Inside Carnegie Mellon's $4BN Endowment

Thank you for having me. It’s a pleasure to be here. You’ve had some incredible guests on the podcast and I’m honored to be one of them.

Well, let’s dive into it. We’ll dive into the into the heavy and hot. It’s a surreal moment when that happens. You know, I think everyone at that age thinks you’re invincible. I did. And you get that news, and you’re in a bit of shock. Right? And it was so abnormal to me when they told me I had lymphoma. I said, Oh, great. What’s lymphoma? I thought it was like a cold. I didn’t even know what it was. And they said it’s it’s it’s cancer and it’s progressed, you know, quite substantially and and we need to, you know, start a chemo process here within the week.

And so, like, I’d say most all people, I I sulked for about twelve hours, went home, was mad at the world, didn’t wanna speak to anybody. Why me? And and I woke up that next morning. And one of my college football coaches had a had a great quote that that really stuck with me, which was, you know, success in life is 10% what happens to you and 90% how you react when happens to you. And so I took that running that next day. I said, I’m gonna attack this.

I can’t change the situation I’m in, but I can change how I react to it moving forward. And so I basically said, you know, cancer can’t kill me if I don’t stop moving. So I basically started, you know, a pretty insane regimen of of workouts. And when I would go in and get my chemo, that was like my R and R. That was my recovery period. I’d get out. I’d I’d I’d start that again. And flash forward four months, I was cancer free, and I have been so ever since.

Yeah. It was crazy because I I I got in there. You get a scan right before, and then you go into the office. And I waited two hours in the office post scan. Usually, it’s, thirty minutes. And I’m sitting there, like I I might be, like, biased towards negativity. I’m like, it’s it’s gotta be bad news if he’s waiting two hours. And he came in. He had his arms wide open. He gave me a big hug. It was a it was pretty incredible.

Yeah. It’s special. And, you know, looking back on it, you everyone’s know, had adversity. You know? You’ve had adversity in your life. You know, a lot of people do. Everyone does. No. Life is is perfect. But there’s there’s beauty in the struggle. Right? Like, that makes you who you are as a person. Right? And and it builds you into a stronger person. And so the trials of life are many, and and, you know, I wouldn’t change anything. Did it set a benchmark of shit that now everything else seems kind of okay?

Oh, I mean, the the perspective you have, you know, moving forward after that is one of the great blessings of that. Right? Life is an incredible joy and a blessing. Right? And so there’s there’s not many things that can that can take me down, you know, mentally at this point.

From a top down perspective, we manage 4,000,000,000 on behalf of the university. And so starting at the highest level, we think of equity and fixed income as as kind of the two parts of the endowment. 85% of the endowment is equity, 15% is fixed income. That is our allocation. And and we manage to that on a on a quarterly basis. One step below that then is the sub asset classes within that. And so our target is 50% of the portfolio is in privates. That’s a mixture of venture capital, private equity, real estate, natural resources, private credit.

The other 50% is hedge funds and liquids, which the liquids are public equities and fixed income. And so that is the the top down management of the portfolio within that private bucket. We have free rein into the underlying allocations within that. So we call it a best athlete portfolio. So how do we find the best risk adjusted returns globally across all of those different private asset classes so we can have the best risk adjusted return for the portfolio?

Yeah. So we, you know, from a liquidity perspective, we’ve been fortunate compared to most endowments where that private equity book has been self funding the past three years. So our distributions have paid for our capital calls over the past three years. Now, the sub asset classes within that have had much different performance. So our buyout portfolio, our private equity portfolio has contributed the most to those distributions. Venture has been the largest detractor of those, but it’s been self funding. Right? So our private equity book at at kind of that 50% number has stayed relatively consistent for the past six or seven years.

Venture, as the distributions had slowed down over the past three years dramatically, has risen as an average, but there’ve been markdowns over the way as well.

So for us, venture globally is a little less than 25, the total endowment. So almost half of that private equity book. How does that compare to others like you? I’d say we’re overweight venture by call it anywhere from five to 10 points versus most other endowments of our size. We’re underweight hedge funds and real assets, which would be real estate and natural resources. On privates as a whole, we’re right on par with with most endowments, plus or minus five points.

We take everything from a lens of risk first starting off. So when you think about the different, you know, private asset classes there, you’ve got real estate, natural resources, private equity, venture capital, which is a mixture of growth and and and early stage. Know, take real estate for example. You know, you could have a, you know, industrial building that does triple net lease rents being leased to Amazon. Those rents increase 3% a year. It’s a very stable asset. There’s a replacement cost to that to that asset.

Not nearly as risky, and so the returns will compensate for that. It is not as risky of an asset. Right? Venture, picture early stage venture. You know, it’s a $100,000,000 fund investing into two or three people in an idea. Could be a completely new idea. It could be an idea going against big incumbents. The company’s not gonna be profitable when they start out. Probably the riskiest asset class you could have. So you want to get compensated. You need to get compensated for that risk you’re taking within that within that asset class.

Do

Absolutely not. Why not? I mean, we take a very hard look at the data that comes out of the asset class from there’s really good data from, call it, ’98 to today. You look at the, you know, the the the median IRR for the asset class over that time period for mature funds. Right? So so we’ll look at the the ten and fifteen year returns for every one of those vintages kinda stopping at 2016 as that’s gonna be the closest to a mature vintage you’re gonna get.

The median IRR is about 8% net for that asset class, and and and the top quartile, is a bit higher, 15%, but the MOIC is about two and a half x. Right? And the big, you know, the the difference is when you look at that, those performance numbers, then on a DPI number, we’ll stretch that from 10 to 15 year. Top quartile DPI from 1998, fifteen year vintage funds per vintage year up until 2015 is 1.8 x top quartile. And so, you know, when we think about those underlying asset classes and our public equity portfolio, we have a public market equivalent for every private asset class we invest in.

Right? For real estate, it could be VNQ, which is Vanguard’s, you know, REIT index. For our buyout portfolio portfolio, it could be a smaller mid cap value index. And for venture, it’s the QQQs, the Nasdaq 100. And that’s been the best performing PME globally over the past twenty five years.

That’s the million dollar question. I think you need to have a frank conversation with say say you’re a you’re a new endowment or a new family office, and and you say, we want technology exposure. You’ve got two options. You could do that through the public markets. You could do that through the private markets. My question to any new allocator or an investor is do you think you’re going to have access to top decile managers? At that point, top decile, you are achieving returns above the PME consistently.

But below that, even top quartile, you’re not. That is the question. And I think most people clearly by the data, especially as a new entrant to a major asset class, are not going to have top decile access.

A strategy that a lot of people are taking, you know, first time funds and and smaller funds as as the incredible performance of the now multistage venture firms have have they’ve scaled as that performance has allowed them to. We spend time in that space as well, but it is a time, a place that is quite risky. New funds, small funds, and it’s a hypercompetitive part of the market. There’s thousands and thousands of managers, you know, specific seed funds, angel funds, operators.

Mhmm. My my response to that would be consensus seed deals, either consensus founder or consensus idea, extremely hard to plan because the multi stage firms have have all planted a a flag at seed and have essentially said, we’re gonna all these seed funds are our shrapnel. We’re gonna blow this your model up. A much cheaper cost of capital than you, and we can deploy $510,000,000 checks at seed when when the model traditionally was two to three. But if you’re doing nonconsensus founders, nonconsensus ideas, know, those rounds are usually noncompetitive, and and that shows up in price and ownership.

And so I I’d say that’s the question I’d possibly ask.

The true moat of early stage venture capital, the picking skill. And you look at some of the the most incredible companies that have ever come out of the venture asset class. Airbnb, Uber, SpaceX, Amazon, struggled mightily to raise their seed round. So to your question, is there so much capital available at seed today that that’s never gonna be the case moving forward? I hope and pray not as an allocator to the space, and so I still believe there is a a moat around picking, but we’ll see.

I think it’s both.

Oh, weigh it out of a 100. I would say if you are a multistage firm that is, you know, deploying large checks at scale, 70% access, 30% picking. If you are a small and nimble early stage fund that is trying to break into the mold, I’m gonna say it’s, you know, 80%, 70% picking. I’ll flip it. Yeah. 30% access.

I think for us, the sweet spot is dependent, one, the GP skill set and what they’ve done prior, but for us and our commitment size, which at the low end, call it $10,000,000, Anything from at the low end, we’ll do an $80,000,000 fund. At the high end, you know, anywhere from 400 to 1,000,000,000. Right? In that range, dependent on the skill set and the track record of the team. But it’s very much dependent on the people, what they’ve done, what they’ve proven, what they want to do with this fund, and the pattern matching and diligence we can do against that.

Yeah. So the five would be sourcing, picking, winning, helping, and selling. Selling is gonna be the most the new of those five, I think, for the asset class as a muscle as a whole. Do you

Some yes. Some no. You know, Union Square broadly. And we’re not an investor there. We wish we were, but I think they’ve apparently been the best at selling, and they’ve got a very strict protocol that they run through, you know, from years eight to twelve on those funds and with those founders to let them know that they are going to be active sellers. Do you think managers should

We like them distribute cash versus stock. Reason being, if they distribute stock to us, there is sometimes a time lag between when we sell that and when others sell that, and so there could be a one to 2% pricing discrepancy on that versus them distributing cash day one is quite easy. They sell that entire book immediately, and they distribute that to all their LPs equally.

Clearly not. I I mean, I think that’s a pretty easy one. The one thing I’ll say, the reason it got so crazy was the public markets were were pricing growth assets for an eighteen month period at, you know, the median ARR multiple for a software company was 20 times. And if you were a top quartile grower, it was 40 times. Right? And so everyone looked at their models and thought their company was gonna be worth two, three x what it was in in three years. You had public market comps to support your reasoning of holding stock, but that all changed very quickly.

Do

Certain ones, no. We we Who’s the best? Usually, the the the multistage firms think you’re perennial like Excels or Sequoia. They’re they’re they’re taking very aggressive discounts on basically all of their securities, Even if it’s a great company that is maybe achieving even a higher price on the secondary market, they’re still gonna hold that at a at a 20 to 30% discount. Right? But 2021 caused us to create new muscles in regards to underwriting as a group as well. And so for any re up or any new manager we diligence, we’ll look at the top 10 company NAVs within that general partnership.

We’ll underwrite those companies ourselves. And and we will, know, on a rough approximation, determine are these assets extremely overvalued? Are they undervalued? Are they fairly fairly valued?

Look at the data. A top quartile TVPI is is 2.5 x. Top quartile DPI is, you know, 1.8 x.

When I I’ve had a few manager meetings where folks come right out and proactively say how easy what they’re doing is and how great much great access they have in in the great performance that they will have. And that with the market they play is just it’s it’s just like shooting fish in a barrel. And that is always to me, like, we’re gonna we’re gonna stop this call early. Just the the kind of hubris I mean, this is the one of the most competitive asset classes in the world, and and we look at returns of everybody.

Right? So we we see how hard it is, like you said, to achieve, you know, a six x net fund. So that’s that’s definitely a big one.

The premier funds on Sand Hill Road and in in London, such as yourself. Well played. Thank you. You’re welcome.

I

I think there is no systematic sourcing strategy. It’s the partners and the brands are so strong, and they’re they’re so networked in the s tier founder community. There’s gonna be a first call for a lot of these firms. I think if you are doing a more esoteric strategy such as bootstrapped companies in, you know, in Australia or or some of these tertiary in Pittsburgh. Right? I think you can build, like, automated CRMs to maybe track some of those companies that are gonna be off the radar of your traditional Silicon Valley firm.

But I think those more traditional firms, the brand and and strength of the partners, I don’t think there’s much systematic sourcing strategy there.

it’s become such a crowded market. There’s so many alternatives. You’ve got South Park Commons. You’ve got Ali Partovi in in their network. You’ve got YC. You’ve got Techstars. You’ve got a thousand seed funds. Outside of maybe a few like Ali, I think sourcing broadly, and I’m willing to to be wrong here, but I think there’s a lot of luck in sourcing. You’re just hustling. You’re going out. You’re getting emails from friends. You’re getting emails from partners. You’re taking as many meetings as you can. You’re on a call with a Harry, and he’s like, wow, Harry is fucking unbelievable.

I’m gonna I’m gonna dive into this. You know, it’s it’s the magic of venture. Right? That’s how I think I see most of it.

I love the way Mike Maples discusses picking in his the way he thinks about these companies that are, you know, going against the grain of the universe and are inherently, you know, not gonna be super attractive or super hot because it is against the grain and it is, you know, dysfunctional against the way that, you know, our human minds work today. I’ll never forget. I mean, when I first heard of Uber, thought it was the stupidest idea I’ve ever heard. I mean, that’s how you know I’d a bad venture capitalist.

I mean, I I was in, you know, late in college. I’m I’m gonna get in some random person’s car, and they’re gonna drive me some same with Airbnb. I’m gonna go to some random person’s house. I’m just gonna sleep in their bedroom. I mean, this is the craziest idea ever. Right? Those are the people and investors, you know, sign Bannister, another one, like, who who in a lot of those companies, Uber, right, that we mentioned, like, their ability to see into the future is something that not a lot of people can do, and it’s it’s a superpower.

do you unpack whether someone’s a good picker? Is it just looking at track? I think it’s looking at track, understanding the true thought behind what what were they thinking when they made that investment and when they met that founder. And then, you know, we speak to founders. And so we wanna hear from from their side of the story as well. What was that pitch like with the broader community? They’ll usually tell you, you know, no one would even pick up the phone for us. Right? No one would respond to our emails.

And, you know, Cyan or Harry, you know, sat down and they had a a blink in their eye and and they saw the idea. They believed in us before everyone else did. We really wanna understand the the depth and and granularity of those stories.

often get bad references? Yes. Do you? Yes. Wow. The way we think about referencing, you know, when we do a new fund, we’re looking for at least 20 references calls, right? 20 reference calls. And we’ll take five from the GP, which those are the worst references we’ll get. Right? Yeah. Miles was great. Miles was great. Yeah. Yeah. And by worst, I mean, they’re gonna be patting Harry on the back. Right? He’s also the godfather of my children. He’s my best friend from school. So, you know, those ones we don’t spend too much time on.

The golden references are are the offshoot references. And thankfully, venture is such a networked community that you spend enough time in the asset class, you’re able to to build those networks pretty quickly. And and so we’re we are proactively trying to shoot

Perspective on strategy, not so much. We are very much trying to find interpersonal risk and partnership risk. Those are two things that we are really digging. We wanna know, are they a good person? You know, have they created a bad persona amongst other people? Have they wronged others in a in a pretty malicious way? And and then understanding the partnership dynamic, things that they will never tell us on a phone call. We could ask them blunt to their face. Is there any risk in the partnership?

Do you you know, does Harry like Sally? Does you know, how is the mesh? Oh, that’s incredible. This is the the best partnership ever. We love each other. We sit down every day. We we’ve never disagreed on a deal. We spend a lot of time trying to understand that partnership risk.

Incentives.

I I mean, I I personally think you’ve seen partnerships what’s the word I’m looking for? Mean Blowed? The amount of change you’ve seen at partnerships over the past two years is the most I’ve seen combined in my eight year history as an LP. How do you justify that? How do you reason that? I think there’s a lot of reasons. I think I think one, folks who had made a lot of money didn’t wanna deal with the crap that you’re dealing with today. Right? These, you know, three years of of no liquidity, you know, dealing with broken cap tables, dealing with founder transitions.

Like, it’s just a lot of hard work, gritty work that if you made a lot of money, why do it? I think two, if you were a newer GP, you know, you were promised a certain amount of compensation for your role, and part of that was variable carried interest. That carry has evaporated, right, as performance has come down. And, you know, now you’re you’re getting paid 70% less than than what you thought you were. And so why not start fresh? Why not start with a new book, or why not start my own firm?

Yeah. We historically have not done many, if any, spinouts. Call it from, yeah, you know, your your tier one, maybe clean spinouts. Right? I think we’re less. Think Probably we’re less. Yeah.

So like we really need to be

One, it’s good to have a relatively diversified LP base, which protects you from that. Right? So a mixture and not everyone can choose their LP base. Right? Sometimes it’s it’s, you know, take yeah. Whatever Take money’s green. Right? But, like, in a in a best case scenario, you’ve got a mix of endowments, foundations, family offices, founders, maybe a couple GP checks in there from from some venture funds. A mixture of folks who are aligned to your long term vision. And and inherently, stuff’s gonna happen. Right?

Like, you know, folks are gonna have a liquidity crunch, a family office, the the family’s gonna say, you know, fuck venture. We don’t wanna we don’t wanna play in this asset class anymore. Like, you’re gonna have some things come up Being open open to that and trying to still be as good of a partner as you can is pretty important.

Yeah. I mean, case scenario, you don’t have anyone more than 10%. But if you’re raising a $50,000,000 fund or a $100,000,000 fund and you can, you know, secure a $10.20, $30,000,000 check-in their long term line, that still makes sense, but best case scenario, yeah.

Yeah. I mean, I think you’re right historically, endowments being quite long term oriented. The endowment model in The US today has headwinds, in particular certain endowments where they’re gonna start getting taxed at, call it, the 8% range. That’s five endowments. That’s a headwind to their model, to a sense. It’s not as bad as the 20% that it was gonna look like a month ago. Would you expect them to cut positions, downsize? It’s all gonna depend what they do with their draw. Right? So What does that mean?

So an endowment is mandated every year. 5% of the endowment goes to campus to support scholarships, professors’ salaries, buildings. And that can range anywhere from, call it, 4% to 6%. But most endowments have stayed right at that 5% number forever. But if it turns out we’re gonna start getting taxed 8%, you know, we could lever our drawdown, you know, to four and a half percent versus 5%. Because the real risk you run this endowment is eating into the purchasing power in the endowment. Right? The the way an endowment works, you got a 5% draw every year.

And then inflation, let’s call it 3% for higher education here in The US. So just to maintain the corpus, the purchasing power of that endowment, you need the eight percent return. Most, you know, endowments are targeting eight eight to 10% return over the long term, ten or fifteen years. And so when you start getting closer to that number, you run into some real risks. And so it’ll depend on what they do with their draw. You know, if they don’t, reduce the draw, I think venture broadly will be okay.

It’ll still be the idiosyncratic headwinds of there’s just no capital coming back from venture. That’s the headwind to the asset class for LPs re upping today.

I mean, I think GP should be spending the least amount of time fundraising as possible. It’s not your job, and you make your money investing. But some people are not as fortunate to just do the one and done closes. Right? And so I think it’s very much dependent on your situation. Best case scenario, you have a very timeline. You know, we’re gonna do our first close here. You know, lining up your LPs and and being sure they’re committed to that process and and doing work on the sub docs and the legal work prior to that, really important, and just setting clear timelines.

Do you mind if a manager’s ever sold part of the management company? Yes. Absolutely. Massive red flag

The magic of a partnership is the care and interest. And you are now giving that care and interest away to a silent partner who is not going to be, like we said, grinding and, you know, taking a 100 calls a week and and working 996 like you. Yeah. Baby. And so how do you feel when you deliver incredible returns when a silent partner is getting, you know, a decent chunk of that care and interest? It’s the problem.

It worries us. The funds are extremely large today, and I think it’s hard to assume the same returns you had from 2010 to, call it, 2017. I think, you know, Masa and SoftBank, I would I would put as the the the flag in the ground Vision Fund one when when all the other venture firms saw that as the opportunity to just absolutely scale their capital base. It’s wrong to assume the returns you had from from those years where most all venture funds were basically raising a $400,000,000 years a fund, all the premier funds.

And maybe they had a maybe they had a 400,000,000 growth fund attached to it. But the fund size has stayed basically the same for a decade. And so it it worries us tremendously. Do you think they will post as good returns then? No. No. I’ll walk you through a very simple math that other LPs can can put in their back pocket. But for for how we underwrite, you know, these big funds now today, simple math, but but I’ll walk you through it. So, and this is a live manager.

I won’t share their name, but this is a, you know, a manager we underwrote a year ago. So we’ll look at their fundraise. So this manager was was targeting a $7,000,000,000 fundraise. And so what we do is we do a dollar weighted entry ownership across their different funds. So this had a billion dollar early stage fund, a 2 to $3,000,000,000 growth fund, and the rest was an opportunity fund. And as an LP, most LPs have to invest para pursue across those funds. So, like, equally as a percent of the fund across those funds.

And so inherently, your your smallest check is gonna be to that early stage fund. Your largest checks are gonna be to the growth and opportunity funds. And so what we do is we look at the early stage fund. So this fund, call it, had 15% entry ownership for that fund. The growth fund had about six to 7%, and the opportunity fund had about two and a half, 3% ownership. And so we we dollar weight that on the funds, and then we look at our check. What is the average entry ownership our check is getting within those funds?

And so this fund was about 5% across those vehicles dollar weighted. And so the very simple math there is 7,000,000,000, you know, divided by 5%, which is a 140,000,000,000. Right? So that’s the enterprise value. That is the market cap of companies that the size of those companies they are just deploying that fund into, a $100,140,000,000,000. And so for us, when we do a venture fund, our target is a four x net. That’s our goal. And so if we want a four x net, these funds, you know, the early stage funds charge two and a half and 30.

Growth funds charge two and twenty. So you’re gonna need a six x gross at least to get a four x net on that fund. You know, 140,000,000,000, you know, times six. You know, you’re close to, you know, 800,000,000,000 of market cap needed to return a four x net for those multi stage funds. Now for reference, 2021, the best exit year of all time, there was 850,000,000,000 ish of market cap exit value from that year. Okay. You need an entire year of IPOs in M and A just for this, you know, one manager.

Clearly, it’s gonna be broken off off of numerous years, but it’s a that’s a staggering number.

It could. I we we we acknowledge that we could be wrong, and SpaceX and OpenAI and Anthropic go public at at trillion dollar nations. What we look at and like I said, this is is backwards looking data, but we’ll give you a few data points. There’s been $1,150,000,000,000 dollar IPOs venture backed. 11. The two largest venture backed IPOs ever were Facebook in 2012 and Alibaba in 2014. So we’ve got a decade, one of the greatest venture bubbles of all time, 2021, and we still haven’t had a bigger exit than we were getting in 2012 and 2014.

So so my guess is that a $100,000,000,000 IPO over the next ten years is still going to be a generational outcome. And so the question I throw back is, you know, do you think there’s gonna be ten, twenty, $100,000,000,000 plus IPOs? I do not think so. You You you look at the trillion

Oh, Stripe, SpaceX For sure.

Yeah. And and even still, 2021 is a is a good learning opportunity. Most, if not all, call it except maybe Palantir and a few others, these very large 2021 IPOs are down significantly still today from that price. These were the greatest venture assets of that vintage. And so to say that it’s a guarantee that, you know, OpenAI is gonna be worth, you know, 1,000,000,000,000 in in five years, There is a lot of risk involved in that. And so what we posit back to our team is, you know, what is the margin of safety that, you know, great investors, Warren Buffett and Benjamin Graham kinda coined in these terms?

What’s the margin of safety we want investing in a fund for what we have to believe in to achieve our desired return? I would rather not have to believe in 800,000,000,000 of market cap IPOs and M and A transactions to get a forex net versus other funds where maybe we have to believe in maybe it’s a billion dollar fund, but kind of the entry ownership is 10%, and and we have to believe in, you know, ten, twenty, thirty billion. Right? And and anything above that is where you get the real alpha.

And and so it’s it’s hard for us to imagine on on these very large multi stage funds having that kind of alpha.

to you at scale? Index. I think they have to be. I mean, the performance they’ve put up in the last twelve months is I’ve in a in a market that is as bad as you hear in the news and from all the folks on the podcast, the performance that they’ve delivered and are are delivering here in the future is unbelievable. I mean, largest shareholder in in Figma, largest shareholder in Dream Games, largest shareholder in Wiz, second largest shareholder in Scale AI, Revolut. It’s unbelievable. And and I give Index all the credit in the world for not scaling.

They even reduced their latest fund size. They reduced it after the 2021 era. The credit I give them for not ag they could raise as much capital as they want to, and they don’t. They they are the most performant driven culture that we see. And so I give them a ton of respect for that.

I absolutely think they will continue to survive and thrive at that range. I think you have enough capital to write big checks. Right? So you can participate in the abnormally large seed series a, series b’s, and you have enough and so excuse me. It’s a limited amount where you can still drive extreme parallel outcomes within the fund. And I think performance driven culture and and what that brand stands for being, you know, the backer of some of the most generational companies of all time. You had you had Vlad on the show recently.

Should I ask him why did he go back to Index for his new, his new math company? Right? He could have gone to probably a cheaper source of capital. The guy Nikki told him to fuck off.

He

probably could have gone to a cheaper source of capital and raised from Masa at SoftBank or general analyst or or you name it. Right? But

Well, I mean, most people, right, most funds can’t raise 1 or 2,000,000,000. Right? So so most are inherently gonna be in the lower end. And then the ones that can, they’ve had good enough performance. Most of them scale. They? Most of the big funds have not got great performance. I think so. I I we’ve looked at all of their returns. But, I mean, these these people deserve to raise larger funds. Right? I mean, they’ve they’ve produced really strong performance.

One, we lean on the math where even if you do own 10% of a generational $20,000,000,000 outcome, which is still gonna be generate know, Figma, generational company. It’s probably gonna we’ll see where it prices. Call it 20 to 25,000,000,000. You know, if you’re a GC, their last fundraiser is 7,000,000,000. Say you own 10% of a Figma, which is a generational company, 2,000,000,000, you know, they’re gonna take 20% of that. I mean, you’ve returned what? Point 0.2 x? You need you need you need 15 Figmas. It’s my it’s mind boggling to me.

go up to core math and really what we try to understand this is more qualitative, but at some point, the alignment breaks, in our opinion, between the GP and the LP. And when you think about let me let me put this clearly. I I don’t ever blame a GP for raising bigger funds. I I am a I love incredible business models. I study. I live. I eat. I breathe investing. These business models these GPs are creating are some of the best high margin businesses ever created, and they’re stacking funds.

So you think of a firm that has raised, you know, 7,000,000,000 this fund. They raised 5,000,000,000 in their prior fund. They raised 3,000,000,000 before that. 15,000,000,000 of capital. They’re charging full fees on all of that. Right? So they’re making, call it, 300,000,000 a year a year in fees. For often, like, five or six partners Yeah. Where 80% of the fee stream goes. Yeah. We really try to understand has the magic bond been broken between GPs and LPs, which, you know, leads us to, you know like, we think the fee structures need to change to accommodate for that.

Why do you think the fee structures need to change? Because when you’re investing at that size and scale so when you’re when you’re a fund that big, you are inherently setting up for 100,000,000 checks into very well established, well run, well oiled companies. You are essentially acting as a long only public equity investor. Right? You’re not actively, you know, managing the company. They’ve they’ve got their own, HR team. They’re doing all their own hiring. You know, they’ve got a a 20 person product team. They’ve got a 10 person BD team.

Like, this is a well oiled machine. These are what public companies would have been ten years ago. And so you’re charging two and twenty on basically passive investing. Right? You’re not you’re not actively managing most of those positions for the most of the time.

Yeah. But you you still need the fees for that, you know, in a in a $400,000,000 fund. Right? You need a team to go out and meet all of these people. You need an office to bring these people in. So, like, with a $400,000,000 fund, Harry, like, you’re not gonna become a billionaire off of that. Right? Sadly. Sadly. Yeah. If you had 15,000,000,000 in AUM, which, you know, God bless, I hope you do someday, you’re gonna become a billionaire off that off those funds. Right? And that’s the difference, right, is is you need that capital as a true early stage venture capital firm.

They’re utilizing it.

Yes.

nuts. Yeah. It’s remarkable. Right? But you But you suck it up and peg it. This is this is this is the one I the Renaissance tech. Right? You know, the best hedge fund of all time. They were so good that at one point, I think they were charging, like, 60 or 70% carry and, like, 20% management fees. And they kept increasing it. They kept increasing carry and increasing managers to incentivize their LPs to get out of the fund because they wanted all the capital for themselves.

Like, the performance is so good that folks would would pay them whatever they wanted to be in that fund. And so what I what’s hard for us to understand today is, like, I do I share the performance data with you. The performance is you don’t look at that data on a $7,000,000,000 fund and think, god. Like, we will pay whatever we need to get into those funds. And so what our hope is and and the hedge fund industry went through this cycle after the global financial crisis where there were thousands upon thousands of hedge funds.

They were all charging two and twenty. Performance was incredible for a very long period of time. All the funds increased competition. Returns came down. The global financial crisis happened, and you had a complete bottoming out of the hedge fund industry, which obviously rose to these incredible multi strat hedge funds. But fee structures changed dramatically from o five to o seven then at 2010 to 2013. What will fee structures be in venture in ten years’ time? If you’re raising, you know, that early stage fund, the core $500,000,000 series a fund, Charge us two and a half and and 20, and if you’re good enough, two and a half and 30, we’re okay with that.

Right? But those those growth funds that are really for scaled businesses that are mature assets, like, you should be charging long only public equity fees, which are one in 10. And if you really love your LPs, it’d be it’d be it’d be zero in 10, but or budget based, right, based on based on the team. But 10% carry. I mean, that’s that’s the number for a a passive long only investor. Going back

You know, think certain LPs, yes. Us, no. I mean, we are in an extreme performance driven culture. But if

It depends. It depends on it depends on how different that fund is and how different the strategy is. Right? And it very much is dependent on the on the situation.

I get why. I think it goes back to a, you know, an incentive problem in the LP industry. For me, personally, I could be your janitor here at 20 BC offices, and I’m gonna be the best janitor you’ve ever had. These are gonna be the cleanest floors you’ve ever had. This is gonna be the cleanest table you’ve ever had. If my name’s gonna be on it and I’m gonna be part of it, I am gonna put my a 150%. But maybe there are certain people that are incentivized to park capital in brand names that won’t get them fired.

Right? No one gets fired buying IBM. Right? That’s the classic quote. That’s a problem. And and frankly, are For you, is

You know, we have an investment committee that we go to for approval. That’s our governance committee. And we write a detailed memo for any re up or any new name in the portfolio, and we gotta present our merits and concerns. But we’ve educated our governance, which is such an important part of of any LP that’s wanting to get into venture, having the proper governance set up to allow you to take these very long term bets. We we educate them on the math and the risk adjusted return of the funds and the fee structures.

And so, you know, they’re very understanding of of our strategy and and how we think about the world. Do LPs

I think certain LPs choose to just not even think about it, frankly. And and so certain LPs, you know, such as ourselves, I will never blame you, Harry, for raising $10,000,000,000. Like, I will give you a But you’re not gonna write me 1,000,000,000? No. Dude, come on. No. Come on. No. I thought we had such a good one. I’ll never I’ll never blame you for doing that, and I’ll never blame a GP for that. I’ll never bash a GP saying, oh, how dare you? Right? It’s the market.

Like, and you’re you’ve obviously done something well enough that’s allowing you to to raise that capital. It’s it’s our choice to determine is is that the right place risk adjusted for our capital?

How do you think about that? I think it’s very important. It all stems from what did that GP tell you they were going to do? If they told us that this, hey, this is a two year fundraise cycle. We’re investing it in two years, and they come back to us two years two years later, we’re okay with that. We underwrote that. Right? But if this is a three to four year investment period, and you told us it was gonna take three to four years, and you come back in two years, then we’ll have some some questions for you, and and we’ll want to work with you to understand why.

Know, what’s what’s the reason? Because time diversification is extremely important. What happens if they’re slower? Is that bad? No. I don’t think so. Because a lot of people say, oh, play the game on the field. Play the game on the field. Right. I think certain folks would have in it today bear hugged their GPs for not playing the game on the field in in 2021. You know, we’re not investors, but Marc Sutskever, I give him all the credit in the world. He’s been in the game for a long time.

He saw 2021 as an insane period, and he strip sailed, like, majority of his portfolios and his funds for a very good price. DPI in the pocket. Like, all of his LPs are are are bear hugging him for that. Brutal market. Tough market.

Yes. Look at you look at the data both at European venture fundraising and US fundraising, we’ll see what q three and q four will look like. But in The US, this is gonna be the lowest year since ’17. In Europe, same. So it goes back a bit further maybe to 2016, but it all goes back to liquidity.

A lot of different reasons. I think the the main reason is liquidity. 2002 to 2004, you had more dollars raised in the public markets from IPOs than you did from 2022 to 2024 and with an asset class 10 times the size. And just for reference, like, .com bubble, it took you thirteen years from the peak of the .com bubble to get back to par on your public equity position in the queues or or the Nasdaq. Like, that was a real downturn. It it makes, you know, obviously, 2021 look like pennies.

And you had more IPOs raised the three years following that. And so something clearly is broken in the industry given how bad the liquidity was over the past three years. And I think what really frustrated LPs is you watch the public markets continue, especially the factor exposure of technology, has done tremendously. And I am not a believer ever that the IPO markets are closed. It’s purely a function of price. Right? That is the problem. Folks paid significantly too high prices during the peak. Growth has slowed down.

You know, there’s not much of a market for a 100,000,000 ARR SaaS company growing 15% with breakeven free cash flow when you can buy Microsoft growing top line at 14%, growing earnings at 17% with real GAAP profits buying back 1% of the company every year with strongest competitive moat in the world. People get frustrated when it’s like, oh, no one’s gonna give me eight times ARR, 10 times ARR for this business. Well, like, look at the alternatives. What investors could invest in of a similar factor to your company?

Yeah. I mean, we we look at the data. Historically How close do you get to the underlying portfolio companies? Very close. We ask for trending revenue, trending gross profit, and trending free cash flow for the top 10 NAVs, every fund of we underwrite. Does every LP do that?

Yeah. And then it turns into an absolute freaking monster. There’s there’s always going to be an extreme distribution retail outcome in these funds that is gonna be impossible for us to underwrite. Right? And that’s the beauty of of venture capital. So we we acknowledge that. We’re not gonna you know, our valuation of the company, we know it’s it’s probably gonna look quite different three, five years down the road, but we just wanna know, are these good fundamental businesses that are growing in value and that give us conviction in that these are gonna be real durable businesses one day?

I think there’s a lot of factors that go into it. One being the headwinds we talked about to the endowment model. But, know, you look at Harvard selling 1,000,000,000. It’s a $50,000,000,000 endowment. I mean, like so so 1,000,000,000, it’s not, like, some monumental thing for them. That’s probably just a refresh of the portfolio. But, like, think I there’s real lessons learned. Mean, there was an article out today about Yale and and Calpers. Calpers was the buyer, you know, a piece of Yale’s portfolio. And and, you know, I was on the phone with our CIO this morning.

You know, just take a step back. We had a venture capital fund that we committed to in 2012. This fund was in its tail life, thirteen years old. We hadn’t looked at this fund in three or four years. There was one asset left in the fund. It was basically fully realized. We have a great analytics team and our analytics system that tracks our underlying portfolio companies, but the company have to be over a million bucks in NAV to us for us to be it in our system.

And so this company wasn’t even showing up Circle, the company, we’re talking about in our system because it was below a million Flash forward, you know, they were holding it, the manager, at a at a 30% discount. Like I said You saw it on TV. No? Well, you said I was reading the s one. Yeah. My my son woke me up one morning, and I was up early. And so I’m reading the s one kind of as just, you know, for fun, I’m looking through the cap table, and I I see our GP on there.

And I’m thinking, oh my gosh. And so I go and start looking through the quarterly reports. And so they were holding at a 30% discount plus or minus to the last round valuation, which was I think their last price round was around 5,000,000,000, you know, three and a half valuation. And, you know, you look at at Circle, and it’s a $50,000,000,000 company today. This is a thirteen year fund that is essentially gonna do an extra three turns on the fund in its thirteenth year. Unbelievable. So the article with Yale and and Calpers was Calpers bought a very large piece of their portfolio of which part of it was general catalyst, and Circle was the the largest position in that fund.

And essentially in, you know, a two months time frame, I I think it said in the article they bought 500,000,000, you had a $100,000,000 write up from Circle alone. That’s the risk of selling secondaries as a long term venture investor is that you’re gonna have these crazy right tail outcomes in the fund that could come to fruition at years eight, nine, ten, eleven, twelve, thirteen that you’re traditionally even if I said to Chuck, I mean, like, I’m not that smart. Right? And but, like, we would under we would have underwrote Circle if we were looking to sell that fund a year and a half ago, And we probably would have sold.

Like, who would have guessed that Circle was gonna trade at a 100 times EBITDA in the in the public markets and that stablecoins in a year and a half were gonna be, like, the hottest sector in crypto? You could not have predicted that. I’d imagine Yale probably did the same. They probably underwrote that, and they’re like, there’s probably not a juice not a lot of juice left to squeeze here.

I’m sure Yale would do well. That’s a fantastic team with a great portfolio, but it just goes to show that the risk of these these fat tail outcomes in these funds. Dude,

Fantastic deal. I I you know, not knowing the underlying GPs in that fund and not knowing the mix between, you know, buyouts, real estate, or or venture, you know, I would have guessed. You know, Yale’s got incredible managers in their portfolio. Right? So they’ll have some pricing power. I would have guessed 20%. You know, that would have been probably the number that I would I would have put on the board. Do you think we will see many more of these large institutions doing strip sales of their venture portfolios?

I’m not sure. Certain ones with with real liquidity needs, I think they’ll have to. Right? And so that’ll be a forcing function. But still, I mean, there there there’s not a ton of secondary capital out there that’s gonna be able to swallow all of that NAV. Right? So if every if every, you know, billion dollar down comes out and says we’re selling 10% of our venture book, I mean, the pricing there, it’s a supply demand market. Right? There’s only so many buyers.

We are thankful to say that we’re now self funding in our venture book this year, which is which is give us a round of applause. I mean, it’s the first time since 2021. I think that’s So that’s a positive. But on the flip side, there’s still a lot of, liquidity that, sure. It’s been announced, but, you know, the whiz deal, right, that’s gonna be a a q one twenty twenty six event. Right? That’s gotta go through FTC approval. Figma hasn’t gone public yet. You know, Dream Games said in the article they’ve they’ve they’ve gotta get European approval for Do you think 2026 will be a year where that liquidity really hits?

Yes. And and what’s exciting me is and this is a crazy statement. Right? So it’s not that I agree with the statement, but No. It’s just me and you. Yeah. Exactly. For for the longest period of time, private market capital was cheaper than public market capital, which is the most mind boggling statement as, like, a fundamental investor ever. Like, it’s hard to fathom that. Right? But that was the case. That is why the best companies in the world didn’t go public because you could get a cheaper cost of capital.

You didn’t have to do quarterly earnings calls. You didn’t have to go through all the hoops to go public. Why would you go public? We speak to founders. Like, we understand why they why they don’t wanna go public. But the public markets are now pricing risk very differently than they have over the three year the last three years. You look at Circle. You look at, you know, Nebius. You look at CoreWeave. You look at Palantir. You look at Cloudflare. Like, these are all businesses trading at extremely healthy multiple multiples.

So my message here to all venture capitalists, now is the time. Please take your companies public.

And particularly, as as maybe folks take that But it’s needle moving on that already. I mean, it’s been such a dearth of liquidity over the past three years that, like, one year is not gonna solve the industry’s problem. Right? So we’re gonna need, like, multiple years of really good liquidity to get back to a a normal state. So, like, there’s still a lot of wood to chop here, but it’ll help. Right? Undoubtedly. Absolutely. Do you love thematic funds like every other LP does? We are agnostic.

We do not have a mandate or a rule saying, you know, we’re only gonna do thematic funds or we’re only gonna do generalist funds. We’re a best athlete. So when we find really great partners aligned with us for the long term who we think have an incredible skill set that aligns with what they’re trying to do in the fund, whether that’s a generalist fund, whether that’s a sector focused fund, we’ll do it. And so, I mean, inherently, you know, we’ve done one new sector focused fund over the past three and a half years.

And so it hasn’t been a huge part of our portfolio, but we are absolutely open to it. What was the best ever performing fund you’ve been a part of? We had a a a fund out of out of China that produced over a 20 x net return to to LPs.

Wow.

I

How do you think about China? It’s a very high bar for us today and a very hard place to invest. I mean, there there’s a couple, you know, really big headwinds. One is The US executive order, you know, mandating US dollars can’t go into artificial intelligence or semiconductor related companies or defense companies there, which we completely understand and align with. But the big problem what’s so unique about the China venture capital market that maybe a lot of founders or maybe LPs who haven’t spent time there don’t know is that in China, these GPs raise USD and RMB funds alongside each other.

And and these RMB funds are from local governments and municipalities. And most of the time for the past fifteen years since the China venture industry has been around, those funds were parapasu. They they mostly invested in the same securities. That isn’t the case today, especially now that US dollars cannot go into these AI companies, which I at the last time I checked, 70% of these deals in The US are AI companies. Like, mean, it’s everything. And so that’s a big alignment issue. Right? What are we getting exposure to in that fund?

That’s a big worry. Totally

Yeah. I mean, we’ve got we we have incredible partners there that we’ve had, you know, for a long period of time that are extremely hardworking, extremely smart, and have been great partners to us. It’s a hard market today. And and frankly, you know, a lot of the best, you know, Chinese founders have have chosen to raise elsewhere, whether in The US or Singapore or London. It’s a tough place. We mentioned

If Wizz gets approved, every other large max seven company is gonna see a green light in regards to making big splashy acquisitions again, which is a good thing. You look at Google, Microsoft, Amazon, and Meta combined. I mean, they’re doing 600,000,000,000 of operating cash flow, just cash coming off the company every single year. And I think they would much rather make very strategic acquisitions than buy back 50 basis points of the company. Right? The the big worry that I think those companies see today from our purview is that the AI landscape is changing so rapidly that the the twelve month time period it could take to go through a review to get that acquisition done, that company could be obsolete in twelve months.

Dude, you saw this with Windsurf. It changed a lot in a couple of months. Lots of of of great hot AI companies have have been very hot and then not hot. You know, Stability AI. You know, lots of companies have gone through these waves, and there will be many more. You know, that chance and you look at the whiz deal, there’s a 10% breakup fee there. Largest breakup fee ever for an M and A transaction. So, you know, say that someone else wants to do a $30,000,000,000 acquisition Perplexity, and Perplexity says, oh, we have to wait twelve months.

Our board’s gonna recommend a 15% breakup fee. Now will those big fund you know, will those big companies risk a $45,000,000,000 breakup fee in twelve months where this company might not be what it was twelve months ago. I think that’s what is is the reason these folks are acting in such a fast way in regards to take the top talent, license the IP, license the tech, get these people building within our company now, day one.

You know, the way we think about it is we very much spend time on unit economics. And from what we see with OpenAI, unit economics are improving rapidly, which is great to see. But still, when you take into account CapEx, you know, why has OpenAI raised two of the largest venture capital rounds ever in a span of twelve months? Not because they want interest income from the cash on the balance sheet. It’s because they’re burning 5 to $10,000,000,000 a year. Right? In my opinion, the music will stop eventually.

Right? Like, I I this would be the ultimate anomaly if a bubble did not pop in AI. Right? You look at past historic incredible technological moments. Right? You think of the railroad. You think of cars. You think of electricity. You think of steamboats. You think of the Internet. Every single one of those, there was a bubble that popped. Every single one that impacted the equity markets at that time. You know, inherently for the long term, it’s a good thing. Right? Like, it shows that this AI thing is real and people are going to overinvest.

And so I I I would find it extremely anomalous if if there was not a bubble that popped here. And so if if folks align with a bubble will pop eventually. If you do not have control of your own destiny and if you’re sitting like OpenAI and your pref stack, what’s their pref stack today? 70 or 80,000,000,000? You know, stuff hits the fan, and no one’s willing to write you a $40,000,000,000 equity check anymore because the capital markets have completely gotten smoked. Like, what happens?

SpaceX is SpaceX is is is self funding. They don’t need cash. That’s what I mean. So and you look at Google and Meta. Right? When they went public, Google and Meta had, like, 30 to 40% GAAP operating margins. Those were, like, these were the most profitable companies ever. They had complete control of their own destiny. Right? So capital markets, whatever happened, it didn’t matter. They could not be killed. SpaceX cannot be killed. You know, Starlink has reached escape velocity. That’s a very high margin product. They do not need cash.

They’re doing secondary tender offers. OpenAI needs cash. Will OpenAI and Anthropic be independent companies in five years’ time? To say, like, slam dunk, these are gonna be trillion dollar companies five years from now, like, there is a lot that can happen within that, you know, five year period. Right? And so we would say there’s still a a good amount of risk in in both of those businesses.

Ten years gets closer to I thought you were gonna maybe say three or five, which I’d say no. Right? I I think these technological transitions take a pretty long time historically to to bleed into GDP creating industries. And OpenAI is obviously an incredible company, but, like, they burned up all their GPUs in April because people were making, like, emojis. Right? They were making, like, cartoon figures on on the app. Right? Like, I that’s not like a GDP boosting product. And, you know, clearly, like, they’re making inroads.

Right? But, like, it all these things take time. But I think the problem is time is not your friend. When you look at the hyperscalers, just take them, for example. You look at, you know, 2024 to 2027 estimates, it’s a trillion dollars of CapEx they’re putting into the ground. And then you add on venture as an industry, you know, investing, you know, say the run rate’s a $100,000,000,000 here in The US, and 80% of that’s going into AI companies. Now, sure, not all of those are gonna be CapEx intent intensive.

Maybe some of those will be application companies, but that’s a lot of money to invest that sum. If this does not come true for ten years, there will be a lot of pain.

I I I do not think that it’s too highly priced for the business today. One of the benefits of of our roles, we’re generalists. Right? So we get to invest across, you know, buyout, hedge funds, real estate, public equities. And so, like, we get to witness some of the best investors in the world, across the world. And so, you know, a man from from your hometown, Chris Hone, like, this guy’s one of the the the most incredible investors, of all time. And he thinks a lot about, you know, peak earnings and peak multiple, which is which is a common theme, obviously, in in the public equity industry.

But NVIDIA is a cyclical business at the end of the day. You look at their historical financials over the past twenty years. Essentially, like, every three years, they’ve had extreme negative year over year revenue growth. Now it rebounds. Right? But this is a hardware inventory cyclical business. And so back to my question, if folks agree that an AI bubble will pop at some point and the largest buyers of these GPUs are advertising driven companies, Google, Meta, Amazon is now a very large income, revenue line of of advertising.

And advertising, which is also a cyclical business, and you have a global downturn, like, there is a really plausible scenario that, you know, revenue drops 20%. You know, I think that would be conservative, you know, 20 to 30%. And so then earnings, right, if they don’t react on their OpEx quick enough, maybe earnings drop 40%. I looked this morning. They’re trading at, like, 38 times earnings forward. Maybe it drops to a trough multiple of, you know, 24 times, which has been a trough multiple for for NVIDIA.

You just blinked and you just had a 70% drawdown. Right? So, like, to think that that’s, like, not a possibility in the future, I wouldn’t say that. I’m not gonna guarantee you that’s gonna happen in in one year, two years, or three years, but I think it’s a it’s a possibility.

My background comes from a sports background. Right? So I played football, you know, growing up and in and in college, and, you know, I was used to hard coaching. Right? Hard coaching, you don’t love it in the moment. You don’t love a coach MF ing you and, screaming you and telling you you’re playing terrible and you need to do this better or you need to do that better. But it’s better for you. Right? And you know it’s coming from that coach wants the best for you.

They don’t want you to fail. They are incentivized for you to do the best work possible. And so, like, I love getting coached hard. I told our CEO, Chuck Kennedy, when I first joined, like, he he shouldn’t have hired me to begin with. And so I told him when I joined, like, in my mind, I I I had a pretty good thought in my mind. Like, there’s a probably a good chance I don’t make it, like, six months. Like, but I’m gonna try my best. And so I told Chuck, was like, Chuck, I need you to criticize me.

Like, I need you to coach me hard. And he looked at me with, like, crazy eyes. Like, I’ve never heard anyone say this to me in my life. But, like, I love hard coaching. No founder is gonna be perfect. Right? Founders are gonna have weak spots. And if you can have, you know, people that are, from a loving perspective, close to the business and can supplement certain weak spots and can bend the trajectory on a company even a bit, why wouldn’t you why wouldn’t you push for that?

Those are gonna be tough conversations. Right? But tough conversations aren’t bad things. Right? When we’re sourcing and we’re doing reference work, that is not something we we we try to dig out. Like, we want we want the most founder friendly GPs. That’s not something we we source for. I’m so

over 4,000,000,000. I think that’s a pretty easy answer. There’s firms that do over 4,000,000,000 No. No. No. Excuse me. On their growth funds. Right? So the early stage funds But they do three and thirty on growth funds? No. They’re charging 2 and 20. I don’t think they should charge that. I I think a core early stage fund, if if they have produced incredible returns over the past fifteen, twenty years, they deserve three and thirty. What’s the biggest lie GPs tell LPs during fundraising? Oh, that’s a great question.

I would say, Miles, this is the perfect fund size for us. We wanna be a union square. We wanna be a benchmark. 300 to 400,000,000, this is the perfect sign. We’re never gonna raise a bigger fund. I hear that. I kid you not. At least every other every other intro meeting I take with a firm. And it’s 99% bullshit? 99.9% bullshit. Yeah. What’s one red flag in a GP that others keep ignoring? I would go back to alignment. I think, you know, we talked about kinda, oh, he’s looking the other way, but alignment is GP commit is one form of alignment.

It’s supposed to interrupt you. Yeah. How do you guys feel about that? It’s a it’s a very important data point for us. The the nominal number is not important for us as what does that number mean to that person? Very important to us. Right? Frankly, like, we have two quantitative data points outside of fund size and past returns that are the best forward looking indicator for future returns of our funds, and and one of them is GP commitment. Yeah. It is an important factor for us.

Who is the most underrated emerging manager today? He’ll probably raise a bigger fund, but I’ll say I I think Kevin Hart’s and A Stars, I think they’ve done fabulously well as a partner. What do you think makes him so good? Kevin, please, if you’re listening to this, do not use this to raise a billion dollar fund. What I think what’s interesting about that team, you know, you’ve got Kevin Hart’s, you know, multiple time founder, took in his companies public, been through a lot, seen a lot.

You’ve got Gotham who was, you know, COO, CFO of Uber. You’ve got Bennett who who did some incredible deals at co two. And I think it’s a very heavy team, a very powerful team for a right sized fund. I don’t think there’s many of those funds around, frankly. And so I think their ability to have really premier access that traditionally a multistage fund is is gonna have 99% of, I think, is is pretty rare.

we go back to is people, really trying to understand who are the people driving the returns at that fund. Do you think you’re moving attribution. That we’ve gotten much more sophisticated on our reference work. We build our own attribution tables. Right? So, like, that is another, like, a huge red flag and lie that, like, we get from it’s not it’s not an outright lie. Right? But, like, they will give us attribution, and you have one partner leave who retires or goes to another firm. And, like, you’re getting this attribution from this new person who clearly we know was was not the partner on this home run deal.

We understand why they do it. Like, they they have to assign somebody to it, but it could be very misleading to a new LP coming into that fund and saying, oh, these these incredible partners who led these incredible deals are all still here. And so we, through reference work and through, you know, longevity, we build our own partner attribution.

Well, if it’s Harry, you know, that makes the decision a little bit tougher. I I I’d say in general, we would lean to someone that has has been through multiple cycles and has the the scar tissue of that. And so I’d say we’d probably lean to the 55 year old, but we’re open to everything.

You know, when I first started, you know, from a first principles perspective, I was drawn to the data, which we laid out here in the beginning. And you can’t over index that data too hard similar to, you know, what we’ve talked about. And so I I would go back to, at the end of the day, this is a people driven business. You can do all the data work you want, which is important, clearly, as we’ve stated. Really leaning on the qualitative reference and people work to really and and speaking to founders.

Like, we we don’t take a lot of founders’ time. Right? So they have a lot of better things to do than speak to, you know, measly LPs like us. But really understanding, like, why did you choose that partner? Why did that partner choose you? What’s that relationship been like? And and understanding that dynamic is is critical for

and and one bad. Oh, go on. Okay. What do you want first? Start with the good. Okay. The good, you know, Long Journey Ventures, which, an incredible partnership, between Lee Jacobs, Cyan Bannister, Ariel Zuckerberg. We had a celebratory dinner out in San Francisco. And we get towards the end of the dinner, and somehow we got started talking about ping pong. I’m a pretty good ping pong player. And I brought up that when I was in college, I won the Pennsylvania State Ping Pong Championship, which is true.

I did. Lee Told Lisa. Lee Lee immediately was like, there’s no way you’re a better ping pong player than me. I am a really good ping pong player. So Cyan was like, well, we need to settle this. And I’m like, it’s like 9PM. Like, we had just finished dinner. And I’m like, yeah. I mean, I I don’t know how we do this. She’s like, I’ll find a ping pong bar. Cyan gets on her phone, finds a ping pong bar. We all go to a ping pong bar at 09:30PM in San Francisco, and Lee and I play ping pong for about an hour.

Who won? I won.

The bad one, I mean, this one forever stands out, was we underwrote a manager in 2023 that was holding OpenAI at 13,000,000,000, which, like, that one was like- And you questioned them on it? Yeah, obviously. And they came back? They said, We’re gonna revise our valuation policy and we’re gonna revise that mark. That was a crazy one, yeah.