Why Traditional VC is Broken: How VCs Learned Nothing from 2021

Absolutely. Thanks for having me on. Nigel’s a legend.

He’s also the hardest working man, and I joked to him the first time I met him. I’m like, well, how’s retirement? And then he showed me his Outlook calendar, and I’m like, I think you work more now than you did when you ran Capital One. But and by the way, never go on a bicycle ride with him.

What I would tell you is my time at Bessemer was very formative for why everything we do here at Lead Edge. When I joined Bessemer, 2005, Bessemer is this legendary early stage venture fund that is very Shark Tank esque. And what I mean by that is every year, you know, a thousand entrepreneurs would walk in the door, and at the time they had five partners and it was very like Shark Tank esque. They were wondering why Insight was finding these $15,000,000 revenue companies growing fast that had never raised money, and they were like personal friends with the guys that ran, know, Jeff and Devin, the guys at Insight.

And all that Insight was doing was replicating what Summit and TA did, which was hire 22 to 24 year old knuckleheads, which my now partner Brian and I were, and pound the phones calling companies all day long. You realize if the company calls you back, the company sucks. It’s the CEO you talk to every two days for a month. And you know how you know what a good company is, over two years talk to 10,000 bad companies. When we got there, a week into the job, they’re like, okay, next Monday, you’re gonna come and present your best companies.

We got there, we’re like, oh, we found this great company. It’s 2,000,000 revenue. It’s gonna be the next Google. They’re like, no, it’s not. This company sucks. Find us companies that meet like 10,000,000 of revenue. And then the next week you’d find a company that meets 12,000,000 of revenue, but grows 10% a year. And they’re like, no, no. Find us companies that grow for them, it’s like 50% a year. And then you find a company, but it has 20,000,000 of revenue, grows 40% a year, but, you know, has 30% gross margins.

And they’re like, no, no, find this business with, like, 70% gross margins. And they over, like, a period of a six week time or eight week time built these, like, five criteria. And they basically said, on Mondays when we do our pipeline meetings, we want you to never bring a company that meets less than three criteria. If it meets five, you better already have the meeting set up the next meeting and start the pipeline meeting with, I spoke to company a b c. It meets x number of criteria.

Here’s what it does. And so it just like, it was a very rigid framework. In a world where, like, you can call companies all day long and it’s like an unlimited universe, like, stay, like, very rigid. And so and we took that framework. We expanded it to six. Now it’s the Lead Edge eight, and it defines everything we do.

Look. We speak to 10,000 companies a year. We have a team of 20, 22 to 24 year olds that are speaking to 10,000 companies a year. If I say I need to meet all eight of these criteria, it’s about a 1% yield, which is, you know, 10,000 companies, a 100 meet all eight criteria, and to do five to seven deals a year, that’s like too small of a pond deficient. You you wouldn’t end up doing anything. So what we find is if you say I need to meet five or more of these criteria, it’s just subjective.

Like, you’re 23 years old, was the company 4,000,000 of revenue or 18,000,000 of revenue? You find about 10%. And this is after taking to probably 70,000 companies over the last decade. So about a 10% yield, you get five or more criteria. We do diligence, that gets you 10,000 to a thousand. You do diligence on a 150 to a 175 of them. How do you go from a thousand to one fifty to one seventy five? Most aren’t looking to do anything. Because you’re calling them, they’re not calling you.

And by the way, the good ones don’t call you back. The good ones, you call every two days for a month. That one fifty to one seventy five leads you to do five to seven deals a year. In terms of the AI response, so like, we find the companies, 70% of what the stuff we invest in, the guys at Spark have never looked at, they’ve never heard of. Because they they’re investing mainly in the coasts. Less than 10% of our companies are in the Bay Area.

Not because we don’t like Bay Area entrepreneurs. We love Bay Area entrepreneurs. They’re gonna build some of the biggest companies in the planet Earth. I just think it’s very hard to make money at a 100 times revenues, invest in. And also, you look at our companies, less than 10% are in the Bay Area. 70% of the time, we’re the first institutional investor. Now AI and, you know, disrupt all this stuff. So when Deep Seek was announced, which I find quite funny that a lot of people that invest in the infrastructure of AI didn’t even know about it.

I think investing in AI infrastructure today is like investing in websites in 1997. You and I could have taken $50,000,000, bought some microsystem servers, and built a website. Today, for £10 a month, we can build a website that’s 50 times better than that. Same thing’s gonna happen. Prices are gonna plummet. But the stock market actually acted pretty rationally that day. What happened? Nvidia stock fell, the software stocks went up. So why do I mention that? We’re investors in a company in Toronto that we own the business called Gravity, world’s most boring company.

It makes budget planning software for small local governments. If you are the water district of Atherton, if you are the Palo Alto police department, you need to post a budget online. It helps you plan the budget, post it online. Roughly around a ten million hour business, grows very nicely, had never raised capital. Before we came in, had never had a salesperson. We came in, brought our new CEO, brought on a CRO, partnered with a guy who had built a $200,000,000 GovTech business. My point is here on the AI stuff.

They have 10 software engineers. They can use companies like Cursor, Copilot to help their 10 engineers become like 30 or 40 engineers. And you’re gonna see this at Salesforce. You’re gonna see this at Workday. The incumbents usually win. Since the iPhone came out in 2007, 2000 whatever, ’6, whatever it was, there’s only been three companies built that did not exist before that were a $100,000,000,000 companies. ByteDance, Pinduoduo, and Uber. Who won? Facebook, Google, Microsoft. Like, incumbency wins. It’s customer distribution. The idea of a single person AI company, I I think is like comical at best.

It’s like, these software companies are not like as you know, like, you we run an awesome venture fund. Like, a lot of the software stuff isn’t that it’s not like that complicated. It’s not like rocket science tech that people are solving. It’s sales. It’s distribution. It’s GTM.

It’s

that kind of stuff. If I had a dollar for every time somebody had said to me like, oh, Microsoft’s just gonna do this, like, I would have never invested in any software companies and nor would anybody else have. But the great thing is is it’s like people ask us, they’re like, well, you must run out of companies to call. Every Monday morning, new companies come in that we’ve never heard of. This is like software. I mean, when Josh Krishna said it ten years ago that software was hitting the world, I was like, oh, I just kinda like, this sounds crazy.

But he’s right. Like it’s changing every sector and every industry. And I believe that when you look at, like, technological trends over the last fifty years, people always overestimate it over the near term, and they always underestimate it in the long term. AI is gonna completely revolutionize the world over the next ten to twenty years. But it’s not gonna be because we create a new call center software company. There’s gonna be some type of company that AI is enabling that nobody else could do something before, and that changes it.

And it’s gonna be guys like you or Benchmark or Sequoia that find that thing at the very early stage. And my guess is it is not just some infrastructure software company that, like, the world knows about right now.

We think we bought the business for, like, $50,000,000 or something like that. We own the company. Like, we bought the business for $50,000,000. By way, it grows, like, 60% a year. Now by the way, it will never be an IPO. In a million years, it will never be an IPO. We wanna build a business. So I’ll give you an example. We just sold a company. There was a company called Safe Send that makes it’s like a verticalized version of DocuSign for tax returns. There’s a bunch of reasons DocuSign’s not very good at it.

It also is like the tax organizer that people get that like, you know, did you get married this year? Did you have kids? Did you move? And all this sort of things. When we invested, when we bought, we bought about 60% of the company in 2021. My partner Nimay did the deal and my partner Brian. That business, we met through cold calling. It was based in Ann Arbor, Michigan. It was a bootstrap business that had never raised capital, had been around for six or seven years, and it was COVID enabled.

And what do I mean by that? It turns out before COVID, a bunch of people like used to literally go to their accountant’s office and like sign their tax returns. Sounds totally insane. But after COVID, like, couldn’t do during COVID, you couldn’t do that, so it was all electronic. But then it turns out it stayed COVID enabled, unlike a virtual events company like a Hopin, where like people during COVID couldn’t go to events, they went to virtual events. It turns out that people like to go to Vegas and drink beer and get away from their husbands and wives and children.

And so like, everything went back to Vegas in these events. You’d never have gotten a DocuSign and said, oh, I’m sorry, please send me a paper copy. It’s like the reverse. So this thing was cool. So we invested in that business. It was about 13 of ARR. It was growing about 60% a year. It was a controlled deal, so we were buying 60% of the company. And we bought 60% for about 90 of equity and 20 of debt. So what is that? I don’t know. A $130,140,000,000 valuation?

In three and a half years, we built the business to about 47,000,000 of revenue and very nicely profitable, and we sold it to Thompson Reuters, you know, for a great return. That was a business that if you had read our Investive MO, the word IPO would not have come up in the thing. We were like, listen, we’ll grow it from $1,314,000,000 to $60.70, 80,000,000, and we’ll sell it to a mid market private equity fund because it’s got 90 plus percent gross dollar retention, or we’ll sell it to a strategic.

If that deal so we pay, you know, at a $1.30, $1.40 for it, middle of twenty one, insanity. Right? Had that deal been backed by Benchmark, like, Peter Fent, no one of those guys, backed to Benchmark, doing a minority deal based in Silicon Valley, it would have been $500,000,000.

And so, like, let’s go find stuff. We don’t have to play the same game. Let’s go find the boring stuff that’s not gonna be the next there’s 0% chance it’s the next snowflake. It’s the next data dog. Let’s go find stuff that we can just build, like, you know, invest when they’re 10 to $20,000,000 revenue software businesses and exit them when they’re 60 to $80,000,000 software businesses.

That’s totally fine. We have these eight criteria. Some of them are like generational companies. Late last year, we were buying ByteDance. We’re paying five times earnings for it. It grows like 25, 30% a year. It’s just, do you meet the framework of what we do? We own a business called Exegrid that was started in 2002. We own about a third of the company. It last raised money fifteen years ago. We bought out Lehman Brothers. It’s a $165,170,000,000 dollar revenue business that competes with HP and Dell and, like, storage devices.

It’s a 70% gross margin business. It did 26,000,000 of EBITDA last year. We bought it for we bought our stake at a $130,000,000 valuation. Great. I’m gonna build it into a $250,000,000 revenue business doing 70 of EBITDA, and I’m gonna sell it for 10 times EBITDA and make four times that money. No. It is not generational game defining, but it is tech investing making really good return making, like, you know, good returns.

dead. So fundamental problem that happened, we saw this when we were at Bessemer Coal Co and Companies. Back then, you would basically exit a company through an IPO or a strategic. Those are like the two options on how you could get out of a company. And if the strategic didn’t show up, and if you got it, it’s like $50.60, 70,000,000 revenue that stopped growing, you’d be, well, then what the heck do I do? And in 2010, 2008 timeframe, mid market private equity firms like Nordic Partners, GTCR, Charles Bank, they would buy industrial companies, manufacturing companies, services companies, some bought consumer, some bought healthcare, none bought software.

And that was just as like the Vistas, Tomas, and Francisco’s were like just starting to start. Fast forward today, now have these big software private equity firms that have gotten very big. And you also have mid market private equity funds. Where, by the way, these portfolios, they still buy industrial companies, manufacturing companies. Their portfolios grow at like GDP plus two. Right? So if I bring up a company growing 15% a year, that’s like that’s like really fast for them. And now it’s not a 100%, but 60% of these mid market private equity firms also buy software companies.

Like, they have a sleeve to do software. So now if you, like, look at all of our exits, a third of our exits have actually come come to private equity. In those companies, by the way, I’ve got some in our portfolio. Don’t worry. We did some real stupid stuff in twenty twenty two, twenty twenty, and ’21 as everybody else did as well. No. No. No. Exactly. None. You’ll have companies that have 130,000,000 of revenue that have 18% growth. They don’t burn that much money, but they have $130,000,000 of cash.

These companies effectively went public. In twenty fifteen, seventeen, when companies went public, they’d raise a 100 to 300,000,000. Okay, forget the Ubers and Facebooks, stuff like that, but most companies raise a 100 to $300,000,000. In twenty twenty twenty one, they would go raise a 100 to $300,000,000. These companies completed IPOs. You have to get them to I mean, like, we’ve just like drilled in a couple of our companies that have We have this. It’s like, you have to get to rule of 40 because that’s the only way you’re getting out.

A strategic’s not gonna just come and buy you. This company’s never gonna go public. You need to get it to rule of 40 to sell it to a private equity fund. Like, and by the way, I’m sorry the last round was $3,000,000,000 You’re 120,000,000 of revenue growing 18% a year. If we can get it to rule of 40, you might be worth five times revenues. You can try to pivot and pivot all you want. There are so many VCs that just like to, like, waste their time on company boards.

We do not understand it. We’re just like, listen. Yes. We have a pref, so we would get our one x. But if you told me today I could take a point seven x just to get out of it, I would happily cut you. I would I would happily do it. There are hundreds of these companies out The problem with the IPO market, the IPO market is actually totally fine. If you look at IPO performance of companies, they’ve actually done pretty well versus opening day prices. Look at Reddits.

Look at some of these other things. The the issue is, like, the good companies, the Grafana Labs, the Databricks, like, they have so much money. They have so much cash. They don’t the stripes. They don’t need to go public. And then you have this whole other sector company that can’t go public.

And that’s really bad for the venture capital industry and LPs.

That is, like, very do you think guys like Don Valentin or Mike Moritz or this John Doar, they would be, like, putting guns to these founders’ heads today and be like, you need to go public. Don’t be afraid of the 27 year old h b Harvard Business School analyst. You’ll be fine. We actually think it makes companies better. Like, I I get how the size of the trade. How does

Look, there’s there’s two sides of it. Look, nobody says you, by the way, have to be a public company. Chanel, Tetra Pak, Amway, there are big private company, Coke Industries. You do not have to be a public company. But I do think if you take venture capital money from people, you should be very clear on. Look. I think the Stripe guy I don’t know him, but, like, the Stripe guy, I think very early on were saying, like, we don’t wanna be a public company. So, like, if you invest in us, just know that we very much want to be public.

I think if you’re very open and honest with the investors, I think that’s totally fine. There are two different ways. Obviously, the quarterly guide the quarterly cadence of public companies is a little bit nonsense nonsensical. However, I think if you go ask a lot of, like, Marc Benioff or, like, know, the Google guys, did being a public company make them more disciplined? Did it like make them like prioritize one thing over another thing? They probably would say like, but it was a necessary evil. They had investors that wanted liquidity that they needed that they needed to to get out.

I do think like a company like Zoom went public because public companies they compete with were constantly like, well, Zoom, it’s a tiny business. Like, why do you want you know, like, they use it as a negative where you can be like, okay, go look at our balance sheet. But, like, I do think the quarterly cadence is a little bit ridiculous, but there are some companies also that just don’t care care as much about it and their stocks are gonna be more volatile. Like, we have no problem with companies that go public and wanna have dual class listed stock.

I’ve got one in TransferWise over here.

I believe it depends what you tell your LPs your mandate is. I believe most private market investors are very good company pickers, but like good company and good investment are two very fundamentally different things because of valuation. And when you’re a public company, can know on and off. If you are a early stage investor, when your company goes public, you should get off the board and sell the company. Because I suspect that’s what you’ve told most of your that you do. You spend all your time picking small companies, grow them into big companies, and they go public.

Just get off and call it a day. Look, we are relentless in our focus of trying to make like two to five X in three to seven years. And when we do it, just like move on to the next company. No, again, our business is not try like the early stage venture business is a lot of like trying to get 100 baggers and but you’re have a bunch of zeros as a result. That’s just not our business. And we just feel like if you could cut the downside scenarios of the zeros, you can generate like really good returns.

Like, look, people have always credited us with like very high, like DPIs. And it’s just a relentless focus on selling. When I sell, I’ll always either sell too early or too late. Have I regretted selling too early? Yes. I’ve never regret like, too late? Like, I I just think pigs get slaughtered at the end of the day.

We have a disposition committee at Lead Edge, and we meet like What

We look at the portfolio. By way, what’s an investment committee? An investment committee is you you sit and, you know, talk about companies that you wanna invest in. You like analyze, should I invest in this company? Well, a disposition committee is the exact same thing, just in reverse. I’m already an investor in this company. How should we think about getting out of the company? Oh, there’s secondary. Can we find secondary? Is there an early investor that might wanna buy more of our stake? Is there a crossover hedge fund that would wanna buy our stake?

Why might we wanna sell? Because the company, we think the market size could be too small. We’ve lost confident in the we’ve lost confidence in the management team. There could be a whole set of reasons. But it’s like, we think there’s a lot of really good funds that are really good at investing. We think there’s a lot of people that are not very good at selling. By the way, I might blame LPs for this just as much as GPs. The LPs have to, like, hold the GPs accountable.

One of my longtime LPs refers to some p like, some VCs as pigs at the trough. It’s like, I ate the food, and I I like spent all the money. Now give me more money to spend again. And like, they couldn’t give you the third or fourth time if you haven’t given a lot of the money back from the first or second time. There’s just a lot of like think a lot of people in this industry are very complacent. All of us as GPs need to do a better job getting money back to LPs and figuring out how to do

Look. I’ve sold I’ve had lots of returns generated by selling the companies, by putting them up for an auction and selling the companies. There are a lot of things a lot of companies don’t do that they probably should do. It’s very hard to get bought if your strategics don’t know who you are. So we encourage all of our founders to get to know the biggest strategics in this space, get to know the private equity funds that, you know, could eventually buy you. Like, you know, by the way, if you think you’re gonna do 50,000,000 of revenues this year up from 30, tell them you’re gonna do 40 and then beat the number.

And it’s just building relationships and partnerships with people.

trying to make two to five x’s in three to seven years, which basically blends to a 20% net IRR curve.

do. By the way, we oh, totally agree with you, by the way. We met some we met some endowments, like, a couple years ago that said, oh, your Lead Edge, your fund returns aren’t good enough. All your funds aren’t three x net funds. I only invest in three x net funds. And we turned we we left the meeting, we said to ourselves, should we go hire that guy immediately? Like, should we hire him to run our money? Please tell me where all these, like, three x net funds are all run.

It’s a complete fallacy.

it’s I think it’s very hard. I think there’s too many venture funds. My advice to guys and gals that go start venture funds have you ever interviewed or do you know Fabrice Grinde? Yeah. Of course. I’ve

Fabrice has been an LP of ours for fifteen those guys have figured out the game. It’s like invest in the cedar a and sell a bunch in the b or c. That is a fantastic game to play. And you can make a ton of money doing it, and you generate DPI back to your investors. You still get to ride your winners. The fifteen year duration thing is totally true. And it’s actually shocking that the number of venture funds over the last, like, five or seven years has actually increased given that the exits are getting longer, not shorter.

What I believe, like, emerging managers and people starting venture funds need to do is take advantage of the secondary wind of the secondary markets. And the fact that these growth funds have gotten so big or the crossover hedge funds that wanna get or the public funds that wanna get into private investing and start selling off stakes. Do the seed, do the a, and sell some in the b or c. But you don’t you’re not selling the whole position. Just, like, start to return money back to people.

That’s true. Yeah. Yeah. So, like, I take it. But by the way, you gotta stay in business. And so I think the faster a venture fund can get to a if you could get a venture fund that could get to a one x faster than other funds, that fund could probably grow assets quite a bit. And I’m also talking towards emerging managers as well who, like, need to stay in business and, you know, need to raise funds two, three, four, and, you know, are not people like Bessemer that have been in business eighty years.

And by the way, for every Shopify, go ask them about, you know, 1999 and 2000, or, like, how many billions of dollars were were lost in twenty twenty twenty one by not distributing positions.

Our stupidest mistakes were just, like, overpaying for a couple of companies, assuming the exit multiple was going to be, like, higher than it actually is. Like, you know, and I credit my partner, Nimay, you know, who’s been with me since the beginning. With really in, like, 2018 or ’19, we really started to shift our our business away from Silicon Valley based companies and needing to say every company needed IPO. It was go find these gravities. Go find this safe send.

Yeah. Yeah. Yeah. It was caused by the fact that we looked around and said there’s no possible way that every one of these companies can grow to be as big as they are. The law of compounding when you’re investing over a billion or $2,000,000,000 of revenue oh, sorry, a billion or 2,000,000,000 evaluation. It’s just like harder. It’s just like the law of large numbers. And we also just looked and we’re like, who’s got money? Mid market private equity funds. And there’s hundreds of them. And we were like, none of these guys used to buy software companies.

They’re now starting to buy software companies. So now we have like a fertile ground. And if you think about all these mid market private equity funds, their portfolios grow 7% a year, 6% a year, top line revenue growth. Industrial companies, manufacturing companies, now they have sleeves to buy software companies. Wait a second, for us, we’ll go buy a company that’s 40 with 30,000,000 of revenue, 20,000,000 of revenue growing 40% a year. Let’s grow it, two to two and a half, three X the revenues, then and it’ll be growing, like, 15% a year.

That’s, like, fast for the and we can we can run an auction. We can sell the business, and we’ll get 20 people that bid for it.

There is. They just need to pivot the business and realize they’re not building the next data dogs and snowflakes, and they need to get them to rule of 40. And the most important thing getting the rule of 40 is high gross margins. If you have high gross margins and you have 90 plus percent gross dollar retention, you can try to sell it when you’re losing money breakeven or what some of these growth equity firms and venture funds should do is do it themselves. Like, it’s not that complicated.

It’s like, look, you have high retention rates. You know, if you have low retention, like, good luck. You know, if you have seventy, seventy five, 80% gross retention, it’s much harder. But if you have a 95% gross dollar retention business, yeah, like, make the hard decisions, get the thing to profitable, turn it into rule of 40.

We build a five year model. The model’s wrong. We try to put a reasonable exit multiple on it.

to use, like, some reasonable revenue multiples of software companies are just shorthand for EBITDA. Like, it’s not at the end of the day, I think you should assume if you if I if you build a software company and you’re in it, you know, and it’s growing, you should assume an exit of it’s growing 15 to 25 15 to 30% a year, and that should trade somewhere between four to seven times revenues. Like, we tend to like I think our bands that we tend to assume most exits at are like four to eight times revenues.

Maybe sometimes 10 times at the absolute highest if it’s like growing 40% a year. By the way, I I credit the guys at Iconic a huge amount. I mean, look, they were underwriting deals in fifteen, sixteen, 17. I think it like they they thought they’d exit stuff 10 to 12 times revenues. And so they bought the best assets and, you know, they maybe paid 20% higher to get access to the best assets. And then multiples went to like 20 to 30 times. The best way, by the way, to four extra money is two extra revenue and two extra multiple.

By the way, the reverse happens too. So, you know, that’s what’s happening to all the stuff in 2021 vintage funds. Like, multiples got cut in half for people. And so, like, if you two extra revenues and half your multiple, that’s called a one x.

Saying a 100 times revenues for companies? We only like to ask ourselves when we look at businesses. If I invest today and I grow it for eighteen months and I assume like it’s still growing fast, am I like kind of in the money? Or do I need to grow for four or five years until I even get in the money? Like if you I think in Toast, for instance, it was like when we invested in fifteen, sixteen time ish, 17 time frame, it was like 25 of revenue, growing 250% a year.

That’ll be a billion dollar plus valuation today. We paid 20 times revenues. It was like 500,000,000 evaluation. Like, that’s pretty expensive. We think about it we’re like, okay, in a year from now, we’re in it at like 10 times. Okay. Like for that growth rate, that’s like saying it’s pretty reasonable. Like, I think I encourage people to ask like, okay, I pay this price today in twelve months. Am I in it still at, like, 80 times revenues or 50 times revenues? The prices being paid are totally insane.

I also think not enough investors. I’ve had numerous entrepreneurs tell me, oh, I don’t look at gross dollar retention. That’s the only thing that matters. And it’s just like, oh, really? That’s like a I think more investors need to focus on like gross dollar retention. Why so? Okay. If you’ve got a business that ends at the end of twenty twenty four at 10,000,000 of revenue, and got 200% gross dollar retention, so like, okay, my 10 became 20 all through existing customers, but you only have 50% gross dollar retention.

You actually lost half your customers. And you had, yes, you had a few that really liked it, but that means a huge amount of it, like, experimental. When you’re a really small company, a difference between 90% gross dollar retention and 50% isn’t that much because it’s not that much of the pond to fill up or the bucket to fill up. But when you get to, a $102,103 100,000,000 of revenue, it’s a huge hole in the bottom of the bucket, which just then leads to the, you know, sales and marketing efficiency is just awful, and your burn rates are much are higher.

Not enough people and, like, we look at a lot of these AI software comp tons of these AI software companies, and, like, the gross dollar retention rates are just, like, really, really low. It’s actually shocking.

But, again, it’s not 90 growth. By the way, we have a business in our portfolio. By the way, it will not change the world. It makes cardiac monitoring software. It is a very small market. It has 99% gross dollar retention. It just means that you can run the business very capital efficiently over time because you don’t have to keep spending money on more and more sales and marketing.

Yeah. So Alibaba was very cash efficient, actually. When we invested, it was a billion dollars of profit. Actually, there may be less shares of Alibaba. I credit Josiah and the team at Alibaba has actually, like, done the amount of stock based comp dilution for a lot of public companies is totally crazy. Most people, including ourselves, over the last fifteen years, massively underestimated the amount of stock based comp dilution and dilution that we all took. You know, Uber was Uber was was totally insane. We tend to over the last few years, we’ve dramatically increased the amount of, like, dilute we assume 30% dilution.

And if you’re investing earlier, could be a lot more than that. We have this, like, what we call capital efficiency. It’s like, you know, Warren Buffett would laugh at us because it sounds kinda stupid, but it works. Are your revenues today greater than your historical cash burn cumulatively? Not raised. If you’ve raised 80 but only burned 20 and you have a $40,000,000 revenue business, like, that’s a great that’s a great business. But we’re looking for, like, a one to one ratio or better. We just think it speaks to so many just quality qualities of the business.

Like, we were lucky to be investors in Benchling. We’re still we’re still investors. When we invested, Benchmarc did the early rounds. Thrive was an early investor. When we you know, it was like 13 of ARR, growing well north of a 100% a year. That must have been expensive. Yeah. It was expensive. It was, like, I wanna say in the low threes. It was expensive. However, the company had only burned, like, $10,000,000. It had burned very little capital. And why? Because it had, like, amazing gross dollar retention rates.

And the CEO was just like he thought a lot about know, I know when it got to 20,000,000, it had not burned 20 to get there. They just value the value of a dollar. You now have a lot of entrepreneurs that just like like to light my fire. By the way, I’m not saying some of them will build amazing businesses. By the way, we have definitely missed businesses that were not capital efficient. It’s just like it wasn’t for us.

Snowflake. Massive. I mean, when we looked at Snowflake, it had, like, horrible gross margins. Like, again, it was we looked at it at $500,000,000, and, like, we were completely wrong. Like, just, like, a 100% wrong.

looked at it in in past. So like, it’s fine. Again, we’re gonna miss stuff. It’s fine. But again, we have a framework. A 100 out of 10,000 companies will meet all eight criteria. Now a lot of those hundreds evaluations would be totally insane you can even get in them or if they even wanna take money. Out of 10,000 companies, 10% will meet five or more criteria.

Founders want so our pitch is very simple. It’s the reason that, you know, a huge number of our founders have have invested in our funds post exit.

it’s like, what do we do? Why is that? When we started Lead Edge, my partner Nimay and I, because Brian hadn’t even joined yet, sat around and we’re like, why is it we can take our two knuckleheads money? Like, why are they gonna take our money? And we were like, well, if I had been the global head of HR at Pepsi and Nimay, you had been the global head of HR at Microsoft or Dell, pick a company, we could probably cold call HR software companies to be like, hey, let us invest in your business and we’ll introduce you to a bunch of like global HR execs.

And that’d be like pretty probably pretty believable. Right? We don’t have that. We had never been the global head of HR of anything or the you know, we had never done anything except like cold coin analysts. So we thought, well, how are we gonna get into companies? And we thought, let’s make our competitive advantage be our LPs. So let’s raise money from world class execs and entrepreneurs. And so, like, if you look on our website, 90% of our LPs get permission to be listed on our website.

And these are people who run and have built some of the world’s largest companies. These are people like the former CEO of Charles Schwab, the former the former CEO of Kimberly Clark, the former CEO of Colgate Palmolive. And we go to companies and say the following, if you invest with us, we’ll give you access to our LPs who have built, run, and advised some of the world’s largest companies. So, hey, you are a software company that sells into the pharma bio space, you sell R and D software.

Well, hey, would you wanna meet the former CEO of Pfizer? Would you wanna meet the former CEO Biogen? And we, by way, we introduce them during our diligence process. They act as our own version of McKinsey. That helps that’s how we get into deals, that’s why people like us.

A lot of ours aren’t entrepreneurs. They’re executives at, like, plain, boring, vanilla, non software companies. We just constantly leverage them. We can track introductions. We track every intro. A lot everybody says they help. Very few people do. I think there’s a reason that, like, you know, 80 plus portfolio company exec former former and current portfolio company execs who we’ve backed are investors in our funds. So, like, I I don’t know. Everybody says they help. We just do what we say we’re gonna do. It’s just not that hard.

Hierarchy of bullshit. Yeah. The

What?

we believe so, like, we can give there’s a reason that Doug Song, who sold this company for $2,500,000,000, put money with his fund because we drove tons of intros. There’s a reason that VCs and some of the biggest venture funds in the planet are longtime investors with us. They’ve seen us in action do it. I don’t know why more funds, say they have these incredible networks, don’t help people more. I have no idea why. I I have a feeling that a lot of funds Scale. It’s scaling also a lot of people are just like a lot so a lot of our LPs are execs who are plus or minus five years away from retirement.

They’ve been retired for the last five years or they’re about to retire in the next five to ten years, and they wanna help. Like a huge amount of LPs are not from Silicon Valley. And so we find them a company and we get them involved early on in the process. It’s how we do diligence. And so if like you are a payments company, like we invested in TransferWise over here. We very early on in the before we invested said like, listen, would you wanna talk to the former CFO of PayPal?

Would you wanna talk to, you know, the former president of Visa? And any good entrepreneur is gonna be like, well, that sounds like interesting people. And then we call them and ask them, hey, what’d you think?

implement. So look. Every intro we make I wish I could tell you that it’s automatically locked. No. Every we BCC an assistant, and it it gets logged in Salesforce. It’s a highly customized version of Salesforce that, you know, we’ve built and spent millions of dollars on customizing over the last, you fifteen years. Do you have,

do not. What we have is every person that if you’ve worked at Lead Edge if you work at Lead Edge, like, every person on the investment team has access to all the LPs. And by the way, to be clear, if you’re an associate who’s worked here for two years and you’re going to Seattle for a wedding and you say, hey. I wanna stay on Monday. We’ll be like, wonderful. You should meet, like, these four LPs. We’ll pay for your plane ticket.

We encourage everybody that works at the firm to get to know our LPs, spend time with them, educate them on what’s going on in the portfolio versus if I was, like, a vice president at I’ll pick on index, but I can pick any from on the planet. If I was a vice president at index and I was flying to Seattle to meet a company, I would go meet the company, I’d go meet maybe another prospect company, and then I’d fly home. I wouldn’t be spending six hours meeting four other individuals and like who are LPs in index.

It’s it’s not their model. It’s like these funds are primarily backed by the largest endowments and pension funds in world. And our model is like, we’re gonna be 95% backed by individuals, and we’re gonna treat those individuals like gold.

I would tell you that we have two customers, founders, but more importantly, LPs. Because if you do not have LPs, you do not have a business.

So, like, we run our business trying to figure out how do we have 97% how do we keep up 97% gross dollar retention, not net, gross, with LPs? If you think that, what do you do? So we communicate with them. We do lots of events with them. We do quarterly calls. We walk people through the portfolio. We tell people how things are doing. Look, some companies are gonna be doing well one quarter. Some companies are gonna be doing bad one But again, when you grow 30% a quarter on average, like, some are gonna be doing well, some are gonna doing bad, but just like the lack of transparency in this industry to LPs is shocking.

It’s both. By the way, without good performance, you can have none of it, but I can tell you that people here’s the thing though. People want the nice guy, the good guy, the person who communicates to win. So, like, if if you have a bad vintage or two bad vintage funds, they’re more likely, I think, to stay with you.

There there are I’m not gonna, like, talk about there is a very well known, very large private equity fund that historically would raise their it’s not in software. Would raise their funds and literally be like to LPs, you have three weeks to get your docs in. Take it or leave it. These are the terms. We’re not changing anything. They then had a bad fund vintage. They’ve been in the market for three and a half years. The fund they just closed is like a fraction the size of their fund before.

And I asked them LPs, what’s the problem? He’s like, you know exactly what the problem is. They’re jerks. Your LPs are they give you the money, like, without you, they’re paying you.

That’s why LPs are to blame them too for a lot of this.

The smartest ones I find are actually like listen. If the if the opportunity is not there, let’s go figure out where else to put it. Like, it’s not like I have to put a billion dollars in venture every year. Maybe maybe billion dollars in venture is too big. I should be doing smaller. I think there’s a guy, Eric Seabush at Mercer, who runs research there, who took a bet on us very early on. Before fund three, people would laugh at it. Actually, our first institutional investor in fund two was University of Virginia.

And we literally started the meeting with, like, you’re not gonna invest with us. Why would you invest with us knuckleheads? We don’t have a brand. We have nothing. And a lot of the investment consultants are very brand name focused. It’s like, again, don’t get fired hiring IBM, hiring McKinsey. I credit this guy, Seabush, who’s taken a flyer on us very early, and he’s done it with a bunch of other young managers. This is all about the people. And he and he, like, digs into, okay. I’m in your fund three.

Why’d you exit these things in fund one? How’d you think about it? How do you think about returns? How do think about treating LPs? Talks to a bunch of like portfolio companies. Like, how do you actually add value? We tell LPs, everybody tells you they help companies. Wonderful. Let me go introduce you to 10 companies in our portfolio. Call them as many as people as you want and ask

We’ll see let’s see over the next twenty years. Let’s see over the next decade what happens.

No. But I respect a firm, probably one of the best returning funds in like the tech investments. There’s a couple of them. One of them is Spectrum Equity, incredible investors. They’ve kept 2 to $2,500,000,000 funds forever. By the way, Benchmark, funds are smaller. Now Benchmark has had like, it’s incredible Benchmark is it’s like you had gen one, gen two, and now you have gen three, and they still continue to put up really good numbers. They’ve kept it small. Josh Kauffman at First Round has continued to stay small.

Mike and Ann at Floodgate have continued to stay small. But the firm that I think has generated the best returns in the tech investing world over the last thirty, forty years, and it’s become more a buyout fund, but they used to do tons of minority is TA Associates. And they’ve look. It’s gotten gigantic, huge funds, but the DPIs that they put up are just incredible. But a spectrum What do you think they do that makes

They’re relentless in thinking about how to get liquidity to LPs. So a lot of stuff they do in the buyout world now is, like, they’ll do minority sales. They’ll invest in a company two years later, sell 30% of the company to somebody else, get their rate back. So they sit not already a one x. They’re just like relentless focus on liquidity. I think look. Some of these giant platform funds, the Andreessen’s of the world, there’s just so many people at these firms. I have no interest in having, like, hundreds of employees.

You know, we we have

100% agree with them.

Yeah. Like, these bad returns will do it over time, but it’s gonna take a long time. I think the venture industry was about to be in for a rude awakening, and then AI showed up. I

I think that’s a for a lot of these venture funds, I think that’s true. Again, I love to talk to people that have been in this industry longer than I’ve been alive. This what’s going on in AI looks very similar to the Internet bubble. And it’s like people didn’t learn a damn thing from 2021. It’s like shocking. No. No. Let’s not even talk crypto because that’s like a whole another

Yeah. Entry price matters. Don’t over capitalize companies. The amount of stock dilution really, really matters. If you run a fund where you need IPOs, you better invest in founders that wanna IPO their companies, or have a good plan how you’re gonna get a lot of secondary out of it. It’s entry place matters. Entry place matters a ton. These companies are not all snowflake and Facebooks. Like, they’re not. The vast majority of companies I put on one hand the amount of people that are capable of backing companies like Google’s and Facebook’s of the world and doing it more than once.

It’s a really, really, really small group. It sure as heck isn’t me. It’s like the Doug Leone’s of the world, and there just aren’t many of them. I love Doug. Oh, it’s just like yeah. Like, we need more Doug Leone’s and Don Valentines and people that are just like and LPs that are, like, very direct and outspoken. People like Peter Dolan at McKenna. He used to be at Harvard. Like If you would’ve we have

that people don’t ask, they should ask, any manager who is around who’s been around ten plus years, hey. In September ’21, 09/30/2021, how much unlocked stock did you have in your and let’s say September, that was like the high point of the insanity in the last, you know, deck run up. How much unlocked public stock did you have in your portfolio? And the next question is why didn’t you distribute it to your LPs? And by the a lot of funds can distribute stock too, and, like, you could have kept the stock.

So, like, why didn’t you hold? Some people will be like, well, I was on the board. Well, shouldn’t you I mean, like, isn’t your goal just to return, like, returns to LPs? Isn’t that, like, the whole job of the business? That would be a shocking amount of people that have a lot of

Did not return money. Look. I also think LPs should spend more time talking to companies of portfolios that failed. Like, actually talk to the ones that didn’t go well or, like, were the one x’s to find out what is the person really like to work with. The ones that work really well, those are the easy ones. Tell me the stuff that didn’t work and like, how did you how was the how was the partner on the deal? How did they respond? How did they deal with adversary?

How did they deal with you? Those are the things I like to focus on.

It’s a lot easier for me to do it than it is for Fred because he was there when it was it was nothing. I came in as it was a bigger company. But again, there I think are some VCs that are like world class VCs that cut their losers. There are firms that are known to if if you’re a CEO and you don’t perform, you probably won’t be the CEO. Like, I think if you’re just the founder coming in, you should just be well, I have like, I have no problem.

I tell all my employees, if I’m not the right person to run Lead Edge, like, throw me out. Like, that’s fine. Put me on the side. You you come and run the business.

When we underwrote ByteDance, we assumed The US business is worth zero. ByteDance North America is a, you know, single digit percentage of revenue. We assumed it was gonna be shut down, and it’s not profitable in The United States. Then we saw actually what happened when they shut it down for a day, and both sides of the aisle came running up with their bags saying, oh, please, please keep it open. Please keep it open. Please keep it open. And we just want something to happen, either shut the thing down for good or spin it off or do something.

I suspect it’s not done by April 5 or whatever the date is. They’ll probably push it out. Again, I’m not saying I don’t know. I think there’s four or five people in the world that don’t know what’s gonna happen, and time will tell. But again, it’s like just the uncertainty. I do think this though, that the Chinese government actually really likes ByteDance. It’s a truly global business. Alibaba is not a truly global business. Tencent is not really a truly global business. Nike is a truly global business.

Microsoft, John Deere are global businesses. What I mean by that is you can go into, I don’t know, a 140 countries around the world and buy Nike shoes. Probably Try go into a 100 countries around the world and buy a John Deere tractor. China’s always wanted to build a truly global business. This is that first truly global business. Like, they’re very proud of what they built. It’s a huge business. I think they’re gonna be one of the foremost AI companies on on the planet over the next decade.

There’s a reason when the the amount of AI they have already embedded in the product. In India, when they were kicked out several years ago, nobody’s really able to build a competitor in India. I mean, Facebook’s trying. You know? By the way, you know who hates ByteDance. Right? Marc Zuckerberg. And by the way, so would I. To be clear, I would be if I was running Snapchat or Instagram or Facebook, I would be all over politicians in in Washington being like, oh, this is horrible. This is all propaganda.

This is like, you gotta get these guys out of here. It’s the biggest threat to these companies. Absolutely incredible what these Chinese have built. The Chinese, I mean, like if you look at all these stats, like number of PhDs and science spend and all these things, like, is a credible country that is like, they’re not worried about what happens next quarter or next year. They think in fifty year blocks.

A 100%. I just have seen how hard people in China work at some of these tech companies.

I think both countries should learn to get along. A China and US collaborating together more is better for the global world than less. There’s lots of things, like, both countries can do together to make both countries a better place.

Monster. And by the way, it’s a huge ecommerce business there too.

sure. Like, by the way, Tencent’s listed in Hong Kong. It’s gigantic. Hong Kong, a 100%.

Oh, a 100%. Yeah. Yeah. But, like, Tencent’s a huge company. There’s giant Asian businesses listed on the Hong Kong stock exchange. It’s very liquid. You could have a trillion dollar. Like, by the way, I don’t know what Facebook stock is, that market cap is yesterday, but I think it’s like a $1.05 to $17,000,000,000,000 company. This is the same size business in terms of earnings, grows faster. And I mean, like Alibaba and Tencent don’t really grow that fast. I mean, they’re like five, seven, 8% growers. What do they trade at?

Thirteen, fifteen times earnings? You do the math. Like, this this is a very, very big company. I like to we like to buy stuff when no one else likes to buy things. Like, when the world hates something, one of my longtime LPs Does that not

That’s fair. That that is a fair statement. I just think that, you

Yeah. Look. For every for every Toby at Shopify, there’s a 100,000 founders that are like, they’re aren’t gonna make it. But, look, it’s incredible what he what he built.

Favorite deal is buying like LPs out of a 20 year old fund and buying something to like get four times earning. I mean, find something like get four times earnings.

A 100%. So like this Wait, you do strip sales? Yeah. The money’s all Let me explain. So the company I’m gonna get to is this company called Work Human. That’s where we’re gonna go with it. There’s this there’s a table in front of us. Right? Yeah. Let’s say this table is a company. If I buy 10% of this table or 60% of this table, it’s the same table. Right? If you own the table, but the chair you’re sitting on and you’re if you’re the fund and you own the table and the chair you’re sitting on owns half your owns half your fund and I buy the chair, I just bought 25% of the table.

So like, we just view it as, like, buying it to a wrapper. So we we describe investing in companies as we have these, like, very specific criteria, then we take this completely flexible approach. We’ll we’ll go to the front door. It’ll stick up like a like a house. You’re walking down the street. You see a three criteria house? Walk by it. See a four criteria house, walk by it. Get to a six criteria house, knock on the front door. You can go in the front door and you can buy you can lead a round in a minority deal.

You can go in the front door and buy the entire business. Well, let’s say, like, they don’t wanna raise capital. You can go in the side door and buy out like an early investor or an early employee in the form of secondary. Again, it’s still the same house. But let’s say like that doesn’t work. Let’s say like you can’t buy secondary. So for whole host of reasons, it could be ropers, it could be there’s no sellers, whatever. Well, let’s go to the basement window with a pickaxe, and let’s find a derivative.

Let’s fund somebody’s co investment vehicle. Let’s find some twenty year old fund where 90% of the NAV is in, like, one company. So this so this example, 17 years old, and we went to the founders and said, look, the fund must have like a bunch of LPs that went out. You’ve been in it sixteen years, right? I mean, we bought it at like the position at like five times earnings, and we’ve gotten 90% of our money back through dividends in the company. And you’re like, well, how’d you do that?

The LPs were in the fund for like fifteen years. They just like want it out. So in a-

And so we were like, in a world where LPs and GPs are looking for liquidity, fishing in the pond of old funds, like twenty year old funds, people are like, well, what’s your discount to NAV? NAV’s irrelevant. What’s fair market value? If, like, NAV is really cheap, I’ll give you I’ll you a 100% over NAV, but I can’t do that because then the LP would think, oh, you know more than I do, so I’ll pay a discount to NAV still.

It shocks me that more people don’t do this. There’s not that many people doing it. The secondary funds because they do gauge

A lot of a lot of people are going after the multi asset stuff. So you’ll buy, you know, an LP that’s selling 30 positions in 30 old funds, and there’s 200 underlying companies or 500 underlying companies in it. We’re looking for the stuff where there’s, like, one underlying company. And, like, it’s an old fund. 90% of NAV is in one company, and like, we just write off the other stuff, basically. Just like look at it.

Yes. We got back 50% of our money on a 10% in this fund, and we’re human. Yes. It was some like chips company that literally were like, the cash balance on the balance sheet is like almost as big as their valuation for the entire company. Like, this doesn’t make much sense. Like, I don’t know. I don’t know what this thing does. Whatever. Maybe maybe it’ll be get something back. Yeah. We got 50% of our money back.

DPI is the most important thing, and marks are completely for suckers.

The pricing pressure the pricing power they have is just absolutely incredible.

is look. It is expensive, but, like, it’s just an incredible business with amazing price more. I think they have an so you asked me who I thought was the best CEO I saw on that list. I think Sachi is absolutely incredible CEO. It’s a giant business. There are companies in a downturn. If we could get a 30% drawdown, I would buy Snowflake or buy Datadog and put it in, you know, put it in a drawer and let let those compound for ten plus years. I mean, Amazon, can put in that bucket too.

Just a lot of them are fairly rich.

Oh, favorite place to work. If they’re like on the second page of your presentation, if you’re like, we’re the greatest place to work in this region. But a lot of it comes down to like, they’ll be like, oh, my revenues are this. You look at the chart, you start doing all the analysis, and you’re like, actually, that was your total contract value. That’s a that’s a pretty good one. There’s a lot of ways to fudge gross profit numbers.

Oh, self driving cars, actually. Self driving cars. What have you changed your mind? I went for rides in them. Incredible. No. It’s gonna take a long time to get out there. Now remember ten years ago? Like, you know, I said, like, people always underestimate tech over the long term, but they overestimate it always in the near term. Everybody was talking self driving cars ten years ago. The experience that I had in LA and San Francisco and self driving car is absolutely incredible.

If I had to be like a traditional growth okay. Like, Spectrum would be the growth fund, but that’s a lot of your audience is not that type of growth. That’s more like bootstrap growth. Traditional growth, either Iconic or Maritech. The returns of Iconic are freaking amazing.

Those two groups between seed and a, it would be like Benchmark or Bessemer.

If you need to own a large fund and write a $50,100,000,000 dollar plus check, Bessemer is as good as any of that are big funds. Like, I think the guys at index are amazing investors too. I probably a lot of these funds is you gotta buy the basket. Like, Bessemer actually just has one fund, which I highly respect. I mean, I guess they now have a buyout fund, but, like and an India fund. But

Oh, I thought you were gonna ask me, like, the short. Microstrategy is totally insane.

I’m very not bearish on crypto, but, like, I think it reminds me a little bit of the tulip craze that you can’t actually use crypto to go buy, like when you could if I could go buy a Tesla, crypto would be amazing. If I could go to Amazon and use Bitcoin, it’d be incredible. But, like, you can’t right now. Now, again, I think it’s probably just so volatile. People can’t like the currencies. The idea like, from what I understand, micro strategy is effectively issuing debt to to go in the market and buy more crypto, and they just keep doing it.

But if that reverses, eventually got paid on the debt. I don’t just sounds like a house of cards to me. That it just seems to me like some of these, like, crypto businesses are a little skeptical.

I do not. No. I do not have any crypto investments. We’ve looked at stuff around we looked at chain analysis years and years ago, probably should have done it, like the picks and shovels type stuff. Should have done Coinbase, like, years and years ago. By the way, I I should have bought Bitcoin too. I never have. Like, I mean, clearly, could have made a fortune.

Two things. Income inequality and that the fact that, you know, where I grew up in Michigan like, I worked in a factory in high school. I think a lot of those people today are, like, way worse off relative to what wealthy people were, you know, twenty five years ago. If it’s the point 1% or the 1%, it’s just, like, broken off in this printing of money, has just caused, like it’s gonna cause mass it’s, like, massive income dispersion.

It’s it’s getting worse. Well, that causes revolutions, to be clear. But the thing that I actually worry about more near term that’s solvable is social media for teenagers. It’s absolutely horrible. We need but I am a ByteDance investor. To be clear, ByteDance in the vast majority of their market is highly regulated. Like, kids in China go on Byte go on TikTok to read about, like, science experiments and math projects. You know, in The States, I assure you that’s not happening or in England. Social the media companies are regulated.

There’s a reason the BBC or the Discovery Channel or NBC can’t say a lot of the things that get said on social media. Highly regulated. They’re, like, regulated by the governments. You get massive fines. Social media companies need to be held accountable for the content. There’s there’s a law. I’m just forgetting.

Yes. I think we should. I think it needs to be way highly regu by the way, suicide rates, depression rates, all this bullying, all these different metrics you look at are going one way up into the right. That social media is the demise of society.

I think we questioned our existence in 2021 as, like, we were just getting annihilated on prices. We question ourselves now and are like, are we totally wrong on AI and we just don’t get Are there gonna be one person companies way sooner than we think? Are all of our software companies gonna be completely disrupted and all of them go away and they’re stand that they’re not? But I guess I could be totally wrong. Think a good any investor who says they know the answer to something, that’s the best way to fail, and we just know, you gotta stay intellectually curious and

have any thesis. By the way, my thesis is this meets six or eight criteria that I literally The amount of pontification in the world, especially on Twitter, by people that are like in the investment business, people should spend less tweeting, more investing time. Here’s what I believe. What you tell your LPs, just make sure you stick to it and do it. That’s actually the best advice I can give for any emerging fund manager. It’s like, find what you’re gonna do and do exactly that, but don’t stray from it at all.

When? I don’t know. It might be like a know, it might be like a slow hole in the canoe, but eventually, yes, they will. Yes. A 100%.

Humans are just like very resilient people that adapt to change. I mean, I’m I’m glad I became a software investor and not an energy investor. Energy, I don’t know. It’s been like a dying industry for the last fifteen years. And But energy has never been hotter now. Not it’s hotter now, but, like, it it goes in waves. And I just like the amount of innovation that’s happening and just, like, change. Like, I get to I get to meet really interesting founders. Some of them are gonna change the world.

Of them are gonna sell budget planning software to the Atherton Police Department. That’s fine. But like, they’re building cool companies. Like, look, I am an I I I was when I went to Wharton Business School, I was involved in like the entrepreneur conference. And we’d always bring in people that like built software companies, built consumer companies. I was like, why don’t we go get Steve Cohen or, like, the guys who, like, built giant money management firms? Like, Steve Cohen is an entrepreneur. Like, he started with a very small business, started by himself, and now runs, one of the biggest hedge funds in the planet.

Ken Griffin, same thing. I mean, like, they’re, like, incredible entrepreneurs. The ability I get to spend my day meeting cool entrepreneurs is just like it’s not a job. It’s, like, an amazing thing to do.

Yeah. Exactly. Look. I’ve got 80 employees. So yeah. Yeah. Actually, the best advice I ever got and something I try to do every year at Lead Edge was from the from the founder of Excel KKR, which is a very good fund. And he said, you should interview all your employees from admin to your other partners and basically ask them for feedback. Just be like, hey. If you were running the place, what would you do differently? Tell me everything you do in your job, green, red, or yellow.

And so it’s like, okay. Well, I actually don’t care what you do green. I care what you do red because I wanna get rid of those things. And, like, I’ve been doing that for three or four years, and the feedback you get is just, like, incredible.

Yeah. So lots of things. But I would say the biggest thing we’ve we did is as we started to call more and more non Silicon Valley based companies, our eighteen, twenty associates, you know, 22, 24 year olds, were like, dude, in Chicago, nobody knows who we are. In Indianapolis, nobody knows who we are. We need to, like, get the brand out there. So we hired this amazing head of PR comms, Mikaela, who had helped build Tusk Ventures for Bradley, who, by way, built a pretty good brand over, like, a couple years.

And we’re like, hey, Mikaela, how do we get entrepreneurs in Madison, Wisconsin to, like, know who we are? We’ve got fifteen years of quarterly letters about, like, the hierarchy of bullshit that by the way, other venture funds take It’s a book. I’m reading it. No. We literally have a four a well, it makes a good doorstop, good kindling in the winter for a fire. Really good. So that content we want to start to release to the public. Like, we joke that’s like, it’s very funny that partners at Andreessen Horowitz, who we’re friends with, or partners at Benchmark, or partners at, you know, first round have made the hierarchy of BS letter kind of famous.

Like, we didn’t actually make it famous. We just gave it to other people who distributed it. Like, we should distribute our own content. Yeah. And so, like, she’s like, we have ten years of amazing letters like this. Fifteen years. Let’s start to, like, put those out there. Go on CNBC. Like, go on Bloomberg. Look, entrepreneurs, if you’re on TV, you’re you’re now smart. We tend to like be a pretty like direct firm. And like, actually, another thing that we pride ourselves on is fast nose. And I don’t think enough people do.

Tell an entrepreneur if it’s not a fit. Tell them very quickly. Don’t waste people’s time. People, but like, I’d say it’s LPs. If we’re not a fit for an LP, please tell me. There’s no reason for me to meet you two or three times and give you a bunch of data. I highly respect you have a call with somebody, they’re like, you know what? Like what you do, Mitchell. You guys just aren’t a fit for us. No problem. Like, we at Lead Edge, to all our analysts and associates and principals and VPs, like, drive down the fact that, hey.

You talk to a company, like, they’ve prepped for the meeting, they’ve done a bunch of work, tell them. It’s just not a fit. Like, don’t drag it out a month. Don’t drag it out two weeks.

Don’t care. Some people do argue back. By the way, we passed on an analyst candidate. He emailed me and said, hi, I’m on like the Harvard, you know, varsity team of this and this. My rejection box is is full. I reject your rejection. He got another interview. He I was like, this letter is just, like, incredible. He actually, most people get rejected, then, like, 99.9% of people get rejected, and you never hear from him again. This guy was like, no. I reject your rejection. Here’s the reason why I think I’d be really good.

Here are some really interesting companies that I think are interested in. This guy sounds pretty damn good. Like, why do we pass on him? They’re like, oh, we were we’re kinda full for the year and oh, get him back in. Like, let’s meet this guy.

Come in here. Come and talk to us. 100%. A 100%. You’ll be like, yeah.