you really undersize the TAM. It sounds very seductive and logical in the moment. But like, do I think of TAM? TAM matters.

there's a time factor here. You know, people say like, what's the percentage ownership you have to have? And I think in terms of time, there are situations where you can write a smaller check. And I think we've got to be fair to founders here as well.

there's a time factor here. You know, people say like, what's the percentage ownership you have to have? And I think in terms of time, there are situations where you can write a smaller check. And I think we've got to be fair to founders here as well.

I think all things being equal in the rear view mirror, you look at like the Tradesk versus Olo and you go, the Tradesk is like, it's this infinite TAM, right? You could literally be Google, Facebook and Tradesk. And then you look at Olo and you go, okay, vertical SaaS restaurants, is that TAM limited? Probably all things being equal, but there you go.

I think all things being equal in the rear view mirror, you look at like the Tradesk versus Olo and you go, the Tradesk is like, it's this infinite TAM, right? You could literally be Google, Facebook and Tradesk. And then you look at Olo and you go, okay, vertical SaaS restaurants, is that TAM limited? Probably all things being equal, but there you go.

Yeah. You know, Noah raised $600 million for 10% dilution when he IPO'd. That's fine.

Yeah. You know, Noah raised $600 million for 10% dilution when he IPO'd. That's fine.

I used to think that PE firms were like the enemy of the seed stage. And I've changed my mind on that. We've got some PE firms in two vertical SaaS companies that I'm involved in. Their rigor, their financial discipline, and the help they've given to those companies has been great for the entire cap table. So PE can be very, very valuable in portfolio companies.

I used to think that PE firms were like the enemy of the seed stage. And I've changed my mind on that. We've got some PE firms in two vertical SaaS companies that I'm involved in. Their rigor, their financial discipline, and the help they've given to those companies has been great for the entire cap table. So PE can be very, very valuable in portfolio companies.

Totally seeing that.

Totally seeing that.

I find this easier to answer at the company level. So if I think of like applied AI, and I think of some of those companies, Micah Rosenblum on Vokada comes to mind. That is applied AI to camera. Josh Wolfe, who did Anduril out of Lux, that's like applied to drones. Again, if I look at Josh Kushner, billion on a hundred billion, I wouldn't bet against that. So my answer is company-based.

I find this easier to answer at the company level. So if I think of like applied AI, and I think of some of those companies, Micah Rosenblum on Vokada comes to mind. That is applied AI to camera. Josh Wolfe, who did Anduril out of Lux, that's like applied to drones. Again, if I look at Josh Kushner, billion on a hundred billion, I wouldn't bet against that. So my answer is company-based.

Best board member you sit on a board with, and why them? Jake Saper from Emergence on Regal. has been just an incredible augmentation, just been a fantastic partner to have on the company. So Jake sourced Zoom for emergence, deserves a lot of that credit, reversed the track on this portfolio company and every bit of hiring, every bit of advice, it's literally like he can't do enough for a company.

Best board member you sit on a board with, and why them? Jake Saper from Emergence on Regal. has been just an incredible augmentation, just been a fantastic partner to have on the company. So Jake sourced Zoom for emergence, deserves a lot of that credit, reversed the track on this portfolio company and every bit of hiring, every bit of advice, it's literally like he can't do enough for a company.

You know, if I'm writing a 100K check, I've got to be very open to that founder and saying, look, like this is the other side of the spectrum to me being on your board. But if I'm on your board, I can't write a 100K check. I can't write a 500K check anymore because you need my time and you need my interest. And this goes back to alignment.

You know, if I'm writing a 100K check, I've got to be very open to that founder and saying, look, like this is the other side of the spectrum to me being on your board. But if I'm on your board, I can't write a 100K check. I can't write a 500K check anymore because you need my time and you need my interest. And this goes back to alignment.

At a later stage, he chooses very carefully, he doesn't do that much. And when he does, like through thick and thin, this guy just gets involved.

At a later stage, he chooses very carefully, he doesn't do that much. And when he does, like through thick and thin, this guy just gets involved.

It's a long, long journey. And even post IPO, hang on. When you think your company has a real moat and is very difficult to compete with, don't sell too soon.

It's a long, long journey. And even post IPO, hang on. When you think your company has a real moat and is very difficult to compete with, don't sell too soon.

Our biggest loss was probably Pinterest. There'd been so many. So what is my biggest loss? I met Marty Ardlin, who was starting Running Tide. He was a mechanical engineer, first individual in his family who'd gone to college. and just one of the most thoughtful guys in applied ocean that I've ever come across. Third generation lobster fisherman. And I was just very, very seduced by this.

Our biggest loss was probably Pinterest. There'd been so many. So what is my biggest loss? I met Marty Ardlin, who was starting Running Tide. He was a mechanical engineer, first individual in his family who'd gone to college. and just one of the most thoughtful guys in applied ocean that I've ever come across. Third generation lobster fisherman. And I was just very, very seduced by this.

I reversed the truck for Marty. And what I think I underestimated is translating a product vision into something that was truly commercial didn't happen. We lost all of our money on Running Tide.

I reversed the truck for Marty. And what I think I underestimated is translating a product vision into something that was truly commercial didn't happen. We lost all of our money on Running Tide.

Just too much money. Drove everything. Too much capital. Stuffing capital down entrepreneurs' throats.

Just too much money. Drove everything. Too much capital. Stuffing capital down entrepreneurs' throats.

Oh, love that. That's such a good question.

Oh, love that. That's such a good question.

Oh, my God. I'm going to really have to give thought to that. Unmade decision. I literally have got to think about that.

Oh, my God. I'm going to really have to give thought to that. Unmade decision. I literally have got to think about that.

Yeah, it's a great question.

Yeah, it's a great question.

It's a great question.

It's a great question.

The unmade decision. Honestly, I look back and I go, every great decision was never binary. It was always weighing up scales. And I think getting to conviction is confusing for people because they listen to this and they go, oh, you're binary about that. Like you knew unequivocally. And the truth was like the biggest decisions, it was 51%. So leave South Africa and go back to live in Boston.

The unmade decision. Honestly, I look back and I go, every great decision was never binary. It was always weighing up scales. And I think getting to conviction is confusing for people because they listen to this and they go, oh, you're binary about that. Like you knew unequivocally. And the truth was like the biggest decisions, it was 51%. So leave South Africa and go back to live in Boston.

take up the offer to start Founder Collective with Eric. Was that binary no-brainer? Well, the seduction of wanting to be in business with Eric definitely was. But everything I was leaving at home, burning bridges and burning the boats, it's insanely difficult. And I think that the older you get, the tougher it is to take binary decisions.

take up the offer to start Founder Collective with Eric. Was that binary no-brainer? Well, the seduction of wanting to be in business with Eric definitely was. But everything I was leaving at home, burning bridges and burning the boats, it's insanely difficult. And I think that the older you get, the tougher it is to take binary decisions.

And so we've got to be we've got to have some kind of economic alignment. We've got to have some kind of outcome where, you know, you sell the business for 100 million, which is moonshot, as you know. And, you know, you make 50 million, but I make, you know, a million even. What does that mean to a, you know, $85 million fund?

And so we've got to be we've got to have some kind of economic alignment. We've got to have some kind of outcome where, you know, you sell the business for 100 million, which is moonshot, as you know. And, you know, you make 50 million, but I make, you know, a million even. What does that mean to a, you know, $85 million fund?

And I think that the good part of that for a founder is when we give a term sheet, when I say, I want to be on your board, man, it is hard thought through. I do not do that flippantly. And when I do do it, like, do I have every single question answered? No. It's sometimes emotion versus intellect. And at some point you've got to go, I'm going to run with the emotion here.

And I think that the good part of that for a founder is when we give a term sheet, when I say, I want to be on your board, man, it is hard thought through. I do not do that flippantly. And when I do do it, like, do I have every single question answered? No. It's sometimes emotion versus intellect. And at some point you've got to go, I'm going to run with the emotion here.

And conversely, if you don't have that, like, I think about this as going up the mountain. Instantly, we have this incredible rapport. Like I just leave that meeting feeling like so energized. And then I go home and I sleep the night, I wake up the next morning, I go like, this will kill you, this will kill you, this will kill you. You'll never take them on, right?

And conversely, if you don't have that, like, I think about this as going up the mountain. Instantly, we have this incredible rapport. Like I just leave that meeting feeling like so energized. And then I go home and I sleep the night, I wake up the next morning, I go like, this will kill you, this will kill you, this will kill you. You'll never take them on, right?

But like Harry's amazing, right? Like he's unbelievable. And at some point to ignore the emotional visceral response is also wrong.

But like Harry's amazing, right? Like he's unbelievable. And at some point to ignore the emotional visceral response is also wrong.

I come back to love and friendship and loyalty matters most.

I come back to love and friendship and loyalty matters most.

I'm reading this at the moment. I mean, like, I'm obsessed. Okay. What's the favorite book? So, Harry, I'm reading The Path Between the Seas by David McCulloch. The book was written in 1974. It won the National Book Prize in the US. And it had been recommended to me so many times. It is about the building of the Panama Canal between 1870 and 1914.

I'm reading this at the moment. I mean, like, I'm obsessed. Okay. What's the favorite book? So, Harry, I'm reading The Path Between the Seas by David McCulloch. The book was written in 1974. It won the National Book Prize in the US. And it had been recommended to me so many times. It is about the building of the Panama Canal between 1870 and 1914.

Just to give you a sense of this, France spent $250 million and effectively went bankrupt. 20,000 people died, mainly from yellow fever and malaria. The Republic of Panama was like America doing the most colonial thing you could ever imagine.

Just to give you a sense of this, France spent $250 million and effectively went bankrupt. 20,000 people died, mainly from yellow fever and malaria. The Republic of Panama was like America doing the most colonial thing you could ever imagine.

They basically took it and they paid, they gave the Republic of Panama, which they effectively created $10 million, and they bought the defunct business of the canal from the French for $40 million. That was bigger than the aggregate amount that they paid for Cuba, Louisiana, and Alaska. This was like big, hairy, audacious on steroids.

They basically took it and they paid, they gave the Republic of Panama, which they effectively created $10 million, and they bought the defunct business of the canal from the French for $40 million. That was bigger than the aggregate amount that they paid for Cuba, Louisiana, and Alaska. This was like big, hairy, audacious on steroids.

And a friend of mine recommended and said, you know, if you want to look at like moonshot stuff again, and everything that was true in capitalism then is still the same. The lobbying, the politicians on the take, the media. The banks, you know, it puts like Elon, like SpaceX and Tesla just puts that in like insane. But this was like the moonshot of moonshots.

And a friend of mine recommended and said, you know, if you want to look at like moonshot stuff again, and everything that was true in capitalism then is still the same. The lobbying, the politicians on the take, the media. The banks, you know, it puts like Elon, like SpaceX and Tesla just puts that in like insane. But this was like the moonshot of moonshots.

And a lot of the time, like you look at Frederick de Lesseps.

And a lot of the time, like you look at Frederick de Lesseps.

But we can start these things. We can get involved at the beginning of these things.

But we can start these things. We can get involved at the beginning of these things.

I mean, I have to like strong arm my partners into like putting $5 million into a company. But yeah, we can. Yeah.

I mean, I have to like strong arm my partners into like putting $5 million into a company. But yeah, we can. Yeah.

I think some founders still see a name in lights and they go, I want that name beyond anything. If it's Sequoia, A16Z, Accel, you name it, I want that name. And I think there will always be a steady supply of founders who think that way.

I think some founders still see a name in lights and they go, I want that name beyond anything. If it's Sequoia, A16Z, Accel, you name it, I want that name. And I think there will always be a steady supply of founders who think that way.

I don't think they understand that you're gonna, the one in 10, if you're lucky, and those stats are probably not even right, one in 10 get funded, otherwise you're orphaned or you're in a world of hurt because someone that the world thought was like, very, very serious and very smart about. You just said no to you. Go try sell against that. I think it's very, very difficult.

I don't think they understand that you're gonna, the one in 10, if you're lucky, and those stats are probably not even right, one in 10 get funded, otherwise you're orphaned or you're in a world of hurt because someone that the world thought was like, very, very serious and very smart about. You just said no to you. Go try sell against that. I think it's very, very difficult.

To our earlier point, those founders come back to us and they say, like, I was orphaned. They don't understand that 90% don't get follow on funding.

To our earlier point, those founders come back to us and they say, like, I was orphaned. They don't understand that 90% don't get follow on funding.

You know, there have been times where we didn't break the rules for the best of reasons. The first thing that comes to mind is like Pinterest. The founders came to us and we had a conflict. We had a very strong associate in Zach Klein, who is the chairman of supply. We'd invested in supply. We couldn't make the investment.

You know, there have been times where we didn't break the rules for the best of reasons. The first thing that comes to mind is like Pinterest. The founders came to us and we had a conflict. We had a very strong associate in Zach Klein, who is the chairman of supply. We'd invested in supply. We couldn't make the investment.

I look back and then I go like, how, you know, if you look at that outcome, you go like, how could we have, but we didn't break the rules. And I think there's like financial rules. And then I think there are rules of like loyalty and partnership where you go, that's my name on the door. And I cannot break, those are just unbreakable rules.

I look back and then I go like, how, you know, if you look at that outcome, you go like, how could we have, but we didn't break the rules. And I think there's like financial rules. And then I think there are rules of like loyalty and partnership where you go, that's my name on the door. And I cannot break, those are just unbreakable rules.

We're very old school, very old school on that.

We're very old school, very old school on that.

So I'll give you the corollary of that, is there've been companies that I've been very down on. And often it's in enterprise SaaS, where just the sales cycle is so long and you go like, are they ever gonna get there? But I remember saying to my wife on Olo, this is done, we've lost a lot. This was pre-Founder Collective saying, we have lost our money. Like no, it is never gonna get there.

So I'll give you the corollary of that, is there've been companies that I've been very down on. And often it's in enterprise SaaS, where just the sales cycle is so long and you go like, are they ever gonna get there? But I remember saying to my wife on Olo, this is done, we've lost a lot. This was pre-Founder Collective saying, we have lost our money. Like no, it is never gonna get there.

Each time this guy gets a little bit of funding, I feel like he's just pulled the rabbit out of the hat. I feel like he's duped the investor. The corollary to that is some of these businesses take a long, long time. And so consumer, I think you get feedback pretty quickly. By the way, Harry, there've been times where I've said, how good is that entrepreneur?

Each time this guy gets a little bit of funding, I feel like he's just pulled the rabbit out of the hat. I feel like he's duped the investor. The corollary to that is some of these businesses take a long, long time. And so consumer, I think you get feedback pretty quickly. By the way, Harry, there've been times where I've said, how good is that entrepreneur?

And I've started to say, they're not the smartest, they're not the fastest. The velocity of getting stuff done here is very slow. And then something lucky happens. And particularly in a consumer business, you get this fast feedback and then you think they're geniuses. But this is a long, long journey.

And I've started to say, they're not the smartest, they're not the fastest. The velocity of getting stuff done here is very slow. And then something lucky happens. And particularly in a consumer business, you get this fast feedback and then you think they're geniuses. But this is a long, long journey.

Yeah.

Yeah.

We did no reserves in fund one, zero. And then what we found was there was this negative correlation bias. There were these companies that just were not getting there fast enough that needed our help. And we had to break the rules.

We did no reserves in fund one, zero. And then what we found was there was this negative correlation bias. There were these companies that just were not getting there fast enough that needed our help. And we had to break the rules.

One of the best instances of breaking the rules, Eric, who is the most disciplined investor in our team by far, he's created literally the infrastructure on which we all work. you know, rise. Eric looks at me on Trade Desk and goes, they're out of money if we don't invest here. They're out of money. Eric breaks his own rules so painfully so for him. I'm more opportunistic.

One of the best instances of breaking the rules, Eric, who is the most disciplined investor in our team by far, he's created literally the infrastructure on which we all work. you know, rise. Eric looks at me on Trade Desk and goes, they're out of money if we don't invest here. They're out of money. Eric breaks his own rules so painfully so for him. I'm more opportunistic.

I go like, if we've got to do it, we've got to do it. I've got goosebumps imagining this company not existing. No reserves in fund one. And Eric invests in Trade Desk as a follow on because nobody else is going to give them money.

I go like, if we've got to do it, we've got to do it. I've got goosebumps imagining this company not existing. No reserves in fund one. And Eric invests in Trade Desk as a follow on because nobody else is going to give them money.

It was like somewhere between half a million and a million. Whatever we did, it felt like a lot. In fund two, we created a reserve strategy because, and it was that negative correlation bias that made us do it.

It was like somewhere between half a million and a million. Whatever we did, it felt like a lot. In fund two, we created a reserve strategy because, and it was that negative correlation bias that made us do it.

We went, if we're going to put in like another 50%, we won't lead ever, but if we're going to put in another 50%, like how do we do that only in our companies that like crave and need the money?

We went, if we're going to put in like another 50%, we won't lead ever, but if we're going to put in another 50%, like how do we do that only in our companies that like crave and need the money?

Yeah. I'll tell you what happened is we put in a reserve strategy where we said we won't fund if it's more than 20 million post. But then what happened is the market just went away with it. That became anachronistic. So you create these rules and then the market moves.

Yeah. I'll tell you what happened is we put in a reserve strategy where we said we won't fund if it's more than 20 million post. But then what happened is the market just went away with it. That became anachronistic. So you create these rules and then the market moves.

And in a way, like what you have to do is two years later, you have to try and change those rules altogether again based on what the market's doing. So now today, how does your reserves look? We still have this kind of one-to-one reserve policy, but we actually struggle on our reserves because a lot of the time our good companies- I just don't understand.

And in a way, like what you have to do is two years later, you have to try and change those rules altogether again based on what the market's doing. So now today, how does your reserves look? We still have this kind of one-to-one reserve policy, but we actually struggle on our reserves because a lot of the time our good companies- I just don't understand.

I'll tell you what happened, Harry. This is how this moves. During COVID, we got very scared. At the beginning of COVID, we went, oh my God, the market's going to close down. We're going to really have to fund our companies. So then we're thinking we've got to, in the first instance, put even fewer funds into our companies. And then what happens is the market just gets awash with capital.

I'll tell you what happened, Harry. This is how this moves. During COVID, we got very scared. At the beginning of COVID, we went, oh my God, the market's going to close down. We're going to really have to fund our companies. So then we're thinking we've got to, in the first instance, put even fewer funds into our companies. And then what happens is the market just gets awash with capital.

Everyone's day trading. And of course, we run Raise Fund 4 prematurely. So I would say reserves and how to do the reserve thing is actually one of the most challenging aspects of venture. How to get it perfectly right? Pretty tough.

Everyone's day trading. And of course, we run Raise Fund 4 prematurely. So I would say reserves and how to do the reserve thing is actually one of the most challenging aspects of venture. How to get it perfectly right? Pretty tough.

The minute I feel like we should reserve more, I almost feel like the market will go crazy. The minute I think we need to reserve much less, my sense is, oh my God, like the market is going to like, you're really going to need more money now.

The minute I feel like we should reserve more, I almost feel like the market will go crazy. The minute I think we need to reserve much less, my sense is, oh my God, like the market is going to like, you're really going to need more money now.

Pretty forthright. I'm the opposite of Jason. And he may be right, but sometimes I think, look, whether I say something or not, you're kind of running out of money in three months time and I better say something. I feel like I'm abrogating my duty if I don't say something. Running Tide, we just closed down the business.

Pretty forthright. I'm the opposite of Jason. And he may be right, but sometimes I think, look, whether I say something or not, you're kind of running out of money in three months time and I better say something. I feel like I'm abrogating my duty if I don't say something. Running Tide, we just closed down the business.

This was a carbon sequestration business, literally ag in the ocean, unbelievable business. We've got $10 million and he's burning $3 million a month. I think Marty stopped taking my calls because he knew what I was going to say to him. And I said it to him anyway. I said it to him in an email. The fact is, like, at the end, he wrote it on his window in the condensation.

This was a carbon sequestration business, literally ag in the ocean, unbelievable business. We've got $10 million and he's burning $3 million a month. I think Marty stopped taking my calls because he knew what I was going to say to him. And I said it to him anyway. I said it to him in an email. The fact is, like, at the end, he wrote it on his window in the condensation.

Can't burn.

Can't burn.

I put it on the boat. I knew I had to take the boat out. And I knew that he was rolling his eyes knowing exactly what I would say. We closed the business like a month ago. Could he have cut the burn to give himself? He absolutely could have. But these founders get onto this treadmill and it's almost impossible to slow this thing down. Why?

I put it on the boat. I knew I had to take the boat out. And I knew that he was rolling his eyes knowing exactly what I would say. We closed the business like a month ago. Could he have cut the burn to give himself? He absolutely could have. But these founders get onto this treadmill and it's almost impossible to slow this thing down. Why?

I think what they feel like is their loyalty is to the team that they've put in place. Their loyalty is to the last set of capital that still says go for it. And then the same thing that makes these amazing entrepreneurs where they go like, I'll walk through walls. They go, I'm going to be the guy. I'm going to be the person that is going to pull the rabbit out of the hat in the last three months.

I think what they feel like is their loyalty is to the team that they've put in place. Their loyalty is to the last set of capital that still says go for it. And then the same thing that makes these amazing entrepreneurs where they go like, I'll walk through walls. They go, I'm going to be the guy. I'm going to be the person that is going to pull the rabbit out of the hat in the last three months.

I would say reserves and how to do the reserve thing is actually one of the most challenging aspects of venture. Still think of like pro-rot as like the original sin against entrepreneurs. You own your own destiny by minding your monthly burn. I think that DPI could be dead. LPs are looking at this asset class right now, I think, and going, where is the DPI? Those guys were just like a casino.

So down to the last draw. And in fairness to them, some of these enterprise clients are still giving them hope. If you do this, this, this, you get $100 million contract.

I would say generally founders who've had enormous, enormous success and exits come to the next opportunity with some degree of hubris. I speak about this personally. I sold my first business and I thought I could conquer anything. And they look at any vertical and you kind of go, I'm going to disrupt that. I'm going to be the one that's going to show them a lesson.

And generally speaking, that hasn't worked out well for us. Versus entrepreneurs who tried their asses off, raised money, and for some reason or another, it didn't work out. They come back hungrier. They come back, they want that prize. They want to prove, chip on the shoulder. And if they can bring back the team somehow. So second time entrepreneurs where they failed and they come back for more.

Tom Lease at Motorway is an unbelievable example. I was on the board with Sonali Durekar of Top 10. They build an unbelievable product in the travel space, but they get crushed in that vertical. Try to outspend Kayak in the other place, spending $100 million a month, Google's single largest advertisers. You can have the best product you want,

tail between their legs, go off, they lost all of our money. Brings back the team and starts motorway, billion dollar valuation. They're great people to back. The trick is you got to get them to come back and speak to you because sometimes- They didn't.

So, you know, that is to say, look, you failed for all the best reasons. You failed. It's not because you didn't try your ass off. It's not because this team isn't thoughtful. And the clock cycle, the frequency at which you got stuff done was enormous. The context was just impossible. Come back to me. My bad on steroids, right? That I didn't say that. And I've learned that the hard way.

Every time there's a failure and I love the team and generally that's the nature of this business. Like, you know, I put teams before themes all the time. It doesn't work out and I love that team. Like I have to say to them, come back, please. Not because I'm an options junkie, but because I want to be in business with those people.

I still think of like pro-rot as like the original sin against entrepreneurs. You asked me earlier, is there stuff that entrepreneurs don't understand about VCs? If I said to you, Harry, I've got an option to, I don't know, you know, anything, right? Like, why would you give me a free option? Why would you give me a free option?

If I said to you like, you know, for $10 million, like give me an option to buy 10% of 20 VC and I can decide if I want to do it or not. You wouldn't in a million years, right? But you've had to learn that. The amazing thing about entrepreneurs is they give pro rata. It's like the superpower thing for VCs. And I think it is terrible, terrible for entrepreneurs. You're selling options against you.

So standard operating procedure is, you know, later stage VCs look at it and they go, go to the market, test the market, see what the market will bear. That's code for like, I don't want to price you, you know, go out. The market's going, I'm a stalking horse. Like, why would I be a stalking horse for X, Y, Z?

And if you're doing great, if your revenues, if your rule of 20 is like, your rule of 40 is off the charts and you're doing great, amazing. Pro rider doesn't matter. If you're struggling, pro rider is terrible. Why is it terrible if you're struggling? Because you go to the market, you're a stalking horse for XYZ lifetime fund that's on your cap table already.

Everybody's going, I'll price this thing, they'll come in at that price only. It's just very difficult, I think, to get deals done. By the way, then you find, unless you're killing it, So I remember, I think of Coupang and Coupang went to Sequoia and said, look, it's a 4 billion pre. BlackRock will put in a billion. You don't get your pro rata.

When you're doing incredibly well and you're hot as anything, you can do it. When you're not, even the later stage investor goes, I want 20% ownership. And your cap table saying, no, no, no, no, we're doing our pro rata. And then you get into that struggle of, well, I've got to dilute more than I thought I would. So in good and bad, I don't think pro rata is great for entrepreneurs.

I think it's a good signal to investors early if that happens. Like, do you want to be in business with that entrepreneur? It happens to everyone. But I'd rather it happens early to me than later on because it was pretty clear that that individual was totally transactional. Josh Kopperman, there was a time where he would say, I'll give you $2 million uncapped note ahead of the next round.

A lot of this was in his portfolio already where he went like, what's the quadrant that's really killing it? What first round used to do is in the quadrant that they thought was like amazing, they would go to those founders and say, here are literally uncapped checks.

And what we're doing is your initial founders are showing such enthusiasm for your company that that can only be great as a selling point when you do the next round. So that's a different take on it. But I think you can do that. You can do it in the opposite direction where you just show unbridled enthusiasm. And in a way, that's testimonial marketing for the founder.

I would disagree with Nick because I would say prefs are fundamental, saying you should give your investor their money back before you kind of distribute the spoils to everybody. I think that's a fair tenet. I think most entrepreneurs would go, yeah, giving them their money back is fair. I remember in Uber, by the way, we had preferred shares.

Eric was the first investor, was one of the first in the first round on Uber. And I remember one of our LPs saying, you've got Common. And Eric went, no, no, no, they're preferred. And our investor said, no, no, you've got Common. And Eric was like, what are you talking about? Like, they're preferred. He said, well, you're under a stack of so much prefs. You're under like $5 billion of prefs now.

It's equivalent to Common. And so I think there's another way of looking at that, of going, when companies raise so much money, if you're in the very beginning, right, do you really have prefs? You're under that whole pref stack, unless you got kind of pari passu. And I think that's changing in this environment now. How's that changing? Well, I think the terms are getting tougher.

You know, there's so much capital out there, but later stage capital can call the shots a lot. And it depends on how well the company's performing. But when tougher performance companies raise money, the terms are getting tougher.

as well. And the pref stack, like Perry Pesu feels like something of the past. There's a real pref stack coming.

Well, the listed markets change completely. So if you look at SAS multiples in 21, 20, where that was 20X, and then you look at those SAS multiples as five, six X, that trickles down. So later stage investors that invested in private at a billion and expected that rule of 40 to be at least profits and huge growth all the time, and that hasn't materialized.

They're looking at those same companies who are going out for top-up rounds and they're going, why would I top out at the last valuation? Or they're saying, again, go to the market, see what the market will bear. We've seen down rounds in companies that got valued enormously, hugely. Goes back to at any point, you own your own destiny by minding your monthly burn.

I think that DPI could be dead, right? And let me clarify that. But I think a lot of LPs look at 2018 plus funds and they go, where's the DPI? And I think that what happened there was a perfect storm. Our fund three is a 2018 vintage, no DPI yet. And what happened is if you look at fund one, fund two, five, six years in, we were giving DPI.

It wasn't even our biggest hitters, but we were giving through companies like Cruise or Desktop Automation that you've never, Desktop Metal in fund two, right? Through companies like Datalot and InfoScout, we were already giving significant DPI. That's way before we got to Uber, Trade Desk, Coupang. And we haven't given DPI, by the way, at all in companies like SeatGeek, Airtable.

But you look at 2018 plus funds, and the problem is it was this perfect storm. So we were preparing, we were getting involved in companies that had lots of potential. And then 2019, 2020, Zerp comes along, day trading at home over COVID. And 10 on 40, 10 on 40, 20 on 80. Tiger looks at A16Z and goes, you know, they have 10 on 40, we'll do the 20 on 80. SoftBank. And that was the apotheosis.

But at every stage, the money was just going out like crazy. Did we do founders favors? Like, no, no, no. That's the 2018 plus vintage. So LPs at every stage, I think, are looking at this thought for LPs. And they still want to get into good funds. So they're not being as direct with the managers. But they're looking at this and going like, show me the DPI.

Harry, we've got no DPI in fund three yet. We've got an LOI in a vertical SaaS business right now. LOI, we haven't got, this is not there yet. The company's done tens of millions. It's got a good valuation. It's PE, it's all PE. There are still PE players who are now looking at a vertical and going, I like that vertical. And they seem to be quite disruptive in that vertical.

And I can tie them into XYZ company where I'm amalgamating a whole lot of companies and they're the tech play. So we've got PE in this company with us and they're going to ultimately sell to like a bigger PE and they've got a 1X Lickpref and they won't take, they'll literally shunt it into the bigger company because they think their outcome could be better.

That's how M&A and DPI is going to start to happen now.

Yeah. You know, there's the saying, like, one swallow doesn't make a summer. And I kind of like think, no, no, no, no, no, no. One swallow can make a summer. So think about this optimistically. One good IPO and everyone will go, IPO markets are open again. I think pre-election in the US, IPOs are pretty much closed for now.

I think post-election, one or two or three great IPOs, every single, you're going to have like the swarm of JP Morgan and Goldman Sachs bankers coming to tell you like, it is open. It needs to be a magnum. And Instacart won't do it. No. There are tons of four, five, six billion ones. SeatGeek's been IPO ready for two years. But that doesn't do it. No, that doesn't move the needle.

Yeah, the minute that happens, IPO will be open.

LPs are pissed off at the moment. LPs are looking at this asset class right now, I think, and going, where is the DPI? And they did unbelievably well. And some of them are scared to sit it out. And it depends what kind of LP you are. If you're an endowment or you're like a parastatal or something, you've got to be in this asset class. And your allocation can still be tiny.

But I think LPs are looking at this right now and going, where is the DPI?

I think vintage matters so much. I look at our 2020 fund and I go, that's actually gonna be okay. 2018 fund, I go, I'm much more worried about that. We need DPI there. I agree with you. By the way, I think what we've seen is like the more polarization than I've ever seen in my career before.

We've seen this completely binary outcome thing where companies are losing it and companies are doing very well. And to return these seed funds, you can't just have these huge, it's great for PR, it's great for your story to say like I was in XYZ great company, but actually fund returners, you need four or five good companies. If we sell four companies at $250 million each, we can return a fund.

If we sell 10 companies at 100 million each, Like nobody cares about that we can return a fund. And if you don't have that, you're in trouble again.

Look, Harry, I will be infinitely grateful to have been in Uber. My gratitude to Eric knows no boundaries. Can I ask, how many times did Uber return the fund? I mean, Uber is just in itself. Yeah, it's just it's just that's incredible. Tradesk was a bigger outcome for us. Coupang returned the fund and multiple times.

If I look at and then we've got in SeatGeek and Airtable potential fund, you know, fund returners again in fund one. But but Harry, here's the thing is PillPack returned fund two. I am so grateful to Elliot and TJ. PillPack returned fund two. Yeah.

Yeah. I mean, we were in at the beginning of PillPack, right?

Entrepreneurs need to do the math on that as well. Entrepreneurs need to be doing the math on that. It goes back to our point is, if you take 20 million from a billion-dollar fund, do you move the needle for that? What does it take for you to move the needle there?

And if entrepreneurs get a $10 million check from XYZ large-scale fund, and a partner doesn't join the board, that is not a good signal. I think if a partner says, I'm putting in $5 million and I'm joining your board, right? Like everybody goes like, you know, multi-stage firms or a seed. I think there are other ways.

If a partner at a multi-stage firm, billion dollar firm says to Harry, five on 20, and I'm going to join your board, I would say that's a strong signal. That's very tough for me to compete against. They're saying to you, I'm going to spend time here.

But some of them show up. Some of them show up. And I just want to give credit where credit's due. There are people who show up. Then there are people who are very disciplined and say, like, I'm not investing. Again, percentage of the fund and what it takes to return that fund is very indicative of whether you'll get time or not.

Yeah. I think for entrepreneurs and for LPs, size of fund, check in company versus size of fund tells you everything.

They are dialed back. They've dialed back a little. But I think they'll always go, look, we have to have 1% or 2% or 3% in VC. Oh, way more. Or more. So I'm going minimum. Absolutely. Totally. If you look at the Swanson model, VCP, it was more like 30%.

Yeah. Well, so you've seen high net worth family offices pull back even more. I think the vintage just matters a lot. And some of the large LPs will be scared of sitting out vintages. It's kind of like the Excel Fund 7 era. So I sat out and I missed Facebook. So I think sometimes if you think you're as an LP in a great fund, But you got to keep up your track record. You got to be a great fund.

Do you mind LPs bowing out in those cases? We're so small that in some cases we welcome LPs bowing out. So in our last fund, in fund five, we had one fantastic family office. We love and adore them. Say if it's less than 10 million, we're out. And we went, it's less, your allocation's less than 10 million. They're out. Our fund's small. We don't mind.

Harry, we spend a very, very small amount of time on fundraising. If you ask me, I spend truly 95% of my time on finding good companies and supporting good companies. I think I spend 3% of my time on fundraising. But it doesn't mean I don't care about our LPs. I'll talk to our LPs any day of the week, and I love spending time with them, but I'm not out there fundraising.

I'd say the first thing is secondary is so elusive. Like if I think of the secondary we've had over a career, I can count it maybe on two hands. So secondary tends to be in your, and by the way, do you mean companies or do you mean funds?

Yeah. So, you know, it's elusive like in your high flyers. So in your really well-known companies, there's a real secondary market. Try to get secondary in your smaller private company. It's almost impossible. So I found secondary to be very, very difficult. Where we've done secondary, they've been pre-IPO, really high flyers, the secondary markets all over them, and then you fall off a cliff.

It's funny. You think about product market fit as in the early stage only. But if you don't maintain product market fit and you don't maintain growth, it just becomes... Well, most of them never had it. Yeah. Well, the ones who didn't have product market fit, they're being abandoned. At some point, their boards start to abandon them or they just get incredibly frustrated. Yeah.

Some of them, frankly, you know, it's at every single stage, late stage. Some of these companies have IPO'd even, right? And then, you know, you really kind of, you really know what that looks like because the market walks away from you. In some respects, being private then is a luxury, particularly if you've got a lot of money. But if you're burning it fast, it's just a matter of time, Ari.

I do.

I think it's for the entrepreneur, there comes a point where it's like you can have, it goes back to your earlier question, you can have words, you can have as many discussions. If the business is just not working out, do you expect your investors to be around? That comes back to relationship, I think. That comes back to some degree of sentimentality.

And if you're purely commercial about this, the investors are moving on. down the whole ecosystem. Just like the LPs are moving on, they invest in those companies. If I invest in you and we're personally still involved and I'm going like, Harry's going to get this right at some point, maybe it's this abundance of faith. Maybe it's crazy and sentimental.

If I believe in the call option of Harry may just still get this right, maybe I'll stick around.

I have to channel one of our LPs, Tim Blyamtas, who is the CIO of WeatherGage. And I remember around Uber, Coupang, some of the situations where we had shares to distribute, speaking to Tim and saying what we should do. And Tim said, whatever you do, you're going to be wrong. And of course, like the answer to that is you sell prematurely and you didn't capture the upside.

You don't sell and think tanks and you didn't preserve value. And frankly, it gets more complicated than that. Some investors want to give the shares to their foundations and they get pissed off with you for cashing out and giving them cash instead of shares. Some investors say to you, LPs say like, I don't know what to do with that share. Like I've never heard of the trade desk.

Why didn't you make the decision for me? The answer there typically has been with big distributions where large positions, so fund movers or it's half the fund, we distribute and we say it's up to you. With smaller positions, when it IPOs, so desktop metal, for instance, it got to the point where it was like, I don't know, worth $10 million, we sold and we take the cash and we distribute the cash.

So I would say quantum or size versus the fund size is pretty much how we decide around that. Now, what our LPs did with their stakes, so TradeS 25X, Uber 150 billion. I don't even remember what the IPO price was. But Harry, that is, if I look back, I go like never sell a single thing. If you could, and people have to live and people have various desires, but if you could, never sell a share.

And I know we've gone through up and the down cycle, but great companies, companies with real moats, right? Like you want to be in those companies forever. That's when we get into Buffet land, right? And like, we're not good at that.

Well, I think the timing was problematic, right? Clearly. But I think the theory that they had, I'm impressed with them that they thought about that and they executed on it. I think the timing was unfortunate.

One call to John a tiger, like 20 on 80, no problem.

And then the companies still have to be extraordinary, right? So the company's in there and you could argue that they had those. So I think the strategy there was actually sound.

Oh, Harry, this is a subject I can keep you here all day on. But LEACH is Lethargic Economic Extractor Causing Harm. These are these legacy companies. A great example of them is the PBMs, the Pharmacy Benefit Managers. Companies that were very innovative 40 years ago. So a PBM connects the pharmacy to the insurer. You know, 40 years ago or 30 years ago, they were great companies, right?

And the insurance codes and how much you should pay out for your meds, great. And then you have the whole internet and you've still got hundreds of billions of market cap, hundreds of billions adding no value. And the problem is that these incumbents use every trick in the book. Capitalism's so beautifully set up for them.

I mean, I think you still can. I'm going to appeal to the inner McKinsey consultant in you. I know it exists. But if you think of right-wrong consensus, non-consensus, you don't have to only do kind of right non-consensus, but that's where you do do well. And there's lots of ways of still being non-consensual, I think. So if you think of non-consensus, founders...

So they use lobbying, they use lawyers, they use PR to say that the challenges are illegal. That's like job number one. I have had this... time and time again. And in one way I go, it's a badge of glory, right? Like to actually like rouse a leech, like unbelievable you're doing, you know, because the incumbent is now pissed off or worried about you. It's a badge of glory.

But I think going through that, what it takes to take on these leeches is tremendously underestimated.

I'll tell you, SeatGeek, I actually gave testimony to a panel of lawyers for the Department of Justice. Russ D'Souza is the co-founder of SeatGeek. He says to me, come on a sales visit with him. So I go to TD Garden in Boston, which is like Madison Square Garden. We meet with the manager. She's awesome. She says, we turf Ticketmaster in a heartbeat and go with SeatGeek.

We love your ticketing policy. We love the open thing. We can't give up Ticketmaster. I look at her, I go... But hold on, you're like, there's no other venue like you in Boston. This is this covered arena. It's beautiful. It's where all the basketball and ice hockey takes place. When you two comes to town, where else are they going, right? She goes, no, no, no, no, it's not that.

She's like, Live Nation straight out said to us, you two will come to Boston. You'll have one night in Boston instead of three nights. I make like a million or $2 million net profit a night. I literally gave testimony to the Department of Justice telling them exactly what I've just told you. And what you've got is you've got, you take vertical after vertical.

So Live Nation, Ticketmaster, that merger should never have been allowed. But once it's allowed, we will occupy, monopolize that position all day long. Harry, we've got it right now. I had it in my business in terms of taking on the legacy telcos in my startup, like impossible. And we can talk about some of the strategy around that.

Yeah, yeah. We've seen this again in Suno. So Suno is a fund for company. The recording industry has just gone wild against Suno. And often it's exact same playbook. But I think this is a place where VCs can add a ton of value is it's the same playbook. So they're lobbing their ass. The recording industry like first says, you're illegal. Like what you're doing is illegal.

And OpenAI and lots of people have that same legal challenge, although it's slightly different. So the OpenAI challenge is on the output, right, the LLM. Suno, the challenge is on the input. And Suno's going back and saying, we're training on the open internet. That's like Harry learning to play the piano and listening to the Rolling Stones. Is that okay?

But the first thing is legal and you go, what's this actually about? And sometimes the answer is, I don't want you in business. I do not want you in the sector and I'm going to use all my heft. And then sometimes it's about like, I want my pound of flesh. But I do think this is an area where VCs, by any stage VC can add a lot of value. So if you go, look, this is going to happen to you.

Here are, this is the way the game is played. Here are the lobbyists, here are the lawyers, here are the PR consultants, and here's how you're going to have to use your money. I don't know. It's like war. Air, land, sea. And that's how you win. So you take TJ speaking to Mikey Shulman at Suno going, this is the playbook. This is the only way you resolve this.

People who come from less traditional backgrounds, people who come from secondary schools, right? That like mainstream is not going to back. That still very much exists. Frankly, founders who've had, who failed, right? You haven't done well. And like, you know, the mainstream is kind of like, wouldn't touch that. Founders who've been orphaned.

Do these companies inherently need to have more cash then? They do. They do. By the way, you can have all the cash you want, you can have all the strategies you want. The first thing you need is customers that absolutely love and adore you. If you don't have customers that love you, what are you doing this whole thing for?

So if you don't have actual, and I would say this is SeatGeek, PillPack, Suno, Like every one of those companies had customers, their revenues were increasing because, and that's why they're a pen in the ass to the incumbents is the incumbents go, oh my God, like customers are actually going there. Like what's this thing about? And usually they don't have their shit together, right?

So the incumbent is like playing for time or just like going like, I want this to happen when I want this to happen.

And actually, you could say, really, what is Spotify? It's just another distribution mechanism. In some ways, that's just another way of distributing music. The recording industry, the publishers, the owners, they didn't love when CDs disrupted LPs or when tapes happened to CDs. And in a way, all Spotify, it's a Herculean outcome.

But if you look at how much of their revenue the record labels actually take, Suno is something very, very different. This is where AI is fascinating and really interesting. It allows Harry, basically it's the breadth of your creativity. If you're creative, I will give you the most professional tools that the best DJ in the world has. You've got that on your phone now.

This is really, really problematic. Now, is the recording industry going away? Is Spotify going? None of them are going away. In fact, in some way, the biggest threat is if Spotify does this with their incredible distribution, you've really got an interesting competition on your hand. But the incumbents don't go away, but their share of the market can change dramatically.

you know our view is kind of teams versus themes. And even in AI, like the teams have to get some kind of product market fit, some before. I think that can still be done reasonably capital efficiently. I think after that, if you look at the capital required to scale and to distribute, you look at like, Josh Kushner's 1 billion at 100 billion open AI. And I go, would I take that bet or not?

So founders who come back and go, you know, I took money from one of those large funds. They went through the distance. They had to feel the pain, right? They said, I took money from one of those large funds. And man, like I got orphaned. They left me, they come back. So non-consensus founders, non-consensus market still.

All things being equal, I probably would take that bet. If you said to me, you have to, are you for or against? I would say, is Josh in the winner there going to make 2x and maybe much more than that, but bet against the 2x? I wouldn't bet against the 2x. I think his LPs will make 2x on that. But at some point to play in that, that's a whole different world.

If you want to play in the hyperscaler game, wow. you're going to need ridiculous amounts of capital. And by the way, we're seeing like what's a TLM, like tiny language models, which run on the mobile phone, basically make things like scanning or translation very realistic and on your phone, even when you're not connected to the internet.

You need capital for that as well, because the programming overhead of that, the number of engineers you need to create something tiny is huge.

We're off-piste. We're non-consensus. We're contrarian. So when I see those rounds, if I see a round at 5 on 20, that's in our hitting range. When I see those rounds at like 25 on 100, pretty much we're out. We're pretty much out. Again, team versus theme. So there are rare instances where we see someone who's just like, you cannot ignore.

You wake up in the morning, you go, oh my God, like, how can I not be involved? But for the most part, 99% of the time, we're not involved. But you just can't make money in a seed fund, those numbers. I don't see how you can make money.

Yeah. Overall, I admire your discipline. I think rear view mirror on this, you can't build a fund on this. Rear view mirror, you can think about that one that you missed, and they're one or two in a generation. There are these generational companies, or maybe there is one a year. And if you're in that company, awesome. But can you build a fund strategy? I don't think you can. Not at Seed.

Everyone says you gotta be right in non-consensus, but I often think, well, what do you mean by non-consensus? So you've got, if you were really early in new markets, 2009, the best bet, like everybody was like chasing, I don't know, nanotech. Bitcoin had to have been the greatest investment in 2009. 2015, Ethereum. I know everybody is chasing DTC, right? That's where the whole market's going.

Well, if you break the rules and you're right, you've done unbelievably well. By the way, again, if you broke the rules and it was a 10 post and you broke the rules and it was like, you know, 250 million post, like the return to you and your fund is infinitely different. So I think you break the rules and you get right on 250 million post and you get a 10X, That's why I go Josh on a billion.

If he makes two X there and you go like, that is the company. That is the company. Would you bet against OpenAI right now? No way. So it depends on the customer base for OpenAI. If they distribute well and more and more people say, look, ChatGPT, it's on my phone, download that, start using that.

Like, you know, when my wife and my kids start to use it and like go, oh my God, like I'm going here before Google. I'm not sure that Microsoft can think of it only as their plaything. If people are leaving OpenAI and OpenAI is not scaling and not creating more and more revenue, you may be right. But if OpenAI continues to grow the way it is, I don't know that Microsoft can ignore them.

I think in some ways Microsoft are going to have to say, this is terrible because we wish we owned 100% of it, but this is our play. And who knows? The next thing could be a merger between OpenAI and Microsoft. I don't know that they want that. I think there's a lot of regulatory heat around this that you may kind of do well to avoid at the very beginning.

I start now. So I have a range of tools. But if you say to me, where do you start? I start on ChatGPT. I don't go to browser. That's where I start.

I think there's short term and long term. So I think in short term, we're going to be, you know, underwhelmed right now. I think if you look at like the amount of CapEx that's being spent and you look at the actual earnings that will be generated in the short term, there's just no way it makes sense.

And I think, by the way, all the way through the ecosystem. So it's not just the hyperscalers, right? It's like downturn. David said it well, like down to the data centers, down to the steel, down to the chips. I think in the short term, it's going to disappoint. I think in the long term, Harry, every one of these waves, by the way, it reminds me of like self-driving cars.

I remember taking a bet with Eric and he said, self-driving cars in five years. And I said to him, the last 5% is very difficult. And like, we're getting to self-driving cars now. So it takes forever to...

And now it's like Waymo, if you get into a Waymo in California, like your mind is blown. So I think to discount AI in the next 10 years, man, you've got to be crazy. Like I think it's going to have profound, profound changes. The difficulty is it's always Hollywood. There'll be one in a thousand. companies that will be off the charts and there'll be like one in a hundred that's amazing.

And that will launch so much capital. Being involved in that, we're too disciplined to be involved in figuring out which is the one in a hundred. I remember this with Eric, and this is just like the height of humility. An LP at one of our annual dinners leans conspiratorially over the table and says to Eric, how did you know? Talking about Uber, going like, how did you know?

I literally see this in my mind's eye. And Eric looks at them straight in the eye and goes, I didn't know. The company before, it was so easy in that moment to retrofit how smart I... And he said, I had no clue. He said, the company before was just as interesting and the company after, he said, I had the same high hopes. And I think we're not smart enough to figure out the one.

You've got to be around and you've got to hoist a flag and say, I'm interested in these great teams. We don't know how to do this.

You go Ethereum. So new markets, non-consensus, you can still do very well. And then old markets, non-consensus. Harry, do you know one of the best portfolio companies that I'm on the board of right now? Smalls. It's cat food. Dude, it's cat food. Nobody likes cats. Like dogs get all the love. DTC is dead. Nobody will touch DTC. We try to raise money for this business, Smalls, right?

You're reminding me again of Eric, right? Where Eric has this lens. It's so simple. We look at a company and go, can we 10x that? Can we 10x? And if we can't 10x... then we shouldn't invest. And I think that is alignment with the entrepreneur. So much flows from that, like the economics, the size of the deal, the size of the valuation. If we can't, with high conviction, 10x, we shouldn't invest.

That's how we create the alignment. That is Eric's rule entirely.

Small fund, you can do that. Small fund, four companies at 10x, we return the fund. Easily.

I just think it's insanity. I think you market those winners. And again, it's great PR fodder. It's great to attract the investors in the next fund. But I think it's insanity to go. It's like that huge... People don't even use the word unicorn anymore. It's that huge company or bust. I think it's insane. By the way, I also think it's boring.

It doesn't take you in a whole range of fascinating directions where at the beginning you go... Look, these guys are crazy. But could this be a 10x? Yeah, it could be a 10x. I think that just provides this much easier on-ramp into these very interesting situations.

But I think it's the most unfair feature of capitalism, Harry. The most you can lose is all your money. The most you can make is 3,000x, unlimited. If you just look at that, it is such an unfair feature of capitalism. And my LPs maybe go, I don't want to lose money for anyone. But I sometimes think exactly the opposite.

I don't even know what it is now. We have definitely lost companies. And we've lost, you know, there's good losses and there's bad losses. The bad losses are where you look back and you go, my judgment wasn't good.

So if I look back and I go, I love the what, I never really loved the who, I've really learned this the hard way. It's, Koppelman called them, are they like red button or green button entrepreneurs? They call it like 7 p.m. just before you're having dinner with your family, do you take the call?

Well, if it's you and I go like, I love this guy, I'm taking the call and I'll say like, I'll call you back after dinner. But if it's red button, oh, you made a mistake. I look at that and I go, do I want to have lunch or dinner with that entrepreneur? That's a big mistake for me. When I look at it and I go, I fell in love with the what?

Like I fell in love with the what, but I really didn't love the entrepreneur at the beginning. And I wasn't, you know, the chemistry wasn't there. That's a mistake. When I look and I go, look, that was just such an extraordinary entrepreneur. That person was so compelling. I was so energized by that person. And, you know, the context was wrong. We were too early.

Doing 50 million ARR. Try to raise money in December. Nobody would look at us. Nobody would look at us. Because people hate cats, full stop, right? Cats get no love. And everybody then looks at like, this didn't work, farmer's market, whatever, didn't work in dogs. You can be in old markets, right? You can still be non-consensus.

Like we gave it our best shot, but the incumbents just killed us. I never look back at that and go, that was wrong. I look back and I go like that comes, you chop a lot of wood, you're going to get splinters.

I think it's a great test. I'm very impressed. Sometimes if you love the deal and there's heat for the right reasons, to take a smaller amount is doable. So I think the problem with that comment is it ignores the context and the context matters. So in a vacuum, that's a fine comment and I agree with it.

But in the context of there are lots of other people interested, including some collaborators, you may go, I actually want them in this deal with me. And by the way, that is under pressure when people have got funds that are too big and the deals and there's less collaboration. But I think there really are people who you want alongside you because they're smarter and more experienced than you.

If you're having to throttle down a little bit for that, I have no problem with that.

In fact, in an ideal situation when there's insane heat and something that we've gotten earlier, like that's a great moment to take secondary if you can. Sometimes you can't. But if I speak to teams about this all day long, so like. You've got a billion dollar valuation and you're doing 50 million or 40 million revenue. Forget like you're losing money.

This is an awesome time for you to take some money off the table. And in certain situations, we've had the founders say to us, look, there's a little leftover because there's such heat here. There's 20 million to go between, do you want to take some money off? And we have been able to take a third of, but do we get that right all the time?

Well, the answer was, you only know that in the rear view mirror. I won't mention the name of the company. We did take a third off the table. We were right over there, but we've got it wrong as well. We took secondary in some of our biggest names. We shouldn't have sold a share.

Well, Trade Desk, I regret every single share I sold. Uber, I regret every single share I sold. Hindsight is just the most precise science. These are great moat companies. Why would you bet against those?

My rule of thumb is there's a hot big deal going down. Again, this feels anachronistic because this was happening on steroids three, four years ago. I'm seeing less of it. But if you take less, 10% or less off the table, nobody's going to really mind too much.

If things go south later on, then LPs look at it and investors look at it and go like, I wish Harry didn't take $5 or $10 million off the table. But I don't mind if Harry took a million or two million. By the way, I always say the first million dollars, like when the first million dollars makes, it's binary, it makes all the difference. It's partially selfish.

It sounds like I'm so generous in saying, take as much money as you want, but it's actually very self-serving as well. If that founder's going home and worrying about the mortgage and under pressure from their wife or husband or whatever it is or partner, we alleviate that pressure in giving them secondary and encourage them to take secondary.

So I'd say it's self-serving for the investors as well. Next thing you've taken some secondary, the mortgage or whatever the issue is. And of course, if you're like in your early 20s and you don't have these problems, the context matters.

Yeah. We had this. The biggest sin of the last era has been the huge amounts of capital. These like boatloads of capital. I'm going to meet later with Sam Franklin from Otter. Great founder. Lovely business. And I remember. The other investors were talking about 10 on 40, right? Like one call to John a tiger, right? 20 on 80, no problem.

And Sam at the moment thought I was like the superstar investor of all times. He was like a seed investor across the, biggest name investors involved there. And like in a second did that. In retrospect, what a sin, what a sin.

When the whole swarm, when the whole herd moves in a certain direction, great. Like, seed is not dead. And so then you see the pricing adjust for those deals, correct? You do. I mean, you've still got to, like, market to market. You know, I think if you're going to be like, I want a 4 million pre, you're like totally anachronistic.

What a sin even for me to like, and I was caught up in the moment, but to... So he called me on that deal.

Yeah. Oh, man. Those guys were just like a casino, right? Like it was insane. John was doing, I kid you not, we did a 20 on 80, two weeks. We did one the one week and we did one another week. And Otto was one of them. But in retrospect, you go... How do those founders know what to do with that money?

And they have that money and they're going, no one would have like expanded in the US if you didn't have that money. But you go and you open an office in the US and you go, before your model's working beautifully in the UK, you're trying it over there. So the sin, like the last era, like the boatloads of capital, like that's the sin of the era.

I think it's the haves and have-nots. So I think if you have AI, right, like it's changing. I think, again, if you're a vertical SaaS company doing $50 million, right, the multiples or the listed multiples are constraining you. You're not getting a 20x multiple, dude, because that listed company that I own shares in is at 6x, 7x. That's the multiple.

And the fascinating thing there is like, it's like goes back to the Andreessen, you know, like Andreessen said, software is eating the world. Like I have this, like the haves and the have nots around data. And you look at some of these vertical SaaS companies or horizontal SaaS companies, the truckloads of data they have, it's theirs to lose.

So Mark Benioff, Salesforce, you write that off at your peril because the amount of data they have, they throw in these AI tools, they're doing their own stuff, right? Their opportunity is enormous. And I've seen this in some of our vertical SaaS plays. If we give the customers enriched data, if we don't enrich the data, we're out of business.

But we enrich the data we have, and you look back, you're like, whose opportunity actually is this in terms of AI? If you've got data and you drop the ball, only blame yourself.

I think there is a market and there's a market clearing price and you pay that price. But these are not AI prices. This is not AI deal where I go 5 on 20, that guy's unbelievable. Next thing, you know, I'm on a Zoom and he's in San Francisco in a hotel room and I just come off that Zoom and I say to my associate, I say, we're dead. There's going to be 100 million pre. This is real, by the way.

I think short-term defensive. Short-term defensive. If you enrich that and you're the one to do it and you retain your customers and because of the enrichment, you increase your revenues and you increase your customer base. Look at the great companies. Tesla, I don't know. Look at Netscape, right? At some point, freemium. It's like freemium on steroids.

I think the right play is defensive to start. And then once you retain those customers and you've enriched the data, I think there's a lot you can do.

I don't agree with that. I think some of the tools are actually very commoditized. So I think that the vertical SaaS or horizontal SaaS or data owners will be able to access the underlying tools reasonably cheaply at some point.

And you may disagree with that, but I think if you look at some of the open source software around this, it's going to become more and more commoditized, the underlying tools. So you could go and say, well, why can't every single company do that? I don't think you can, but I think there are going to be software providers that enrich their tool set that are going to do unbelievably well.

Yeah. You remind me a little bit of when I started our ISP with my co-founders and we went to like the biggest banks and we offered them internet service and hosting and all sorts of like e-commerce options. And then we went to like the national kind of railway owner and they said, look, I've got a network. I own a network. I've got fiber on every single railway.

I own a network that like just dwarfs you, right? I can do all of this, like what I need you for. And I remember like, it was like, okay, like walk out, right? Six months later, they'd done nothing. You know, a year later, they're done. Two years later, the answer is there'll be the short-term thing where again, everybody goes like, I don't need you.

Like, is there a business in terms of smart software solutions? And yeah, that's all over the place still.

Too kind.

Well, I think you have to have that economic alignment to start off with. So I don't think you should ever take a board seat where you own too small a percentage or the size of that potential outcome vis-a-vis your fund is too small. So I really think you have to have that economic alignment because it means every time you sit down, it's like us.

Look, if you kick off and you own on a board less than 15% of that company, I think it's problematic. Certainly in terms of our fund structure, the capital and the cash is infinite in a way, or has been in this era. Your time is not infinite. And at some point, you're gonna think very seriously about your time. To be patient, you need that economic alignment with the founder.

So if the founder owns 95% and you own 5%, problematic. Every time you sit down, you go like, I'm working for this guy. de facto. If there is more alignment in terms of ownership, then I think it works better. Harry, if things are going like ballistically, then it doesn't matter. So that always breaks the rules. I'm talking about 99% of the time. You've got to sit down and go, it's our company.

What do you do in that scenario? I mean, we have to bow out. In that situation, I broke every rule under the sun and we put in a 100K check, right? I broke my rules, but we don't do that. Why would you do a 100K check then? Because I like the individual so much.

We're in this together.

We don't think about dilution much. We really don't. Our MO has been we dilute alongside the founder. As a seed stage fund, we get involved at the beginning and it's been a strategy and we don't think about dilution. We think about time and we love the alignment of coming in very early and hopefully being economically aligned with the founder.

And then it's the exact same strategy, exact same thinking is we'll dilute alongside the founder. By the way, I can't afford in my fund If I've done my job right and you are, you know, raising your next set of capital at 3x or 4x, I just can't afford to actually maintain my percentage ownership.

In a career, I've been through one bankruptcy, one bankruptcy. So in hundreds of investments, I've had one bankruptcy. And Micah Rosenblum, my partner's father, Lou Rosenblum, was one of the best bank, he's out of Chicago, one of the best bankruptcy lawyers. And I remember thinking, oh my God, I do not know what has hit me here. This is like a freight train.

There was an enormous fraud in the company. The CFO committed suicide. The CEO is still in jail. I mean, like huge story, right? Like they were literally fraudulently putting KPMG on fraudulent financials. I remember that moment when Micah said to me, Lou's going to take you under his wing. I'd been paid out a couple of million dollars.

The first thing Lou said to me is, you're going to give back every last cent. You're going to be the first person who gives back all the money and all the other investors are going to hate you for it. But that's the first thing you're going to do. So I had taken secondary. It was four XR investment on the secondary, gave every cent back. But here's the thing.

The degree to which I felt taken care of by this guy who was an expert, I think sometimes... And I think he felt great that here was this helpless capitalist hit by a freight train in terms of this bankruptcy. If we can do that once in a while, the joy of that, right? Sometimes... This is about financial returns, and it sounds like completely ridiculous to say it's not.

But sometimes the gift of that, right, and the chemistry that that unlocks, you know, we'll do every company together after that.

I think they could come out. Harry, I think the era gave rise to that, unfortunately.

I was thinking about this. I actually just wrote down matchmaker here. Like the small fund versus the big fund. And the concept of like the big fund, the lifetime investor fund really has no incentive to matchmake for you. They have this incentive.

Okay. So when you're a small fund and you're not going to invest round after round, right? Like whole MO is make introductions all day long. If you think of like a lot of what I'm doing is making introductions to other funds. I'm like a glorified matchmaker.

If you're my partner, I can't tell you what you would throw at me. Because my partners look at that and they go, that was utter insanity and stupidity.

So some of the thought over there was, what's the difference between, and maybe it's stage specific funding, but like what I get from you, what I get from Sequoia. Well, Sequoia will never ever send you, will never matchmake for you. Sequoia will, if you take your check from Andreessen, Sequoia, Axel, you name them. They will never, they have no incentive to matchmake.

They have no incentive to take you to another fund at some point because at every stage, right, they either want their pro rata and they want their pro rata. This is the difference between kind of totally financial investors. And I'd say a lot of the ecosystem has become that. It's like, I have my pro rata. Let me wait for you and go to the market, whatever.

And if you're hot, I'll invest at the market clearing price. And if you're not hot, I'll get a deal. And otherwise, I'll just won't invest at all. Or orphan you. Right? So it's basically like call option time all day long. Whereas if you look at us, if you look at seed funds, a whole incentive is to get you funded.

Harry, I promise you, I imagine a lot of your time is like, oh, think about that fund. Think about that fund. Think about that partner. To the point that over 15 years, we've operationalized this. Like our software, I don't care if you use Monday, Airtable, we use Airtable.

But our Airtable and the number of people in our organization who are just like full-time dedicated to this, to like finding you not to the right fund, but find you to the right partner, right? All we do, like I'm like a glorified matchmaker on steroids.

Totally. So you need the science and you need the art. You need the science of going, I'll take you to the right partner. Because of course, hit rate with the wrong partners and happens all day long is like, Harry's busy, you're on a deal, you're not that particularly interested in that vertical or whatever, done, finished. But there's the art as well, right? And ideally, this is sales, right?

This is testimonial sales. I'm saying Harry is awesome. Harry is awesome. Like it's not Harry going, oh, I'm awesome, right? It's me saying Harry's awesome. And by the way, I have to believe that for that to be really authentic.

So that's why like our testimonial sales with our better companies, with our companies that are performing are better than, you know, when we're trying to kind of sell a company that's not performing. So it comes down to performance.

It depends on the context again. It depends on how hot the deal is. I think you're describing a hot deal in a tougher time, like halitosis is better than no breath at all. So, you know, like if you're doing your buddy a favor and that person's putting $5 million into my deal and I have struggled to fundraise, like bring it on.

I've never heard that statement before. Do you do market sizing? We do. I've seen a bunch of times where funders will look at TAM and they'll walk away from a deal and they'll say because the TAM wasn't big enough. One of my favorite examples of this is MediaRadar. I was in it with Bain Capital, pre-founder collective.

It's one of the biggest vertical SaaS plays, if not the biggest in the world in media now. How much is it worth? It's worth billions today. It's another company I wish I'd stayed in. Todd Kreiselman. Unbelievable business. So we showed it to, I don't know, Bain, Flybridge, Bessemer. I remember this like it was yesterday. The Bessemer team did all the market sizing.

They went newspapers and magazines. That's dying, right? The damn shit. Couldn't really argue with them. Like just kept going. I'd looked at newspapers and magazines as the angel investor and gone, you know, so that's a couple of hundred million dollars, not billions of dollars. Okay, next thing media radar goes into Facebook, Google, everything online needs them.

Next thing they're going to Netflix, Apple, Amazon, everything that is being screened needs them. And the TAM just was like infinite. So I've seen the mistake made where you really undersize the TAM. It sounds very seductive and logical in the moment. But like, do I think of TAM? TAM matters.

there's a time factor here. You know, people say like, what's the percentage ownership you have to have? And I think in terms of time, there are situations where you can write a smaller check. And I think we've got to be fair to founders here as well.

I think all things being equal in the rear view mirror, you look at like the Tradesk versus Olo and you go, the Tradesk is like, it's this infinite TAM, right? You could literally be Google, Facebook and Tradesk. And then you look at Olo and you go, okay, vertical SaaS restaurants, is that TAM limited? Probably all things being equal, but there you go.

Yeah. You know, Noah raised $600 million for 10% dilution when he IPO'd. That's fine.

I used to think that PE firms were like the enemy of the seed stage. And I've changed my mind on that. We've got some PE firms in two vertical SaaS companies that I'm involved in. Their rigor, their financial discipline, and the help they've given to those companies has been great for the entire cap table. So PE can be very, very valuable in portfolio companies.

Totally seeing that.

I find this easier to answer at the company level. So if I think of like applied AI, and I think of some of those companies, Micah Rosenblum on Vokada comes to mind. That is applied AI to camera. Josh Wolfe, who did Anduril out of Lux, that's like applied to drones. Again, if I look at Josh Kushner, billion on a hundred billion, I wouldn't bet against that. So my answer is company-based.

Best board member you sit on a board with, and why them? Jake Saper from Emergence on Regal. has been just an incredible augmentation, just been a fantastic partner to have on the company. So Jake sourced Zoom for emergence, deserves a lot of that credit, reversed the track on this portfolio company and every bit of hiring, every bit of advice, it's literally like he can't do enough for a company.

You know, if I'm writing a 100K check, I've got to be very open to that founder and saying, look, like this is the other side of the spectrum to me being on your board. But if I'm on your board, I can't write a 100K check. I can't write a 500K check anymore because you need my time and you need my interest. And this goes back to alignment.

At a later stage, he chooses very carefully, he doesn't do that much. And when he does, like through thick and thin, this guy just gets involved.

It's a long, long journey. And even post IPO, hang on. When you think your company has a real moat and is very difficult to compete with, don't sell too soon.

Our biggest loss was probably Pinterest. There'd been so many. So what is my biggest loss? I met Marty Ardlin, who was starting Running Tide. He was a mechanical engineer, first individual in his family who'd gone to college. and just one of the most thoughtful guys in applied ocean that I've ever come across. Third generation lobster fisherman. And I was just very, very seduced by this.