Altimeter (with Brad Gerstner)

0:00 Alright, well hopefully AirPods don't screw things up too bad. Can look like humans on air. And if we ever end up in a situation with microphones that are out of frame, it'll be game changing. It'll be less like we're talking to each other. Who got the truth? Is it you, is it you, is it you Who got the truth now? Is it you, is it you, is it you?

0:22 Down! Say it straight. Another story Welcome to Season 10, Episode 4 of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert, and I am the co-founder and managing director of Seattle-based Pioneer Square Labs and our venture fund, PSL Ventures. And I'm David Rosenthal and I'm an angel investor based

0:47 In San Francisco. And we Are your hosts. We've done Sequoia. We've done Andreessen Horowitz.

0:55 but we have not gone deep on one of the biggest stories in Venture right now. Crossover investing. We are watching hedge funds like Tiger Global and Kotu come all the way down to seed investing, and we're simultaneously seeing classically early stage venture capital firms like Sequoia completely reinvent their structure. to hold on to their winners longer.

1:18 even as they become public companies. one of the firms that pioneered this dual approach of operating a hedge fund and a venture capital firm simultaneously. Ultimeter capital. There's been a

1:33 So much change in Venture in the last few years. More change, I think, in the last few years than in the decade that I was doing venture. Than watching it before. And listeners, to tell the story right, we are joined today by Brad Gersner. the founder of the firm.

1:50 And actually To tell you the truth, he is joined by us. We actually recorded this episode in person, even with video, stands, microphones, everything at the Altimeter office on Sandhill Road. And for those of you who don't know, Brad has had Uh

2:06 unbelievable career starting five companies, so he's got a very different mentality than you're sort of Class hedge fund guy. On the investing side, he led the series C in Snowflake and still owns a massive stake of the company. He's led large investments and sat on the board of companies you know like MongoDB and Roblox and Zillow and Plaid. He led the SPAC that took Grab public in South East Asia. And he is widely known as one of the most knowledgeable people in the world.

2:36 on the business of online travel after his involvement in Expedia, Orbits, Uber, and many others. And You you forgot maybe the most important part. I think he's the number one Besty Guesty on our friends over at the All In Pod.

2:52 I think that's probably right. Probably right. All right listeners. Now is a great time to talk about a new partner of ours here on Acquired, Lagora. The agentic operating system that is redefining how the world's best legal teams work.

3:08 Yep. It's sort of obvious that AI is gonna completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Lagora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry? So the founders did exactly what great founders do. operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done.

3:40 And that's how you get features that customers love, like tabular review where you Drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Legor's bed here is interesting, since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time. And they recently launched Lagora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective. Then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required. And Lagora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Ligora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win seventy percent of the time. Legora now has over a hundred thousand lawyers on the platform from twelve hundred legal teams in fifty countries.

4:45 And crazily, they went from one million To a hundred million in ARR. Eighteen months.

4:53 truly insane numbers. And that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in house at a company, You can learn more at Lagora.com slash acquired And just tell'em that Ben and David sent you.

5:18 Well, we will cut over to our interview with Brad now. But please do know ahead of time that uh you can discuss this episode and everything else in the tech world afterwards with us. at acquire.fm slash slack, join eleven thousand smart, thoughtful people like yourself. And we have some awesome new LP show content out there. You can search acquired LP show in the podcast player of your choice. And uh lastly

5:45 This is not investment advice. Do your own research. And now Over two. Bradgersner. from Ultimate or Capital.

5:53 Tell us about You're Family and your dad's experience with entrepreneurship. Well, I grew up in a in a small rural town in northern Indiana. Near Notre Dame.

6:04 First generation college. My dad had you know, classic immigrant story. His parents had kind of given up everything in order to help put their only child Through college. He started

6:17 at Northwestern they couldn't afford to finish their you know, ended up at at Bradley in in Illinois, got an engineering degree. And long story short, nineteen seventy seven, I was born in seventy one. So nineteen seventy seven, he becomes uh general manager of uh auto parts manufacturer and You know, the small town that employed most of the people in the town. Is it a like a GM uh Yeah, it was it was a supplier to GM, a supplier to Ford at the time. And remember, our auto industry was under assault by the Japanese auto manufacturers. You had double digit interest rates and inflation, which

6:53 For the first time and thirty years is all of a sudden a topic of conversation again. With the Fed under under Volcker? Yeah, under Volker. We had, you know, you remember stagflation the end of the seventies, which was low growth, high inflation. And for some reason, you know, so there was an acquirer that came along to buy this plant. They needed to get my dad and them the workers to go along.

7:16 you know, with the deal, my dad said he could deliver the workers so long as they agreed not to lay anybody off. Of course they said they would do that. You know, three months later they were gonna lay off all these people and in this small town, you know, your words your bond and my dad just couldn't live with himself with that outcome. And so in a fit of of Lunacy. decided that he was going to start a competitor.

7:41 Um, he knew nothing about starting a business. there was no such thing in that part of the world as venture capital. All he knew is that he knew how to make these parts. And he knew he could inspire these men and women to join his cause and and it was a crusade. And it was a you know, I look at it and I'm sure I look at it through rose colored lenses, but it was a valiant crusade. Unfortunately you had to borrow money from

8:06 The town bank. In a typical acquired episode or a typical tech story, it's like This is the hero's journey and like he wins. And like you grow up in this like amazing, you know, entrepreneurial journey and you're like, This is awesome. I'm gonna go do the same thing. That's not gonna happen. I wish I wish the story ended that way. Um You know, for his sake. I mean he

8:27 borrowed money from the bank, mortgage the house, mortgage the car. And The punchline is there are moments in time where the deck is so stacked against you Notwithstanding all your best effort, notwithstanding All the extraordinary sacrifice of the team

8:44 Or maybe even the brilliance of the idea. It's not meant to be at that moment. And Um, invent your capital if you fail. The risk is largely on the venture capitalist. I mean in Silicon Valley, failure is

8:57 On the part of the founder, so long as you conduct yourself in a way that's honorable, it's a badge of courage. That you gave it a go. And we have an institutional structure where the venture capitalists can withstand that loss because they have a portfolio that they can you know, cushion that with. So I often You know, young founders will come in and say, Well, I just don't know if I can take the risk.

9:18 You know, they just graduated from Stanford, they have no student debt. Yeah. You know they're getting money from a venture capitalist if they fail, they don't have to pay the money back. If they win, they get you know huge upside. If they're at the stage where they're actually taking money from a venture capitalist and they have a term sheet and that you know that's gonna happen for them. You've already won. The personal risk there is extremely low. There's there's no risk. What what risk are you talking about? The risk

9:43 Is Have a young family. Mortgage your house. Mortgage your car double digit interest rates and inflation, the business goes under

9:54 My dad loses his health. He loses his house. He loses his marriage, Right. That's risk. Yeah. Right. And the beautiful thing about this country is, you know, we have created a system

10:08 Where we encourage risk takers. Unfortunately in nineteen you know, eighty in the middle part of the country in a small town. My dad refused to declare bankruptcy. He would work the rest of his life trying to pay back that money. Because it was his word.

10:23 that he gave to the people who lent him the money. And so I think about that when I hear from entrepreneurs or when I even think about the risk associated with starting Altimeter or starting the other companies I started. It's really not risk relative to the risk he undertook. So I grew up around an entrepreneur, but it was not a heroic

10:43 Entrepreneurial story. And my grandfather, my father's father basically forbade us from becoming entrepreneurs. And he said to the four grandchildren You can become professionals.

10:57 You know, doctors, lawyers, architects, but Please don't become entrepreneurs. And so I you know, I I felt like I owed that to him. Even though I felt I was always kind of starting little enterprises in high school and thinking that way my brother did in college. Um, but I went to law school.

11:15 And you thought you were going to go into politics, be you know a leader in government. Uh, how far did you get on that path? That was programmed pretty early. I had studied uh in ninety one, ninety two at Oxford. I came back and worked

11:31 For the US Senator from Indiana, Dick Luger. He was chairman of the Foreign Relations Committee at the time. We're denuclearizing Russia at the time. It was a pretty heady moment in time with a senior statesman, road scholar, incredible human being. Honored to work with him, stayed close with him and so When I graduated from law school and I went to work for a big law firm, I got a call from Senator Luger.

11:55 asking me, I don't know, I must have been twenty six or twenty seven, if I had accept an appointment as deputy secretary of state in Indiana. Evan Bai, who went on to become governor and senator from Indiana, started there. So it's kind of a known launching pad into Indiana politics. So I I became deputy secretary of state and You know, face to this fork in the road that I was either gonna run for secretary of state Or I was going to go try to make some money.

12:21 And I concluded having grown up around a family that struggle for money. In fact, my grandfather said we don't have money, we have lack of money problems. I've heard you talk about this before. Is it is it fair to say that um You You didn't want to go.

12:35 Raise money to run a political campaign. The idea of Grovelling for the rest of my career. For money. Just didn't sit well with me.

12:47 Kind of a loon, but somebody I admired was the nineteen ninety one campaign of Ross Perot. And he, you know, spent tens of millions of his own money to go on television In kind of a goofy way with poster boards and rail against the national debt. And I thought Nobody owns this guy.

13:06 And Però people forget, he dropped out of the campaign. Three weeks before the election. And I think he still got seventeen or nineteen percent of the vote. He was an entrepreneur himself, right? He started EDS. EDS, yeah, Electronic Data Systems.

13:22 And I wouldn't say I you know, there there's a lot about Ross Pro, I don't know, and is not an endorsement of of his politics. But it was seeing that. Yeah, it was a meeting I can either shake a tin can for the rest of my life Um but like others who came before me, I said, Hey, I'll go back to business school

13:41 Maybe I can make, you know, a little bit of money. And so the plan was go back to HBS. How did you decide on wanting to go to HBS? Did somebody inspire you or or encourage you to do that? It's slightly embarrassing story. Like I didn't really do much research. I remember taking the You know, the entrance exam like the last day scrambling to fill out the application. In fact I didn't even finish the application because I I ended up getting an interview and I remember

14:05 The person who interviewed me said this is a unique situation. I can't say that I've ever interviewed somebody who didn't have time to complete the application. And so he started with why didn't you have time to complete the application? You're like Well I'm deputy secretary of state right now. I went through I went through it and it wasn't y you know, it was just I decided late. And I was. I was working my ass off. But I said

14:29 Now's the time. And we went through it and So you know that's a different outcome to the same story for Warren Buffett. Oh, he wanted to go to Harvard Business School. And he was so sure he was gonna get in, he didn't complete the application, was sure he was gonna get in. Of course he didn't get in. And then he had to scramble and that's how he ended up at Columbia, and of course

14:46 The rest is history. Uh when I was in high school, one of my first you know, I worked and was was going to school at the same time, and this was after this episode with my father and The part of Indiana that I'm from, they make all the R Vs and conversion like vans in the in the in the country. So I ended up with a job as kind of the right hand little chief of staff, go do anything I asked of a guy named Pete Legal. And Pete Legal was starting a R V company.

15:14 And I worked for two years for Pete. He had me doing everything, you know, in the accounting department with the CFO, you know, out on the line helping to run purchasing for the Sierra R V line in nineteen eighty seven. Here's the interesting thing. Pete went on to build the largest R V company in the world. That he sold.

15:35 To Warren Buffett. And Warren has written a lot in his annual letters about Pete, who's just a legend of a human being. was a great inspiration to me. And it was funny because

15:48 Ultimately I became fond and friendly with Ted Wechler who works alongside Warren and we worked on some deals together and You know, the world. It really came full circle. I have the same personality characteristic that you do around an aversion to asking people for money. And in fundraising for politics, I can see how that would be especially hard.

16:13 I mean you you've raised I think literally billions of dollars over the years for Ultimeter. What is it about the way that you fundraise now that hits differently in your psyche. You know, I had the feeling at the time, and maybe it's just because

16:27 At that point in time. I didn't believe in myself perhaps the way I believe in myself now, but it felt like a very personal ask. Like give me money for my campaign. You know, now I am a steward, I am a fiduciary on your behalf. And I believe I'm gonna make you a lot of money. And we have made a lot of money for our L Ps.

16:47 And if you could see the letters we've received from university endowments. From foundations. From Family offices. And

16:57 the transformative things they outlined that we allowed them to do, free education, you know, dramatically more scholarships. Yeah, whether it's the environmental causes, whether it's immigration causes, whether it's inner city schools. So To me, I think there is, you know, the great causes I think as somebody else coined the phrase, that we can work on behalf of in a way that's great for uh entrepreneurs, in a way that's great for our economy, and in a way that helps to, you know, really transform some underlying causes. So it's it's an easier ask for me because it doesn't sound it doesn't feel quite so personal. And even though when you're running for office, you know, it's in public service.

17:37 It kind of felt to you more like hey Do this thing for me and I can't totally see the ROI for you as a citizen, but What's kind of a problem if you can see the ROI for you for giving me the money to invest like No, I th I think that's right. Uh listen. I've gone on

17:53 To raise a lot of money. For people in politics. to for a lot of other great causes. It's really easy for me to ask for others. It's a more difficult ask when I'm a beneficiary of the ask.

18:06 And at twenty six, even with the support of your mentor, it's not like you had the broad network to gr have so many people go ask on your behalf. Okay, so you get to HPS. You get hooked up with two guys. At HP S. David and Joel.

18:21 Who were going to start general catalysts. They themselves weren't people that you were like, Oh, it's obvious you're gonna start a venture capital firm, right? Quite the opposite, but um I love them both dearly. Let me rewind just a little bit before that. Nineteen eighty nine, I really start, you know, getting enamored with email networks. working in prodigy and following AOL in in the nineties, really interested in investing. Nineteen ninety six, I'm graduating from law school. Now

18:47 My grandfather who I mentioned left me twenty five thousand dollars when he passed away. And I day traded that twenty five thousand dollars to put myself through law school and business school. And I took the series seven because I thought, man, maybe there's something these people know that I don't know. I want to know the dark secrets of investing. And then I realized, wow, none of these people know anything. That's the dark secret. The dark secret is there is no secret. So nineteen ninety six, when I'm graduating from law school, I also

19:17 have this aha moment like so many people did with the Netscape browser. And I said, This changes the game on this thing called the internet, which was just these computers talking and email networks and it felt wonky and inaccessible. And I remember gathering in the law school library. a group of my friends, including the guy sitting in there who's now my general counsel. And I said, You gotta see this.

19:43 So from nineteen ninety six, then I go back, work for this law firm. We started getting litigation claims of people who were doing domain squatting in nineteen ninety six. Well nobody in this six hundred person law firm knew anything about the internet or domains or anything else. So I raised my hand. I said, I'll take all of that. You know, I helped them build the firm website and I quickly became known as the internet guy. But I was thinking So if I go back to business school, like I've gotta find my way to Silicon Valley.

20:12 When I was graduating from law school I actually came out here because there is an innovative law firm out here called VLG, the venture law firm. Oh yeah. That was taking equity stakes at the time for doing work for companies. So I literally got on a plane, I flew out here, the office was right next to the Rosewood across the street. I just walked into the their offices and said, Hey, I'm looking for a job Now they didn't have a job for me, but you know, it started to demystify this place for me. And business school was going to be my pivot, my off ramp.

20:42 So I go to business school in nineteen ninety nine. I mean this is Peak. This is peak peak, right? And You know, McKenzie and Goldman couldn't get anybody to show up at their interviews at HBS in nineteen ninety nine. Because all your classmates are just so gaga for every classmate is gonna start a company, every classmate's gonna work for a startup.

21:03 consulting firms were, you know, being started that were internet only. Um it was it was it was really an interesting moment in time. Now Again, I'm day trading CMGI out of the back of my finance classroom, knowing that this thing's going to zero. But I'm gonna ride it while I can. And is that like fe trade? Or how are you day trading at that point? We had Bloomberg terminals right outside the classroom. I had a Fidelity account actually, and I would do my research on the Bloomberg and then we'd place trades. Listen.

21:34 I was What's known as a poet. I mean, I'm a lawyer from Indiana I had never run a spreadsheet in my life. And I show up and I have all these guys who've worked for hedge funds, private equity firms, venture firms, Wall Street guys, investment bankers. And so all of a sudden I'm huddled around

21:52 You know, these machines with folks who knew a lot more than me. Is poet in finance the same thing as like a fish in poker? Exactly. I let's put it this way, we were transitioning to taking exams on computers and there were two of us who took our finance exam with a calculator and a pen. And the rest did it with a spreadsheet. I remember myself and A classmate of mine, uh, who is a doctor.

22:15 Chris Gilligan. And look at you now. Look at look at all those chumps who used computers back then. I was hell bent on coming to Silicon Valley. Nineteen ninety nine. I start coming out here. I was enamored with a small little search company that I had started to

22:32 you know, run all my searches on called Google. hot startup called Tell Me run by Mike McHugh. Oh yeah. That was uh voice reading. Yep. And sold to ultimately sold to Microsoft. And so I was very focused on coming out here. one of my classmates who had eventually become my wife was very focused on staying in Boston.

22:53 And I'd met David and Joel and so I said, Okay Maybe I can help start this venture firm stay in Boston. And see where it goes. So in nineteen ninety nine, two thousand, we had a launch idea for the venture firm. So a launch company, if you will. Which was a

23:09 Online travel concept. It was called N L G National Leisure Group. And basically what we were trying to build was The infrastructure think Shopify in some ways the infrastructure uh that would power Expedia travelosity, Yahoo, others who were

23:26 Selling travel They were selling air tickets, they were plugged into these global distribution systems, but there was no GDS For selling vacation packages, cruises, and all these other things. So we said, let's go build the GDS effectively for that. And we partner with Softbank. We raised Must be fifty million bucks.

23:44 for that business. We bought a little business to give us kind of the kernel. We build a digital layer on top of it and while the rest of the world was imploding We found ourselves in a pretty enviable position. We built the business to over a billion in gross bookings, I think had over a thousand employees at the peak and That was all like within a year, right? That was within eighteen months because again It worked like people were actually buying this stuff online. Right, and we were plugging into existing pools of demand. We weren't going out and having to create demand

24:14 So Expedia launches you know, a cruiser vacation package booking engine and the next day a lot of people are actually buying it. And we're kind of the Shopify, if you will, inside And so Rich Barton.

24:27 Who ran Expedia said hey We wanna buy the business. And then we ran into Darakashhahi, who was running M and A for Barry Diller at the time, and he said You know, I wanna buy the business. And to be clear, this is pre IAC buying Expedia. So these are two completely different entities bidding against each other for your home. Correct and I said to

24:48 Dara, well, we're already have an interested party that we're talking to. And so he goes, Well let me talk to Barry and so he talks to them and they come back and he said, Well Who is it? And I said, Well I can't tell you that, but it's one of the big online travel players and he goes, Well, I think Barry wants to buy them too. And that's ultimately what went down.

25:07 between um October of two thousand and May of two thousand and one uh we put together a deal where USA networks would be renamed IAC bought both N L G uh and Expedia. Oh, those were concurrent? Concurrent deals announced together. Uh I remember. being in the back of a limousine in Hollywood on my way to

25:29 Barry Diller's house with Rich Barton and we looked at each other and we were like, Strange world, how'd we end up here? This was the beginning of very Transforming from a media guy into a Media and technology. Guy and and building IAC. Yeah, it was USA networks and it became

25:47 I A C Well I would say two things about that real quickly. First, Barry was early to understand Transactional commerce through a screen.

25:58 Mm. Because of home shopping network. Because of home shopping network. He also acquired Ticketmaster. And he also acquired an an asset called one eight hundred hotels. And he also acquired some catalogs and what they all had in common was transaction, you know, they were all e commerce based business models.

26:16 And they were through various mediums. The biggest being Home Shopping Network, which is through television. So for him to squint a little bit and to see how all these transactions were gonna move to the internet Was not that difficult. And the commerce engine, the commerce flywheel that was flying the fastest for him

26:34 was one eight hundred hotels that he would rename hotels.com. So he was doing extraordinarily well in travel. understood that that would be a big category of online commerce. And I remember very distinctly

26:48 him talking about, you know, commerce through all the screen. And that was in, you know, nineteen ninety nine, two thousand before most people saw it. I think this is such an important thing to realize about the dot com bubble,'cause everyone looks back at it and makes jokes, but They consumer behavior was there. It was a objectively better way to transact in all these different mediums and the bubbst because it was a speculative asset bubble and capital went away if you didn't have a business model. But for those who did and who could you know, be free cash flow positive.

27:20 This is where all the demand was going, and that never went away, right? Could you feel that in the moment of like people still want to do this as long as I can't say that I did. I I you know, like I was really worried about you know, you gotta remember Th the size of the bubble bursting the change in risk premiums Right. And then the events of September eleventh, two thousand and one, they were also compressed. It's the fog of war.

27:47 Right. I think About all we really knew for sure is this internet thing wasn't going away. There are gonna be real businesses built around it.

27:56 But it was very unclear when you would have the capital required to build the businesses, where the capital was going to come from. You know, and in hindsight it seems pretty simple, but I would say two thousand one, two thousand and two, two thousand three turned out to be a gift. But that's a slog. Right, when you're going through it. Yeah. I look at business models today that have, you know, negative unit economics, negative gross margins, raising money at super high valuations.

28:23 I have post traumatic stress from that period. because if you are a highburn business with negative unit economics And you fly into a world where risk premiums change It doesn't matter how good you are. You cease to exist. Mm-hmm. Right. And they will change eventually. I mean that's the thing. Just look at what's happened over the course of the last eight weeks, right? Um

28:45 Growth multiples are down fifty percent, risk premiums have changed dramatically. There are a lot of businesses that are in the category I just described that aren't going to make it. So the natural thing to decide after all this is that you're gonna go be a public markets investor, right? Like you know, part of why we want to tell hey, it's a great story. But also like What Ultimeter ultimately becomes in this You know, you guys I think are

29:09 Maybe the Pierce Play example, certainly one of the first If not the first life cycle investor. You know, it was just not at all obvious that you should go join a hedge fund at this point, right? Like how did that happen? Yeah, I mean, so there's a little bit more in between, you know, so September eleventh happens, which is, you know, a really catastrophic event, particularly for our company that was an online travel company. And so we negotiated kind of the soft landing with IAC. I won't take you through all the Trials and turbulations, but it was a good outcome for general catalysts.

29:40 I thought I was gonna go back and join David and Joel. I knew they were two extraordinarily special human beings and they were gonna build something really big. But I had kind of been bitten by the startup bug. a friend named Bajo Samaya who now runs light speed in India. uh in south east asia had an idea And it effectively was

29:59 Think of Yelp pre Yelp. And so Beige and I started this business. Um, we bootstrapped it, had a bunch of venture capital term sheets for a variety of reasons, didn't take them. And we sold that business uh a couple years later to a public company in Seattle. And again, in the first transaction, you know, I'd worked really hard at NLG and I think I walked away after being the CEO and helping put the deal together with a million dollars.

30:22 Which for poor kid from Indiana. That was game changing, but by Silicon Valley standards today, people would be like w you know, are you are you are you clueless? There was a lot of work that went into that. The second business where I started with Beige. I think I owned forty percent of the business when we sold it.

30:40 That was four or five X the outcome. And then When I thought about what I wanted to do, I had two competing ideas. Wha one was another operating business. Like if you're an entrepreneur, you have these ideas you have to get them out of your car. But what I really thought

30:55 that I was better suited for was investing. And a person who made this clear to me was Rich Barton. And um Rich. One day he sat me down and he said, I don't think you're a great

31:06 Entrepreneur and I said that's so insulting. Well he keeps it real. And he said You know, being an entrepreneur is the art of the possible. Right, you have to will things into existence. And He said

31:26 You know, you constantly think about what can go wrong. When you're an entrepreneur, oftentimes you have to suspend disbelief. And just think about what can go right. And he said, But as an investor Investors think about distribution of probabilities.

31:40 Not possibilities. And he's like, I've always, you know, kind of observed you Like your training as a lawyer, how you think as an investor, like you're gonna make a great investor. And so I was like, you know what? He's right and the best investment business model.

31:55 Right, is kind of this venture capital hedge fund business model. I thought there was gonna be a lot of disruption occur in that business model. Also when you say this this business model, this venture capital hedge fund business model, until what you and now several others have done, that was not a business model. Those are two completely different types of business. I'll hit that in just a second. But I wanted to start a business and I said I will start you know, I think I can build a better version of this model.

32:23 At the time. If you really rewind the clock. Warren Buffett. Right. I I don't know what year it was, nineteen fifty five when he started his hedge fund. He did both public and privates.

32:35 Right. He didn't distinguish he he just sought out great investments. Paul Reeder, who started Park Capital, was doing private investments before Brad Gersner showed up. Seth Clarman at Bowpost was doing private investments You know, before we coined the term crossover. Right, David Abrams in Boston. So I had a lot of legendary investors I looked up to.

32:56 The they never thought of the world in crossover, but they thought the world You know, there wasn't this artificial constraint that I can only invest if you're pre IPO or you're post IPO. What did private investments mean to them? Did it mean what we think of or did it mean something else? Well I would say for them, private investing was maybe buying

33:15 Auto dealerships. or newspapers or textile companies or whatever the case may be And as you know, in value investing, which w was really the rage of that couple of decades. I'm gonna buy a company. With a bunch of free cash flow.

33:30 I'm gonna use that free cash flow to go invest in things that actually have higher returning characteristics. Paul invested in that first company NLG. He was on the board. We got to know each other quite well. He saw me day trading in companies like Priceline And he thought, This is interesting, a CEO who actually is also an investor. So, you know, I remember him saying to me, You oughta come work with me someday.

33:54 And so after we saw that company open list, I showed up and I said, Hey I want to come work with you. I can run the technology part of the business. You don't have a technology business. I'll build a technology business, both public and V C. Okay, which is consistent with historically what you've done. And I said

34:13 If I like the business I'm gonna start my own. So you don't have to pay me. Make me an apprentice. All I ask

34:21 Is that we have lunch together every day and you teach me the hedge fund business. You'd made a you know a couple of million dollars at this point. And did he take you on that deal? He said, Oh great, you can you can quote unquote work here with and I and I won't pay you. He did say kind of come apprentice. Yeah. And I think I was two weeks in and he said, This is ridiculous. Um he said, Okay, I'm gonna pay you, you're gonna do this. And I will say it was one of the most extraordinary mentor, mentee, you know, journeys over the course of the next two and a half years. He's a legend, he doesn't get the credit he deserves.

35:01 And he gave me the autonomy to on the public side You know, go invest in my entire book in Google and Price line and Yeah, a couple of great companies and

35:12 than to go make some venture capital investments, like leading the series. You know, be in Zillow. And I remember at the time thinking, This is so easy. You know, I had such deep conviction in Google And I didn't have to have this highly diversified book. And if it if it went down, Paul would come into the office and say, What do you think? I'd say buy more. I've had into yoga. Right. It was this like and uh and so but we had a we we had a really great run together. I didn't realize that you that was with Paul when you led the series be in Zillow because you you were a Zillow board member from that point on for quite a long time. Did you stay on the board of Zillow sort of as an independent even after leaving Paul's firm and starting ultimately? No, I I I I left the board. I don't know if it was i exactly contemporaneous.

35:59 Uh to that, but about that time. You know, by the end of two thousand I mean, listen, I learned so much from Paul and All kidding aside, the idea of portfolio management, risk management Paul didn't call it essentialism. But you know

36:14 running a simplified, concentrated portfolio around your best ideas. was something that I absolutely I may have been constitutionally predisposed to believe that anyway. But we were just very symbiotic in our thinking about how to manage portfolios. He couldn't have been more supportive, and so I learned through some pretty heady times with him.

36:35 And then by two at the end of two thousand and seven I, you know, kinda said to him, I I think I want to do my own thing. You led the series B. In Zillow as a crossover hedge fund. The idea of crossover

36:48 you know, existed as you said in in not necessarily in tech and other, you know. Domains but also in tech with T C V and others. They were not leading series Bs in companies that that like that. Series B at that point in time is what, ten, fifteen million dollars. I mean it's not a fifty or a hundred. Yeah, that's right. I think I'm trying to think the the check size. Uh we may have put in twenty to thirty million bucks and if I recall it was a couple hundred million dollar valuation. Listen to his credit and another OG, Jay Hogue, who started T C V was already in Zillow by the time I came into Zillow. Yeah. Maybe it's a you know the nomenclature. I don't know if one was a C and an A and a B, but those were the first three rounds of institutional capital. And you know, Jay had a relationship with Rich from his days at Expedia. Yep.

37:36 I obviously had a relationship with Rich. We uh we knew he was a special entrepreneur. I knew Bill as well. And so it was a big idea. It was a special collection of people out of Expedia led by Rich and Lloyd. Um but I remember at the time talking to Jay

37:53 About you know Like technology crossover ventures. Like you are the guy you know to do you know, crossover. And I remember sitting down and saying this is what I like, that's the winning model. Like that's really the winning money. No, I was coming at it You know.

38:08 with a more I think clear idea of public pool of capital and venture pool of capital. T C V had evolved into almost more of a later stage You know, venture firm. Yeah. Right. That that held some public positions.

38:23 But didn't have a hedge fund per se. So I think I had a slightly different view. But credit where credit is due, their vision for where the world was going was was ahead of their time. Okay, so it's two thousand eight. Two end of two thousand seven, beginning of two thousand eight. You tell Paul you're gonna Yeah. Go out on your own. You just keep nailing this time. Yeah, you're just really the whole world's going go go and just in case it falls. I w I wish I was nailing it. I got married at the end of O seven.

38:48 We had our first child on june third of two thousand and eight. Uh remember the world Cracks. were shown in August two thousand seven. Like it whenever you look at these stock graphs, they look at like they're generally stable, but man, the number of days of lost sleep. But I remember saying to Michelle Yeah, we didn't have that much money.

39:09 We were living in a few thousand square foot kind of subterranean apartment in Boston. We were having our first child. And It's clear the world was getting tougher by the summer of two thousand eight, and I said, I think I'm starting you know, I'm I'm gonna start my own firm, go tell Paul. And

39:25 Let's just say that when you're nursing a baby in September of two thousand eight, October of two thousand eight, I have C N B C on. It's Like you just want to find the waste basket to get sick in. And I'm launching with no money. You had a bunch of commitments and they dried up. Right. So at the end of O seven

39:44 You know, the track record had had been good. And You know, so I talked to some university endowments, some foundations. Now I didn't know this world at all. Like I didn't know the world of L Ps at all. Um, but I talked to a few people and they're like, Hey, we'll give you some money and so I thought I was gonna launch with hundred to two hundred million bucks. But it was clear by September, October two thousand eight.

40:04 People thought the financial world might be over forever. And It's hard now. It's hard it's hard now to like put ourselves back in those shoes, but when when you think like People thought Lehman, Morgan Stanley, Goldman Sachs were all going to collapse. Right.

40:22 And nobody knew the contagion effects of that. Nobody knew the impact on the dollar. Nobody knew the impac you know, the the thought was it was going to be a very deep r depression. And so it's interesting just to put in the mind of the founder. People say to me, Oh, you picked a really great time to launch. Okay. I can assure you. Sarcastically. I mean it was In fact, one of my advisors who runs a big hedge fund

40:47 What's a big hedge fund to you? Oh, he r he he ran a multi billion dollar hedge fund at the time. And i I just had an informal group of advisors and he said, You've made a huge mistake. Go back to Paul and see if he'll give you your job back. Oh and don't do this. Right. And

41:03 Because I had organized my life in a really humble way I didn't need money. And I had started a few other companies and when I started them, I started them basically from scratch. I knew what it felt like. I knew that feeling, that founder feeling on day one was was both excit exciting and terrifying. And I was like, I got this. Like the horses left the barn.

41:25 I'm doing this. And and to Paul's credit, Paul was like, You got this. You know, and he had started par with less than three million dollars in the S and L crisis in nineteen ninety one. And I had a roadmap. And I had a mentor who believed

41:42 And I had a clear vision as to where I was going to go and I knew I was gonna do it for a really long time. And you also had about three million dollars, if if our research is right. Yeah, I had I think on my day one investors. Not to out them, but Paul was one of'em. My brother was one of'em.

41:59 Now My brother My brother oldest brother's about fifteen years older than me. The side note is He's an architect. He had saved his entire life a million bucks. Like worked I don't know how many years, fifteen years to save a million bucks or something. And he invested it all in a hedge fund. I don't know why I laugh.

42:16 Put it in a hedge fund in LA. And the guy stole. All two hundred million of this money. So my brother literally worked fifteen years. Oh my god. His life savings went down the drain. He scrambled together another half million bucks. And he said, I'm giving it to you.

42:33 Were you like And I was like I was like I was I was like, I don't know if I can take this. And I remember we were on a hike in LA And he said, I know you're gonna do great with it. And I said, Well, here's the thing I promise you, I may lose it all naturally, but I won't steal it. I know where you live if you steal it. And I can happily say less than a decade later He was retired and it had worked out.

42:56 Fabulous for him. What is it with your family and risk, right? Like you've like gone, you know, essentially gone bankrupt, you know, a couple times not you, but you know, your dad, your brother. The thing with their family is We're incredibly close. We support each other. Even including my father. He was famous. He would have given you the shirt off his back. And you know, to know that you have those folks. And so like, you know, again, I don't want to make it seem overly heroic. I we launch with very little money.

43:23 The first trade I placed was Ultimator, just for We launched on November first, two thousand eight. The first trade I made was into Priceline at Forty two dollars a share. Which of course became booking after it later bought booking and booking. Um, but you know, that forty two dollars. People probably didn't recognize yet what a monster that was. Like Forty two dollar a share. I still owned it when it hit Two thousand dollars this year.

43:49 And teach a class at Columbia Business School on it and you know, securities analysis class on the old gram and dot class on on on kind of like What did people miss and what you know, what did we see? But at any rate, you know, that was the start. I will say that when we launched I wanted to be in Silicon Valley. But I was in Boston because I had no no dough.

44:09 And at the time people who had invested in co mingled funds because remember by the end of O seven Everybody was starting to put privates in their public vehicles. Right. I remember an ex uh for example, the Bill Miller of Legmation famously invested in Zillow in two thousand and Six or two thousand and seven. And then in two thousand eight sold all those shares back.

44:32 to the company because everybody was unwinding their private positions. And so when LPs found themselves Overly illiquid in two thousand and eight. I know that is n how not to do crossover. By two thousand eight they were like we do not want private in public funds. Right. So I had the vision, but it wasn't clear how that was going to be executed.

44:55 Um, because people really w you know, crossover fund, co mingled fund, public private fund. That was a bad you know, those were bad phrases in in the fall of two thousand eight. Why was it by two thousand seven that people had started adding these private companies to hedge fund portfolios. So the observation I had Probably in two thousand four, two thousand five. Yeah.

45:18 was and I was a securitier by training, I had done a bunch worked around a bunch of IPOs Um, maybe that helped, but You know, I was like Companies the private markets Are becoming way deeper.

45:31 Way more liquid. Companies are gonna scale faster because the internet provides a network upon which they can scale. And they're gonna stay private longer. because they're deeper pools of private capital.

45:44 And we've made it more difficult for them to go public post two thousand. Okay. And then certainly post two thousand eight. Correct. And T C V was there, Chase had started Tiger Philippe had started Co two. So we started to see examples of hedge funds that were really smartly, I think, starting to do Some private investing and I thought

46:06 I wanna build the best crossover fund in the world that's based in Silicon Valley. Built by a founder. Right. And I thought that was my differentiator, right? That I had a network in Silicon Valley You know. most of the other hedge funds were in New York or Boston. Most of them were stock pickers, not founders. And so I thought I can do this, you know, in a way that's

46:28 Really more empathetic. And more closely aligned with founders, like True Venture. but they could scale all the way into the public markets. And so It it was delayed in two thousand eight because nobody wanted coming funds. But by two thousand and ten we had we got off we had a great

46:45 start in two thousand eight, two thousand nine, two thousand and ten, and by two thousand and ten people are like, Okay Now we'll let you you know, start to uh undertake your vision. And so two thousand eleven we started putting together the first dedicated pool of capital. Two thousand twelve I moved to Silicon Valley.

47:03 And that first dedicated pool of capital. Dedicated for venture investing. Public pool of capital, which was long short technology effectively.

47:17 We also became pretty well known for doing a lot of travel related investments. Um, but in that pool of capital we could also do a certain amount of private investing. But we realized that for the venture and growth opportunities that we saw, we needed a longer duration pool of capital. The strategy makes sense and history has obviously shown that. But how d yeah, how do you trade off like If

47:40 you're running a public book, you probably want to be pretty close to fully invested. For privates. You need dry powder. Uh How did you solve that? Is that by raising these dedicated pools? Like any entrepreneur founder.

47:53 Right, you have to see some market changes. that give an opening for a new entrant. Right? Because the incumbents have advantages. Right. And so I believed that the very nature, the three things that I mentioned, IPOs harder to do, companies scaling faster, deeper private pools of capital. But I also believed that that was going to lead to the industrialization of venture, right? That this thing was the like the winners were gonna look different than the previous generation. And this was an industry that was only a generation or two old. Venture capital. Venture capital. Yeah.

48:24 And so we needed a long duration pool of capital. We needed a product that suited our public market investors. So we raised that first pool of capital. Now When I raised it There is the requisite level of skepticism. Like how uh you know, how do you think you're gonna compete with Sequoia? How do you how are you gonna compete with Kleiner, how are you gonna compete? And

48:46 We made very clear that Um I thought that the business building journey that started in that first institutional raise was different than what we intended to do. Right. Like I raised a lot of money, three different companies. Right, as a founder. And so Which if if it's two or three raises per company or more and think

49:07 thirty firms you talk to to to get one term sheet. Like you knew hundreds of venture firms at this point. And and had deep relationships with people who We had made money together. So I assume your answer to that question of how you're gonna compete with Sequoia at that moment in time was Or not. You're not. Okay. So remember

49:25 just these venerable early stage firms, you know, Mike Spiser and And Jim White and the team over at Sutter Hill and my friends at Benchmark and friends at Sequoia. Interestingly enough, Andreessen I remember March of two thousand and nine.

49:41 Allen and Company conference, Arizona. They're getting ready for fund one, right? So the market bottomed. Not in two thousand eight, on March ninth. Two thousand and nine. And we were all at the Allen Conference. Was this before or after they did Skype?

49:57 Um, this was well before and I remember sitting at a table With my little pitch deck. And I looked at a table next to me and it was Mark and Ben with their pitch back. And let's just say they scaled much, much faster. And uh but yeah, we were both there at the same time. You know, they had a a a vision which was a brilliant vision for the industrialization of venture. How they were gonna change venture and

50:22 You know, they've done it extraordinarily well. Well fast forward to day your Your two frames are about roughly Same equal order of magnitude. The AUM may be in a similar territory, but the firms are very different. We can get to that in a little bit. But they've been looking around here, I see. Thirty people? Thirty versus three hundred and fifty. And today's a full company offset, right?

50:47 But We raised that first pool in two thousand and twelve. Um, it was basically passing the hat. We had made good money for our LPs. Pass the hat around the table. I was the biggest LP in that fund. By a long shot because I wanted to get it, you know, upwards of a hundred million bucks.

51:02 But that first fund I think had six investments. And that fund I I I don't think we will possibly have a return profile. I that fund it definitely is is up there in terms of uh in terms of great returning fund. When you led the Snowflake round, do you remember what the share price was? I don't remember what the exact share price was. I think the enterprise value at the time was somewhere around a hundred and seventy five million dollars. Okay, so that was

51:29 Two thousand twelve. The fund was two thousand and vintage, two thousand twelve, two thousand thirteen, I think. I I'm not sure when that first round of snowflake, fourteen. But th that moment in time, did you have some insight that you felt nobody else had at that moment? Or was it The right Time like how Uh I I a a few things. Number one

51:49 I did have confidence. That You know I was a decent investor.

51:55 Right, so We worked really hard. We're blue collar. There's different ways to prosecute the strategy. I think there's some people who work the cocktail circuit. And you know, we really were were students of we're anthropologists about like where things were going and what was going to be big.

52:14 And at the time there was a lot of pessimism, frankly, about cloud computing. Salesforce. you know, had some quarters where they saw more deceleration than people thought. And there were really kind of these obstacles. One was the cost of compute in the cloud versus the cost in a data center. But the big one was this perception that

52:34 Like I'll never put my customers data in the cloud. Right. It was really a security issue. Which then like, let's just review history. Like everyone that decided that was not a tech company that they needed to maintain an on prem data center. got hacked and leaked customer data were lots of them and everyone who shifted to the cloud. You know, oh, do we really trust Microsoft and Amazon? They're pretty good at that. That was a great thing. And they had thousands of people working on security versus your data center that had two consultants.

53:01 And um but it was really the Sony hack, if you remember that. This is the the Son the Sony board hack where I think it was Colin Powell. if memory serves me correct, his email was hacked, and in his email was the target list for Sales forces, MA. uh activity.

53:24 All the Snapchat stuff. All the s all the all the stuff that got leaked. And so if you were a board member or you were a CEO You immediately said, What if my email was hacked? And that was like a game changing moment. But I would say for us We for all of cloud. Our view Was

53:43 It was safer. And then it was only a matter of time. before the cost and efficacy of, you know, kind of computing the things you could do in the cloud would be better. We were on the lookout I I would say one of the things that we were focused on at the time and this has been a

54:01 I think theme for us over the last decade. We have this view that not all Software's created equal, right? Not all ARR is created equal. Mm-hmm. And If you rewind the clock to two thousand, like the largest sector of software was databases.

54:16 Right. In two thousand, if you aggregate the total enterprise value of companies that were principally driving their revenue from databases, it's about a trillion dollars in market cap in two thousand. So then if you fast forward and you say Well, every year we're producing more data than in all years of human history combined. It's gotta find a home. We're only gonna censor more of it in the You know, build sensors to gather more data in the future.

54:41 Where is that home gonna be? And then I remember Bill Gates saying Somebody asked him a question. I think it was Meg Whitman asked him the question, you know, isn't all the interesting stuff done? And he said, Megan. Like

54:54 Do you realize how barbaric it is the way we make decisions? He said in the future. Right, we will have all this data stored and machines will analyze the data and help us make better decisions. About how to diagnose an illness. About how to educate a dyslexic child.

55:14 about how to maintain in aircraft's Engine. Right. It will all be. decisions made by machines looking at data.

55:23 And so that was a you know, m our v we did have a strong view that the entire database market was going to be remade. It was going to be remade in the cloud. uh purpose built for the cloud. And so for us, that infrastructure layer in the cloud, all the enable that would be required in order to get enterprises in the cloud was something we focus on I would say more than probably anybody else, and that proved to be a rich fane. This is an interesting Like if I think about

55:51 where you were first successful. It was really realizing that The internet is an amazing place to transact. People wanna transact there and they wanna buy stuff and overwhelmingly they're originating that journey on Google. And you sort of went down the list and said, okay, what interesting businesses could people buy stuff from when they click through from Google. Yes. And so you know you've got Expedia, you've got Priceline, a lot of a lot of travel Amazon. But then there's this like second I don't know if it's still an emerging thesis since you did uh Snowflake and the sort of mid two thousand

56:26 Teens? Two thousand thirteen. Two thousand fourteen? Well it's totally separate. It's this sort of like B to B you know, we're gonna need the rising tide to power all these businesses. Are there other sort of core pillars of areas where you look for where you're like, oh, this is, you know, multi-trillion dollar opportunity where we wanna have several bets in the portfolio on that. Yeah.

56:47 You know, one of the things you correctly identify which is I think that Unless you have An architecture?

56:56 Unless you have You know, unless you deconstruct what's going on in the world and try to understand the theme, the human behavior that's driving these events. Then you just have a bunch of data points that are disconnected. And as an investor Our job is to look at these complex fact patterns and try to make sense out of them. So one of the things that was very clear to me in early two thousands is, you know, the internet is the most fabulous thing in the history of the world. It connects all these people, it unleashes all this productivity, but it's chaotic. How the hell can you find anything? Right.

57:29 And so those who could organize it, so if you think about that decade. That decade was the decade of search. Horizontal and vertical search. Right, Booking dot com was a vertical search company. Kayak Vertical Search Company. Zillow Vertical Search Company.

57:45 Google horizontal search business. Baidu horizontal search business. And then there were these e commerce businesses that were the beneficiaries, right? They learn how to tuck into the underbelly of the discovery engines. Right. So that was an investable theme for a decade, right? Google's desktop search I think didn't go negative. Until two thousand and twelve, maybe the fall of two thousand and twelve. That's when there were fewer people searching on desktop. you know, on a year over year basis because people were switching to their mobile devices. Okay.

58:16 Which has a totally different entry point. One hundred percent. So what as the anthropologist, what did we do in two thousand and ten? I said, Whoa. This whole search thing. is gonna get disrupted by this phone thing. Now I don't know exactly how this is gonna go down.

58:31 But like the way that we enter these phones Is not through search as our principal metaphor. Right. And so then it became how do I become one of these icons. Right, on the front of this iPhone. There was if you were as you recall, you know

58:49 Facebook famously, you know, building You know, an HTML five, not not building their you know, not building an app. I remember Facebook became our largest investment in two thousand twelve when it went on the cover of Barons at seventeen dollars a share post IPO. When it goes through its IPO because everybody said they'll never be able to monetize this. And if you did the work and I remember being at Google Zeitgeist in Arizona at the time, talking to all these CMOs, and they were like, Oh my God, the sandbox for Facebook, like they're crushing it. Like this is going to monetize better, not worse. Right. Mobile device, the stream on the mobile device.

59:23 targeting on mobile devices, you know, and so If you had a decade of search You had to understand. All search all the companies that benefited from being in the underbelly of search, the Yelps and TripAdvisors. By 2012, they had to be in your too hard bucket.

59:42 Right. Right. Because their princip they had it too easy. They acquired customers, millions of customers, effectively for free. And they monetized them out the back door. Well, the free game was over. Right. Right. It's famously hard to start an OTA these days because what, you're gonna compete against Expedia, bidding on the traffic from Google. Good luck. Right. You know, then we started looking at who are gonna be the beneficiaries of the switch to mobile. So that was an architectural change. And I think if you connected the dots, you probably, you know, you had some things go your way. Who are the winners, who are the losers. Software was similarly situated, and so

1:00:18 you know, we had been investing in software in and around software for a long time. But it really started getting interesting about that period of time because if you believed Do you mean like B2B SaaS when you say software, like what specifically is interesting to you? Today. Yeah, or as you were starting to develop this thesis. Well, I mean, if you just look at it, you said there's a trillion dollar enterprise market, trillion dollars of annual enterprise spend spend, and it's all going to shift. Right. So like In investing

1:00:44 A, you need these market dislocations, you need things changing, right, to create these opportunities for new entrants. Um, but then the second thing was, you know, s you asked a question, was it obvious or whatever in two thousand twelve, th two thousand thirteen. I mean, when David Cherry uh took over, you know, Mongo, I mean, it was famously hard for him to get that last private round of financing done at a billion dollars. And You know, it had taken longer. It was moving slower, but we looked at the product pipeline and we understood what the company was doing. And it takes a long time for those companies to spin up, but when those developer communities get going,

1:01:17 They're incredibly sticky. You know, as Buffett has said The best investments you have to be non consensus. And right. Mm-hmm. The problem is being non consensus is

1:01:28 is most often wrong. Right. Consensus is consensus for a reason. And there's a zillion things in your life telling you You should be uncomfortable or in pain when you're doing something non consensus because you got all these smart people telling you you're wrong. Correct. And if you're a founder of an investment firm, those are Oftentimes career ending decisions.

1:01:50 Right. And so, you know, think about this. This is kind of fun one. And we're doing something that's somewhat orthogonal, uh, to what the other folks are doing. You know, I won't mention the firm, but probably one of the best known firms, Silicon Valley, who passed on that round in Snowflake. You know, the partner said to me, Like I wouldn't do it and here's why. Um and we ended up we ended up doing it. And by the way, his argument was a good one. Like it was pretty compelling at the time.

1:02:16 One of the things we did in that story was Over Christmas that year we actually we were aggregating a lot of data for our own hedge fund. Right. So we were crawling web pages, we were buying data. Like we we had a data warehouse. Right. And we punted you know, Kevin who's my partner and was, you know, kind of a young analyst at the time, computer scientist out of MIT, said how how about if over Christmas I'll replace our data warehouse with this snow you know with Snowflake, which was non GA at the time.

1:02:48 Right. It was in beta with a couple companies. Wow. And so we did that and he's like, This is gonna win. Like this is the winning arc. This is good stuff. This is good stuff. Yeah. But he also wrote a Bug report. Right, of like the ten bugs he found on and you send this bug bashing report to the founders to Benwall and the dictionary under How to Win a Deal. And let's just say they said no other investor has done that. Certainly no hedge fund. Yeah, exactly. Just to contextualize this for listeners, because I know people think like, Oh, Ben and David, they have like great investors on the show, and I'm sure they get into like, you know, they they have some great investments. Just to throw out some numbers, I think that round you mentioned was at$175 million valuation. They IPO'd somewhere around four point four billion dollars.

1:03:31 And this trading in a window, anybody know what their market cap is ish today? Hundred ish billion, I think. Hundred ish billion. So The cool thing about what you're doing is You can hold for a long time, including when these things become public companies.

1:03:49 I'll just say it so it's coming for me. I think Snowflake is still over half, or as at the end of last quarter was still over half of Altimeter's public position. It is unbelievable, both from a returns perspective, but from a conviction perspective to stick with founders with that sort of founder mentality. and this longevity.

1:04:10 this long. I mean, I think that's the unique thing about this kind of capital platform. Yeah, so I I say a couple things. One is You know, it was an extraordinary investment, but it's uh also just an extraordinary partnership. Right. Um his founding CEO Mike Spiser. Bob Mouglia.

1:04:28 Frank. Slootman, Mike Scarpelli, I mean These are deep relationships that become really important friends. You work really hard through a lot of tough issues. And when

1:04:41 It's all said and done. The incremental dollar doesn't isn't gonna change the answer. But working side by side and building something that like you're extraordinarily proud of. It's what motivates me. What I would say about that investment is for our venture investors. I don't know what it was at the peak, but You know, w I talked about two different pools of capital.

1:05:01 On the venture side, those are ten year funds. So last year we distributed extraordinary return and a game changing return for a lot of our partners. But at the same time On the public side And personally, you know, we think this is going to be a multi year compounder. I think this company can be worth over five hundred billion dollars. over the course of the next five to seven years. They think it will be extraordinary.

1:05:23 And we have one of the best management teams in the business going against one of the biggest TAMs in the business and delivering a really beloved service. And so it's kind of a tragedy if you can't continue to participate in that, but you have to match Right. Like That's not the bet that my uh the folks who invested in my venture capital firm made that that I'm gonna hold this forever.

1:05:45 Right. And so you want to make sure the you match and you align the interest of the LPs in the product that they're buying with the duration and the nature of the investment that you're making. And so You know, listen, Sequoia's innovated you know, in a really interesting way around this permanent fund. uh in this regard, we have a structure that allows us to continue to, you know, partner and compound and and continue. I think you'll see more and more of this.

1:06:11 Rewind the clock, you know what? I start investing in Price Line. When it was less than a billion dollar enterprise value, right? Today it's upwards of a hundred and thirty billion. Right. So they went public, or you could buy them in the public markets for less than a billion. Salesforce went public at eight hundred and fifty million. Amazon I think was sub five hundred million. And so

1:06:31 I wouldn't say never say never. In fact I hope that we start to see A return of earlier IPOs. It's great for the public. I I think it's great for retail investors. I think it's great for companies. They need the discipline. Having companies running around with billions of dollars on their balance sheet and

1:06:49 You know decacorn valuations and not the discipline of public markets. To me is not a great thing for the company, for the employees, for the founders. It's not to say that they're that they're undisciplined, but this idea that you can't innovate in the public markets is nonsense.

1:07:07 Right. Jeff Bezos innovated plenty in the public markets, Facebook in the public markets. You know, look at what Mark Benioff has done in the public markets. And so I think that that the public markets not only is an important source of capital, but it provides a source of discipline. Scarcity Leads to ingenuity. I hope

1:07:26 that one of the things, you know, you we'll talk maybe a little bit about our capital markets business. But I hope one of the things that we bring back to the IPO market is that companies until they get to a hundred million or two hundred million or five hundred million of revenue in order to go public. Right. I mean just look at the crypto market, if you want to know the appetite of the investing public To invest in speculative assets, right? And we used to allow retail investors and others like myself

1:07:55 to put myself through business school investing in C M Gi Right before, you know, while it was still venture risk in terms of its orientation, but we've largely deprived the public markets of that today. And we may say that that makes it safer. But it also means that you're not going to see those hundred X investments. So if you're If you have a pool of capital, if you're an LP

1:08:17 Or you're a G P And you want to think about this. Bite dance we invested in at ten billion dollars. Okay. Today it's marked, you know, somewhere between three hundred and fifty billion and five hundred billion, depending on which crossover fund.

1:08:33 You know, you look at imagine that. Over three hundred billion dollars of value creation. Right. That goes to the Sequoia's the Altimeters. The GAs, etc of the world. And

1:08:44 No retail investor. Has access to that. Like'cause it's not fair. That's not a level playing field. We don't w like that that's not a great outcome for folks. Um, and it's not to say that we should force companies to go public earlier. But we should reduce the friction.

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1:10:55 I wanna get your opinion on an In a moment. Back back to that first fund in the twenty thirteen, twenty fourteen. Feel free to argue with me on this. But you said in fundraising I'm not competing with I'm not competing with. Excel and the like. And you weren't.

1:11:11 They that Snowflake round, that manga round, those firms weren't leading those rounds. In the intervening years, now of course they are, and they're doing it in their own companies and that Part of is contributing to stay private longer and all this. How did you think about those years and like your You know, you

1:11:29 Yeah, that first one, that's amazing, right? And then you saw Of course you knew you had the the public guys, the go to's and the tigers and the like. But then you saw the venture guys also coming into this space. How did you view the market at that as that happened? I mean, listen, what's happening is this happens in all markets. Right? The venture market is maturing. I might

1:11:50 argue the venture market has over earned For many years. Right? And so The market's gonna become more efficient.

1:11:59 It's gonna be more competition. With more competition, that means founders are gonna have better access to capital. They're gonna have more efficient markets, so it means they're gonna be, you know, presumably get a better price, less dilution for the work that they do. Which presumably is an incentive to invent more shit that's gonna make the world a better place.

1:12:17 So like I'm down with being part of the competition. that makes venture more efficient. Listen. I wasn't invited into the venture party. Right. There was a club out here on on Sand Hill Road. And you know, but this club respects meritocracy.

1:12:34 We come out here, we work really hard, and we add value to the companies. And if you do that over a long period of time, Right. then I think you're going to be you know, have a shot at being part of this ecosystem. We collaborate as much as we compete. Okay.

1:12:50 And when we compete, we're gonna go at it. We're gonna lay out why we think we're the best partner for the company. But we're also going to collaborate. I know that what we're collectively doing. makes America the best place on the planet to start a company. Right there's a vibrant seat. I mean, we talked to a bunch of your founders in preparation and they were like

1:13:08 Wonderful. Like this is this is great. This is like the best thing. And so I got you know, rewind to my dad's story. Like. What if what if a venture capitalist had handed my dad five million bucks? Right. He wouldn't a lost the house.

1:13:21 Right. We like that's who we should encourage the risk takers, the bold ones, the ones who get into the arena. And so I think it's an incredible honor to be able to do that. But at the same time, I don't think I'm entitled to be able to run the table on the crossover business model, everybody is going to compete for these different rounds. My job just like any other founder entrepreneur's job. is to build the best product.

1:13:45 Like what what is it that we do different for entrepreneurs? than these other partners might do, right? Or how do we fit into the system? Actually let's let's not make that rhetorical. What is it that you do different than other Right. And so I would say with a you know, with total respect to all those others, first I don't wanna compete in that first round of institutional capital. You know why? Because Chayton at Benchmark and Mike Spiser at Sutter Hill

1:14:11 Or, you know, the folks at Sequoia or the or the folks at in they do an incredible job. I mean, I started at GC. Right. Like I I I've been a day one founder. I know what that first two to three years of gestation looks like. And those firms, why does Andreessen have three hundred plus people? Because they really have built the infrastructure to help those early You know, entrepreneurs win. Same with benchmark. They're extraordinary. I mean and that's Right. It makes sense what you say, but the that is a contrarian view today. Well I would say like listen, the jury's out. Uh you know, Tiger did, I don't know, seventy or eighty series A's and

1:14:48 You know, and it's it in seeds in series A in the back half of last year. I have again ex like Schleifer and and Chase are great friends. Lots of respect for those guys. Ultimately

1:15:02 Entrepreneurs get to make the choice. Right. And w the story will be told down the line, right? Are the entrepreneurs that take money From Roll off.

1:15:12 Or from Chayton or from Eric Vishria, or from you know, from Mike Spies or ultimately do they have a higher hit rate in terms of building successful and big outcomes. Then companies that take money from folks Who raise their hand and say, we're probably not going to be as value add, right? This is this is more a new we're more just a source of capital. Yeah.

1:15:32 I think that Tiger's building an extraordinary business. I just am maybe I'm of the minority belief. that early stage venture, those first two to three years is craft building And we like to partner with founders who are wise enough. To put around that early board table people who have been through the trenches.

1:15:51 And so that increases our probability of success and reduces, you know, we think the risk inherent. And so we come in and partner then at that stage. So you ask like what is it that we do that special? I think that Altimeter has a founder's mentality. We have the empathy of an early stage founder or or venture capitalist. But we have the scalability of capital. So some people I've heard say, hey, they bring the best of you know Tiger, but also the best of Sequoia.

1:16:19 If we ever get that compliment and I think about our NPS among founders all the time. Right? That's the highest compliment. That's what I want to do. We wanna increase their probability of success. And when we start moving in that direction, we want them to know that we're side by side with them on the important issues they face, recruiting a CFO, building their board, getting the company public, helping them raise capital.

1:16:43 And that we'll be first in line to write the check. You're a reasonably concentrated portfolio. So it's it's kind of like the benchmark. mantra but applied to later stage. And that discernment ends up accruing value to companies because you have such a deep pool of capital. So like take a modern treasury, for example. It does

1:17:02 show up as value to them in the way that they can communicate to their customers. Like, yeah, we're only a four year old startup. But Look, we're with Altimeter. And you know, it doesn't mean that the capital in your fund is on their balance sheet, but because you do have a r a reasonably concentrated portfolio, that brand power actually can accrue to the company in a way that shows up to their customers.

1:17:26 A couple of things. First, I would say that the the level of concentration on portfolio is I think it's pretty consistent with the history of venture, right? Like The reality is if you don't have deals in your fund that on their own can return the fund Then you're probably overly diversified. If you're overly diversified, you're gonna provide vintage returns. Which, you know, I'll just leave my money in the public markets, right? If all I'm gonna do is invest in you know, the top ten, fifteen percent of venture is gonna take eighty to ninety percent of the returns. Okay. So

1:17:54 Yes, I am in the business of finding the best companies in the world and helping them succeed. I'm not in the business of taking the average of vtages and building a big fund around that. That's a different game. That's an asset gathering game, and it's not a game I find particularly fun. Not to mention it's never been a great idea. for at more than one vintage to just be the median of all venture investing. That's not something you want to index. Right. Yeah, listen, I think It depends what you're what you're promising your LPs, right? I'm the largest L P in our hedge fund. I'm the largest L P in our venture funds.

1:18:27 Right. I'm only going to put my money into venture if I think I'm gonna earn a superior return to having my money in in in in a liquid security, right? If I didn't think I could beat the return on Snowflake over the course of next decade, put all my money in Snowflake and go Surf with my kids, right? Um but I actually think that there's like a noble service being provided. I think we can deliver like radically superior returns. And so I would say it's not the concentration

1:18:52 Right, that leads to that value add for those investors. It's because at Modern Treasury We help Dimitri, you know, bring other investors to the table. We help him bring the CEOs of big banks to the table. We help them with recruiting. We're there during the high leverage moments in a company's history that can really help Uh, you know, add fuel to the fire. So you had mentioned earlier, but

1:19:14 Talk to us about the capital markets business. Cause that feels like something that like again, if I'm a see if I'm at Demetri at Monitor, like that's something that You know, even as the early stage guys are adding later stage operations like that you can really bring in away and have for Roblox for Plaid, for so many, you know, others.

1:19:35 How did that start and what is that business? Well, I think it's it you know, so I'm I'm Talk to a you know, well known venture capital firms. L P meeting tonight. About capital markets, what's going on in the public markets, what does it mean for

1:19:48 You know, their venture portfolio, et cetera. Th that's just fundamentally different, right? And I'm an IPO lawyer, spent twenty years in the public markets. We've worked on Yeah, participated in over a hundred IPOs. Right. The equity syndicate desk at Goldman Sachs and Morgan Stanley need to sell an IPO, they call us.

1:20:06 Right, they call long only's and so We've been in and around that market for a long time. Bill Gurley and Rich Barton and I Going back twenty years. um were fascinated with how inefficient that market was.

1:20:19 with mispricings in that market, with you know uh it's instantly when you step back and look at it isn't it's Hombricht and Quest were innovating with you know the modified Dutch auction around the Google IPO I mean lots of fascinating stuff. So if you're just like if you're a student of this game and you're an IPO lawyer like I was like you pay attention to it. I helped Bill put on the direct list conference a couple of years ago, which You know, we've seen a lot of of of progress on again, just giving choice to entrepreneurs. At the end of the day Right. If there's competition for the bank IPO, the bank IPO will be better. And now there is.

1:20:53 Right. The direct list is an alternative for some companies, a better fit for some companies. And the reason spacks were interesting to me is If you really just close your eyes, it's just a third door into the public market. And we go help you build a book. We help you price the security. We help you sell it. to Capital Group and Fidelity and T Row

1:21:13 All three of these things are the exact same exercise. You're selling 10% of your company, you hope to sell it to great public market investors, and you hope with the least amount of pain and distraction to step into the public markets. Right. And so I think this innovation in the public markets is a you know, a terrific thing for founders. Um it's fun to be a part of. But last year we participate we anchored direct lists like Roblox. We anchored IPOs like Confluent.

1:21:39 We anchored our own IPO like Grab uh by way of I saw your website, yeah. You don't call it a spec, you call it the ultimeter IPO. I mean part of what we're trying to do Is we're trying to di mystify. the transition to the public markets for CEOs and boards because frankly I've done it over a hundred times, but most founders will do it one time in their life.

1:22:02 Right. And they just don't want to mess it up. Like at that point it's their baby. Why on earth is everybody but the standard. Right. And and and again you know, I think Goldman and Morgan Stanley is w maybe where My friend Bill Gurley and I have slightly different religions on this. At the end of the day, this is really about pricing. And If we price these things efficiently.

1:22:21 In any three of these stores. then they can be great outcomes for the company. And if you have a bad sponsor, if you have a bad bank in a in an IPO and it goes poorly, then like that's a busted process. Yeah. Right. If you have a bad sponsor in a spac You know, and you shouldn't be public. That's just a busted process. If you try to take a company You know, if try to direct list a company and you you have a reference pricing round that's too high for where the business adds, it's gonna be a busted process.

1:22:46 So We spend a lot of time. I hired Chris Conforty out of Goldman. He ran the equity syndicate desk at Goldman. So he was the one selling all the IPOs for Goldman for a really long time. What we said we want to do is just as a value add For all the private companies that we talk to that we look at. is to really be able to give them the inside scoop.

1:23:07 Right. Like we're not a bank, but we'll tell you all the dirty secrets. Right, about a traditional IPO, a direct list, or a spac, you can't have credibility Telling those secrets unless you've lived them, which we have in each of those doors. And now we can offer what I think is the best insights. to these founders and we have no

1:23:26 economic finger in the scale. Because I can partner with you if you want to do traditional IPO, great. We can anchor it or just participate. Direct list, we can anchor it or participate. You know, you wanna go you wanna partner with us and that and we'll build the book for you, great, we'll do a spec. And they're different prototypes, right? Different archetypes for which each of those fit.

1:23:48 Um, and I think among the folks who are doing this, we're probably, you know, um might be first among equals In terms of our insights into how it got public. That's the old mungerism, right? You show me the incentives and I'll show you the outcome. And in this case You coming from the perspective of Hey, you realize when the banks are trying to sell an IPO, they come to me to buy the IPO. So having sat on that side of the table,

1:24:11 And not yet having an incentive, I can talk to you about how this would get marketed to me. So you at least have that transparency. And then I can tell you how I want to play in that process. And you can give me feedback and tell me where I belong in your process. Yeah. No, I I I think listen. I see it.

1:24:28 Banks are getting more efficient. The direct list pri the competition is leading to more choice. And better outcomes. Free market's a great thing. All right listeners.

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1:26:27 Okay, so as we Moving to the kind of the analysis section here. There are two We of course want to Do grading and ask you to paint you know the what what is your you know, when you go to bed at night and you dream your your best dreams of an A plus scenario for Altimeter and

1:26:42 three to five years, but versus you know, a C minus of like we survived, but Yeah. We miss some stuff. We'll get to that. Maybe first. If you have thoughts on kind of like a bull versus bear case on

1:26:54 The life cycle investor model. Yeah. And pr that probably leads into grading. What are the risks to like What you

1:27:02 Pioneered in our and are doing. Yeah, well listen, I think that I certainly uh I appreciate the credit as a pioneer. I don't think of myself as a pioneer, like I said, in many ways it's back to the future. Right, Warren Buffett was my hero. He if you asked him why do you do private investments, he's just say, I do great investments. Right. He didn't like it's not private versus public in many ways. It's the LP community who want to put people in buckets, right?

1:27:25 And so I think in order to generate alpha and above our average returns in probably the most competitive market in the world. Okay, you have to be extremely passionate. Right. There there are big sacrifices and trade offs. To be great in this business.

1:27:40 And for me If you said, Brad, you can only do public market investing, that wouldn't scratch my edge. If you said you can only do venture investing, that wouldn't scratch my edge. And so for me, it starts from the premise: like, what do I want to do? What can I be most passionate doing? And the reason I think we attract some of the best analysts in the world is because most analysts don't want to leave their, you know, thinking cap at the IPO door.

1:28:02 Right, they're like, I spent all this time on this company, and now you're telling me I can't make any more money on it, I can't bet on it, I can't invest in it. Like what what's that about? I think that the maturation of the venture growth business model is here to stay. We saw it in LBO. We saw it in private equity.

1:28:20 that was a highly fragmented industry, you now have a handful of global platforms, right, that are prosecuting that strategy. inventure highly fragmented industry. We're still in the the middle of a lot of creative destruction. You got solo GPs attacking, you know, venerable early stage firms. You got a lot of firms that are vertically integrating upwards. You got hedge funds who all say this venture capital stuff is easy. I'm gonna go do it.

1:28:48 You know, at the end of the day, what I love about this business is there's a scoreboard. Mm-hmm. Right? And the hedge fund, it's a painful scoreboard. Right. It's like every day. Uh and in the venture business there's a lack, but at the end of the day your reputation among founders. I I say two sided marketplace.

1:29:06 Right, what's my NPS score among founders? And what's my NPS score among funders? The people who entrust me with their capital. And I get up every day thinking about how do we build the best product for both of those folks? Because if we do And we deliver the returns, then we have a great business that I actually think is serving, you know, a really important part of the uh of the capital process.

1:29:28 It's really interesting the analogy to But hey, totally agree. Uh but the analogy to the LBO Business and market.

1:29:38 You're absolutely right. I mean, I remember coming up being an investment banking analysts as you were starting Altimeter in those same days. And uh The LBO market was vastly more fragmented than it is now. And it has consolidated around like some some major and they're niche players and there's lots of strategies that can work. But yeah, we are I hadn't quite thought about it. We are s I think seeing the same thing in venture. Right. And you if you think about what's happening in the private equity LBO world, right? You have Some global now public

1:30:05 platforms. Their cost of capital goes down. And we've seen a compression in terms of returns, right? Because the market got more efficient. And as the market got more efficient, returns went down. Like what do I expect that y you know will happen over the full arc of time and venture?

1:30:20 Right, we're going to compete away returns. We've already witnessed it over the course of the last couple of years. Right. But That just means the returns that go to the premium players, the players who truly see the best stuff.

1:30:34 that truly convert the best stuff are gonna be even more unique. And the average return is gonna be a a a much worse place to be for both LPs uh as well for the people prosecuting those strategies. So Yeah, to me. And and for the founders who are backed by those terms, right, too. I mean, because there is a As we've been saying and talk often on this show, there is a a brand Transfer and halo effect that happens in the venture markets. For sure. The signaling effect is is profoundly important. And I think

1:31:02 I think probably underestimated. Which is amazing considering how high it's estimated. I'm with you, but I think when you have the best partners, not even in even the best funds. It's the best partners at the best funds. Who do things together repeatedly. It's because there's a shorthand around trust.

1:31:22 There's a shorthand around business building. Right, that increases the probability of successful outcomes. And the signaling of impact of that, like I underestimated as a founder. I don't underestimate it now. And so it's not to say that. Folks who take You know, who bootstrap, take solo GP

1:31:41 you know, take passive capitalist not just say they can't build big businesses, right? But I don't think that that makes it easier for them. Right. At the end of the day. Like I think you know, I said go public earlier because having that discipline and that scarcity Right, having some great early business builders that see those different patterns.

1:32:00 They create the conditions that I also think drive success. Well what's different now is You can go public, early. And you still have Ultimeter or Benchmark or Sequoia, whoever has your shareholders. It's like

1:32:13 It's not like you have to check your hat at the door. Sure. I think we're in the early phases of industrialization. you know, five years. I so w how do I score myself? Our returns for our partners, right? Like we got to deliver excellent returns for our partners. I say to my team. Is our NPS score with founders higher or lower at the end of the year?

1:32:32 Right. That is really important to me, right? That's the durability of the brand. That's the love for the brand. Yeah, lots of software companies. can increase revenue selling a shitty product with a aggressive sales force. But ultimately that will not be a really valuable software company. Right? You show me a software company where The product is flying off the shelves because the people on the other end really need and want the product and love the product, right? That company, even it has lower revenue, deserves a much higher multiple. I think the same is true um when I think about our business and what we intend to deliver.

1:33:05 And you know, I I guess this is a segue as well to a bigger issue, you know, which is What is this all about? We are all part of one of the most fortunate systems at one of the most fortunate times. Right, in the history of modern capitalism.

1:33:20 And I intend to use this platform to do things that matter. Right. And I think founders care about that. And I think funders care about that. Because at the end of the day, you know, helping some You know, hedge fund guy make a little bit more money or some venture capitalists make a little bit more money. It's not what gets me up in the morning.

1:33:39 So I do think that The very essence of what we do. Right, which is Increasing the velocity

1:33:48 Right, allowing Moderna to build an MRNA technology that can, you know, help solve a pandemic. Right, to transform the way software works so that, you know, that is the infrastructure that powers all discovery. Right. Like those things I think are intrinsically good. Um, but increasingly what I see is people who are using these platforms to drive diversity. Right, to use these platforms to to tackle things like the wealth divide.

1:34:13 Which you know I care about with with the Invest America initiative that I've talked about. So The people who work here Right. I think if you went if if you did a survey, they would say, you know, I work there because you know, great brand, fun, love doing venture, love doing public. But we also care about like the impact of what we do.

1:34:32 And I'm lucky to be able to lead that. I really want to talk to you about Invest America because I think it's a fascinating concept. And you you mentioned we we chatted about it when we were sort of preparing for this. What is the idea there? So Rewind the clock.

1:34:46 I was definitely on the outside looking in. Right. I was not part of the ownership society. You know, I didn't know what stocks were. And um but you know, all else being equal. You know, I never really

1:35:00 Felt deprived. The industrial revolution in many ways was a great equalizer, right? My grandfather was a welder. He worked on the Manhattan Project. He was a brilliant guy, self educated, read textbooks. But he could earn a a wage and save that allowed him to leave twenty five thousand bucks for a grandkid who had gone to put himself through law school and business school. The technology revolution will have even more positive impact on humanity, but it naturally tends toward concentration. Right. It is not an equalizer in terms of

1:35:30 you know, wealth so far as I can see. And the data I think you know works against it. Because if you think about it, it's logical, right? Mark Zuckerberg can have three or four billion customers for his product. Even Carnegie and Rockefeller couldn't have Software and then the inner on top of that kind of compounds that advantage. And so You know, to me

1:35:50 You know, the social contract that we're going to have to have is gonna have to evolve. Right. And I think this country is better positioned to evolve that social contract than just about anyone, but part of it is first just making people feel Right, that they're part of the game. And you know, the start of COVID really drove this home for me because we had massive government intervention.

1:36:12 I went on C N B C on March twenty sixth, the bottom. Um, I wish I knew that was gonna be the bottom. Yeah, it was it was uh like an extraordinary day, but At the end of that day I I literally had grandmothers Fathers, doctors, lawyers, just email our website. Generic email saying, Will you protect me? Will you take my money? Will you do this? Right. There's just extraordinary fear in the world.

1:36:39 And I'm from Indiana. Most of my friends didn't go to college. you know, in the in this small town. And what happened when the government intervened is the stock markets ripped. Okay, because the Fed went all in, Congress went all in. But a lot of those my friends working in those R V manufacturing plants were unemployed.

1:36:56 Right, lost their jobs. And so we can't have a system where the owners win. Right, because of the government intervening. But we only have thirty percent of people who belong to the ownership society. And that's the public stock market. That's not even like accredited investors, which is this tiny slice you're talking about earlier. Yeah. Small percentage of America that Owns.

1:37:17 Any equities. Right. So I I a very simple idea that I floated, Chamath and I were on CNBC, I'd been thinking about it for a long time. I I've abhorred the accredited investor laws. Uh, for as long as I can remember because as a securities lawyer You know, I remember studying securities law in law school and saying to myself, Hold on.

1:37:36 You mean to tell me? That we've rigged the game so only rich people Can invest. In the best companies. We have to be protected, Brad. Right. And so like what what what's this all about? Because the proxy for intelligence Was money.

1:37:53 Right. Jason Calicanus has talked about having an investor test, but I knew I knew T Cal loves that investing test idea. I've seen dumber ideas, I think it's onto something. I appreciate The pr on principle he has The same

1:38:10 you know, allergic reaction, and maybe it's because he also grew up poor. on the outside looking in. And for those of us who did. Right, i you know, now that we're on the other side, we say we gotta fix that. Right. And so Set aside a credit investor, there's some ways we we can attack that, but one way we get everybody into the game.

1:38:30 Okay. We have I think seven million children born a year in the United States. Mm-hmm. If you c gave every single one of them an invest America account, so think of that as a Robin Hood account on their parents' phone that would eventually be on their phone. And that just shows up from the government when you're shows up from the government. You get your social security number, you get an invest America account.

1:38:49 We fund the account based on means. If your parents make over two hundred thousand dollars a year, maybe we put a hundred bucks into the account, your parents can fund it up to five thousand dollars. So it's like a FafSA type. If You're under a certain threshold, we put five thousand bucks in it. Okay. Can't take the money out. Compounds at six, seven percent.

1:39:06 For you know, s fifty years It's worth a million bucks. Okay. But much more importantly. The behavioral psychology, the behavioral economist knows that

1:39:18 the propensity of somebody who actually has a savings account, an investment account to save goes up dramatically. Okay. So because you actually Have a little snowball. You understand the law of compounding. Right. So if we wanna educate

1:39:33 and include and make everybody feel like the system isn't rigged against them. then they actually have to be part of the game. Right. We have a way to do this. It doesn't cost a lot of money. Right, in the in in the scheme of things like this is less than twenty billion dollars a year for the federal government. This is a drop in the bucket relative to trillion dollar stimulus plans.

1:39:53 You know, trillion dollars of defense spending And this is a game changer. psychologically and otherwise for everybody in the system because now over a period of twenty years You've effectively gone from thirty percent of the people being owners to a hundred percent of the people being owners. And I think that that's, you know, again, I'm sure there are other great ideas. Do you think I really believe in.

1:40:16 Do you think it should be a discretionary account? And people should be able to like a like an IRA or or a basket of again, like, you know What I intend to do When you're running for governor of Indiana. Yeah. What I intend to do is to fund people. Right to push this idea forward. Okay. Hm. There will be a lot of debate. We've debated baby bonds.

1:40:38 For thirty years. And we've never done anything. A bond is So far as I can tell. Right.

1:40:45 Is spiritually connected. But it's stuck in the old legacy of like the war bond. Like it's safer, therefore we'll give you a bond. But it doesn't appreciate. And the recipient doesn't learn much. Right. Right. And so hopefully we can harness the energy, the power, the lessons of that.

1:41:02 And make sure that every child in this country owns their tiny little slice. Of Apple. Of Walmart. of Tesla. Of the future SpaceX.

1:41:12 Right. And I think if they do Think of how elegant that Robin Hood app is or the your Schwab or your Fidelity app, you open it up And they see all of these names, their tiny little ownership of all of these names, and they see that grow over time. We know how often they'll be looking at those phones. We know how their parents will feel.

1:41:32 What I would say is they can't take the money out. Right. Until A long way down the line. Okay. That ensures a retirement program for basically everybody. But you can add

1:41:44 We could build adjacent accounts. Right. You could stick a five twenty nine side by side with that that they could pull out at college. I don't like the idea of a government program, well we'll give you a little of this every year. Right. Give me title and ownership. Right to something. This is mine. And then let me benefit from American innovation. Let me compound and benefit and be part of the system. So that when you know, I have a c I have two sons

1:42:07 In fifth and seventh grade, right? They're both interested in investing. They both want Robin Hood accounts. They both want all this. No I love it. But think about how privileged Right, that position is. Right. We should have

1:42:25 A standard curriculum in this country for six graders. Where it starts, they walk into their math class or whatever the class is and they say, Open your Invest America account. Everybody's on the same page. You teach sixth graders in an inner city c school today. About stocks?

1:42:43 You may as well be teaching them Mandarin. They're not participants in the game. Right. And so to me, you know, I talked to Seth Clarman from Bowpost, he said, I'll write the curriculum. Right. I take that curtain. You know, uh Dr. David Solomon at Goldman, the folks at Schwab, Fidelity Everybody sees this as a challenge.

1:43:03 This is a simple, simple idea that we could get behind. And literally in a single term. Could change Over a period of a decade. the trajectory of every child born in this country.

1:43:16 Well what's kinda cool is like you've I I think you've basically already seen evidence that this works with Robin Hood, you know. Robin Hood is not a People still had to have the means to put money into Robinhood and then decide to do it. But it activated so many

1:43:32 people to become investors in America and around the world over the last couple of years. That otherwise you know, and and Some of those. People will prove it. To not be good investors. Some of them will prove to be amazing investors. And some of this listen, I mean

1:43:46 Part of the challenge here is everybody says, Oh, you're letting people invest in the stock market. What if it goes down? Well, so here's the deal. We have a hundred years of history. Right, owning your slice of America is a good bet. As Warren Buffett likes to say. Okay.

1:43:59 So I don't know if it's gonna go down in the first year or up in the first year and it doesn't particularly matter to me. I know if you give these kids a slice of America. Over a period of forty or fifty, it's gonna be worth a hell of a lot more in the future than it is when they get it. But way more important.

1:44:15 is every day of their lives. They will feel like they belong to the system. They're not on the outside looking in. And the power of that psychologically to that child will dwarf the amount of money that's in that account. Brad. Before we wrap here, anything that you want to point listeners towards.

1:44:33 Or where could they find out more about you or Ultimate or on the internet? Yeah, I would say follow me at alt cap. On Twitter. I encourage all of our analysts to be on Twitter. I think they're incredible. brains and thought leaders and you know being online and

1:44:48 sharing content. Like I don't like to be a cheerleader on Twitter. Um, but I do like and encourage our analysts to pressure test their ideas. Right, whether it's you know, Jamman talking about what's going on in you know, in software or whether it's Vivek talking about what's going on in you know, internet marketplaces or crypto or Frida talking about what's going on in China.

1:45:10 And so I think I always say to people if they're interested in learning more about Altimeter, just follow Uh this incredible group of analysts on Twitter. But all of this said. We're truly lucky. you know, to be doing what we do. You guys are doing this incredible podcast.

1:45:24 about founders and entrepreneurs. This is a rather new experiment. In the history of the world. And I think it's yielded you read the Bill Gates annual letter at the end of every year. And Uh you know, we live in the most peaceful, notwithstanding Ukraine.

1:45:38 We live in the most prosperous, we live in the healthiest period of time in the history of humanity. And you know, one of the things that scares me is, you know, that people during periods like this, they'll turn against capitalism or they'll turn against you know, technology or the turn against whatever But it's very clear to me, like I'm gonna fight for that and fight for those founders and

1:45:59 I think when we look back at this system in ten years, it's gonna be more vibrant, more capital, more access, more ideas. And I think the secular curve around creative destruction and innovation has never been steeper. And the ideas over the course of the next ten years are gonna dwarf the size of the ideas that emerged over the last ten. So super optimistic and in a in a way, Ukraine I think has uh For me at least helped uh remind me of that. Ben and I were talking at dinner last night that like No, the old saying that I think uh

1:46:27 has become forgotten a little bit in recent years is that capitalism is terrible. Is the most terrible system, except for every other system that has been tried in the history of human kind. Right. Well, I don't think it's the only thing. Right. I don't think it's the only thing in life.

1:46:44 But I think it's an enabler for everything. You know, somebody reminded me the other day, Julian Robertson after you know an incredible track record In nineteen ninety nine, obviously got hit hard, money redeemed and they said, You know, I Are you bummed and to no longer be in the public markets? Uh he was the founder of Tiger Manager.

1:47:03 And apparently he he's reported to have said, you know, I didn't want to die looking at a quote on my Bloomberg for the yen anyway. So uh you know, yes, in this firm and in my life My friends, my family, my kids, there are a lot of things, you know, that resonate, you know, as as more important. But I am a staunch defender of, you know, this beautiful system. I tell you It's a hell of a lot better than having to mortgage your house. You think about the velocity of money of the risk you run if you start that, you know, auto parts company is you lose your you you know, you you you lose your health and you lose your house. There's not gonna be a lot of risk taking, and risk taking is the engine that moves humanity forward. Business creation and experiments without personal guarantees are an incredible thing. And it's amazing that we have

1:47:50 a system that actually allocates a Um big slice of capital to go toward that. But think about that. That's a modern experiment. I don't know, modern capitalism's been around for five, six hundred years.

1:48:01 Like that's a thirty year old experiment. But you think about the impact that global sovereigns who are trying to effectively take fossil fuel dollars and turn them into technology dollars. We have more dollars moving into this You know, you mentioned we have very few people who have access, okay? to the private markets.

1:48:19 I I heard this statistic the other day. uh you know, endowments and others have reaped the benefit. Which makes me happy. But retail investors and the average investing public has not.

1:48:30 A one percent increase in penetration of the retail investing public. Two alternatives. I heard is a trillion dollars. Like I haven't run the math myself. But it's an extraordinary number. And if you look at the retail channel

1:48:45 The accredited investor retail channel. through Goldman, through Morgan Stanley, through these other aggregators as a percentage of the fundraise for Tiger, for CO2, for Altimeter, it's going up dramatically relative to traditional LPs. And so We'll do another episode and we'll talk about how we're gonna unshackle ourselves from the accredited investor rules. Would you ever consider a future for Ultimate where you're

1:49:10 L P capital is more directly from People. For sure. For sure. I mean like it you know Our aspiration is not to be the biggest.

1:49:19 But our aspiration is to Uh Have the scale to have the level of impact. that we can to drive the highest MPS among founders and funders. Like we want to deliver for both of those uh folks in that network and I think it's inevitable.

1:49:35 that an increasing percentage of these dollars can and will and should come from willing retail investors who want exposure. To this incredible asset class. All right, listeners. Now is a great time to talk about one of our

1:49:51 Favorite companies Statseg. Yes, there is a reason why the best product teams rely on Statsig, whether they are iterating on their core product features or shipping AI powered experiences at scale. Yeah. In the crazy speed of today's AI world. Shipping fast is just table stakes now.

1:50:10 It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers. And how fast you can use that signal to guide what you ship next. This is where StatsIG comes in. It brings experimentation, feature flags and product analytics into one unified system so teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved. So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com slash acquired to get started. All right, listeners, hope you enjoyed our interview with Brad. He is uh

1:50:53 He's unbelievable. I mean, what a journey the last twenty years have been for him building altimeter and and really helping to shape this industry. Totally. And personally I'm

1:51:04 pretty excited about his sort of idea with Invest America and we'll definitely be watching to see where that goes. Totally, totally. Well Listeners to round us out. You know the drill.

1:51:15 Join us in the Slack. Acquire.fm slash Slack. gonna be talking about this episode and everything else. We've got The limited partner show. Where uh recently we've had awesome episodes with the folks from NCS Capital coming back to talk about the state of the markets.

1:51:31 David Christina Melas Curiazi joined us to talk about fintech. Uh we've recorded two more episodes that we haven't dropped yet. to the general public that are rolling out to paid acquired limited subscribers. And uh those folks can join at acquire.fm slash LP to get two weeks early access. We've got a job board and some really great stuff on there. I just added a couple the other day from Vanta after we got to spend time with them uh at their office, met their head of engineering, uh spent some time with the team. So really cool companies, go check those out.

1:52:04 And uh lastly If you enjoyed this episode, share it with a friend. You don't need to shout super loud from social media hilltops. We like that high affinity one to one stuff, so uh Share it with a friend. Think of someone that has kind of talked about some of these concepts with you and see if they'll uh Take a listen and and they might enjoyed it just as much. Indeed. With that. Thank you so much to Vanta.

1:52:29 Vouch and our friends at SoftBank Latin America Fund and listeners. We will see you next time. Well see you next time. Who got the truth? Is it you, is it you, is it you Who got the truth now

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