Jeff Wang
speaker
190 appearances
1 recordings
1 series
first heard Oct 2024
last heard Oct 2024
Jeff Wang’s voice in public audio — every appearance, attributed to the second.
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Appearances
I'm not sure if continuation funds are a permanent or a cyclical feature. Right now, the IPO markets have not been open. We have not gotten a lot of liquidity. I don't know what it looks like when the IPO markets do reopen. And I mean, right now, we are still well, well below, obviously, the 2020, 2021 levels for the IPO markets. We're also well below the pre-2020, you know, 2021 levels, right?
I mean, I think these continuation funds exist. Some of them exist today because there's no liquidity. And so it's effectively a way to get some of these LPs liquidity at a time where the IPO markets are shut. I do expect the IPO markets to open, say, back half of this year into next year. We'll see. But, you know, we have a number of companies on file.
Sebastian, as you know, has been very vocal about going public. I think there will be a number of other companies that test the public markets. And one of the things that we've seen over the last couple of years is that it took a couple of years for these companies to write the ship in terms of the financial profile. Right. And now a lot of these companies, I think, are ready.
The days of rule 40, you're going out at 60, negative 20. Those are gone. You have to be a 30 and 10, 40 and zero kind of growing into a nice profitability curve in order to get public. And it took a couple years for the companies to get there.
It also took a couple years, I think, for a lot of these companies to get to a level of predictability of their revenue that the public markets expect, right? So if you're coming off COVID, you have all these just weird headwinds, tailwinds to your business that make it really hard to project. And so now I think We've rolled forward a couple of years. The markets are more stable.
These companies are more IPO ready. And so I do think the IPO market will open as we look into next year.
I think that's kind of the deal that you made with investors and employees.
I think there are a couple of companies that can do that, but do you think the $5 billion SaaS company that's a good, it's not maybe the best company in the world can really do that? No. Right. So like, I think there may be a certain set of companies out there that can pull off what you're talking about, but for 99% of the companies out there, I think that's really difficult.
I think it's actually pretty natural and organic for us because we're at about a third of the portfolio that is private. That is probably more than I want to be steady state. And that's a function of some of these companies just not going public in the timeframe that we thought they would. What would you like to be steady state?
closer to 20 to 25% would be more comfortable because then that gives us an opportunity to add. If we are focused primarily on the public markets, let's say if we had 50% of the portfolio private, that would feel too illiquid to me. So 20 to 25% feels like a pretty comfortable level.
We have a pretty concentrated portfolio, so about 15 to 20 longs. I want to make sure that the top longs can really move the portfolio in a major way. As I mentioned, I think the power law still exists in the public markets, obviously to a lesser extent than the private markets, but we want to have the top side of the portfolio be pretty chunky. About 15 to 20 longs, about top five or about
35, 40% of the portfolio. So it's pretty meaningful. And then what we'd like to do is to, you know, have the shorts just essentially fall out of that. Again, it's really how much more conviction do we want to express on our longs, albeit on the other side, we're not necessarily trying to solve for the short sign in a target, a particular gross or net.
So it's a really interesting question. And this is a visualization that I like to give to everyone who joins our team. You have to be a pirate interpreting a treasure map. We need to sail to the right island. And if we get there, great. If we get there first, great. There is a massive amount of buried treasure. But if we're the second ship there, we're also doing pretty well.
Even the third ship is going to do pretty well. So if we get AI right, there will be a lot of good ships. NVIDIA is clearly the best ship today, but a lot of others are doing well also. Now, if we don't sail to the right island, it doesn't really matter which ship you picked. Those are just not good investments.
So yes, we want to pick the best company, but we definitely better pick the right theme. And so for us, 70% of our research process is actually upfront on the theme and only 30% on the actual company. And so the example that you gave there, I think we'd be positive both Shopify and Amazon. I don't know which is the first ship to get there, but we are positive overall on that theme.
You know, what we want to avoid is we want to avoid some of these themes that I don't think have legs where companies, whether or not you do a lot of great company analysis, it just doesn't matter.
One, we spent so much time making sure the theme is actually working. And then two, we have pretty good insight from seeing what's happening at Sequoia. Doug likes to say, you got to look at what wiggles, right? And you got to go hit what wiggles. What does that mean? So being able to see what wiggles be a company or theme early, I think is really important.
And then being able to see is that wiggle becoming a tremor? Is it becoming an earthquake? Is it getting to be more than a wiggle? But if you don't see the wiggle, you could do great analysis. But if you never see the wiggle, you're not doing any analysis on anything. What did you not see that you should have seen?
One of my bigger regrets and one of our bigger losers is in a company called Twilio. Twilio initially was a very good investment for us and actually ended up being a decent investment overall. It could have been a legendary investment. We held on for too long. And as competition started to eat away at the business, and we actually saw some signs of it.
So gross margin was off a few points here or there, a couple questionable acquisitions, key executive departures. And I think each one of those things you can explain in a vacuum, right? You can pro forma analysis for this gross margin, this specific quarter, or you can say this executive left for a really good opportunity.
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