# Why VC Returns Will Get Worse, Why LP Incentive Structures are so Broken, What is the Answer to Liquidity with No M&A or IPOs, When to Sell vs Hold Your Winners & Turning $5M into $250M with The Trade Desk Roger Ehrenberg, Eberg Capital 20VC · Feb 19, 2024 · 71 min · 12,685 words Speakers: Roger Ehrenberg, Harry Stebbings Source: https://www.996.fm/episodes/20vc--ep-fe8a384b/ ## Cold open **Roger Ehrenberg** [0:00]: There's gonna be a compression of returns. You're going to have more of the end reasons and the insights and these platforms. They're not really venture firms. Very early artisanal VC is not scalable, and it never will be. I'm not in pure tech anymore. But if I was, I would literally be spending almost no time in pure AI. Take risk. Don't play it safe. Have a deeply held thesis and just put it out there. Don't be a sheep. Don't follow the playbook. **Harry Stebbings** [0:28]: This is 20 VC ## Intro **Harry Stebbings** [0:29]: with me, Harry Stebbings. Now, I remember reading Roger Ehrenberg's writing ten, twelve years ago. It inspired me in so much of the way that I think. To me, he's one of the true greats of this business, and I'm so so thrilled to call him a friend today. With that, Roger is most recognized as the founder of IA Ventures, one of the most successful seed stage venture firms of this generation, having seeded Datadog, DigitalOcean, The Trade Desk, and Wise. Today, Roger is the founder and managing partner of Eberg Capital, a pioneer in bridging the gap among sports franchises, sports betting, media, and entertainment. And his current sports portfolio includes the likes of Miami Marlins, Alpine Racing, and many more. But before we dive into the show's ## Sponsor read **Harry Stebbings** [1:10]: day, HIVE is the marketplace for private stock. 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Plus, you can streamline global employee management and cut HR costs with Remote's free HRIS. And hey, even if you are not looking for full time employees, Remote has you covered with contractor management, ensuring compliant contracts, and on time payments for global contractors. There's a reason companies like GitLab and DoorDash trust remote to handle their employees worldwide. Go to remote.com now to get started, and use the promo code 20 v c to get 20% off during your first year. Remote opportunity is wherever you are. You have now arrived at your destination. ## Conversation **Harry Stebbings** [3:44]: Roger, I am so excited for this. You just said, you know, the magic happens in the conversation. It does. Thank you so much for joining me today. **Roger Ehrenberg** [3:51]: Thanks, Harry. As usual, I'm thrilled to be here with you. **Harry Stebbings** [3:54]: Now, I was listening to you on Eric's show the other day, and you've said before about essentially seeing these seismic shifts in landscapes every kind of seventeen years, which I thought was kind of mysterious the way it was every seventeen years. But if we go back to the first seismic shift that you saw when you went from banking to venture, what was that seismic shift that you saw that others didn't? **Roger Ehrenberg** [4:14]: I felt like there was almost a a euphoria on the street back in those days. You know, I had been running derivatives desks at Citi and Deutsche, and then my last tour of duty on the street was as the CEO of DB Advisors, which was this multi billion dollar trading platform. Money was coming really easily, but also with that, knives were never sharper in terms of, you know, the politics. Whether it's inside hedge funds or at the top of Wall Street, the pie is big, and people in those cultures want as much of the pie as they possibly can. I just found that culture corrosive, and I also felt like this fell too easy. The markets were up and to the right. Money was being minted really across the street, debt and equity markets in addition to trading. And that sense that things feel a little too good, and I personally had felt my learning curve had stopped, and I couldn't really imagine another traditional job on the street that was exciting and would enable me to grow. That's really what precipitated my spending the next five years really digging into the seed stage technology world, and then it was really during that period that I crystallized my hypothesis that very early, very concentrated, that kind of big data infrastructure theme was something that ultimately was gonna be a matter of fact. **Harry Stebbings** [5:39]: You said there about it seemed a little bit almost too easy to make money. Things seemed just a little bit easy. Venture in the last few years, I think, many, it seemed easy to make money. Again, not real money most often. Would you align the two timelines? Because for the last few years, it did feel too easy in venture. No humble brag **Roger Ehrenberg** [5:59]: or false humility. If you look at when I left IA, that was pretty much the peak. And then, you know, the last couple of years have obviously been very, very challenging. Again, I'm not gonna sit here and say, it seems that venture is really overheated. Maybe this is a good time to step out, monetize my stuff. But that's effectively what happened. So I do think that there's something about this intersection of macro circumstance in the industries where I'm spending my time and this emotional pull that tells me it's time for a change that has aligned with these cycles. And then now, you know, being on the buy side as opposed to the sell side and liquidating stuff, it's pretty good time to be on the buy side, I think, if you've got a long time horizon. **Harry Stebbings** [6:42]: Can I ask you, you know, you mentioned that timing the peak, so to speak, well? Doug Leone said on the show before venture capital's transition from a boutique high margin business to a commoditized low margin business. Do you agree with that statement? **Roger Ehrenberg** [6:56]: I don't. I think what Doug is referring to is the asset class being awash in capital. There's gonna be a compression of returns when you look at the denominator effect because you're spreading aggregate returns over a much larger asset base. And unless you're creating proportionate exit outcomes that are at least proportional to that asset grade, then of course, you're gonna have return compression. But to me, it just further indicates, and this is something I talked about back when I was on Wall Street and wrote about when I was doing early blogging in 2006 and 2007, is this barbelling of the industry where, yes, you're going to have more of the Andreessen's and the insights and these platforms that they're not really venture firms. They're corporations that are multistage investment firms that have some venture, that have some growth, that have some pre IPO, and in the case of Insight, even pure PE. And then on the complete opposite side, you will always have the boutique investors that are actually helping form companies and helping the best founders design the experiments to race to product market fit, and then serve as the the farm system for those larger asset gatherers who can deploy much larger amounts of capital in order to sell the best of those that come out of the farm system. So I do not think you can really paint the industry the broad brush and say venture is now commoditized. Venture is never gonna be commoditized. Maybe mid and late stage venture will stop looking and feeling like venture and feel more like institutional asset management, but I think incubation, pre seed, and seed will always occupy a different place in the universe. **Harry Stebbings** [8:40]: Can I take a counter to you or a question to that which is, well how do we operate then as boutique players when you have these corporations who come in and now do 10 on 50? We've seen 20 on a 100 several times in the last month in Europe for pre seed, pre product. As a boutique player, how can one compete when corporations destroy seed in this way? **Roger Ehrenberg** [9:04]: So this has happened forever, and it tends to be very steam specific and highly cyclical. You could say the same thing about cloud computing or machine learning, and now it's AI. There are these trends where large asset gatherers are going to wanna have a lot of bets. And they're going to need to have that convexity in their portfolio because they need those grand slams in order to justify the huge asset base that they're deploying to generate institutionally acceptable returns. But if I'm and, again, I've got my focus over here. I'm not in pure tech anymore. But if I was, I would literally be spending almost no time in pure AI. Almost none. I would be looking for other things where there are still massive opportunities, but that are not getting the attention that the hype themes of the moment are. I'm so glad we're aligned on that. **Harry Stebbings** [10:01]: I do have to ask, again, back to a statement. You said you said we're awash with capital and the capital supply increasing so much, which obviously causes the worsening returns. Is there a going back from this? Can you retreat from that? Is it purely a cyclical motion? Or actually, are we just seeing now venture as another asset class like PE and it will continue to have such high levels of capital supply? **Roger Ehrenberg** [10:22]: I would say the latter, Harry. I I think that things have fundamentally changed, and partly it's with new sources of liquidity becoming LPs and venture firms. You know, if you just look at sovereigns. Sovereigns were not major players in the last cycle of VC, and now sovereigns are everywhere. And then you've got the number of family offices that are multibillionaires or deca billionaires has skyrocketed. So just in prudent asset allocation, where is this money gonna go? And this is where people like Marc and Ben were really very early in saying, we really need to build something that's scalable, that offers an array of products that can serve the largest and most sophisticated limited partners. That was a very keen insight and something that has served and likely will continue to serve them well. Now, it doesn't make them great, very early stage investors. That's the thing, is very early artisanal VC is not scalable, and it never will be. People have tried, and they have failed. And because of the small asset size, IA is certainly one of the best examples, It's hard to access. As a result, there will be relatively few LPs that will have the opportunity to invest in the very best, very early stage firms, but that's okay. Even if you can have a little bit of exposure to those best firms, those returns can be quite significant on an absolute basis as a blend to an overall portfolio. So long story short, tectonic shift in liquidity, if there's no going back because there are now these much larger firms that are institutionally investable, can take sovereign money and massive family office money, and that trend, that wave is just gonna continue. **Harry Stebbings** [12:09]: The thing I like about this conversation is actually, you know, you don't have fees now, obviously, managing your own money. My question to you is, you mentioned the worsening fees, and you mentioned the increasing capital supply and the private equity like nature that venture might, you know, adopt and maintain. How much longer does venture have on the two and twenty model before there becomes real pressure on fees and fee structure? **Roger Ehrenberg** [12:32]: So I think it will very much be a function of performance. It's gonna be just like hedge fund. The very, very best hedge funds charge exorbitant fees, but on an after fee basis, they still outperform. Canonical example there being Rentec. Right? Five and forty four. Look at Sequoia. Look at their fees. The best firms charge premium fees, and we'll be able to get it because on an after fee basis, they still outperform. So I think you're gonna have that continuum. And then you've got a bunch of hedge funds that are big asset gatherers that are now one in 20. Sometimes they have share classes that are one in fifteen, one in 10 for longer lock of capital, but on billions of dollars. So something that's different about hedge funds versus venture funds is because of strategy type, you have these massive differences in liquidity. There is a cost curve for wanting to access long dated liquidity in a hedge fund context. So when you see some of these hedge fund launches, I remember when Eric launched Eat Park, there were like three different share classes. A three year lockup, a five year lockup, and a seven year lockup. And the fees went down the longer the lockup, which makes intuitive sense. I mean, that that's logical. But in VC, everything is a long dated lockup. There is no differential. You know, you could say, well, I'll invest in a mid or late late stage strategy. Those necessarily should have lower fees because the time to hold and the amount of work is less, and the assets are generally larger. So what I would expect is a normalization that would look a lot like the hedge fund industry. Smaller, longer dated, higher returns. Differentiated managers will still command premium fees, and then more mature strategies, late stage growth, pre IPO, massive AUM, that will become commoditized and you will see fee compression. **Harry Stebbings** [14:19]: The first thing that I have to say is you mentioned kind of, well, it's performance based. Question for you. I speak to many LPs and they're very open with me. And they say, honestly, I don't care about your performance. I care that I'm not getting fired. I'm probably gonna be gone in five years. I'll probably be retired in ten. Performance for you will be fifteen away. So actually, is LP structures completely broken in that way? **Roger Ehrenberg** [14:42]: So LP structures traditional LP structures are completely broken. And I've I've spoken a lot about this. You know, I feel a lot of the dumbing down of venture and too many venture firms being created. LPs have been enablers. They've been enablers on that end, and they've also been enablers on the completely opposite end, which is name your venerable Silicon Valley venture firm fund twelve, thirteen, fourteen, fifteen. When they haven't even returned capital from fund four, they've raised billions and billions and billions of dollars getting two and twenty managers that haven't actually had DPI in a generation are getting paid $10,000,000 on their fees. So the answer, Harry, is yes. But I would posit those traditional LPs as a percentage of the overall pool become diluted and much larger, much more return fee return focused investors like sovereigns who don't give a shit. They wanna make money, and their the freshness of perspective, would argue, is good. That's healthy on the industry. They are deploying enormous amounts of money, which is why I come back to the greatest disruption in a way is gonna be in the mid and late stage venture scene where managers are going to want to and need to gather enormous amounts of assets. But the game in town is going to be this new LP class who is much more focused on fair fees and returns. **Harry Stebbings** [16:14]: Do you worry that there'll be fair weather LPs? You know, often in venture, it's, hey, choose the golden names because they are stable, they will stay with you for three funds. Do you worry that the new class of LP, whether it's new sovereigns, whether it's new corporates, family offices, whatever that may be, do you fear that they may be fair weather and cyclical? **Roger Ehrenberg** [16:34]: Corporates, I don't even need to make the argument. They are fair weather and they are cyclical. But it is very much a fruit of the day. Oh, there's new management, and they're like, we're gonna foster this innovation culture. We're going to put money to work alongside VCs. And then there's a downturn, they get fired, and then they exit the asset class for a period, then they come back, and it's back and forth. I think that for the reason that we touched on earlier that there is this just inexorable rise of wealth and liquidity that needs to be deployed, venture is here to stay, and I see these sovereigns developing durable asset allocation strategies of which ventures apart, they can't leave. They need to deploy capital, and for them, it's gonna be much more around who should I deploy my capital with, and do I fire certain managers, or have I really backed the best the best ones, and I'm happy to just keep rolling it forward. So I think there's always the fair weather LPs, but I think it's much more the corporates going like this, but I think sovereigns and the largest wealth accumulators, they're not going anywhere. **Harry Stebbings** [17:41]: We mentioned the broken incentive structure there. Endowments are a large part of kind of the LP landscape, especially in The US. If you were a CIO today looking at your team, how would you structure an incentive program that was aligned, that made sense, and that avoided some of the structural incentive problems that we discussed? **Roger Ehrenberg** [18:00]: Well, endowments are tough as opposed to, like, let's say, a hoarsely bridge, who I mean, they have their own equity culture as a profit making enterprise, who takes endowment money and deploys it, versus an endowment itself, who has this public good. If you choose to be in this field and you go work for an endowment, it's not profit maximizing. That's not why you're doing it. You're doing it, in my opinion, for one of two reasons. One reason is working with great people and learning relationships. And that's super valuable, even if you're not gonna get paid as well as you would if you worked for a private investor. Conversely, there's mission. I have a particular institution in mind that to me is the most extraordinary culture, University of Notre Dame and their investment office. So that's obviously a very mission driven institution. They've got a very clear set of goals and a very clear charter. Everybody that works at Endy went to Endy. They believe in the institution and its mission and the students. And they're amazing, very smart, very long term oriented, do unbelievable diligence, and they really invest in relationship. But the people that work there could be at any number of places making way more money, and they choose to be an ND investment office because they love their colleagues and they love the mission of the institution. So endowments are funny. I really think it's less about fee structure, and it's more about either providing a fertile learning environment for the best young people, or the sense of mission associated with the institution itself. **Harry Stebbings** [19:38]: You mentioned the liquidity element being kind of a a lever that one could pull in terms of hedge funds and their fees. If we're being blunt, venture sucks for liquidity. It's long term lockups and you have little choice. My question being, would you invest in venture today given the fundamentally lack of liquidity for such long periods of time and the challenge that ensues? I would, but **Roger Ehrenberg** [20:00]: I think when you think about how venture plays in a diversified portfolio, unless you are a perpetual institution. This was Dale Swenson's whole argument at Yale, right, which was I'm investing money forever. I have some liquidity needs, but at the end of the day, my objective function is having the base of the endowment compound at attractive rates over extremely long periods of time. So he put, I think it was north of 40% of Yale endowment in alternatives. And people thought that was batshit crazy. And then you look at Yale's performance over very long periods of time, and they've kicked ass. I mean, he started doing this, I guess, in the eighties. So twenty five years of putting this or nineties and started putting this thing together, and they built a gorgeous portfolio. But you need that kind of a holding period in order to be the optimal investor in the asset class. However, however, if instead of allocating twenty, thirty, 40% of your endowment to venture or alternatives that are illiquid, you did 5%, 7%, as if you put it on the shelf. You focused all of your energy in manager selection. Then you just let it ride. Let it ride. Let it ride. That five to 7% provides a lot of convexity in return when you have those liquidity cycles because these things happen in bunches, Harry. Illiquid, then it's massively liquid, and then illiquid, massively liquid. But again, if you look at the compounding with the best managers, you want those returns in your portfolio. You just need to be able to manage your liquidity profile during those illiquid times. **Harry Stebbings** [21:40]: Do you know what I think the challenge is? So I think a lot of endowments look at Swanson and the entry point there and go, well, if we do the same proportion, we can get the same compounding over twenty five years. And I think what they forget is the non consensus and right element that he had in the nineties when there was less to choose from. It was a more fertile asset class to invest in. And if one were to do the same proportion today, the element of picking is so much more challenging, and the asset class itself is so much worse as a performing asset class that it doesn't generate the same. Do you see what I mean? **Roger Ehrenberg** [22:09]: I know exactly what you mean. That's true. I think the the principle is the same. The absolute returns are different. But I would also argue, depending on your portfolio construction, you could you could construct a less higher returning, but less volatile portfolio than Swenson had. Because so many of these managers that you would be investing in today and deploying larger amounts of capital are more institutional. Their returns might not be as high both because of an industry awash in liquidity and where they sit on the stage strategy. Most of the capital is in mid mid and late stage just because that's where the dollars are so great. But if you could get risk adjusted returns of 12 to 15%, pretty freaking good. If it's below 10%, then you're not getting paid for the risk. It's what is the premium that you're willing to accept above liquid strategies over long periods of time in order to have that illiquidity. That's really what it comes down to. And if you're doing mid and late stage, it's not the same degree of illiquidity as the stuff that you and I do, Harry. Right? Because these are real companies with hundreds of millions in ARR, and it's much more a function of it's almost like PE. It's like early PE versus venture. It's it's a completely different asset class what you and I do. **Harry Stebbings** [23:27]: I totally agree. I think to your point though that the 12% being good enough, I think that's exactly why Andreessen, respectfully, will continue to thrive and raise billions and billions of more dollars because compared to the six or 7% net that they're getting elsewhere, the 12% is perfectly fine. That's good enough for the portfolio that the LP is building. **Roger Ehrenberg** [23:45]: We're starting to converge on what I believe is the right answer, which is yes. If if you're getting paid 500 to 700 basis points for illiquidity and you're a either a perpetual institution by charter or just so massive that you effectively act like that, yes, that occupies a perfectly fine place in your portfolio. **Harry Stebbings** [24:04]: I am optimistic about some things today. I I'm just I I didn't bring my optimism to you because you are the answer of my concerns. I'm concerned about liquidity, Roger. We see M and A markets pretty much close-up entirely. I don't think IPO markets will open for 2024 bluntly. I don't think Stripe or Databricks will go out in '24. And I'm just going, where the fuck does liquidity come from this year? How do you think about an answer to that question? **Roger Ehrenberg** [24:28]: I think probably the greatest source of liquidity now is gonna be continuation funds, and it's going to be existing portfolios, raising money from net new investors, yet it reflects today's valuations. And you basically get fresh capital to join the partnership, provide an off ramp for those who have your facial expression right now and are like, I just need some fucking liquidity, and it ends up being a win win. And I think that's a perfectly reasonable intermediate strategy for an environment where you there's so much liquidity that's looking for returns that to mark somebody's attractive portfolio to market and say, okay. We're going to price this at a 20% IRR from our projections. We will step into a portion of your LPs, and in some cases, GP shoes, in order to generate liquidity, great. Honestly, that's what Insight's done. That's what NEA's done. And I see this as being actually a very pragmatic technique, especially for managers that have stacked funds where there are some real gems in there that you've got some antsy LPs that are like, man, I need money to fund other parts of our mission, whatever it is, and net new investors can come in and provide that liquidity. I I think that's a really great strategy. **Harry Stebbings** [25:50]: Do they happen at scale, these continuation funds? I mean, I'm thinking of Lightspeed, you mentioned, you know, NEA there, you mentioned Insight. They happen at scale or just for the big names? **Roger Ehrenberg** [26:00]: No. They can they can happen with smaller names. You probably still need a continuation fund as small as 50 or a 100. You probably could get it done. But then it's you need some smaller firms that have really good private portfolios in order to generate that kind of investment. Because you're obviously not gonna sell the whole portfolio. You're gonna sell I'm talking about this in the context of going concerns. Right? These are active firms that are investing new funds, and they're operating as normal funds. But it's addressing the exact question you asked, which is what about the liquidity? And if you're three, four funds deep and you've got some stuff in one and two that's illiquid, but really, really good, profitable, and growing quickly, but it's pre IPO, or they're IPO scale, but there's no IPO market, would you be willing to take a discount in order to generate some liquidity for your LPs? Some of these firms are saying yes. I think it's a viable strategy for a decent swath of the venture industry. It certainly caters best to the later just because you can price those assets easier. **Harry Stebbings** [27:05]: Is that not a core conflict of interest being the pricing? You're the price setter and the price giver. And so **Roger Ehrenberg** [27:11]: You're not the price setter you're not the price setter and the price giver. Remember, so you have net new investor looking at a portfolio. They're the price setter, not the existing manager. **Harry Stebbings** [27:21]: But they're they're the LP in the continuation fund, though. They're not doing select asset buy. They're an LP in the top continuation fund, and then you manage the continuation fund to buy assets underneath. No? Well, you're operating **Roger Ehrenberg** [27:33]: that **Harry Stebbings** [27:33]: portfolio **Roger Ehrenberg** [27:34]: that's already been deployed. You're now managing a static pool. Right? So there there's no net new asset coming into that pool. It's fund investor, works with manager to hire firm, to value portfolio. So there is a third party that's valuing the portfolio. Buyer and seller need to agree on a price around that third party valuation. If price is agreed to, remember, existing manager, not existing manager is still managing these assets. They have LPs. They're GP. So for them, they wanna get the highest price possible for their LPs to be happy and for their crystallized GP interest to be worth as much as possible. Obviously, continuation fund manager wants that value to be as low as possible, so their basis in that portfolio is low. It's that dynamic that creates, if you can find a market clearing price for the portfolio that is both fair from the existing manager perspective and represents an attractive investment opportunity for the net new continuation fund investment. **Harry Stebbings** [28:36]: Speaking of fairness of price, and we really haven't stopped the schedule here, but I'm loving this. I think every LP in the universe will also be going, this is great. There's a lot of chasm in how managers are valuing their books today. Do you think that the way managers are valuing books today is fairly reflective, or do you think it still has a way to come down? **Roger Ehrenberg** [28:56]: That is a very manager specific question. I can't give you a blanket answer, Harry. And honestly, I'm kinda out of the game, so I'm not really speaking to these firms. You're you're much more in it than I am. I would posit from what I know, and I am an LP in a lot of funds, that they have been very slow to adjust down, and it's been happening. Everything is always with a lag in venture. Right? It's slow to adjust to down markets. Down markets is being observed in the public arena, and very slow to reflect up markets. It's just everything is like this. Public markets are like this, and private markets are like this. Which is why, honestly, I think this whole continuation fund discussion is so interesting and topical because you've got these two very different utility functions. Because there has been so little liquidity for so long, some managers are desperate because they're under tremendous heat from their LPs to get blood from a stone. Then you've got continuation fund managers that are deeply aware of the phenomenon I just mentioned, and they're like, oh, yeah. Public markets have recovered. Public markets are near highs, but private markets are still really low. Now is the time for me to get in and take advantage of that desperation on the liquidity front. And that's what makes the magic right now. **Harry Stebbings** [30:11]: So I do love you. So if you were a large scale LP, and I was like, you know what, Roger? I've heard you. You are the man to lead our continuation fund strategy day one. What do you do with that strategy? If you're head of strategy for the continuation fund program, what does that look like? **Roger Ehrenberg** [30:28]: It's a very interesting challenge because on the one hand, the very best firms and funds won't do it. Right? Because, well, there may not be liquidity today. They've got great portfolios. They've had tons of DPI in the past, and they're like, I don't give a shit if we don't distribute anything for five years, and neither do our LPs because they've already made so much money. They're off the table. Then you've got a bunch of MEP managers who don't have that much interest in the portfolios, haven't delivered DPI, and they're just kinda fucked. Right? And I think there is a whole swath of the industry. It's like a slow motion train wreck. They are not going to be able to raise new funds. They're going to struggle, but the firms have so many funds behind them and so many assets that they are eventually going to wither. But they're not my target either, Harry. So, you know, what I'm what I'm looking for are honestly the most promising early and mid stage firms that started in an unfortunate time. Just as their companies were hitting their stride, the IPO market shut. The m and a market became increasingly challenging with Lena Khan and the FTC getting much, much more aggressive. But they've got really great portfolios, but they haven't had a lot of DPI. That's where I would focus my energy is on those funds that are new ish, meaning past decade, have some great stuff, but started a little late to miss the IPO wave of the 2016 to 2020 era. **Harry Stebbings** [32:02]: You mentioned missing the IPO timing, and you mentioned the very small windows of liquidity in venture, which you need to take advantage of. Horsey Bridge have got some amazing data on really why venture is a shit asset class unless you take advantage of these very finite windows where then it can be an amazing asset class. Roger, I want your advice on how you think about when to get out. What have been some of your biggest lessons on when to get out and what it takes to do that successfully? **Roger Ehrenberg** [32:28]: I think we need to distinguish between IPO liquidity versus secondary market liquidity because those are two very different things. **Harry Stebbings** [32:36]: If we if we divide the world between secondaries and privates and then IPOs, how do you think about that? **Roger Ehrenberg** [32:42]: We at IA would work with our companies to plan probably two years before a planned IPO in terms of undergoing an IPO readiness process and being in a position to be opportunistic. When both the company was done with our preparation and literally were public markets ready from an infrastructure, a legal and compliance, and a org structure and board structure perspective. And that takes time. So, literally, it's like a two year lead time. Then, yes, once you're ready and let's say it takes nine to twelve months to get that done, then it's okay. Let's find the best time and then do it. But I find that framework of when a company is on that trajectory to be an IPO two to three years forward to undertake this IPO readiness, show you can be opportunistic based upon the market environment. That's one. The private side, the secondary side, that is much, much harder for the reason that clearly in this particular bubble, in the same way when we were in '99, '98, '99, you had companies that had these stratospheric valuations that made no sense on any objective basis. Clearly, with 2020 hindsight, it would have been great to sell something. Sell some part of a position. Sell 10 or 20% of a position. It's hard. It's very, very, very hard to do that, but I think the mindset needs to be almost the same as the public company readiness framework, because it forces you to be objective. Is this company a public market candidate? If you had taken a deep breath, looked at an offer, said, from an IPO readiness perspective, where is this company? The objective answer to that question is no fucking wear. Light years away, then maybe that would have prompted you to say, I really believe in them, but maybe I should take 20% of the position off the table. Something. And you know who's done that really well is USB. Mhmm. Fred. Very selectively. And they've obviously had big IPO winners, and they've had some IPO winners where they've sold some in advance. **Harry Stebbings** [34:52]: Have you sold some in advance, Roger? We **Roger Ehrenberg** [34:55]: did. Yes. So, we sold a little bit of Wise in the series e. **Harry Stebbings** [35:04]: Was that the right time we did it. Was that the right decision on reflection? And I guess, why was that the one time? You know, we had such an enormous **Roger Ehrenberg** [35:12]: position in the company. We wanted to distribute something from fund two and to generate some recycling dollars, and it was what we considered to be a fair price at the time. And it was part of this process, and Wise did this brilliantly, actually. They made money. Right? Like, they generated actual money way in advance of going public. So they they held these annual employee tenders where we basically cleaned up the cap table. We brought in the super sophisticated, great pre IPO investors to then buy out some early investors and to give employees a measure of liquidity. And so it just basically continued to concentrate the cap table and shrink the number of holders, which makes life easier. We sold into one of those for the reasons I said. We ended up being able to return half of fund two and generate recycling capital. Fund two is a 105,000,000, which obviously has done extremely well. That was great. We had a similar result from a very different situation in fund one when we sold Simple to BBVA because that generated the liquidity that we then invested in The Trade Desk Series B. **Harry Stebbings** [36:25]: So this is what worries me, which is you spoke about recycling there and the ability to reuse those dollars and make every dollar as optimally efficient as possible in that fund deployment. I don't think we're gonna see recycling possible due to the lack of m and a. You know, we used to have this remember the small m and a kind of eight, ten years ago when I eat fifty, sixty, seventy million dollar m and a's that would would generate the recycling quickly for you, and you could use dollars more effectively. We don't have any recycling now most often. Does that concern you? And do we see the end of kind of effective recycling, really? **Roger Ehrenberg** [36:56]: It's a very fair point, Harry. Yeah. I think the really, the only way to get that recycling now is through secondary, is similar to what we did in Wise. Like, the the BBVA simple thing, you're right. That was, like, a 117,000,000 m and a. Yeah. We don't see very many of those these days. And, honestly, I I just chalk that up to dumb luck. Like, the timing ended up working out for us there. No. And we were holding our breath. But recycling for a very early stage fund is a struggle, a real struggle, just because of how how early you're investing, how long it is before some of those companies have these opportunities where, oh, I want to invest in that, but where am I gonna get the capital from? It's like you've deployed. You need to reserve for your fees. Well, where do I get the money from? And that which is why a lot of firms try and solve the problem with SPVs. We never would do that. So we forced ourselves into finding solutions for recycling. We got bailed out with the Simple acquisition in fund one. And in fund two, we addressed it proactively through the sale that sale of a little bit of our Wise position. **Harry Stebbings** [38:01]: So that's on the secondary side. Going back to the public side, we've seen funds believe that they know more and have asymmetric information to public markets and to LPs, which they literally do, having been investors before. But believing that then they should be able to hold and maintain management of that position. How do you feel about that? And I guess when you look at Datadog, when you look at The Trade Desk, you have many absolute bangers. How did you think about whether to distribute versus whether to hold and sustain? **Roger Ehrenberg** [38:33]: That is one of the hardest questions that Brad, Jesse, and I have dealt with. And we talked to tons of friends and mentors about this to try and develop our own philosophy. And I would say our behavior shifted post Trade Desk. Trade Desk was idiosyncratic in that that was our first grand slam. Right? Like, that was the franchise making investment. Our first IPO in 2016 enabled us to return many, many, many, many, many multiples of our first fund. But because of that, we got out of that position much faster than we would have otherwise because it was such a franchise making deal. So if you look at our average distribution price on TTD, it's probably 2,500,000. It went IPO at a 700,000,000. That's it was valued at 700,000,000 on the day it went public. So we ended up doing two public secondaries within the first six months, and then we distributed shares over the next eighteen months. That was one where, because it was our first, we got out quick. So you think, well, what could have been? Early seed stage funds, $50,000,000 fund, first big win, return, five six x net on that one position. We'll chalk that up as a win, but a lot of money left on the table, obviously. Now, personally, you know, we distributed shares. I held shares for a very long time. So I personally, and those LPs who didn't sell immediately, made way more than that because the stock just rocketed. But as a firm, what I told you is what happened. Then when you think of our other IPOs, Datadog, Wise, DOCN, those we've been much more measured and systematically distributing. Not doing public secondaries for cash, but actually just distributing shares over time. **Harry Stebbings** [40:37]: When you look back at The Trade Desk, it's actually very rational. As you said, 702.5, you're like, okay. Do you regret it? And do you look back and go, that was silly? Or do you actually go, no. I still see it. But, like, I can understand all rationale I'm thinking. I'm not a **Roger Ehrenberg** [40:51]: regretful person, Harry. That's just not that's not the way I'm wired. You can always look back at twenty twenty hindsight and overfit a curve and say, well, this would have been the optimal thing to do. But that's not real life. Real life is we discussed in great detail what our strategy should be. We discussed the balance between what happens if the market goes to shit and we had this franchise making position. Well, how would we feel then? What about our brand? You know, we're gonna be in this thing for the long run. So I think we behaved incredibly rationally. If it had been not IPO one, but IPO two, three, four, we would have behaved differently, and we would have generated greater returns. By the same token, you could say the same thing for Wise, and we've done very well on that. So it's kinda like, you know, dude, as long as you're thoughtful and as long as you go through the process of analyzing the context and the trade offs, it kinda is what it is. I lose no sleep over that. **Harry Stebbings** [41:50]: How much of an impact does it have to have an IPO company, a fund maker, in the earlier years of a fund life cycle? Like, there, it was your first. That was that was a real flag bearer for you in those days. I feel like **Roger Ehrenberg** [42:04]: we had a ton of respect in the market even before the IPOs. By then, we were just starting to deploy fund three. Right? Fund two had Wise and DigitalOcean. Fund one had Datadog, and we had a bunch of other stuff in there that was really great stuff. So I think that we had the respect in the industry both by peers and our LPs. But I'm sorry. There is nothing like taking a company public where we owed 17 percent on the day of IPO. How much money did The Trade Desk make for IA? I think that we ended up returning five to six x net on that one trade. That was a $250,000,000 fund. So 5,000,000 5,200,000 turned into net $2.50 to 300,000,000, DPI net. Was it **Harry Stebbings** [42:54]: a consensus agreement deal? Did everyone wanna do it? **Roger Ehrenberg** [42:58]: Oh, jeez. Remember, we met Jeff Green before I'd even set up the fund. We met in the fall of two thousand nine, and I incorporated IA in December of o nine. Brad was a consultant for me. He hadn't even started. And Ben Siskovic was there who would work with me on my angel portfolio. And, yeah, I think we all felt very passionately about Jeff. He hadn't yet onboarded his cofounder Dave Pickles, the CTO. We literally committed on the basis of a PowerPoint. We worked on that deal with Fatter Collective. So Eric Paley and I both sat on the board, and so we we literally coled the seed round together, and then IA bridged them three times before raising their series a. **Harry Stebbings** [43:44]: I do love you guys. I don't think it's sad enough that, like, a gen well, I didn't know about everyone else, but, like, I looked up to you and found a collective for so long as like the poster childs of the boutique artisan style adventure, which is so special to me. Fanboy moment there, but moving on. You can see my arm is just like getting worse and worse. Usually, I end up with a sleeve. I wrote up to the CEO of the largest sovereign wealth fund the other day, and he's like, oh, you have tattoos. I'm like, no. No. It's just notes. You're one of a kind here. Do know what? He said, you're not normal. I said, I I think that's a compliment. Will you give me $10,000,000,000 now? That's the minimum check. My question to you is, and this is a blunt one, do rich investors make better investor decisions on liquidity? Because as you said there, on the other ones, you didn't need it as much. The money didn't mean as much. You know, you could look at Sequoia and say like, hey. They just see upside, which means they ride the winners. They absolutely capitalize on them, and they capture as much value as possible because they don't need it. Sometimes desperation causes less good returns. Do rich people make better investments? You could say it **Roger Ehrenberg** [44:52]: that way. I would say it a little bit differently. I think about it more as have you made the franchise? Now Sequoia made the franchise forty years ago. For them to set up this evergreen structure makes all the sense in the world. I wanna be precise. When say, like, rich investors, it's not so much that when TTD went public, we were then rich. What it meant is we had actually done our job and returned significant capital to our LPs. They all had a thesis that we were great stock pickers, a great partnership, and had keen insight into which sectors would ultimately be fruitful. This was the first objective validation that they were right and that we were right. So to me, Harry, it's less about the rich and more about we proved it. And once we proved it, then the level of confidence that we had in ourselves that, maybe we're not this ragtag bunch of geeks, but we're actually really good fund managers and really good stock pickers and really good partners to founders that, I think, gave us the opportunity to take a deep breath and then say, okay. What is the optimal liquidity strategy for public markets positions once we have the freedom? That's the way I would say it. **Harry Stebbings** [46:15]: It's a validation. My question to you is that can have a flip side, which is one can become overly confident. Investor psychology, I think, is one of the most under discussed aspects of our industry, and I think it's really fucking hard. I think there's a lot of young investors today who are going, my portfolio that looked great on paper three or four years back or that I built over the last three or four years is actually taking a hammering. The companies are getting down rounds. How do you manage investor psychology? What have been your biggest lessons first? **Roger Ehrenberg** [46:41]: Well, firstly, acknowledging that it's a super hard job and that we're all human and subject to frailty and bias all over the place. And I think one of the amazing things about my partners is that we were able to talk about all this stuff, like, very openly. So having a strong partnership and that deep respect and intellectual rigor and honesty helps to deal with that. And I think if you're a solo GP, then you really need mentors that can kind of help serve in that function because we process this stuff a ton. So I think we are always very grounded, Harry. But when it comes to the psychology of missing something great, we could have invested in platinum, like our Antarct portfolio. Or we had the opportunity to take liquidity off the table when a company was high flying and then it crashed. Well, how do you deal with that? And then there's the issue of, well, we could have held on to TTD and returned another five to 10 x of the fund. Aren't we stupid? Just processing these things very honestly and then learning from what happened was one of our superpowers, which didn't mean that we always made the best decisions. It certainly meant that we tried to make the best decisions and that we had deep logic for our decisions, but that's separate from did it work out because life is not in your control. I come back to the clubhouse example of, well, even though you believe, even though it's crazy, what I'm seeing here in valuation is divorce from objective reality, just sell something so I take that schmuck factor off the table if the thing goes to shit. That kinda drove a lot of the thinking around TTD. There was the franchise making aspect, and then there was the if we don't do it and things go south, and we could have made the whole fucking franchise, but we didn't do it. How would we feel then? Let me tell you. The downside regret versus the upside opportunity cost, we made the right trade. It's not even a question. **Harry Stebbings** [48:42]: Does success get easier to attain in venture the more you have? Is it cyclical? Because IA has amazing bangers. Wise, Datadog, The Trade Desk. Great founders come to you. LPs come to you. Success is this cyclical snowball down a hill or bullshit. You still have to fight like a dog every day on the field. The answer is **Roger Ehrenberg** [49:02]: yes. It's yes to both. Because venture in the best of circumstances is hard as hell, and I am sure your pal Doug Leone would say the exact same thing. **Harry Stebbings** [49:12]: He said it on the show, people think that, like, great entrepreneurs just rock up every day and be like, oh, we we're only coming to you. Bullshit. **Roger Ehrenberg** [49:20]: It's as successful as he's been, he fights like hell. And this comes back to the conversation that we had before we even started recording about wealth, motivation, what do you need to make you happy. Doug, he's richer than Chris's. My sense of him is he wakes up every morning, puts his feet on the ground, and he's like, let's fucking go. I'm not as rich as Doug Leone, but I'm in a pretty good place. When I put my feet on the crowd, I wake up in the morning and I say, let's fucking go. Do either of us need to do this from an economic standpoint? Of course, we don't. Do we need it for ego and validation? That's not really it. At least I can't speak for Doug. That's not really for me why I do it. I do it because I just fucking love to work, and I love working with founders, and I love building stuff. To answer your question, is it easier if you've actually done a bunch of really good stuff and you have a ton of respect and awareness in the market for both investors and founders? Yes. Do you still need to hustle like hell and work as hard if not harder than everybody else to leverage that little advantage you have over net new manager? **Harry Stebbings** [50:26]: Yes. Apps a fucking lutely. It's both. You mentioned that the element of wealth, and I I did wanna talk about it because it it's something, again, I think we don't discuss enough. When you think about kind of it sounds weird, but your kind of journey and relationship with wealth, What were the biggest needle moving moments in terms of your relationship to money? The first million? The first 10? What were those needle moving moments that changed your mindset on wealth? **Roger Ehrenberg** [50:50]: So as I think I had told you once before, for me the most, The time when I realized, wow, I can make a lot of money is when I was, I think, twenty twenty eight on Wall Street, 29. Got a $320,000 bonus in my $95,000 base, so I made $415,000. And that $320,000 bonus check, Harry, was, like, the most exciting amount of money I've ever received. And it was just such a vast difference from what I ever thought I could make. **Harry Stebbings** [51:20]: Was that happiness, or was it short term joy? Was it like, yes. Amazing. You got out for a lovely dinner, but the next day it's like, Or were you actually happier as a person? And I don't think it's shallow to be happier. I think we wrongly assigned that. **Roger Ehrenberg** [51:34]: No. I I understand. I think it made me feel different. In the way that I talked about the TTD IPO giving us this measure of confidence and validation, that bonus gave me something similar. And that was the first time I had felt something quite like that. That it felt durable. It felt like it validated my skill as a Wall Street transactor, as a partner to customers, and I was really valued. And that did change something inside of me. I'm good. I can do this. That was the first inflection point. Second inflection point was and that was at Citi. At Deutsche, five years later, when I was on the equity management committee, I had rebuilt the equity derivative structuring and marketing business. Thereafter, they blew out all the BT people in the wake of that acquisition. And I built a great fucking business. Great people, super profitable, low risk profits. And then my boss at the time who ran the equity division, he got the special pool to give to 20 people, and he gave it to me. It was a special equity program on top of what was then my largest bonus. Just tell you. So order of magnitude. So, like, the $320,000 of 29 or whatever, this was 6,000,000 plus this other thing, this special thing that only 20 people got. And when he communicated that to me, like, I was in shock. It was, like, not something I was expecting. It was that next level of wow. You could draw a line from the day that I got that $320,000 bonus in my position at Citi at that point to where I was at Deutsche five years later. It was a whole other level of wow. Like, almost like the impostor syndrome, Harry. I and I've said this a bunch, and it is true. There is still a sense of disbelief in how I've gotten to where I am. I couldn't have imagined it. Certainly wasn't foreordained. And as I I told you when my wife and I got married at 27, we had less than zero. We had her student loans. I worked all the way through Columbia BS School to pay for it myself. We had nothing. We had our love. And three years later, we're here. And it's still to this day, dizzying. Like, I don't quite understand it. And I'm incredibly grateful for it, but it's these moments. And I guess, TTD was kind of the next one. If there have been, like, three in my life, those are probably the three. And I'm excited to see what the fourth will be. **Harry Stebbings** [54:05]: Do you think there will be a fourth? Respectfully, you've used the term before being post economic. Once post economic, is there, like, no more flags to put in the ground on it? No offense. Another 50,000,000 is like, okay. **Roger Ehrenberg** [54:16]: It's not money. I I've never worked harder. I'll know it when I feel it. I'll give you an example. I've now invested in multiple sports teams, and that's exciting. But that's simply because I have money and people value me around the table. That's not it. What's it is going to be one of my venture investments that I seeded or preceded becoming a wildly successful company. It's gonna be the same thing that I did thirteen, fourteen years ago at IA or eight years ago with TTD, it's gonna be something like that in the future. It could be that. It could be some of my economic development work that I'm doing in Detroit. It could be something there. Like, I don't know what it is. There'll be a fourth and there'll be a fifth. I'm in this for a long time, my friend. **Harry Stebbings** [55:02]: What's been the most surprising thing about accruing such wealth you did not expect? Probably how little of an impact it's had on me. In terms of what? The life you live, the way that you approach the world? **Roger Ehrenberg** [55:16]: I think the way that I approach the world, obviously, it's like, we have nice things. I mean, the place that we raised the boys in New York, we have this house I'm calling you from today, New Jersey, a little house in Ann Arbor. Okay? Well, there's people with a lot less money than us that have those things. Married to the same woman, never been happier, knock on wood. Something I do know is at this age and stage is all about health. Getting to this age and just friends and family and stuff like that. Honestly, Harry, I feel like the same person as when I met Karen at a bar in Ann Arbor in 1987. I don't feel that different. Yeah. There's the feeling of waking up in the morning and not worrying about money. Right? Like, worrying if somebody gets sick or if, god forbid, some you know, one of my kids needed something or whatever. It's like, we don't worry about that. So that, like, that whole thing is off the table. But in terms of, like, my drive and motivation and excitement and and I think humility and desire to learn and do new things, that's really largely unchanged. **Harry Stebbings** [56:18]: The universal truth that I speak to many immensely successful people about, I spoke to Debbie Valais at New Bank about it just in short short capital, and it's that it's so challenging to bring children up in a world of financial abundance and make them feel ambitious and hungry and hustle. What have been some of your biggest lessons on how to create children with ambition and hunger in a world of financial abundance? **Roger Ehrenberg** [56:42]: That is probably the question I get asked the most by people who have known me and know our family. I'll first say it's it's hard as hell, really hard, especially raising in a place like New York City where they went to school with kids whose parents might have different values than ours and needing to remain true to ours and for our kids to respect that. So our kids, are young men, 26 and 23. It's still constant vigilance. This is an ongoing conversation. So, thankfully, I think Karen and I, just because of who we are and how we live life, there is not a disconnect between what we say and what we do. We walk the talk. We work hard. We care about other people. We believe in investing in your community. We believe in humility and gratefulness. This has been pounded into our kids' heads from day one, and they and they've lived with it. It hasn't been words. I've been present no matter how high powered a job I had. I coached their teams. I never missed a birthday. I was at every school performance. I optimized for my family. Thankfully, I was able to do that given my career choices. Karen, clinical psychologist, has her own practice, could shape her schedule to be a full time parent, active in the kids' schools, active in their activities, coached their baseball team, was commissioner of the baseball league. We have done everything to align our actions and interests with what we want from our children. We have kept them grounded because we ourselves are grounded. And it's not just we're jetting off doing this and that, and they're sitting back with a babysitter and $10 on the counter. Oh, go have a good weekend. So it's a very long answer, a very short question, Harry. It's a very nuanced question. And again, it's it's an ongoing conversation or family even as our boys are adults. **Harry Stebbings** [58:30]: Have you ever felt like you failed as a parent? And how did that change your mindset? No. Which doesn't mean I haven't made mistakes. But, like, I don't have kids now because I don't think that I could be there in a way that I would want to be like you said, and that would be a failing of parenthood to me. **Roger Ehrenberg** [58:45]: Yeah. Well, no. I don't feel that way at all. I mean, again, my wife and I were together for a decade before we ever had kids. We had kids when we were ready both in our personal relationships and our relationship with ourselves, we embraced it and invested in it and engaged in it as the priority in our lives. So even with all of my business activities and achievements, I never didn't optimize for family. **Harry Stebbings** [59:13]: I just wanna finish on actually Karen. You you mentioned her being such an ongoing and continuous incredible force in your life, being your partner. What's the most non obvious secret to having such a brilliantly successful sustaining marriage? It's not respect and trust. Picking your battles. **Roger Ehrenberg** [59:31]: And what I mean by that, Harry, is as long as we've been together and as well as we know each other, there are ways in which we still bug the shit out of each other. That's just natural. We're humans. There is stuff that used to irritate me that I would call out and she would get angry and vice versa earlier in our relationship. And I think what has happened over time is a bunch of those things, stupid things, but annoying things, a bunch of stuff is hardwired that's very, very hard to change. And unless it's really important, biblically important in terms of the way it makes you feel about your partner, just fucking let it go. Just let it go. So that'd be one, and there's there's one other enormous one and maybe even the biggest one, which is it's not about winning. I used to feel that if we disagreed or had a fight, and I knew I fucking knew I was right, but she didn't agree. When I was younger, I used to feel like if I didn't win the argument, I was weak. Like, I was being a pushover. And what I came to realize is that it's almost exactly the opposite. You should never have the mindset of winning or losing versus your spouse, your partner. Never. That's just the wrong frame. You can have a disagreement. You can argue and fight. Personally, you should always fight fair. Words matter and not being very conscious of saying hurtful things because you're hurt and you wanna lash out. Sometimes it's important to just take a breath and pause and not say that thing that you wanna say because you're so red hot. Just don't say it. Take a deep breath. Because I guarantee you that next moment will be better than had you said that thing. And it's always better to have hard conversations later after things have cooled down. If things get really hot, the best thing to do in that moment is just to say, let's stop. Let's pick this up when we're both calmer. And, again, I'm saying these things. It's very, very hard to do. This is like level 10 ninja shit. But I'm also speaking to you as somebody that's been with this person for thirty seven years, and we've been working on this for a very long time. And we still fuck it up, believe me. But we largely get it right. **Harry Stebbings** [61:44]: Hey. I love that. And I agree. I I tend to just go for it. I always used to believe that, hey, when you got a problem, radical candor, let's go now. And that was the worst piece of advice that I got. Never never a good idea to go now. And Harry, it's not always right to be as honest as you want. Like, it's how it's heard, not what you said. That's very true. Listen, I wanna do a quick fire. This has been fucking amazing. So I say a short statement, you give me your immediate thoughts. Does that sound okay? Okay. So what have you changed your mind on most in the last twelve months? That **Roger Ehrenberg** [62:14]: I'm not insane for going back into seed stage venture after having gotten that. I actually love it. It's my calling. **Harry Stebbings** [62:21]: What's the biggest surprise of owning a sports team? They are not managed as well as you would think. There's a lot of room for improvement. Have we reached asymptote in terms of pricing of sports teams? Every PE firm is in sports now. It's crazy prices. Have we reached a cap? No. Because **Roger Ehrenberg** [62:38]: of something we talked about earlier, which is with this tremendous influx of institutional capital and with pro teams, pretty soon the NFL, I would guess, becoming PE investable, return expectations are gonna come down and prices are gonna go up. **Harry Stebbings** [62:54]: What's the best investment advice you've ever been given? **Roger Ehrenberg** [62:57]: The ability to withstand short term pain for long term gain is a superpower. So being able to manage your own internal stress and to let a thesis play out even if it's unpopular and unconventional can lead to amazing compound returns. You just need a long enough time horizon. When **Harry Stebbings** [63:15]: the IPO markets open again? **Roger Ehrenberg** [63:16]: I think we'll see some green shoots in '25, but probably '26 is when it's really gonna come back. **Harry Stebbings** [63:22]: Will Trump win? I hope not. If he won, would he open up m and a environments? **Roger Ehrenberg** [63:28]: Yes. Certainly, with the different head of the FTC. I mean, the pendulum has swung all the way in the other direction. I think you could argue that antitrust was extremely weak for a generation and now it's swung all the way in the other direction. I would expect it to come back the other way. Yes. **Harry Stebbings** [63:44]: You've got see, pick, and win, three core tenants pre investing. Where are you weakest and where are you strongest? I would say **Roger Ehrenberg** [63:53]: I am weakest today on c and strongest on when. C because my energy is much more focused on my current company's tremendous energy on having them be their best. I am not out going to conferences and doing all the things that I did in my younger days because I'm just fucking tired. But that's what I have my kids for. They are going to scaffold the sea. **Harry Stebbings** [64:23]: Listen. The only reason you have kids is to blame your thoughts on them and to send them to conferences. Okay? **Roger Ehrenberg** [64:28]: It's it's such an awful existence, Harry. It's so terrible for my boys. **Harry Stebbings** [64:34]: Honestly, I I feel so bad. If you need a third adopted child, I'm right here, baby. Karen's like, really to **Roger Ehrenberg** [64:40]: the family. **Harry Stebbings** [64:41]: Yeah. Yeah. It's great. Most people meet me and they're like, wow. You're really quite big. We expected you to be like Harry Potter. I'm like, thank you. I I grew up about ten years ago, but that's wonderful. So, yes, what's the biggest advice that you have to a manager out raising today? **Roger Ehrenberg** [64:56]: Be different. Take risk. Don't play it safe. Have a deeply held thesis and just put it out there. Be shocked. Don't be a sheep. Don't follow the playbook. **Harry Stebbings** [65:04]: Penultimate one, do the best founders need their VC? A lot of VCs like to pretend like we have this mythical value. Founders wanna say, hey. The best founders don't need you. Don't worry. I think the best founders **Roger Ehrenberg** [65:16]: aren't dependent. I think the best founders benefit from really good VCs to act as a sounding board, especially in those earliest days. And to and to give them, honestly, empathy and psychological support because that is often the hardest thing to get when you're struggling at the beginning and trying to get to product market fit. Again, like, the very best companies that we've been involved with, the founders were all amazing. They all were highly self motivated and independent. Like, they didn't want to lean on us as a crutch and didn't. But I would say to a person, they all benefited from us as strong, stable, safe partners to process hard feelings and hard business problems in those early days. **Harry Stebbings** [66:04]: 90 of VCs detract value, Vinyl Cursor. Agree or overstatement? **Roger Ehrenberg** [66:09]: There is something to the general view that VCs think a lot of themselves and probably attribute more skill to themselves than they actually have. I think unless a VC is proactively and consciously humble and aware of the limitations they can have on the outcome of a company, then they're probably value disruptive. **Harry Stebbings** [66:30]: It's because of these fucking podcasts they go on these days. Yeah. Assholes. There's no wonder. Tell me why you're so brilliant. Final one, Roger. Where are you in ten years? That's a classic, but, like, where do you wanna be? Like, doing this with Andrew and Ethan? Wanna be handing it over to them? What does that look like? **Roger Ehrenberg** [66:51]: Ten years is a good time horizon. So in ten years, I'll be 68. They'll be 36 and 33. I would aspire for them to be day to day running pieces of our family business with me really serving more in a chairperson's capacity, but with them being the principal operators. We talk about venture, and that's where we spend most of our time. But there's lots of other things I do too. Like, I've got this pretty significant real estate business, and I have this deep interest in affordable workforce housing and investing in Detroit. I've got investments in food and beverage. I'm, like, very invested in the rejuvenation of Detroit. That's something I'm very, very passionate about. And it's not just in Detroit, kind of the the Great Lakes States and believing that that is a great place to do business and ultimately with the intersection of climate change. **Harry Stebbings** [67:41]: Do you manage that yourself? Do you have a family office to do that? I do it. I do everything. Do you know what my advice to you would be? You do too much. You're doing too **Roger Ehrenberg** [67:49]: much. I'm actually doing, like, four, but the difference is it doesn't stress me out. **Harry Stebbings** [67:56]: Roger, you've been amazing. Thank you thank you so much for being so fantastic, and I've absolutely loved this. **Roger Ehrenberg** [68:01]: Well, I hope we can see each other in person soon and have probably those 28 mojitos that you won't be now. **Harry Stebbings** [68:08]: I have to say, I think that's one of the best shows we've ever done. The combination of venture, marriage, bringing up children. Roger really is one of the most incredible people in this business. I wanna say a huge thank you to him for being so brilliant. If you wanna see more and watch the show, you can watch it on YouTube by searching for 20 VC. That's $2.00 VC. But before we leave you today, ## Sponsor read **Harry Stebbings** [68:27]: HIVE is the marketplace for private stock. 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