How We Made $800M on Coursera

Well, I think that’s that’s humbling, you know. It’s sometimes difficult to open up and tell the story, but, I enjoyed our walk.

Yeah, for me it wasn’t really, hey, I want to be a venture capitalist and manage, you know, billions of dollars. You know, I come from nothing, was a fundraiser for academic institutions for their endowments. I was good at that. And everybody I raised money from, most of people, not everyone, most people made it investing in private companies. It would be PE funds or venture funds or running their own operating businesses. It didn’t matter what it was from, you know, windows to financial management to PE. They created real wealth for their families.

And I was like, they’re not that much different than me. I work hard. I’m smart enough. Maybe I can do it. So I went back to business school late in life and our business today was my thesis and I started buying, you know, the smartphone became something that was running our lives in 2010 And I just started saying, this is super interesting. Why don’t I buy shares? And I follow Twitter. I like Twitter. You know? What about early Uber? What about early Spotify? And I just started buying shares from my classmates with my own money.

Well, guess it’s not knowing what you don’t know is in ignorance is bliss is kind of the same thing. I didn’t realize it was something you shouldn’t or couldn’t do. I just asked people, you have shares, can I buy some of your shares? Well, I never really thought about selling them because I really can’t sell them. How would you buy them? And still to this day, fifteen years later, there’s a form that I created at Carey School of Business at Arizona State. One page form that then we sent to the company to buy stock.

And it still floats around. I got it I got it back from a broker not that long ago and it’s like literally the form I created in 2010. One page and it’s binding though. That’s scary. It’s binding. So, which has bitten me in the ass a few times.

Yeah, so small, you know, I wanted to make a change. I was working in college athletics. That was changing as it’s become today. You know, this whole thing, players should get paid and coaches’ salaries and pretty soon the inmates were running the asylum, so to speak. And I was like, this isn’t my passion, this is not where I came from. I wanna make a change as a former athlete, like, maybe I can use my brain, not my braun. I cashed in my retirement, I went through a divorce, got remarried, had nothing, had no money and I just had paid the tax on my retirement, started buying these shares and I think

Yeah. Well, half of nothing’s nothing. My wife came to our marriage with $50,000 I had went through a pretty tough financial situation, rightfully so. My former wife kind of took what I had, raising my three young kids at the time and my wife and I today, we started a journey together and she backed me with the $50 in my small amount of retirement. I just started buying Twitter shares and Alibaba stock from Jack Ma’s family office and then holy shit, it worked. And you review those today.

Which was the single

I mean, Twitter and Alibaba were pretty good. Those were when I realized there’s something here. Making a little bit of money in your whole life, working ten years in a profession, thinking you’ve kind of made it coming from I grew up in an orange trailer in Mighton, Utah. You know? Having like $100 in your bank account one random Tuesday felt pretty good. And I said, This is something interesting. And I got some advice. You should raise some third party capital. And that’s when I really understood the power of OPM, other people’s money.

I went around to all of those alums who basically, I think, gave me some money because they were tired of me asking that I worked at five different large academic institutions.

thesis? For me, was very simple. There’s fewer institutions to help companies go public, coming off the financial crisis, funds started deploying large sums of money. So then the byproduct would be companies would stay private longer. The average age from inception to IPO was like three years leading up to ’20 10. From 2010 to 2018, it got to like seven or eight years. Today, our average portfolio company is 15 years old. So there was to me something that was clear there, which was there’s an opportunity to buy shares from these people who have no liquidity and you should be able to make more of a return than and also companies wouldn’t return my phone call, frankly, because I had like no money.

And hey, Twitter. Hey, Dorsey. My name is Larry Aschebrook. I’m a retread athlete that wants to become a venture capitalist. Can I invest in Twitter? And by the way, my fund size is I don’t have a fund. I just have, like, $200 in my name. I’d like to buy $10,000 worth of Twitter stock. That conversation obviously wouldn’t go anywhere.

Three years, $35,000,000 deployed along the way.

Yeah. Three years, 2010 to 2013, 34,000,000 or 35,000,000, and deployed the money as I raised it. So you did multiple closes? Oh, yeah. Multiple.

for for companies or founders for new managers? New managers. Well, first of all, if I knew then what I know today, I’m not sure I would start the journey, because I didn’t know how hard it would be. I just wanna do something different with my life, try to create value for my family and try to set my children up for a different future than I had. I was lucky. I grew up. My siblings grew up in the same house as me. We don’t have the same life today.

I got out of the squalor because I could run and throw and catch. My siblings didn’t have that benefit. I didn’t want my children, who knows what their outcome would be. So the whole genesis of it for me was to try to create something and seeing opportunity and capitalize on it. So with my mentality still to this day, raising billion, dollars 2,000,000,000 funds is the money’s there, you close. Start deploying it. Build a portfolio. Show some improvement in NAV. It is inertia that makes it easier.

I don’t have the benefit even today with the returns that we’ve had and the DPI we’ve had to say, Hey, I’m raising a new fund and have 2,000,000,000 show up in two months. We don’t have the benefit of that. I’m okay with that because I think the way we’re forced to raise money makes us better. Now, 2021 was very different. I was sat at my farm, you sat in your underwear probably and raised in three months, you I don’t know what you raised. A $150,000,000. A and $50,000,000.

We raised a billion 4 and then turned down another 700,000,000 in very short period of time. And companies, by the way, also raised a ton of money.

The real momentum happened in 2014, and that’s when I really felt the power of what I was trying to do when Alibaba goes public.

Yes. Bought bought shares from Jack Ma’s family office, and wow, what a creator of shareholder value, Jack I’m sorry,

I mean, that’s the story of my life. It’s like, you know, it’s a bit of luck. You meet an alum that I knew knew somebody that knew somebody and kind of introduced me to a gentleman’s name was Barry Pursell, who was running Jack Ma’s money in Virginia of all places, I believe. And he said, Hey, we have some shares to sell. I’m like, Okay. Hired a group in India to do some DD because I had like two people and wrote me an investment Oh yeah, my early investment committee memos in the early vintages were outsourced to a group of really smart analysts in India, that you could pay a fraction of what you pay talent in The US.

And I didn’t have any money to invest in talent.

Okay, so we start. So yeah, Alibaba was thefor me, there’s a business here. It was grinding, grinding, grinding. That was the first one that was material for me. Was 2014 Alibaba.

Yeah, so from the beginning, again, you don’t know what you don’t know. I didn’t like the idea in my personality is kind of you go big or go home. I didn’t like the idea of trying to manage a lot of these positions because I didn’t really know how. So, my idea was I wanted to put a little bit of money in, understand the businesses, and then pick a few and put all my money in. Today, we call it land and expand. We have all this bullshit that we say that our marketing you know, our marketing team, our team is second to none.

We’re very well-being. Reserves heavy

See, it sounds like that. But really, for me, it was, oh, fewer companies because ultimately, how do I get liquidity if I have 50 companies? It’s my money. I don’t have much. I’ve got a few people who trusted me. I want to get their money in and out as quick as I can because as you’re trying to raise that fund, you know what it’s like, people want track record, they want pedigree, you know, what’s your TVPI going to be? What’s your MOIC going to be? I had people who were running their own businesses give me a little bit of money and say, I want the money back quick.

I want optionality to it. So from the early days, was how can I build a strategy that I can actually make a good living at to have velocity of the capital come back in optionality? And today our business has become that and the early generation of it was, Start off with little checks because I didn’t have much money. As I raised more money, the challenge of raising the first vintages, the benefit of that, was you didn’t have a lot to deploy. So I’m deploying it as I have it, so inherently I’m doing this land and expand without even knowing it.

Then you look back at the returns and you say, Holy shit, it works. Start off with a couple small checks, all of a sudden you keep getting the data and I’m sending it to my awesome group in India to give I’m me the data it over there. Hey, it’s amazing. You work 20 fourseven. Time zones. But anyway, what comes back is, hey, these five companies are better. And so then what I did is I put a lot of concentration in. And still to this day, which some people are not comfortable with, hopefully 90% of

But most of it is Alibaba. This is funny. This is just dumb luck. Come on. I’m not that smart. Alibaba, Spotify, Palantir, and Twitter. No,

But what do all those have in common, right? And now you look back and say, Well, how do you do that? Right? And there were some dogs in there, some clean tech shit that Clyntar Perkins sold me that was just a flaming bag of turds on your front porch. Like, look at this guy. He’s energetic. Let’s give him some garbage. And that’s what the old line Silicon Valley firms did in the beginning. Oh yeah, we’ll let you in the syndicate. Sure. How much are you putting in?

Oh, we’re putting in very little, but our LPs are co investing a lot. That’s an alarm bell now that you know it’s ringing as loud as like a four alarm fire.

It’s really gonna help your your first time manager. I really want you to succeed. So what do

The timing of that period. No liquidity, large private valuations, really differentiated, unchallenged business models. No one was doing anything like them. The liquidity window was still early from the financial crisis, because you look at the number of IPOs from twenty ten to 14, there wasn’t many.

had in our third vintage.

Yeah, today, then there’s no options for liquidity. It wasn’t that. It was you actually could get really good value. And I think one of the interesting things about the cycle we’ve been in the last fifteen years is, you know, now we look back at the funds and dissect them and say, kind of value did you get as being a secondary direct buyer? In early vintages, we got like 35¢ on the dollar by being a secondary direct buyer over primary buyers because there was no other secondary buyers.

Because for a lot of reasons. Sure, give myself a little credit, hard work, drive, run through a wall regardless of how thick it is and just keep hitting it until it falls. That’s my mentality, which is good and bad.

It’s there. I think that early vintages, up until 2020, all of those vintages, you were getting a lot of value by being a secondary direct buyer. Now, that’s a key differentiator. What I wanted was, and still to this day what I want, is I want to touch and feel the founders, the companies, the data. I was amazed by what I started. The paradigm that opened for me mentally was something that I’d never tapped into my entire life. This was really interesting, what these companies are doing.

That’s the misconception of what we do. I love it because it actually is when a good LP, the light bulb goes off, they realize that it’s the opposite of that. We get primary level data. We touch and feel the founders because the value of the discount is back and they value the work that you do today because there’s still a massive need of liquidity, but they want a trusted partner. And that’s that’s part of the journey to how we got here today is by doing something different.

The market on direct secondary buying is really fragmented. So first of all, in The US, you have to be regulated a bit of a different way than most fund managers to do it in quantity. Which is RIA. Yeah. A fully registered, kind of like a hedge fund. So you’re seeing a lot of people opt into that. Why? Because they want to pair primaries and secondaries together and they want to do some one off secondaries, big checks.

One of the things from the early vintages that teased out that we still do today, It was the frequency of transactions and touch points of really micro transactions sub $2,000,000 let’s say today on a $2,000,000,000 fund, give you a lot of interim data that you would not normally get in that touch point as a primary investor. It starts to provide you that Trojan horse moment to know when to triple down on a whiz, which we did in our 2022 vintage fund and have the outcome that we’re going to have.

Those founders are amazing, but to make 3X in eighteen months is because of what they created, but the opportunity to do that is because you offer something different than others. That’s to the people you asked me a question earlier. If you’re gonna start raising a fund today, what would you do? Yeah. Raising money. Don’t take no for an answer. Open every door. All those things. Deploy as you go. But also create a firm that’s different. The world doesn’t need just another early stage seed manager, growth manager, crossover fund.

There’s so many.

It’s very different. It’s you differentiate your business by sitting here and doing this and in the know and how many awesome people do you get to talk to to find and to get their references to the next great thing, you have figured out a niche. Most don’t. Most say, Oh, you know, I worked at x y z old logo firm for ten years and I know how to operate. I’m gonna start a VC firm. I’m gonna go to 10 LPs that were in that old one that I got to know and give me some money.

Great. And that also provides the ecosystem for us to operate in.

So one of the first employees I hired, young guy out of Berkeley, he’s now my co PM, Spencer McLeod. He’s a living caricature of what Silicon Valley is. He was working as an analyst with me. This is like 2014. I think he’s like 22 years old at the time. I was telling him this story about how my my mind exploded when I was in college and I could download Metallica on Napster. And he’s like, you know, you’ve heard of Spotify, right? And I’m like, yeah. He’s like, well, maybe we should buy some shares in Spotify.

And it literally, that’s kinda how it started. And we started searching around and we found a celebrity that was going through a unfortunate change of life scenario and a divorce. They had like $4,000,000 of stock and we had a $300,000,000 fund at this point. And I’m like, yeah, let’s buy it. Well, had this interesting process of how they approve shareholders. It was kind of onerous and difficult and my mentality was, they’re not responding, so let’s go see them. So literally, and I flew without an appointment to Stockholm.

My wife came. We spent a week there in the terrible North in, like, November. We had a new baby. We were staying in an Airbnb that we rented, which became a great investment for us later on. Anyway, we started going to get a meeting and finally, this young lawyer, Peter Grandilius, took pity on us in the waiting room and took a meeting and we pitched. I look back and all the pitches I ever gave a company on how we could add value with a small fund and a lot of co investment.

Spotify is what it’s become, but they’re like, yeah, we could use the help. Very humble, very nice people. They introduced us to a gentleman named Johan Burkus who was at the end, I think, the treasurer and then went on to Bolt where we also became an investor in the EU ride hailing business. And before we left the meeting, they were like, do you think you could buy $150,000,000 worth of stock? And I said, sure. And I didn’t have the money because we were in the process of raising the fund and I think we had, like, close on 125,000,000

Yeah, by this time we did due diligence, we’d written a memo, and You know?

Mosaic theory. So most of the early stuff had to be Mosaic theory because companies, Intel really Spotify, so the early wins are gathering data, trying through public sources, but it’s not really available. You’re trying to gather through contacts and putting as many feelers out and then sending all this information to what became our own research team to develop a thesis around it. And then the Trojan horse became the check to get the info. So in that land and expand strategy that we run, as it’s developed often, that first check is kind of that Trojan horse.

You like it, you’ve done some Mosaic Theory work, you think it works, but you don’t really know, you go in. So we go in, they give us a whole deep dive on the business and it’s amazing. It’s like nothing I ever could imagine. It’s nothing I’ve seen before.

At that time, the penetration of the usership in Sweden was like 25% of the population used it. That’s amazing. 25% of the population used the product. It’s already cool because you’re using it and of course Apple Music and I think the Beats and Tidal and all these, you know, SoundCloud, all these competitors. But what they divulged to us in that one on one personal meeting after saying no to us for six straight days was the fact that the record labels were also investors. That to me was like, this is like Napster on steroids.

And it worked. And obviously they went on to create amazing shareholder value. It’s one of the best businesses we ever invested in, and we had $150,000,000 to go find. So what do you do then?

Yeah. So the way that the transfer process worked on that business is pretty interesting. It actually gave you time. So you signed the documents today, it took like sixty days to clear. So we had, like, let’s say 25,000,000 ready to go. Awesome. Concentrated position on a $300,000,000 fund. We’re gonna start. Let’s do We had 4,000,000 they said yes to. We’ll take another 20 five. So we went out and went on a world tour with our thesis. Spencer and I, different countries.

We had sixty days.

And we got to day 59, and we had sent a 141,000,000 to one of the earliest investors, very predominant Norwegian fund. We’ll leave their name out of it. Awesome founder of that fund who is an iconic pop star or sorry. Metal heavy metal star in in music in his own right. Very serious guy. And we have a $141,000,000 we’ve sent him, and the roofer ends. And if we don’t send him the $9,000,000, the deal blows up. And I don’t have $9,000,000 to my name. So I borrow it from him.

You borrow it from him? Have all the $9,000,000 from him.

the 9,000,000, but if you lend it to me, I’ll close and I’ll pay you back.

that pleasant, Harry. But it worked and God bless my wife. She’s like, do you love this business? I’m like, it’s the most amazing business I’ve ever seen. She’s like, well, do you, how do we figure out how to own the 9,000,000? And we figured it out and that 9 turned into a very different number. And that was the life changing event for me. Spotify buying into our business model. We then went on to become a top 10 global shareholder of Spotify.

Went as far as to putting up signs in their break room, we’ll buy your shares, buying all these odd lot transactions along the way and built a huge position, and it ended up being like a billion dollar outcome to our LPs. 40% of my third fund went into Spotify.

380,000,000. It was a lot of money. Very concentrated risk. What price is it going in, just kind of give or take? Yeah. So in many ways, we did it at the time in which it was perfect because you had Adele announced she was leaving the platform. You had Apple Music taking market share and you had Taylor Swift saying, I want my library off. And Daniel Ek came out and I think one of the smartest things he’s ever done and he agreed with the artist. He said, I have your back.

I understand why you pulled from our product. You’re not the issue. And the record labels had an option to buy more shares and they executed the option to buy more shares. So to me, that was like there’s this moment where we can triple down. Nobody else knows this information. You buy from all the people who are scared to death and you do the counterintuitive thing and you take the bet. And we did and it worked and we bought at like a 50% discount to the current financing round and we just kept buying it there for the next two years.

So after the 150, you kept buying? Yeah. We kept buying. So we pooled a bunch of money together. Some of it we were able to put into our fund. Others, had very prominent, very, very prominent logos come into our SPVs to buy the stock because we had we’d locked in the access. So you have this journey. You start, you’re just hustling, you get to 35,000,000. The second fund was 36,000,000 raised in a year. And a million increase. Yeah. 1,000,000 increase. Yes. Fewer investors. Thank God. And then you get to a $380,000,000 pool of capital.

And in that, you take a lot of concentration in in Spotify. But on top of the concentration we had, we did another 700,000,000 in co invest. In Spotify? In Spotify.

Yeah. I know. You’ve got pool. But by the way, that fund also had Lyft, Uber, SpaceX, Instacart, Impossible Foods. The list goes on and on of companies. Because of Spotify’s acceptance of our model It opened up the door. It opened the door. And Johan Burquist and Peter Grandilias, they’re the two people that have made probably the most direct impact to my life because they trusted that we could do it. And they put their names on the line to Daniel Ek that we could actually achieve it.

And then we went and and somehow, you know, Spencer and I Spencer, poor guy, got shingles. He literally got shingles. He was, like, 23 years, four years old, got shingles. You never hear

I mean, it’s it’s an amazing business. It’s truly amazing.

Often in our thesis, we’ll back two businesses trying to attack the same thing. Lyft and that fund became the value play, and we sold it. Did you make money? We made a ton of money on Lyft, we lost money on Uber. What? Yeah. Well, how does that work? When Uber chose to go public, it was a tough time. Today, Uber is valued off of gross profit, which is I think a good metric for them. And I don’t think when it went public, it was rewarded properly.

In our business model, we don’t hold. Rarely do we hold post public. Oftentimes we sell before they’re public. And as it went public at the price it did on a converted basis, we were underwater. We lost we lost like 20¢ on the dollar. And Lyft, we made like a three x.

I don’t know. $50,000,000, probably.

Yeah.

We sold most of before the IPO and, you know, we won’t talk about the names that buy, but you’d be surprised. I think one of the issues with Silicon Valley, one of the benefits of being in Chicago is isolate ourselves a bit from the herd mentality. Sometimes it’s like sheep. They just jump one on after another and they buy more stock and things that you see that you should sell. And it just takes one brand name to jump on board and 10 others jump on board.

And we just kept selling our Lyft stock to others. You know, I get why they did it. It was a value play compared to Uber and it went on to work for them, but we made our multiple and went home and distributed the cash.

Yeah. That’s something I’ve spent a lot of time in the last few years trying to figure out because 2021, all rationality left the room, 2020, 2021, and and us, like everyone else, just kept deploying capital.

Everybody left the room. Think, you know, you wanna And

Yeah. A few things about that period that is the rationality leaving the room that you wanna protect yourself, Guardrails are important. A good friend of mine, and I know you had him on the show, I’m a huge fan of what they’ve done, Mitchell Green. Best things in life are copied in some ways. You know, he has his lead edge eight. We have our G Squared eight. Sorry, Mitch. We kind of borrowed it from you. Is it the same? It’s not the same. We had to really adjust ours after 2021.

It had holes in it that were exacerbated. What

you adjust? Too much qualitative. Too much my gut, my feel. Too much who else is in the room, too much the soft stuff that venture capitalists and growth managers like to pride themselves about. And our strategy has to be about the numbers. It has to be cut and dry, cutthroat, does it work financially or not? Because at our stage, unlike yours, it’ll always envy your seat because if you pay 50 pre or 100 pre, if it’s a good business, you’re still going to make a five x.

A 10 pre, 50 pre, does it really matter for you? Maybe. For me, is it $3,000,000,000 or $2,500,000,000 You walk that forward, I can’t make my 2.5 x net in a five year period if I miss that. Now I get an

Yeah. I think that that’s in a shorter thesis. You’re able to play that game. And that’s one of the benefits to our thesis is yes, as long as you don’t get caught at the end of that cycle, which happened in 2021. So our earlier vintages were selling into it. Like it was happy days. Did you just offload? Oh, just massive amounts. I mean, we made ridiculous sums of money for LPs in that period, which set our business up to be able to survive a bad vintage.

And we’re working our tails off, our asses off on our 2020 vintage, but it’s hard. When you’re

Yeah, I think LPs are happy. It’s also their expectation. Looking for a pat on the back because you did your job is something I talk to our team a lot about. Yeah, it’s a big win, but hey, we also lost $400,000,000 of their money over here. Yeah, we made them money, but look at these losses. How can we lose that kind of money? I think keeping our team focused on that and reducing the amount of mistakes because in a short fund life, liquidity is already hard.

It’s really hard as a fund manager, as you know.

Yeah. With some levers, we can get it a bit longer. But, you know, for the first time, we’ve had to pull one of those levers and it really guts me. Is that a mistake on

behalf or is that a changing landscape? You are what you become, so to speak. Yeah. Are there businesses that I would love to take a ten year horizon on? Because I think they’re amazing companies. Yes. 100%. But that’s not what our LPs have hired us to do. They’ve hired us specifically for this North Star DPI statistic that I’ve pitched them on and our team have pitched them on it for fifteen straight years across They seven

I I even if I would’ve held Palantir for three more years. I mean, who knew they would go on How much more

God. You listen, Harry. We would be having this podcast in my bubble in outer space. But is it, like, two acts more? Or, like Oh my god. No. It’s like I had an LP, long time LP, first vintage. Been back every time. I was talking to him the other day about the difficulties of our twenty twenty vintages and the lessons learned and how I’m more energized today than ever before and how, you know, we’re gonna make it up in spades. And he said to me, you know what, Larry?

You get a free pass on that one. You made me because I distributed the shares to some of our early funds. We distributed shares. We no longer do that. We just sent cash. And he’s like, I held that Palantir stock. And I’ve been investing in every one of your vintages from the proceeds of my first $50 I gave you. So it just gives you a perspective. I think we made a three x on it and sold it at $9 a share.

Oh, I don’t know. I try not to look at it because it’s one of those things, you don’t want to inflict the self inflicted wound of the pain, but I think it’s, I don’t know, it’s $80.90 bucks a share Well, or

Yeah, look, think the answer to that is we’re doing what we’re hired to do and that is to generate the velocity of the capital for our subset of LPs that’s not for everybody. Our LPs are looking for an ability to play the fastest growing, most dynamic technology companies in the world and they want to get in and out with optionality of their capital to give more to firms like yours in every five year period. So if they back to back funds of ours, they make a Forex cash on cash return in ten years.

But they have the optionality of it. And if you have confidence in the mousetrap you’ve built, Forex in ten years, cash on cash return

Yeah. I mean, when your North Star is a DPI figure, there’s no hiding.

And I’ve talked a lot about this openly to our LPs because I take pride in going around the world and we have 60 countries and six continents of LPs. It was smart in my opinion when I started the firm. It’s difficult now. The main mistake we made was believing our own bullshit. Cause coming up to that point, we had some of the best returns in our industry. We were raising money. It didn’t, we just, to put the flag out there, it was hard. We go around, raise money.

Co investment, raise money. Life changed dramatically for my partners, myself, our team. Just had shipped back 2018 vintage fund. By 2020, we had the DPI to almost one. Oh yeah. Airbnb goes public, make a three X. Coursera goes public, make a three X. Sell our SpaceX stock privately, make a big return. Impossible Foods make this huge return. Impossible Foods?

we’ve made a killing.

The herd mentality. I mean, I think that it’s all products of the time you’re operating in. You go back to that period, Impossible Foods was a big deal. People made a ton of money on that, Beyond Meat, and what was the other one? That egg company?

look at the big wins that where the market cap goes in a bad way is we were the largest shareholder of Coursera through our strategy. We owned 16% of Coursera when it went public.

We sold the stock at $36 a share and it’s at $8.800000000 dollars back to LPs on Coursera. $800,000,000 back to LPs on Coursera. That’s part of the strategy where you get the concentration. And the law of large numbers actually works and it’s easier to manage a fund on liquidity. But getting into 2020, the mistakes we made, so you had all these exits. Toast was our largest position in that fund. It’s trading at $76 a share. Mitchell Green and I did Toast together. It’s like you’re popping champagnes around the office.

You’re like, this is we’re so smart. We’re the fucking smartest people in the room. And then I’m on a ski lift in Montana, and I’m looking at, unfortunately, and I’ll admit it out loud, Yahoo Finance. It was before perplexity. It was before perplexity. And I’m like, wait a second. Toast is $76 a share? What the hell? How is it? $76 a share. It’s a great business, but $76 a share? Woah. At the time. No. Toast is an amazing company. Right? Revolutionized in the restaurant space. And by the way, saved tens, thousands, hundreds of thousands of jobs in because of the way they pivoted during COVID to help restaurateurs.

An amazing business, great founders. All that being said, it wasn’t worth, as a public company, that price. So to me, that was kind of the canary in the coal mine and I started freaking out because we just deployed $900,000,000 between, you know, beginning of COVID and 2021. To your point, jumping on board with all these primaries and secondaries, ah, we’re super smart. We can do some primaries too. So what was the realization when you saw to sell? That, that I have a problem in this vintage.

We’ve overpaid for all of it. All of it we’ve overpaid. Go to the team and a lot of them aren’t with us anymore because we went through a, a kind of identity crisis and said, listen, I had went through a period where I wanted to believe that our firm was more than just the co PMs and Spencer and myself and that we could do a traditional model. Because we don’t do that. We deploy the capital between the two of us. We have a research team that support us.

It’s more like a hedge fund. It’s quick decisions. But at that period of time, we’re like, Hey, we’ve made all this money. We’re growing our business. LPs are coming aboard with big checks. They want to chase MOIC. They want to chase TVPI. Right? We have to have a thesis that’s a bit longer. Seven years, not five. So let’s divide the capital up amongst a bunch of people. Let’s build the traditional fund model because we’re so smart. And you know what? We’re still conservative. So we’re going to pay 12 times last twelve months enterprise value on SaaS.

Public markets are trading at 25. Pat yourself on the back, guys. We’re super smart. Oh, the floor can’t be lower than 10. That’s a historic multiple. Wake up in 2025, the multiple’s four. So when that happened, when a really awesome business, which we made a ton of money on by selling it at the right time and harvesting and they’ve In toast. In toast. And they they’ve went on to create a tremendous amount of shareholder value as a public company. Don’t get me wrong. But when it’s trading at this crazy multiple, I went back to our LPs and said, Listen, we fucked up.

We need to pivot. We need another $300,000,000 because I need to protect this thing. And so we went in and we did structured equity deal after structured equity deal. As that market’s falling and the house is on fire, we’re running in the front door with cash. And we’re going and doing minimum IRR deals. We’re partnering with the super savvy investors and the Light Speeds and the Dragon Ears and the DSTs of the world. And we’re doing deals that nobody knows about, third point, co two. And we’re putting all kinds of structure in where these founders believed their own bullshit.

And they said, I’ll take the high priced top line but I’ll embed structure in the equity. And so that vintage of all of our vintages has 70% primary and 40% of that has structure. For people that

It means you embed IRR hurdles and multiples in the paper. So regardless if you say the business is worth 8,000,000,000 on paper, the company has to generate you a 25% IRR or a 2.5x, whichever is greater. So every day, the return’s ticking and you walk it out now five years, the entire prep stack is totally fucked because we the last money in has this ratchet that’s just eating up all the value. And that pivot and the willingness, I think our team, not just me, the willingness for for Spencer and I to get together and say, what were we thinking?

We have to try to save this thing. Our LPs trusted us with a billion at that point, billion 5.

losses. Selling. Taking a different perspective on multiples and saying, yeah, you have to get the price to 10 x. So you’re going back in and assets you overpaid and you’re using the secondary market as the market’s falling to lower cost basis. So we did a lot of primaries, yes, because we didn’t like the secondary multiple because it traded at a premium during that period. So if you paid 25x in a public company to enterprise value the last twelve months of ARR and a SaaS company, privately they traded at 50.

And so you’re like, shit, the secondary market is overly inflated. The secondary market doesn’t work. My business model is broken. And so you go to primary? You go to primary, you go earlier, you do a that lot of stake the cap? Hindsight, the mistake I made was not having, besides thinking we’re smarter than we are, is structurally in our business not having the levers to pull. Because leading up to then, whatever we did worked and you could get in and out in five years and make a 2x net.

You’re a hero. You just keep raising money and it keeps getting bigger. And your amount, your wealth generation keeps getting bigger. So we’re unstoppable. We’re Tiger Woods in 2001. You you start to create this persona that everything works. And pivoting, it was a lot of soul searching. We had a a a large meeting in Was

Yes. It was difficult because I couldn’t believe that I talked myself into it. Silicon Valley coach. Me, a person that grew up in a trailer, might in Utah, athlete, and I have to have a coach to tell me how great I am. I bought into the whole hook, line, sinker bullshit of the entire problem, in my opinion, of Silicon Valley, and so did our firm. What is that problem?

Losing focus of what you’re hired to do and paying more attention to the lifestyle that comes along with being a money manager and the circles that you roll in and about the deals that you’re doing and the money that you’re managing versus at the end of the day, the actual value you’re creating for your people who have trusted you with their capital and making a difference for your underlying companies. That’s what’s important. Not going to a dinner party and saying, I just invested in Wiz or Anthropic or OpenAI or Airbnb.

That’s the culture, in my opinion, that in Silicon Valley. And it’s people deploying the capital that don’t have the responsibility to sit in front of the LPs to explain the problems. It’s a herd mentality that rushes in. And LPs follow, by the way. LPs follow at the wrong time. It’s very easy to raise money in a crazy market like you and I both did and many other managers did when it’s the wrong time. And it’s very hard. Our 2022 vintage we raised, very difficult to raise.

How big was that fund?

No. 2020 was a billion 4. So you went

Well, the 2020 vintage, we topped that up. Remember, as I was saying, we went back and said, hey, we’ve made all these mistakes. We have to protect. We need more money. And it went from a billion 2 to a billion 5. And the protection there was because pay to play was coming in? It was because we saw that we had overpaid on the first tranche of capital, so I wanted more to combat that with secondaries and also structure. So you hadn’t lost faith in the underlying assets?

No. Some of them have went on to monumental failures that have been well written about, but most are really fundamentally good underlying companies. So when you review

Yeah. That’s the easy answer is wait. If I could do it all over again, I would keep the control tighter to Spencer and myself on deployment. And that way, as we went forward, the only excuse we could have is that he and I made the decisions. We wouldn’t have any excuses. It would be clear that we made the mistakes. Versus, Hey, we tried to do the Silicon Valley mentality and hand out the capital and build teams underneath. Yeah, it’s the G Squared logos that we invested in, but the attribution actually goes to X, Y, and Z.

You don’t like attribution? No. It causes unintended consequences. People want to pat themselves on the back for the wins and deflate the losses or deflect the losses, excuse me. If you want to build a firm that stands the test of time, the logo makes the investment. It withstands any transition period in any leadership role in the firm because the logo made it, not the individual. That’s what we’re trying to build at G Squared is when I look out twenty years from now and say, Where do I want it to be?

I want some grandkids to think about the logo that was built and say, My grandpop built that and it’s still there. And it’s the Jim Simmons 40% annualized IRR for twenty years.

Well, we’ve had a lot. In that concentrated equity portfolio, you’re gonna have some monumental misses. Hundreds of millions of dollars you’re gonna light on fire if you have the fortitude to stick to it. So we’ve got a lot of those lessons to draw

painful? Yeah. There’s a couple. One is Theranos and the other is 23andMe.

So Theranos secondary, the big loss there was for me personally. We signed up to do a secondary, at a really good price, met with management, something didn’t feel right. Don’t know what it is. Can’t say that I was like, oh, it’s a great gigantic fraud. I didn’t know what it was. Did you mean it was Elizabeth? No. The kind of C suite without her. Something just didn’t feel right. We went back and we had a that form I told you about, binding to transact. Oh, no.

One page. One page simple. Companies love it. It’s easy. Things that change on it, name, shares, company, dollar amount, binding transaction. So I ripped it up and I got sued to finish the transaction. And I agreed to settle where I would pay a fraction of the transaction cost, but I did it personally so our LPs didn’t have to go in. What that taught me was before we signed that paper, we better be certain because it cost me a few million dollars at a time where I didn’t have a lot of money.

And I did it so that our LPs didn’t take the loss because that was one of those spider sense moments where it’s like, to yours, you’re saying the risks were tangential to the data? And my wife would say if she were sitting here, she told me that it couldn’t work because she’s an epidemiologist and they collect blood and saliva and you can’t get that much data from whatever. She was the one saying Feel the magic. She’s like She was sick. Yeah. She’s like, That doesn’t work.

Long story short, the spider sense came up, going through negotiations to get out of the contract, and then some of the material started to come out, and we were just like, Hey, we’re not doing it. And And then actually, don’t think it was formally sued. It was threatened to be sued and I agreed to settle it out of court and gave them a couple million dollars to go away. And obviously it went on to be, you know, one of the more notable frauds of the time.

But that was painful for me. That was bad process, bad outcome. Sometimes you can have bad process and good outcome. Sure. But what that taught me was you just need to have a good process. And if the outcome is bad, okay, that’s fine, which is 23andMe, which we’ll get to. This was bad process going in. This was jumping, trying to jump on board, play the elasticity and pricing and follow the herd.

No, it wasn’t. Did

To me, I was chasing the discount that was available and the thought that if it just traded at what the last round was, I made a lot of money. On the secondary side, that’s what you’re chasing, right? You want to get that disc value of the discount and that you could get it in bulk. I should have seen, I should have seen a lot of warning signs. That was a tough one to do due diligence on. I would say that added a lot of our check boxes that we now have to make sure that we don’t make those mistakes again.

And we really averted a massive issue in our business by doing that. Massive. What was the check size gonna be? The agreement was to buy about $50,000,000 of stock over, like, four months because because I’m still raising the fund. Anyway, we got out

Oh, it’s catastrophic

Hopefully, she doesn’t listen to this, although I’m sure she will. Oh, she will. Don’t say that out loud because she’ll say, see, Harry’s right.

Yeah.

Yeah. You go through this phase of building a business where you feel like you have some allegiances to some of the people that helped you get there, right? So you have other And you’re investors too far in. And you’re too far in to say no, and you know you shouldn’t do it, and we’re humans. First mistake on you, second mistake on me. The one that’s probably from a financial perspective the largest that hurt, there’s two really, is 23andMe and Getir. 23andMe, not selling, That was my mistake.

First investment, 23andMe in, I think, twenty six, twenty seventeen. Really bought into the business model on the consumer side. Loved it. Enjoyed interaction with Anne, really bought into what she was trying to build, she really embraced our model to be helpful. And I was really taken aback by what she was doing and believed in it. And we built a large position in our 2018 vintage fund. I think it was the second largest position in that fund. Co investment, we have maybe had 50,000,000 in and and LP capital, maybe 30 or 40,000,000 in during the SPAC craze, you know, pair up with sir Richard Branson.

Like, what an iconic pair. Right? You got Anne Wojcicki, who’s who’s a fantastic founder in my opinion. Not maybe a great public CEO, but awesome founder and visionary of what she wanted to build. And the ability to go do it, amazing. Richard Branson on top of it, awesome. Let’s go. Put gasoline on it. Trades 10, goes up, we can start selling at 7, which would have meant about a two X. I think I sold the last share at 70¢. That’s me chasing multiple and that’s a problem in our strategy.

You need guardrails in that to protect from Larry chasing multiple.

Yes. Dollar cost average out just like you dollar cost average in and just start getting liquidity when you can privately and continuing it through when they list. Liquidity’s hard. How big

In total, probably a $100,000,000. $100,000,000. And you said you can do it two x? Yeah. And instead, lost $70,000,000. The LP’s cool about that. No. The pool of the capital’s awesome. It’s just, you know, don’t What

Toast. Yeah, Toast. Awesome business. It’s like 3x net and started in 2018. During COVID, Mitchell and I talking about it, Mitchell Green and I saying, These people don’t get it. Let’s buy a bunch of secondary. Yeah. Awesome. And, man is now here. Also, Asana too. Teamed up. Mitch and I teamed up on Asana. It was fantastic. It was just like you’re conquering the world, you and your buddy buying stock, people running out the front door because their house is on fire during COVID and us running in with capital.

It was fun. What

Getir is one emotionally for me that’s really hard when I think about that good process, good outcome.

We had good process on the first money. Gorillas. The investment in gorillas, we had good process. We had made a lot of money in kind of the food revolution. We were in Instacart. We were in Postmates. We were in Meituan.

Oh, we made a that’s a Founders Fund special, man. We did a lot of work with Founders Fund early. Fantastic group of investors there. I think Peter Thiel’s got more money than God now. But,

yeah,

they were the largest investor in in Postmates. Sebastian Lehman, awesome guy. Spoke at our twenty eighteen LP day. Yeah. We made a three x on Postmates. In how long? Eighteen months. It was amazing. And Spencer McCloud, he was my co PM. He led that deal, and he was like, this, you gotta meet this founder. He loves what we’re doing. He wants to help all his employees. Let’s do it. I was like, yeah. The data looks good, man. Let’s go. And you

Yeah. Yeah. We made a lot of money on Instacart. We sold Instacart privately during COVID. You’re one of the guys who sold it, like, the 25. Yeah. I was like, come on, Sequoia. And the price because Sequoia bought. Yeah. Sequoia make money in the long run on that. They also bought along the way. I mean, Sequoia’s business model is fantastic. We have a lot of investments in common. Their partners are awesome. There’s few evergreen structures I’d ever invest in. There’s just one.

Okay. Funny story. Personally, you know, you have experiences with companies, very frustrating experience with Instacart during COVID, where it went from whole foods only pickers and grocery shoppers, which was an amazing service, right? To then having your Uber driver shop for your groceries and try to get a ripe avocado and COVID from your Uber driver. It’s not a great experience. And I remember a point, I’m hunkered down at my farm, the world’s falling apart. I can’t get the order. It just can’t it’s just not right.

And they don’t take it back. You just keep getting stuff delivered. And I was like, it’s time. I just gotta get out. I’m sorry. Wait a minute. So

Yeah. But also for us, the decision to sell becomes somewhat easy because we’re also solving for something that’s different than others. And we’re solving for this velocity of capital. It’s not part of keeping in the middle of our, to use a sports analogy, fairway, don’t chase the MOIC. We make a 2X net in a five year period, cash return, not shares. We stop distributing shares because LPs blame you if they hold it.

No, we’re a point in time problem solver. We’re like the janitor that’s cleaning up the mess. They have an employee that leaves, they’re out there in the market making noise, they don’t want them to take their shares, we get the phone call. You’ve got a fund that wants to show their LPs that there’s value in the extension they’re giving them, we get the phone call to buy a little bit of their position.

You don’t buy a 100% of somebody’s position typically in a company unless they’re on year fifteen of their fund and have no extensions because if it’s a large position in their holdings, in their NAV, and you buy it all, you kind of scratch your head like, well, why are they selling it to me?

That’s relationships and in our business model, the companies and your peers have to see value in what you can bring to the company. Because what we’re after is large concentrated positions. We’re not indexing secondaries, buying with no information, playing the arbitrage in pricing and putting 200 secondary positions in a fund. That’s not what we do. We’re going to have 10 companies make up 90% of our risk and we’re going to become very large shareholders of those companies by doing our business model. And so it requires your peers to say, okay, they do something unique.

They are going to provide value to us by consolidating the cap table. They’re going to help us with employee structured tenders, shareholder tenders. We have an employee or a former share or a current shareholder that needs to leave. They’re going to buy it. And it’s really the barbell of the small micro transactions that nobody cares about. Some of our companies, we’ve built through 50 transactions to get to $75,000,000 and some we’ve done four to get to 200. You have to sell that you’re going back to raising money as a new manager, be different.

Be different because different It’s a

It is. The muscle memory of that is not replicable for others. The back office you have to have, the investment to not just pay yourself and to hire big teams to run it requires the ability for you to know that the actual outcome is the benefit of the carry, not the management fee.

Yeah. That one took years off my life. Good process.

So we made those investments and made a lot of money for LPs. Get into introduced to Getir by one of our excuse me, to guerrillas. We have an office in Zurich, and we have a a team of about 10 in Europe. We’ve been here since 2017. Say, hey. You gotta meet this company in Berlin. When I’m there visiting, we had a bunch of portfolio companies in Berlin at the time. Met the founders, and the business was growing like a weed. This

No. This was Gorillaz in Berlin. Oh, this was Gorillaz. So we were acquired Gorillaz was acquired by Getir. Yeah. Wasn’t a good deal, was it? So for a group of shareholders, we were a part of helping structure alongside of five others. It actually was a good deal. We actually got good value for our money. Did you get cash out there? We did get a little bit of cash and we got most of the preferred value in the transaction. So four or five shareholders of Gorillaz received, of all of their shareholders, received the majority of the preferred equity that we received from Getir.

So in a good place then, fine. Getir valued at $10,000,000,000 The next three years were some of the worst of my life. Why? Seeing that we needed to then try to protect that money with more money and then get involved with the board and do the heavy lift of restructuring and battles with the founders, and we’ll leave a lot of it out cause it’s still ongoing, but it was really hard and my the mistake I made was the second tranche of the capital.

The total first was, I think, was like $50,000,000 in total between secondary primary. We got that plus sum and value of Getir, and then the next check was a $100,000,000 to restructure that equity to pull it forward. So you get 200,000,000 of risk total, a lot of LPs in it with co invest. Of course, everybody during that period signed up for. You just put it out there and Dude, the co invest is crazy. It nuts in 2021 and and and created a lot of unintended consequences that we can chat about, but and different from our normal co investment model, which we went back to from that period.

But, anyway, the long story short was, I think the major mistake I made there was not willing to just walk away. After the first check. After the first check. The fight that when you grow up in, like, severe poverty, you’re fighting with your siblings for everything, you’re fighting at school, you’re fighting for food. You’re fighting the world. You’re fighting. You’re fighting. You’re fighting. And as you grow into business, that doesn’t leave you. It subsides a little bit, but there’s many people in our industry that have backgrounds like mine, and you don’t stop fighting.

Is it a blessing or a curse? It starts to become a curse if you can’t manage it. Because in that scenario, my thought that I could fight and will the outcome, little o g squared amongst giants, it was like you were you were a dead man walking without knowing it. You were just you were already dead. You just kept fighting. And making sure that we don’t make those mistakes again are important. And that’s where guardrails, other people with voices in your firm

Yeah. Hindsight, it’s easy to say it’s obvious. I’m sure to many looking at me and watching from afar, was obvious for You

still hold it. It’s now a business focus in Turkey, and lots of great people in the business working. And I’m still on the board, so I’ll be careful with some of the things I say. Because it’s a major,

I think investors would say one thing, founders would say another on how it became a global kind of strategy. I think the mistake the company made there was it left Turkey and didn’t focus maybe on other markets that were similar to Turkey from an employment cost perspective. Look, today, it’s still operating in Turkey. It’s a big business. You’ve got a lot of sophisticated people from Mubadala in there working with the business. You’ve got people inside the business that want to win. You’ve 10,000 plus employees that are working hard every day, trying to create values for their family.

For me as an investor, I lost a lot of money. Why I’m still involved is because those people that are commuting, in some cases three hours a day to work in Turkey, you know, they deserve a good outcome. And that’s the piece of our investing. As a secondary investor, you often don’t get that granular involved with and we do it with a handful of companies. Unfortunately, typically when they have issues that you’re trying to save. But yeah, it was a very hard journey. How much

Well, there’s kind of the numbers you can quantify and then there’s the dollars that you lost from a fundraising perspective for your next vintages from LPs. Because you lose that current versus

Depends on how you structure your co investments. In that case, from that fund, my guess is those decisions we made cost our partnership probably a $500,000,000 of capital between capital actually lost and investors that you can’t bring back. It was a monumental miss on our part.

Yeah. And try to over communicate. A lot of LPs because of that, have come back, and now they’re Does it make you

Yeah.

So kind of going through our co investment process, in the early vintages, let’s say vintage one through four, in some cases we were four times co investment to fund investment we Four times co Yeah, but here’s why. Because the type of companies that we were interested in investing in, we weren’t large enough to make a difference. So if you want to run our business model, need capital, a lot of capital. Just to get in the door. Just to be able to solve the problems that they have, to your point of being relevant to the ROFR.

If all you can do is onesies and twosies, and you can’t write a $100,000,000 check when they need you to do it on the secondary, they go find somebody else. And when they turn that faucet on of shares, when they buy into your strategy, when Daniel Lux says, Hey, you guys are interesting to us. Oh, by the way, here’s $150,000,000 worth of stock. If I say no and it’s at a good price and he picks up the phone and calls somebody else, it’s gone. You’re not getting that opportunity back.

With our strategy, you have to have scale. So is the co investment in the early days was a significant part of our strategy? Over time, it’s more normalized. Today, it’s about on a billion 5, it’ll be 700,000,000. It’s still a lot. The mistake we made in twenty twenty one vintage or twenty twenty vintage is we didn’t just do co investments around our core positions. We had LPs coming to us saying, Hey, I built my fortune in, let’s say, wellness. I like health tech companies. You’ve got one down here in the land.

I want to buy stock directly. And we felt at the time, hindsight being twentytwenty, it was wrong. We felt at the time that we were enabling our business model to help them achieve what they wanted by being an LP of ours.

Yeah. Until it doesn’t work, and then they blame you. So you should block them from doing it. I wouldn’t so the way we run it today is the way I think people should run their only in conviction. When your funds are investing alongside of it, that’s when you do the co investment. You don’t do it the way we did it in 2020. You do it the way we did it today. Our 2022 vintage fund, there was a billion 2 in size. The co investments we ran are our top 10 positions.

A couple LLMs, the high flyers, companies like Fanatics, Wiz, Databricks, Turo, the Airbnb of cars, Monzo, companies like that, where there’s, you’ve already decided those are your core positions. And then they make a bespoke portfolio of additional exposure to them in equal weighted size. Why are you in Monzo? Value play to to Revolut and TS is fantastic. I think Revolut is the general We were in Revolut in our 2018 vintage fund. I agree with you. Amazing business. Did you hold it? Yeah. Some of the stuff we can’t really talk about holding it or not in in the live positions, but I just look at it now, and I’m like, fuck

This is a 500,000,000 have it in our twenty twenty eighteen vintage fund. It’s made an awesome return for that vintage. Today, for me

Yeah. Well before. I think four megatrends for us, fintech is one, and we had good success coming off of SoFi, the founders of SoFi, and now the current management really believed in our strategy, and SoFi was actually also in our 2018 vintage fund. Yeah, that fund, man. It’s just crazy what was in it. And off the back of that win, and then we had early N26 before the growth restrictions. Did you sell? No. No, we didn’t. We didn’t sell. They’re working their way through some things and and looking fairly okay right now.

And they’re doing a really good job of managing through the the stress they had in the business and now more of a focused in Germany versus kind of a continental play. And then we had Revolut. What a what a great little pool of companies. Right? What

Revolut went like a hockey stick, man. So, yeah, in our strategy, you need, like And so you’re like, I see Revolut. You’re like, is it I’m gonna go into Monzo? Well, Monzo is a later vintage.

So,

yeah, Revolut’s in our 2018 vintage where sometimes and we have them in every vintage, you know. In our current vintage, we have Chime. Awesome business. Built believed in our our business model, but it went so fast that you can’t build with over time, dollar cost averaging in through lots of transactions, you can’t build a scalable position if the company goes from zero to a 100 in no time. You know, Wiz was very short for us. 20 their current vintage, we did it in three years, but it was only because it started with the back of the downturn.

We caught it at the right moment. Normalized scenario, we would have never been able to build this position in Wiz because it would it was a hockey stick from day one, but the capital availability even to the best assets in the world wasn’t great for eighteen months. What price do you get into months at? Oh, sub 4,000,000,000. Yeah. We’re not solving for what you’re solving for. You have to be TS is great. I really like that. TS is a great operator. I understand. Great guy. So I think what you have to build a portfolio across the four megatrends for us, the way we look at it, is you have to diversify that risk.

So you have SaaS, you have fintech, you have consumer internet and mobility. And so what we do across those is we try to build conviction positions pretty equally weighted across those megatrends amongst 10 companies. And so for every Anthropic you have, you have to balance that with a fantastic business in fanatics, which is more of a traditional, like last quarter, talk about growth. I mean, the business is fantastic and it’s at scale, massive scale, billions of dollars of revenue and hundreds of millions of dollars of EBITDA, like a massive company.

Michael Rubin owned pretty much significantly owned sports apparel merchandising business. You balance that risk. Cause what we’ve learned over time is you can’t just play the momentum because you can get burned. And that’s chasing multiple.

to the leaders. It’s easy. Go to the winners. Cap, what’s what’s what’s holding back the next generation of the LLMs to get to Anthropic and OpenAI scale? In three years, who’s gonna rival them?

careful. They’re your blood that pumps through your heart.

Yeah. You and Spencer McLeod should start a fund together. He’s amazing. He’s my co PM. He believes the same thing.

Poor Bing always gets picked on.

Have them call me. I’ll buy all their shares of Anthropic at $61,000,000,000

all day long today and twice on Sunday. Are you serious? 100%. Even though the dilution is so intense. See, now you’re talking like an early stage investor, Harry. I don’t give a shit about the dilution. Why? I care about the price I pay in dollars and the price I’m going to sell it at in dollars. I am focused on DPI, not MOIC. I don’t care about the dilution.

A lot. And I’ve got appetite for more. Same with OpenAI, same with Databricks. Wiz, holy shit, what they built was amazing. We hosted them on our LP day. Half the things they say, I don’t even understand what they’re talking about. Scares the shit out of me, the world, after talking to the three of them. And what’s out there? But man, did they build? How they did that? By the way, they also sold a business to Microsoft together and made a bunch of money and then said, hey, yeah, we’re well healed.

They’re humble people. They’ve made a lot of money and some of them live in like a one bedroom apartment in Tel Aviv. I went to see them in Tel Aviv, Went to see a bunch of companies. We’ll leave the other ones out. Couple of them wouldn’t even see me. This is after I managed 5 plus million dollars. And Wiz guys welcomed me in, gave me a sweatshirt. How you doing? I’m like, oh, by the way, I wanna land in your company. You’re raising like $500,000,000. I wanna give you like $3,000,000. $3,000,000.

They’re like, know, that’s a little small, Larry, but we like you. Will you settle on 9? Sure. I’ll give you $9,000,000. That’s how we started. And we then we want to build a $200,000,000 position. It’s it takes that buy in and so you go back to Anthropic and the others. We were fortunate enough during, you mentioned FTX earlier, to be awarded during the bankruptcy a bunch of stock. We bid on it. We went through the whole process, bid on the stock, bought a big chunk. The company is, in my opinion, is unstoppable.

That and an OpenAI, they’re just the beginning. So how do you play the space? You go to the winners. Because I have a shorter thesis. How many winners are there? I think I think the LLM space is challenging for new entrants, and it’s because it’s time and capital.

Don’t

I mean, I think for us, our view is take a few concentrated bets in the foundation models and the winners, and then let’s play a bit of the picks and shovels. That’s why we have Lambda. We also had CoreWeave. And then on the business models themselves, let’s play a a scale AI and software to help them scale on the hyperscaler side and focus the balance of our capital on our other megatrends where AI has been embedded into all businesses. So you have exposure to throughout cyber and SaaS.

You have exposure to it in fintech. You have exposure to it in consumer. Companies today that are created without AI embedded in their DNA, like, why? Why would you do it? If you’re not going to if you don’t put it in there. The challenge you have in our industry is you have vintages of managers who invested basically for the last twenty years, many of them without liquidity, and most of their businesses don’t have AI embedded in the DNA of the company. And so they’re chasing now.

You have incumbents that are large. There’s two types of companies that were that big and private that aren’t in AI. They’re kind of we talk internally, we call them vampires and zombies because they’re massive, many of are profitable. They have to now implement AI in their business models and you have some that are gonna get out of it and be okay, and those are the vampires, and the zombies are dead.

It’s hard. And it’s companies are going through I

No. And then, by the way, layer some secondary on, lower the cost basis, and you have you can make a five x in three years.

Yeah, no, it’s a great idea. Think that there’s long in the tooth companies from twenty fifteen vintages.

years. Yeah, think it’s hard, Harry. I mean, liquidity is hard. The one thing, and you asked me this question on our walk, like, what do LPs think they know that they actually don’t? Yeah. And I would say how hard liquidity actually is for us, All of us. It’s really hard. And that’s why the DPI numbers are so low. It’s not because people don’t want to make money for people. It’s because it’s hard. It’s just as hard as getting into the best deals. It may be harder to get out.

Yeah, today I think there’s a handful of liquid private companies basically. They’re quasi liquid. But at scale, Small positions, yes. Because

move a billion dollars of Anthropic.

That’s that’s that’s the that’s thing. That’s the classic sell you know, sell your dogs and keep your winners. And I think it’s it’s actually the it’s somewhat of the inverse is you have to be able to willing to sell your winners to have a sustainable business model and to generate the return that will will actually drive your Harry’s fund forward. What has

Early Wiz and probably early Spotify, both of those were and Bolt, the early ride hailing, it’s yet to be determined, Marcus Phillip business. We were the first institutional money from the North America in that business. Those first investments we made in all three of those are probably 10x.

Which Bolt?

it was $20 a share or something, and sequated it at $2.60.

no. But we had come off, in fairness to us. We just came off a great outcome in Lyft. We didn’t know yet what Uber was going to be. I was going through all the challenges around the transition of founder. Johan Burkwist, that was at Spotify, called me and said, what do you think Lyft and Uber? And I gave him my opinion on both and he’s like, Well, there’s this small business out of Estonia that I’m going go be the CFO at. And, has been our single best investment we’ve ever made.

Spotify, early investment that he trusted our business model in, let’s say eight to 10 X. Bolt, yet to be determined, but let’s just assume it’s somewhere between 50% and face value of what Sequoia paid. It’s six, seven X. And now it’s a big business. And Marcus has been phenomenal. Young kid building that business. Thesis was, well, I’ll go where Uber’s not and do it profitably because I don’t have any money.

relative what’s well. But, yeah, go

Money doesn’t make me happy. Money makes my life easier. Money makes your life easier. Complex in some ways.

When I was growing up, I thought if I could just make $5,000 a month, I would be set. If I could just make $5,000 a month, own my own farm and farm it, and that’s all I wanted to do. And then I spent twenty years trying to get away from the farm, and now all I want to do is go back. But, money doesn’t make you happy. I think it makes your life complex. How you handle that money is important. What do

Yeah. I think that’s a good goal, Harry, and you should try to maintain that. It’s very hard to maintain that. For me personally, my journey has been about not having that fear of going back to the powdered eggs and powdered milk and the government cheese and that fear that it could happen again and setting my family up so that my children won’t ever have to go through that and generations won’t have to go through that. That’s been my desire. Now that we’re partly there creating that, I would say I’m in the probably middle innings of doing that for where I want my life to be.

Reminding yourself of where you came from constantly is important because it’s easy to be around people in our profession and just in general in life as your financial status increases, the people around you change a bit. And I think that pull to be more like everyone is there and maintaining the thought in your mind that this always hasn’t been what your life is and being thankful that it’s here without losing the edge. The most difficult thing to do as you start to make real money, regardless of how you define that, is keeping that edge that got you there.

And I think you see that across sports. I think you see it across business. I think you see it about high performing CEOs.

I think keeping the edge for me isn’t about either of those things. Keeping the edge for me is the chase of the next win. And that no matter what the dollar amount is, that the win is what gives me satisfaction. And the loss is what hurts. Like, I spent a lot of time talking to you about the losses because that’s what I can remember mostly every moment of those, and as an athlete, I remember all the failures.

Yeah. Immunity to losses would be nice to say that you should do that because maybe you’d be happier, plus the money. Maybe you’re like high on life. Yeah, I think some people can. For me, it’s, I think, ingrained in my DNA that I don’t want to leave. I don’t want to know who that Larry is. I enjoy the fight. I enjoy the journey to win and everything in life. I want to win.

Building something that then you don’t realize that people outside of your small sphere recognize as something positive and that is something that you’re randomly faced with. Like, this conversation for me is, I’m a huge fan. It’s like sports radio, longtime listener, first time caller. You’re a young guy, but you’re super successful and you have some of the most amazing people in our industry on the planet sit here and talk to you. And to think that I’m sitting here with you telling you my story is for me very humbling in the fact that you’re even interested.

And I think that piece of building a firm and staying focused on the logo and not me individually has led to this moment. And that tells me that we all, for all of our flaws, which we have many, there’s something in the water at G Squared that works, and we’re gonna keep grinding and doing it.

I I look at, because of my background in sports, who do I admire? I think the longevity of, like, a Cal Ripken Jr. In baseball who basically for sixteen straight season didn’t miss a Major League Baseball game. Major League Baseball plays a 160 games a year. For sixteen years, from the time the guy was 22 to the time he was 38, didn’t miss a start. You know, people talk about records in sports and, you know, all of the high flying athletes that people recognize and their accomplishments.

Here’s a guy who was a grinder, played third base, hard position to play in baseball. You know, I know you’re a cricket guy, but study it up. Sixteen years, not miss a game. Of course, he’s in the baseball hall of fame and celebrated in that way, but a good player, not the best. But the grind that that must have taken for him to do that, just to get to the major leagues as not being the most talented guy, and then to play and not miss a game for sixteen straight years, for one team, and thirty eight when he retires, that to me, we talk about our 20 mile march every day at G Squared.

Like, it’s a 20 mile march, rain or shine. We’re marching 20 miles and we’re gonna make progress. That is a different kind of intestinal fortitude in a set of massive steel balls that you just don’t get in generations today. What that guy accomplished is insurmountable. They will not be another baseball player, in my opinion, in the history of the future of baseball that will accomplish what he did.

It’s it’s the grind and the willingness to have faith and that you can do it and living and breathing the challenge and making it become your identity. And I’m I don’t know Cal Ripken Jr. I can only imagine what he went through, but I imagine it often. Waking up at 38 years old, playing another random baseball game on a shitty team in Baltimore, like, to go out and grind to make that happen for what reason? He’d made tons of money. Why do it? Why do the early shows where nobody was listening?

Because I loved it. Because you loved it. It and was it was your passion. Still is. And that’s where people should find their work life balance, is when your work is your life, your life is balanced. I couldn’t do this today if I didn’t love it. Yeah. Of course not. Why? Hey. You don’t have to go far. You’re in your house. You can go swimming next door and walk

the park.

I think our people would like me to chill out just a little bit, and if I could be a little chiller and less grinding, I think people at our firm would probably enjoy being there more than they do. The money’s awesome for everyone. People don’t leave. We only have forced attrition. That aside, I spent a lot of time thinking about how to change my delivery at this point where we are survivable. We will have the next vintage. We’re going to have many more vintages. There’s not fighting just to fight.

It needs to be altered without losing the edge and I wish I could change it more quickly than I have. And I think it’s, it’s led to, unfortunately, some really good people moving on that otherwise I would still like to be on the journey with me.

Here in London, guy committed on the spot and said, I’ll sign the forms for $20,000,000. Wow. Yeah. First meeting, said, I’ll do it. Never happened to me before. And it was here in London, longtime LP, with us today. Saw the I probably didn’t even care about the strategy. Just, I think liked me and said, I’ll do it. That was the most memorable for me.

I think fundamentally, our industry is the people searching for solutions to the fun life problem. They’re searching for a solution to it because it’s fundamentally broken, and they don’t want to say out loud that it’s broken. So evergreen structures, interval funds, quasi liquid strategies and privates. Continuation funds. The continuation funds, though, I find a bit more interesting today than they were in the early inceptions because now you only want they will only buy your good assets. So now they’re they’ve really gotten smart. That’s really interesting space right now.

Where endowments miss the boat, and by the way, I’d love to have many of them, we don’t, is I think they chase the wrong statistics. What do they chase that they shouldn’t and what should they chase? My belief is that TVPI and MOIC are not the stats that people should be focused on, and they are. Think they’re fake numbers. They should just chase DPI. It’s the only thing you can use to buy food.

I think I need to continue to grow and be more open minded, in which I have and I have full trust now and a co PM of mine who I think is, is one of the smartest people I’ve ever met and fantastic investor. And he has my ear. I think I could do a better job of having more people have my ear. Like I could listen to more people than I do. And that’s a challenge for me in the protectionist mode, just my nature to be productively paranoid.

And I should listen to more people in their advice that they give me. And that’s just something I’ve worked on for the last probably five years more extensively is gathering more around me, digesting it and then acting versus acting. Final one. When has being paranoid helped you? When does it hurt you? Well, I told you about the Theranos that Theranos that that helped me. That was a productive paranoia and also the productive paranoia of closing and investing. The money’s there, close it, invest it. Money’s there, close it, invest it because you don’t know when the next one’s coming.

And that’s a bit of just my DNA as a human being and how I was raised is that productive paranoia that it’s great today, but the wheels are going to fall off and you have to make sure every day that you tighten the wheels and you have to be focused on the right things. That driving every day, that having that paranoia, matter how good things are and always worrying that it’s going to get worse, across all things in life is

Well, Harry. Congratulations on on what you’ve built. I’m a huge fan, and I think you’re only only in the beginning of what you’re building, and I’m gonna be cheering for you along the way.

Yeah. Let’s do it. Sauna, here we come. Nine Beidenhosen. As