E141: State of Series A's, VC dry powder, IPO window opens + more with Bill Gurley & Brad Gerstner

26:52Sachs, what are you seeing? You're a Series A investor. You compete with the Sequoias, the benchmarks heads up for these Series A's. What are you seeing in the Series A? And what do you take from this data being down 26 % year over year, which probably actually means probably 50 % down from the peak. What are those? Well, yeah, the venture capital market peaked in Q4 of 2021 in terms of both valuations and the amount of money that was being deployed and it kept going down throughout all of 2022. And I think it bottomed out in Q1 of 2023, basically in the last several months. And I think now Now the pace of deployment has sort of stabilized and it's kind of stabilized at a pre -pandemic level.

27:39So maybe at 2019 level. Now I think that probably massed some big differences by round. So like you're saying, series A rounds are more competitive. There's relatively more action there. I think the late stage rounds, but I can speak to this. The capital there is dried up, I think, considerably more. And those rounds are much harder to get. And the reason I think is because that when you have more operating history, then it's harder to raise around based on narrative. Whereas when you're at a very early stage, you can basically just raise money based on a dream and a story. The way I frame it to people is when I'm in part of this is my fault because I'm training people in our accelerators and pre -exeilers.

28:19I tell them you're either selling promise or performance. And once you start having customers and numbers and retention, someone like SACS is going to be like, give me the data and they're gonna look at churn and say, yeah, this business is too much churn. It's a leaky bucket, whatever. But when you're selling promise, it's a lot easier than selling performance. I'll tell you guys to see that is a well -known CEO, public company now. He told me, and I think, Gurley, I think you guys weren't bastards. He said as soon as we started having revenue, our valuation felt like it went down. As soon as we started making profit, our valuation went down.

28:53Because at that point, you're judged on the quality of that stage of the business, whereas before you could paint a picture with a thousand words about the different paths you might walk and everyone wants to believe the optimistic path will be walked. And so you can boost your valuation, boost investor interest. But once those numbers start to come through, it really changes the investor criteria for how they assess the value of the business. 12 out of people will state if they have a product launch, telling them they'll tell you to raise money before you launch. Yeah, sell the promise of that on chest old saying it's better to raise on the sizzle than on the steak Yeah, unless the steak is pretty high -grade.

29:32Yeah, obviously if the steak is great then yes, that's the best time But you take that just off the table. Yeah, but just to recap. I think where we are I Think the venture capital markets have stabilized for funding new companies. I think there's a mania going on with AI Both in terms of the size of these rounds and the valuations. It's like 2021 for a lot of AI companies We're not participating in that craziness. We are doing some C checks, I would say, and early stage AI companies were kind of calibrating the size of the check with the stage and amount of risk. And I think that's appropriate.

30:06So you are going pre -series A, C, putting in that's a 500 K, $1 million check. C is what makes the most sense. I think for AI startups, because if you wait for a later round, then they're not being priced based on fundamentals at all. Yeah. Yeah, so it's because that 500 K million we just did one of a four million dollar check where he let kind of a bigger seed round Got it Fantastic. I love that those are called seed rounds today I mean used to be three to five million was your series a but yeah, sure seed round 35 I still don't understand the term precede so just to finish the thought I think where we're at and you know Brat can can chime in on this is I think the venture capital market has stabilized for new companies new fund raising however I think there's going to be a one to two year period of distress for all these companies that raise in the P 2020 2021 and are now running out of money and they don't have enough revenue They're not growing fast enough and or their burn is too high and all those companies are gonna be facing down rounds or Restructuring or they're not going to raise well people are so marking their books now We're starting to see the marking of the market down.

31:16So we're going to have probably a one to two year period of distress for all those bubble companies while we have a little bit of a resurgence for new companies. I got another topic I'm going to go to here related but Bradage wanted to let you chime in on the late stage there because you operate in the BC. I think and this is related to the topic. I suspect we're going transition to but listen there is a lot of activity in venture today. Right. And we're very reflective to the stock market. People were really scared in Q3 and Q4 of 2022. Started in 2021, but 2022 was scary to people because public market valuations for growth companies were down over 50%.

31:58So we really saw IPO markets, venture, all start to slow down. Coming out of that, we've seen stock market within 10 % of all time highs. We see, you know, this wave of AI occurring, what I would tell you is under 500 million, maybe under 600 million, right? Series B and C -Rounds are as hot as I've ever seen them, in data infrastructure and AI and software, et cetera. So there is a lot of competition there. The later stage stuff, which as you know, I call quasi -public. So if a company is over a billion dollars, right? Right now you're very reflexive relative to what's happening in the public markets.

32:40We're starting to see activity. I just read, Wiz raised more money. It's got $200 million, ARR raised at $10 billion. So those markets are definitely - 50 times revenue. Yeah, we did not participate. 50 times revenue. You know, so there is definitely activity. I know a deal we got called on yesterday, raising $2 .5 billion at $100 billion. And there is a lot of activity. However, SACS is right. There is, you know, remember, we had 1 ,000 unicorns at the end of 2021. And I've said 100 % of those are gonna do it down -round. And we're still in the early stages of that reset to occur there was some, you know, there's a report out this week that lots of people coming on Twitter where public markets were down 50 % and private marks were down, I don't know, five to 10%.

33:27Like that will all normalize. it's all going to be down the same. So that's the only place I don't see activity. Under performance companies that were valued over a billion dollars, those are debt on arrival until you get to a market clearing price and we're not there yet. Okay, so the other big issue here is a lot of money was raised by VCs, commonly known as dry powder in the industry, but there are some misconceptions about this dry powder. People are saying, oh my god, all this money is going to come flowing into the ecosystem. Kumbaya, it's going to be the roaring 20s again. However, Bill, you did a little tweet storm.

34:06What people don't realize is when we refer to dry powder at VC firms, the VCs do not have that $250 billion or whatever it is. Quarter trillion dollars sitting in their bank accounts. That money is sitting in another person's bank account, LPs, Harvard's endowment, CalPERS, sovereign wealth funds, etc. It has not been drawn down by the VCs yet. So Bill, why is this an important fact for people to understand? One of the dynamics that LPs are dealing with. Yeah, and there's a ton of dynamics between the GPs at the venture capitalist and the LPs at those endowments that Brad started to hit on one of those, which is the marks aren't in the right place.

34:50And so the thing you just explained critical Jason, which is you don't actually have the money. There's no There's no venture firms sitting around with you know all of the money that they've got committed to their fund in a bank account This just why not why does that not actually occur because people would say oh you raised a billion from these folks They gave you the billion right why one of the brilliant? and realities of the way that a LP agreement works with a venture fund is they're not on the IRR clock until they actually pull the money down. So they explain what that means. They charge fees based on the total committed amount, but they don't actually draw the money down and get gazed on the performance of their investment until they need it.

35:35And so a classic venture firm will do five, six drawdowns over a 10 year period of a fund. And so they don't act, they literally don't have the money. A couple of other things worth noting, so, and some of that I didn't put in the tweet, but the marks aren't right. And everyone kind of quietly knows that the marks aren't right, but there's actually no incentive to get to marks, right? Here's a list. Explain what a mark is to folks. So private companies have evaluation that's assessed either by the GP themselves in most cases, which is a bit of a conflict of interest, sometimes by your auditor, he and wire whoever's auditing your venture fund.

36:14But of course, the techniques they have for assessing valuation are extremely crude, because they're not market based. They're just, you know, they're not public companies. Yeah. And so there's actually not a way to know they have extremely complicated cap tables. the other thing is many LPs are actually bonist on the papermark and this is something that a lot of people don't realize and so they don't have an incentive to dial around to the DPs and say get your marks right because it's actually going to affect poorly on them if they were to roll those up. Both of them are both of the LPs and the GP are in a dance there.

36:54Hey, we know that Stripe is not worth 100 billion right now, it's worth 50 billion. But if you market down, I don't get my bonus. I'm the person who's giving you money for your next fund. And so when we're assessing, hey, how much are we going to give you for your next fund? We're going to look at the performance of previous funds as an indicator. I placed back on what you just said. I agree with what you just said, except no one has the explicit conversation. It's an emerging, it's an emerging behavior. It's emerging. It's an existing. Show me an incentive. I'll show you an outcome kind of situation.

37:26But there's no, I've never heard of an LP like brow -beating GPs to get their marks right, like especially on the downside. Never heard of that ever. Those marks can be done, by and on, like you said, they could be done by around a financing. And then there's the secondary market, weird secondary market. Secondary market can do it. And sometimes LPs have this weird situation where different venture firms are marking companies at radically different prices, which creates some interesting dynamics as well. So I did the Siri, I did the seed round of Stripe where I'm Y combinator and I say you know what?

38:0050 billion fine. We're gonna market at 50 billion because we we invested at two million in Stripe, but then whoever did the You know series G or whatever it's up to we did the hundred billion dollar mark is like yeah We'll mark it down to 90 but you know somebody Calpers or Harvard has Two has the same share class in two different funds at two different prices So then you could really try and go in on reality, huh? Another dynamic that makes it powder less dry that I didn't mention in the tweet store. Imagine you're on your first or second venture fund. Imagine you're a fund that used to just have one fund but they've expanded to four funds.

38:41Now imagine you don't have a lot of liquidity proof points on those funds. Do you really want to run out of money and go test whether or not you You can raise your third fund or your second fund or do you want to wait and see if you can develop some track records? Because you may be facing the imminent death of your firm if you run out too quickly and go back to market and there is no market. So I have a hundred million dollar fund. It's my third fund. Okay. What pace am I going to do this? Am I going to do it in 24 months or 18 months like maniacs were doing during the P, where am I going to take a 36 month approach, a more traditional three year deployment.

39:22If I even have to take a 40 month deployment, hey, I got time to work out all these issues in the previous portfolio. Sacks, you've heard this sort of dynamic, what are your thoughts on the dry powder issue? You yourself have a lot of dry powder, I understand. So how do you think about it? We do have a lot of dry powder and we're going really slow. I mean, there's no feeling that we have to rush out and deploy this capital. And one of the things that's interesting about the period we've been in, that's been surprising to me, is that our metrics actually haven't changed. I mean, the things that we're looking for in a software company haven't really changed.

39:54We look for a certain amount of ARR, certain growth rates, certain amount of net dollar attention, certain CAC, certain capital efficiency. That bar hasn't changed for us, but the number of companies meeting that bar has gone down considerably. Because they have headwinds because customers are in austerity measures, or companies are going out of business and saying, hey, let me consolidate my SaaS tools. Enterprise buyers are sharpening their pencils. They are trying to consolidate vendors. There's a lot of headwinds in the buying cycle right now. Yeah. And it's a little bit like, I don't know if you remember, in the .com crash 20 -something years ago.

40:26Oh, I remember it. Yeah. So back in 1999 -2000, the conventional wisdom was that the company you wanted to be in was Yahoo. Because Yahoo was profitable. And when all these startups went out of business, Yahoo would be the way that you could own a piece of the future of the internet, but you wouldn't have to take all the startup risk. And then it turned out that all of Yahoo's revenues went away because their revenues were coming from banner advertisements bought. I start ups, which were funded by VC dollars. So when you had the whole .com crash, Yahoo's business dried up. So then Yahoo lost whatever was.

41:02The time went out, it turned out. A lot of people were wearing swim trunks. It was. So Yahoo's business was actually highly correlated with startup funding. And I think there's been an aspect of that with a lot of these companies where you would think that they're pretty insulated from the business cycle, even like especially the enterprise software companies. There's a lot of software companies that were selling to other startups. That was pretty obvious. They're going to be impacted. But even the ones selling to enterprise companies have been affected in subtle ways. And there just aren't that many startups right now hitting that same bar that they were Just a couple of years ago.

41:40Favorite your thoughts on this LP, GP dynamics and dry powder?

41:49I mean, I think I mean one aspect on the same front of VCs being somewhat reticent to deploy more capital. It's flowing through to the LP space and girly can probably pine on this, and probably plan on this too. And all of you guys obviously could, but it's been apparent in the last year that LPs are wondering what do they have? What are these portfolios ultimately really going to be worth? What's the actual cash distributions? And I think there's these new rules right early where you got to distribute 5 % of your assets each year to the institution that you're meant to represent. Yeah, I'll explain this here in Endowment.

42:31You're obligated to not just grow your endowment. both either from the board of the like the Adama, the Board of Trustees of University or I think there was a tax provision put in that if you're not distributing 5 % then you're supposed to tax on the returns. And so there's a there's a unquestionable potential issue with LPs around their own liquidity. So they've all followed the Dave Swinson model where they've all got 50 % or even more in illiquid assets. You move into a cyclical decline where the number of IPOs and liquidity events, both for BC's and PE, remember PE's way bigger than BC's. Private equity, aren't coming.

43:17And then the drawdowns keep coming. And so you have to meet the drawdowns. You're not getting any liquidity. Your constituent needs 5 % liquidity and cash crunch. Now you you have cash crunches and LP and I think GPs are aware of this issue so you know do you want to provoke that or not? Right so I'll just maybe you run quick you run early or you run late you don't want to be in the middle. So I'll just say like anecdotally it it seems LP's are more reticent I've heard several folks talk about how they're reducing commitments by 50 % two -thirds or in some cases a hundred percent, particularly after the the mad rush for capital over the last couple of years or capital commitments I would say for the last couple of years.

44:06And so the downstream effect of that ultimately as the current funds get deployed there are fewer new funds and less new capital being committed from these LPs into new funds and you know last forward two or three years and there's going to be less capital available and so it keeps the bar high. This is a while distance, you know, and so the bar I think is only going to get higher over the next couple of years as that capital cycle moves its way through the system. It's probably worth explaining what Freeberg was talking about in terms of a commitment. So you may have a, let's just say, University X has committed 25 million to funds three through five for venture fund Z and now they're saying in the next fund we're going to be at 10 instead of 25.

44:57When they say they're making that commitment, that capital gets deployed by the venture investor over the next on average, called it five years. So the reduction in a commitment this year means that there's less capital to invest over the next three to five years. And so that gets played out as we fast forward. We're still sitting on funds from the last couple of years. As those funds get invested, the new funds are going to be smaller. There's going to be fear of them. And that's when the market gets much tighter as in the next couple of years. Brad, this seems like the greatest setup ever. Feels like the setup last year buying equities when everybody was scared.

45:34If everybody is tightened their belts, if VC funds are not going to deploy, this feels like the time to be deploying. So maybe you could talk a little bit about this austerity, measures coming or just bell tightening or some people may be getting out of the venture business who shouldn't have been in it to begin with. All of this seems like a great setup for more discipline and more discipline founders. If the VCs have to be disciplined, doesn't that trickle down to the portfolio companies? 100 % and while this might happen, I'm going to take the other side. I don't think that's what the lived experiences of most VCs in Silicon Valley today on series series B series C is certainly not in the area we're competing.

46:16We're seeing four, five, six hundred million dollar deals get done on zero revenue, two, three million dollars in revenue. And so let me just throw out perhaps an alternative view as to why this might look a little different than the world of austerity that we saw in 2002, 2003, 2009, 10, 11. The first is right, the stock market is near an all -time high. And we know that the venture markets are reflexive to the stock market. We talked about that. The second reason, which I think is interesting, is most firms on average are a lot bigger. Okay? That creates two issues. We have a situation where younger partners and principals who all did deals that were overvalued over the last few years, they want to put some points on the board in a reprised deal because they have to have some winners.

47:02So you have this principal agent problem. The people who used to check them were the senior partners, right, the investment committee. But now they have a lot of mouths to feed. So when you put money to work, you pull down more fee. And so these funds, now, I mean, if you're tiger or some of these big funds, you have giant cost bases that you've created because of the size of the firm that you created. The third is the nature of LPs. And Bill mentioned Dave Swinson. In 2002, MIT Yale Harvard, they would call, you know, who were the early backers of Interferms. They would call these venture guys up and say, listen, we're hurting.

47:43There were a lot of markdowns. We need to slow down the pace of deployment, right? And so they were a factor. LP said, slow it down. I'm not hearing that out of LP's today. Okay. And I think one of these change. I certainly am hearing it out of traditional LPs, some family offices, some endowments, but pensions, sovereign wealth funds, et cetera, who now represent a much bigger percentage of the total capital -based adventure. They have money coming out of the ground every day that they need to deploy, like they did in private equity. And so again, I'm not saying this for certain, and certainly there are more discerning sovereign and wealth funds than others who are saying don't speed up the pace of deployment.

48:29But I'm wondering if that change in the nature of the LP base is also contributing to this as a sacks called AI mania. Yeah, I mean, we see it in Hollywood. Some new actors come in. They want to build a brand. We saw the Russians do it. We saw the Japanese do it. And you see China do it. People come in, new entrance at the table. They get splashy cashy. They want to place a lot of bats. that want to make an info so I pulled a brand. So that's an interesting counterpoint. Our entire business, of course, is based on exits, the highest form of exit, I guess, is an IPO. And over priced acquisition would be the second, and there's a secondary market for shares as a distant third.

49:10Looks like the IPO window might be cracking open a bit, and some people are being forced. The guns to the head, arm owned by Softbank, I'm a Siyoshi son looking to raise 10 billion, had a 50, 60, 70 billion dollar evaluation, could be the largest IPO of the year. Instacart looking at a $12 billion valuation, Reddit kinda went dark. They had a couple of problems with their community, but they were in line, Stripe obviously in line. Clawio's got a $5 billion valuation, and then we saw a couple of, what I'll say are non -traditional companies going public, something called Shark Ninja. I saw in public, We had a little conversation about this bread.

49:51Kersner, they have a market cap of $4 .3 billion. They had a pop of 40 %. Pava, a Greek food chain, Upa. They went public and have a market cap of $5 billion. Surfair, a company I'd passed on investing in, but was intrigued by. They do Pilatus shuttles between places on the West Coast here. Little short runs. They did a direct listing in July. Market cap of $85 million didn't go well. Bill, early is the IPI window opening for our people kind of on the ledge who have no choice but to jump and hope for the best. One thing we didn't probably spend enough time on in the last topic, which I'll just hit on briefly, is the complexity of those unicorns.

50:35So Brad mentioned, I saw a deck that said there were more private unicorns than public tech companies. So for a billion dollars, one point in time. which is shocking. But because those companies grew up in the 99 -22 -21 timeframe where you could raise money at excessive valuation, their cap charts are very complex and rigid. They have different lick preferences at different places and they've got board members who all have different marks and are all very worried about whether this thing can get to a certain place or not. And so it's very difficult to come in and do another private round in those situations.

51:14You might have to put the return in a guaranteed pick dividend IPO or some complex derivative. A lot of people, I think Brad would agree with this, a lot of people just say they opt out and say, no, this is too hard. I'm not going to go in there and negotiate with five different constituencies on how to do this. You can't just do a simple investment. because of that. Okay, so it's gotten two complex, which then if the buyers of those shares do not want to be involved in that crazy, okay, is Stripe Worth or just pick Stripe as an example, 50 billion or 100 billion and the last investors are out of 100.

51:52Why see in at two million? Yeah, sure. Maybe a bad example just because their total liquef stack may still be a fraction of their market cap for a lot of these unicorns. The liquef stack can be very close to their market cap for their today's valuation and that's what creates. So you have a billion. Real structural problem. You got a billion dollars in investment in the company and liquidation. Money that has to come out to pay those investors, but the company's only worth two billion or a billion. And now it's, yeah. When you get to that place, sometimes going public is just the easiest way to clean it all up.

52:24Because everybody converts to common and we just, the company starts trading and reality is reality. It's kind of like taking the medicine. Yeah, and I think that happened. One good example was Square at one point had done a derivative financing on top that was somewhat problematic and they just felt like they had to get out and they did and it cleaned up the cap chart. And one thing I've been waiting on, we'll see if it happens. But because of hyper competition and investing in 1990, 2020, 2020, there was a term removed for most term sheets that gave investors the right to protect their lick prep on IPO.

53:03That's gone in most of these cases. So you could convert lick prep under, which for a founder or an early stage, Aintel investor would be a huge win. Got it. Whereas if you sold a company in M &A, the lick prep would play. Does that make sense? Yes. So the last investor comes in, they're getting a multiple of their money back, except in an IPO. Right. And the IPO happens, you know, yeah. And I suspect most of those late stage investors keep assume that their investment has a debt -like floor on Lycpref. And if this were to start to happen or recaps, which can also be done, the self -inflicted recaps I have seen many times just to get past the structural complexity, either one of those things could wipe out that Lycpref.

53:53So NetNet, Gurley more IPOs are gonna happen. I think you will see that. There's two things that I think that cleaning up complexity is a great reason for the public market and Brad already said. We've seen a massive recovery in software stocks. Like the marks are better than they were two years ago. So Brad or SACS, just M &A -wise, we've seen lean -accom, we've discussed it many times. seems to be saying all business equals bad, any merger equals bad, she's going to attempt to throw coal water on any merger that's happening. So M &A seems to be being taken off the plate by not just Lena Con, but also the EU's seems to be turning the screws.

54:42So if we don't have an M &A market, then that means there's only an IPO market. Correct. I mean, that's just another one of the reasons that is pressuring these companies. These companies need to race capital. So just to double click on what Bill said and put some numbers around it, right? Because we read a lot of stats about how many IPOs there were. So I had the team pull some figures. 480 IPOs, US IPOs in 2020, 1 ,035, so a huge bubble in 21, 181 in 22, and 123. Okay. But I think that over states, right? Because we had a lot of SPACs and crappy IPOs. So it really over states, the quality IPOs.

55:23So we're one of the major buyers in tech IPOs. So I just went to the team and said, how many IPOs were we tracking and did we consider participating in during these years? So that was 46 in 2020, 100 in 2021, 3 in 2022, and 0 year to date in 2023. Okay. Don't want to be in the Greek food. So what I would say is I just returned from Deer Valley this week where Morgan Stanley is putting on a conference talking to their big potential IPO buyers. We are now queued up as you and I we had this tweet exchange chase in this week and I said, you know, in that exchange, the world's normalized fear of COVID's past, hyperinflations past, et cetera.

56:09First -class IPOs are coming and a bunch of down -round IPOs are coming. So let me just explain really quickly on that. Right? You mentioned Instacart. Right? Super high quality company. I think its last private round was 50 or 60 billion in the bubble. And now it's rumored to be going public at somewhere around $10 billion. Okay? So that represents the reset that will have to happen. And as Bill said, if you were a investor in that last round of Instacart and you were buying preferred shares and thought you were protected, that preference is washed, right? So you're gonna be down 50, 60, 70 % on those preferred shares because you're gonna be converted into common in that IPO.

56:50It's the right thing for the company to do. It's the right thing for the investors to do. It cleans up the cap table. So that is an example of the down -round IPOs of high -quality companies that you're gonna see come public. Then you're gonna have folks like ARM, like byte dance, data bricks would be another one of these. I think that, you know, sneak that would be more in that Instacart camp, you know, like there will be some discount relative, perhaps, to their fully diluted glass rounds valuation. But these make no mistake about their high quality companies that will lubricate and altimeter will compete for those IPOs because these bankers are hell bent on pricing these IPOs at a discount to fair value.

57:30They need them to work. They need to bring buyers back into the IPO market because these companies need liquidity. So suddenly the banks need to get wins for the people buying these shares. As opposed to in the past, they were like, yeah, we're just selling a security at the market rate, whatever that famous, the famous monologue from, always the movie, was that Jeremy Irons who gives that monologue? We're selling securities to informed buyers, and that's it. It was a pretty dark scene. So it won't be a light switch, Jason, but I do think... Margin call. Margin call, thank you. It was Jeremy Irons.

58:06I don't think it'll look like a light switch, but it will be I think we're going to see five six seven IPOs Good size IPOs in Q4 will probably see closer to 10 in Q1 and then it will start opening up in the back half of next year in part because Bords of directors will begin to realize you know what We have to go public if it's down -round who cares? It's acceptable and this is really healthy we need these companies and by the way I'm in the bill girly camp. You should not stay private forever. You should get your company if you have a hundred or two hundred million in revenue Get your company public innovate and grow in the public markets with the discipline and cadence of the public markets and if it's if it's you should expect the prices lower Because the world was out of their mind in 2021 and multiples of reset Sacks you shared a news story with me just about But some of the incredible returns in the Golden Hour Adventure capital, Washington University, Duke University, some of these endowments just exploded in value.

59:09I remember when the circle came out. It was September 29, 2021, less than two years ago. And we were all feeling really good about our industry. But as it turns out, the whole thing was inflated by all the free money that the Fed had air drop. So, you know, the public markets were really frothy. It was basically very bubbly, especially for gross stocks. You had all these new IPOs and SPACs and so forth, and they were super bubbly. And the result was that the returns both realized returns and on paper for these endowments were massive. So, if you think about the LP, the LP community,

59:53if is they look at the total value of their endowments and then they allocate a certain percentage by asset class, so they'll allocate a certain percentage to public markets, certain percentage to real estate, private equity, and then VC. So if the overall value of the endowment is really big, then that percentage that goes to VCs can be really big too. And then what happened is you had this huge correction over the next couple of years. And so one of the things we heard from the LP community last year is a problem they called the denominator, effect. Well, the value of their portfolios had gone down a lot because the public markets were down.

1:00:32What was it? Something like 50 % in some cases, yeah. For growth stocks and like 15%, 20 % for the entire market. So the value of the portfolio was down. But the venture capital part of that was not down, both because of the lag and getting fresh marks. And then also because they had already made commitments to new VC funds at the peak of the market. So all of a sudden the percentage of their portfolio that was VC -related roughly doubled. And so that's why all of a sudden the LP commitments have dried up is because they're over allocated to VC. Now as a public market have come back this year, then that problem mitigates to some degree.

1:01:13But I think it's still out there and I think this is why you're seeing certainly domestic LPs really slow their allocations to venture capital is they stole the denominator problem. Now I think that's less of an issue overseas. I think Jake, how you observe that the four seasons of the bar at the Dubai course. Abudabi bar look like a rosewood to Brad and I live over there. I literally got stopped four times from the elevator to the front door. I am not kidding. Four people stopped me. That's two more than would stop me at the rosewood going to the front door. It was bonkers. I should recognize that as a hyper attractor for where available money was relative to the US dollars and whether they were available or not.

1:02:00Yeah, I think we're in for a period here of just continued distress and pain even though the market is sort of normalized or stabilized now. Again, I just think we've been in a huge software recession for the last year. Yeah, I mean, it's been massed by the fact that the rest of the economy seems to be okay. But this is the worst software recession. We've been in, I think it's the dot -com crash. I mean, the buyers have been laying off employees by the thousands and since software is bought on a per seat basis, the market has really condensed. We had one startup that was selling to Twitter and they got a renewal and I think they're contractless.

1:02:3980 % off? 80 % off because he longs laid off 8 % of the employees. Yeah. And that's before negotiating the last 20 % which you could negotiate 50 % off that. I told them they did a great job is getting that 20 % because Elon's guessing everything. I was like really impressed. They were able to renew a 20 % of last year's value. You know what, we had a vendor. We had a vendor and this vendor went on for far too long. And you know what, if you go out, you know, two, three nights in a row until four or five in the morning, that next week is gonna be painful and suffering. That's what the industry's going through.

1:03:12It's just gonna take a lot of coal plunges infrared and pickleball and you know, sagging to feel good again in this industry. I would like in retrospect that I think super interesting about the venture capital cycle. One, I think it's inherently cyclical and it's always going to be that way unless we fundamentally change the structure of the industry because it just invites competition and there's no barriers to entry. But I went and talked to some LPs that have been in the business for a very long period of time and a vast majority of the reason venture outperforms other asset classes has to do with these tiny windows when you have a super prodding market.

1:03:53And if you aren't around for that part, if you strip those years out of a 40 -year assessment, it's actually not that interesting in asset class, which highlights the need for venture funds to get liquidity at the peak. Yes, right when we are at the peak is when people get the most brazen, the most confident, and they start talking about how we're going to hold forever. And so you had venture firms with the biggest positions they've ever had in their entire life go over the waterfall and basically evaporate what could have been returned. Yeah, I mean, Diamond Hands can come back and bite you, and you've said famously, you can't, what was the line you had you can't eat IRR?

1:04:38Well, you can't. I don't think I said it, but it's been said. Yeah. Since we're on our movie Bender here, for those of you who haven't seen Margin Call, just wanted a great scene. This is the whole scene, by the way, like the best scene, I think of modern finance films. So look at this murderous crime. Can we selling this to? Same people we've been selling it to for the last two years and whoever else will buy it. But John, if you do this, you will kill the market for years. It's over. And you're selling something that you know has no value. We are selling to willing buyers of the current fair market price, so that we may survive.

1:05:22Yeah. Oh, man. We can rationalize a lot on Wall Street, man. But to the point that we're bill saying is that the opposite that took place, which is VCs drank the cool aid and didn't sell when they were at the peak of the market. They also got caught up in a competition of trying to appeal to the founder community of saying, hey, we're in it forever, we're gonna hold forever, we're your best friend forever. But Bill, there was also this element that drove that strategic rationale, this data set, which is the best performers in tech generated most of the value after they went public. I mean, there's a trillion dollars of market value generated in Nvidia, in Apple, in Google, in Amazon, all over the many years post -going public.

1:06:16And if you read Sequoia's notes when they kind of made the transition that they made, they said, we don't want to walk away from the power law. that the power law continues to accumulate in a crew, even in the public markets, and we want to continue to participate in that, because there's another 100x upside coming from here, in the ones that we select, we want to stay with, not necessarily we're going to stay in all of them. Back to be determined. There are some that we believe are still a 100x upside from here, and just because there's an IPO doesn't mean that we want to exit the position, that there's now more capital available to them, more public currency they can use to do transactions, to hire, et cetera, and we want to participate in that value creation.

1:06:54Totally. And the last double could be the biggest, right, Bill? I think the total number of companies that meet that criteria in the history of the venture industries, like 10 or 15, and you name many of them. And the problem is that the rhetoric becomes common narrative and becomes part of the ethos of the firm. And people want to apply to every single company. Everything that's right. Right. Total. And that's not true. And it doesn't apply. I mean, I don't want to get too specific here, but you had a, you had, you know, you do have some, let's say, uh, season vets yourself included Bill, who, when given the opportunity to get liquidity on an incredible investment, we'll do so, Fred Wilson sold, I think all of Queen base when it goes public.

1:07:38He just clears the position when things go public. That's been his philosophy, kind of the antithesis of what Sukhoi and Rulof are doing with some of their holdings. And then we've seen we work has an existential crisis. They don't think this might be a viable concern anymore But famously benchmark was able to sell shares at a very high valuation at some point and lock in an incredible return. Yeah Okay, there it is

1:08:10Let me ask a question bill about getting older. Well, let me ask the question I mean, all their aligns. Well, sex, sex, like your neighbor wants to be the world's 17th best moderate ago. Sex, you have an investment in SpaceX, right? I mean, there's been a lot of secondary action in SpaceX. Why would you not sell SpaceX at this valuation today or would you? Or maybe did he, as you kind of think about this, yeah? I think we're gonna wait till the company IPOs. I think that would be our default. When it goes public, sex, do you then think what's the upside from here? Or do you think my job is done?

1:08:44I think my job is done. Yeah, I think my job is done. I think what we do is just to read the shares and then each LP can make their own decision That's about whether they want to hold it or not And you are the key to deciding what you want to do with your share Yeah, one of the nice things about Distributions is that nobody has to sell So everyone can make their own decision about whether to hold or not. Yeah, once the company is public and the public has all the information Through disclosures the odds that I know something special that a seasoned public market investor doesn't, that's probably pretty low.

1:09:18I mean, the great paradox of what we all do, and Brad, you have both a public and a private portfolio. I started trading public market equities to get better at my private behavior bill. You've done that forever is public markets, you can't trade on inside information, private companies. That's all you're trading on. Maybe you could speak to a little bit about being, what do they call it when you do both? Cross -over investors, Is that making you a crossover investor? Is that the proper term? Well, Bill Gurley is the original crossover investor. He's been trading public stocks since... But he'd been doing that first.

1:09:53Yeah, researching him. But the fact of the matter as he has Warren Buffett and who would laugh at the idea of a crossover fund, he's been running one of the world's largest public portfolios and private portfolios forever. He would say, I invest in great companies that are mispriced. There are moments in the market cycle where late -stage venture is mispriced to the downside and there are moments in the cycle where the public markets are mispriced to the downside. What we saw in 2021 is the private markets were crazily overvalued. In 2022, we had this massive correction in the public markets. We believed that they overshot and part we believe that because we didn't think we're going to have hyperinflation forever, etc.

1:10:37And so you and I invested in you know meta and a lot of other things that were on their ass You've got to buy in the public market when there's blood in the streets, right as as Warren as Buffett says buy when they're Blood in the streets and sell when there's trumpets in the air and you know They're definitely blood in the streets when you saw things down 60 70 80 90 percent Is it trumpets now does it feel like trumpets to you now or does it feel like trumpets next quarter or the quarter after? If you look at people are polishing those trumpets right now. Yeah, I mean, a lot of it obviously depends on your view on what's going to happen in the economy fundamentally and I'm happy to shift to that.

1:11:14But what I would say is this, remember the chart that I've showed many time about software internet valuations, we were, you know, 70 % above normal and then we were 30 % below normal. And now we're closer to the trailing 10 -year average of internet software valuations. there are always outliers on both sides of this, but I would say a lot of the positive arbitrage that we saw in 22 has been squeezed out of the public markets and we're close to fair value. So now if you want to generate alpha, this is going to be about picking individual winners versus individual losers. This is going to, you know, like the beta trade on global macro, I think has largely played out, you know, the catch up back to kind of fair value.

1:11:57And now I think there's a debate between kind of hard landing soft landing. Are we going to have a re -acceleration inflation or not have a re -acceleration? Where you come down on these major issues, I think dictates whether or not, you know, now is a good time for us. You could pivot for us now. Well, can I correct something you said, J .K. Yeah, please. All right. So you said that public markets inside information isn't allowed, whereas private markets it's all inside information. I think that could give viewers a misleading impression of what we do as VCs. Okay. The way that around typically comes together, it's not like we get tipped off by some insider at the company in some nefarious way.

1:12:37What happens is that the company chooses to engage with us or a select number of firms in a process and then gives us their metrics and gives us the business plan and gives us the forecast. and it's all done in a very above board way. It's not like we're being tipped. However, the part of it that I guess is true is that a private company does not necessarily engage with everyone in the world. You might contact them on the website, and quarterly report and say, here's what our revenue and our cost were, and here's our earnings. Although some private companies do start that process like before they're on sale.

1:13:15Before they're on sale. They do. They're selective about who they want to be on their cap table. and that's the big difference between a private company. A public company doesn't care who's on its cap table. It doesn't really know who's got, you know, Apple doesn't know every shareholder and who's got an account set, e -trade, or what are Charles Schwab. I mean, they may care who their biggest shareholder is are, but they don't care who the average shareholder is. Whereas a private company really does care. And part of the reason why they care is because these startups are highly risky and they want to have investors who have a track record of behavior where they don't have to worry about being sued.

1:13:53Yeah, they go loose every time something doesn't work out, which is most of the time. So I think there's good reasons why startups want to control who their investors are. By the way, there's also the issue of value ad, right? I mean, other things being equal founders and startups would rather have investors who can help them as opposed to simply, you know, with John Q. Public. Yeah, I mean, you mentioned both centers. You don't want somebody who's a Neophyte, who's gonna cause chaos and be upset when revenue goes down or things are swinging up and down. And yeah, if you're a public, yeah, buy the share if you want or sell the share if you want, it's a marketplace.

1:14:28Sorry, just pull up this image I just posted. This is from, you know, you guys know GoKal Roger on? GoKal's a great human. We used to work together at Google. then he worked with Jack at Square. He's at DoorDash today and he was a leader at Facebook after Google. But he did this tweet last month. Any tech venture investor who compares their funds return to the S &P is being naive or just in Genus. The correct index to compare to is the QQQ, you know, the NASDAQ composite and its performance has been mind -boggling. And as you can see here, over a 20 year investment period, if you basically just buy the top 10 public tech stocks and at the end of each year rebalance to the top 10 at the end of the year, your multiple over that period of time is 24x over 20 years.

1:15:26Yeah, and over a 10 year period. There's quite a bit of hindsight bias here in saying where we look at the top 10, right? It's like how do you determine? Yeah, No, I know. Why not top 100? I mean, are you willing to say that for the next 10 years, that you should only buy the top 10? What if over the next 10 years, it's more of the field versus the top 10, you know, the next one? Part five. Yeah. I think comparing VC as an asset class to the NASDAQ makes a lot of sense. I think that's fair. Yeah. And that's the second column from the right, which is basically, you know, you would, yeah, 5 .2X over 10 years.

1:16:03So if you're not beating 5 .2x, which is a totally liquid investment, if you just bought the QQQ index. What this really shows is Apple, Google, Facebook, and Amazon have had an massive run -up. Well, that's not true. That's actually not true, Jake. Because if you look at just the static, it doesn't outperform. It's the rebalance that outperforms, which is whoever is winning in the market, meaning whoever's gaining market value each year is he then double down your dollars into for next year. And that's changed over a 20 -year cycle over a 10 -year cycle. And it really starts to play out over time.

1:16:40But I mean, yeah, if you just look at the QQQ, that's the benchmark as an investor, as a private investor. And you know, GoKal's comment in his tweet is that, you know, if they can return, call it 7 -8X over 10 years, or in this case 5X over 10 years, you could argue that venture fund needs to return a significant premium, probably a 25 -30 % premium due to the liquidity and the riskiness of the investment cycle there. Whereas the QQQ you can just sell anytime you want. Call it a, you need to kind of be demonstrating a 30 % premium to the 5 .2X10 year, which is a 6 .5 -7X cash on cash. I mean, according to this, the venture asset class is super overfunded, so why is that then?

1:17:24Do you have a point of view? Yeah, I mean, it would be completely speculative, but I do think if you look at the structure of endowments, you know, you've had a few people really leading the way in terms of a playbook with Swenson, you know, Dave Swenson, who passed away recently, but... Dave Swenson, he created the Yale Derm, right? Yeah, yeah, yeah. He ran yells in downwind and is considering... And I think the vast majority of people decided they were going to follow that playbook, which had an oversized investment in illiquid assets, PE, venture, real estate commodities, those kind of things.

1:18:05And I think it led to just a massive, like, and these things take forever to figure out if they're right or not. If your portfolio is over 50%, illiquid, like who knows what's right and what's wrong. You could do a re, you know, you could, there were years where Yale was printing like 27 % a year. And then in one reset, no nine wiped out, you know, a ton of that. So it's super hard to know. But I think that philosophy became broadly adopted. Yeah. Well, look at, can you pull out this chart real quick? This is a chart from statistics that is value of venture capital investment in the US from 2006 to 2022.

1:18:51And what you see is there's basically a few different levels. Before 2014, call it, the industry was basically a $50 billion dollar your industry in terms of deployments. Then you had a run up where for several years it was around $100 billion and then in the pre -pandemic year 2018 -1920, it was around 150 billion a year of deployment. And then it went totally nuts in 2021. It was 350 billion. It started to come down in 2022 to about 250 billion. I think where we are right now is kind of at that 2019 level of about 150 billion a year. The question is like what it should be. I mean, should this be a 150 billion a year industry?

1:19:35Should this be a 100 billion a year industry? Should this be a $50 billion your industry? Yeah, it sounds like a hundred to a hundred fifty would have been the steady state and Bill, some portion of this is stay private longer having an impact where those last couple of rounds were the big huge juicy rounds and if people had gone public in year 7, 8, 9 like Microsoft Google, not Google but Microsoft and I mean Google went, what year was when it went out eight. Going out a little bit earlier would have chopped off some percentage of this growing? Yeah, and I do think one of the most interesting things to watch is going to be how these 1000 unicorns, private unicorns, play out because not only do they have the cat structure problem, but they lived and grew up in a day and age where they were told growth at all cost and it's super hard culturally to go from that type of execution to the principal type execution you guys have been promoting over the past several months.

1:20:37It's just hard. It's not impossible, but it's very, very... Google went public in year six. That's 23 million of total venture raised, I think, prior to IPO. Think about what that means. If a lot of those unicorns are fake, what does that say about innovation in the American economy. We had this narrative over the last decade that the pace of innovation had fundamentally increased because of the availability of tools and technology. And so you had a lot more unicorns being created. I mean, I remember back in, I don't know, like a decade ago or 2010 era, let's say, you know, there were maybe was like 20 to 50 unicorns a year, maybe 20 unicorns a year.

1:21:21There were arguably 10 to 20 girly great companies formed a year in Silicon Valley or in the tech industry in the West I mean And recent kind of gave this this talk about it maybe a dozen years ago He said the number was 17. There's like 17 important companies created every year in Silicon Valley and your goals Vc is to be in one of those 17 then all of a sudden we had was it like a hundred two hundred three hundred unicorns a year Yeah, I mean if you - That's only a question to me that are real. Well, I mean, Brad was just talking about that you're giving a 50X multiple, 50 times top line. I'm not talking about earnings folks.

1:22:01I'm talking about top line. If you give 50X to every company, then you only need 20 million dollars in revenue to be a unicorn. And that's unrealistic when compared to the public markets where things are trading at five times top line and 20 times earnings of its high growth. So it's just a different market. All right. there's a major slowdown in China. Well, we could talk about Portnoy and buy that part. I just say you want to do markets. Just real quick. I think I've spent a lot of time on the island of Maui. I think it's really sad. I don't know if you guys are going to LaHina, the whole town.

1:22:32The whole town. The whole town. It's beautiful town. So sad. Yeah. It's gone. I just wanted to make sure that we mentioned it because it's pretty depressing. What happened? I don't know if you guys have seen the wildfires. No, I mean, sex in our families, we all went to that area from vacation. My favorite, remember that sex? Yeah, now he's my favorite code 13. Yeah. Yeah, I mean, now he's my favorite place on earth. Then a little hind us so many times, it's super sad what happened. I just want to hopefully kind of on the water with those old days and porches, gorgeous. It's just all gone right now.

1:23:04So yeah, the global warming thing and these fires and wind, man, what a hot summer. I mean, we could do this. Southern Iran, check this out. The temperature hit 155 degrees. It is nine degrees warmer than it's ever been off the the west coast of the United States right now. There was 90 degree ocean temperature is off of the Florida coast. The sea surface temperature in the North Atlantic is the highest it's ever been by I think seven years. Is this global warming or is it all a hoax? Look, the people want to debate all day long about anthropogenic. I'm asking you, the client of some of the science here.

1:23:43I'm telling you with like absolute certainty, the data right now is un -fucking believable. How hot and how dangerous the earth is becoming. And we're seeing not just the fire in Maui, the sea surface temperature, which increases the probability of severe tropical storms and hurricanes in the coming season. and it's unlivellable. I got one in Iran in Saudi Arabia in Dubai, 130 degree temperature, 95 degree overnight lows. If you don't have air conditioning, you will die in a lot of these places. So there are parts of the earth where people cannot afford the amenities and the luxuries that we have in the world that we all live in.

1:24:25Just say it. There is no hopes. There is no hope. I'm trying to be an Earth's top fall right in front of you. Yeah, the earth is warming. The amount of extreme weather is increasing. The significant effect of that is becoming apparent. And we could debate for hours about what quote, can you do about it? But there's just a series of really awful things happening right now. And it's becoming more frequent and more apparent that this is a pretty serious thing that we're in the midst of. All you have to do, Gurley, is follow what you're doing down there in Texas, which has, Is it the highest renewable energy percentage of any state now is Texas greater than California?

1:25:04So one of the biggest successories I saw Some politicians from Texas saying we got we got to get off all these There's no silver bullet if you want to talk about the you know the fundamental challenge that we all face in terms of Whether atmospheric carbon is driving heating or not it if you if you follow that track There is no silver bullet. There is a lot of things that have to go right in the coordinated way. And there are market incentives that make it very difficult for any of those things to actually get done all the way through. But renewable energy and nuclear, you would say. Or important.

1:25:36Two of the most important. Yeah. There's still industrial production. I mean, the list goes on, you know, systems and agriculture. There's a lot of contributors. What's the clearest path? I mean, if you said, hey, put 90 % of your effort on these three things. It would be nuclear renewables, painting, people's roofs with white paint like this new paint. That's reflect stuff. I mean, what would be any... That's not going to change much. No, let's see this conversation other time. We've got Brad and Bill here. I think... Honestly, I'd love to have this conversation. We should do it. Let's put on the dock.

1:26:09Yeah. And next week we'll do a big thing here. Yeah. So just wrapping up here on sort of macro. We'll give you a little macro. Brad. CPI. Seems like it's measured. and consumers seem like they're running out of money and starting to tighten their belts, unemployment, still all -time low, still 9 million job openings. Feels like this is the steady state for the next year, or do you think hard landing, no landing soft landing? Well, maybe they can bring up the first chart. This morning, we had CPI reported. We had the smallest back -to -back monthly gains in core CPI in over two years. back to 0 .2 % annualizing just over 2 % now.

1:26:52So on a year over your basis, it was 3 .2%. Now remember, it was only six months ago that people were still hyperventilating about this 9 .1 % we saw last year that everybody on this pod I think was largely an agreement that was COVID stimulated. But the blue line here represents the consensus estimates of folks like Goldman Sachs, which is pretty similar to what the feds own estimates are. If you go to the next slide here, Nick, this is what the current market is betting will happen to the Fed funds rate. So the market is saying, you've heard Jamasseh many times higher for longer. I happen to think we'll have higher rates for longer too.

1:27:33But the market is saying we're worried about an economic slowdown that's going to force the Fed's hand. So the market is betting that the Fed funds rate will come down either because inflation continues to roll or because the economy me continues to slow. And so this third slide, which I think is a really interesting one, which nobody really talks about, but this is the reason I think Dr. Millen, other, are worried about recession. There's a measure by the San Francisco Fed, which is called the Effective Funds Proxy Rate. Okay? So this is not the Fed Funds Rate. This is what they say the total impact of Quantitative tightening plus rate hikes are and we're now back to the highest level on that proxy rate since we've been since may of 2000 it's up over 7 % I think that's the reason people are looking at this is blue line up over 7 % That's the highest effective rate Calculated by the San Francisco Fed since all the way back to May of 2000 and this is the concern a lot of people Brad, could you just explain that?

1:28:38Why is the effective rate 3 % higher than the official rate? Because of quantitative tightening, because there's a lot of other things going on in the economy, the impacts interest rates, the rate at which you can borrow. Part of it is there's just less money in the system. It's like when a crunch basically. Exactly. Just because the rate's 4 % doesn't mean you can get out of the tube. You can't borrow. Nobody can borrow at the 10 year rate. Okay. So if you're a company or an individual and you want to go borrow, if you have to buy a much higher rate. So that is where the rubber meets the road.

1:29:10If you're trying to borrow to buy a house, borrowed to buy a car, borrowed to expand your business, the blue line represents a much better calibration for the level of tightening in the economy. So there is a very strong debate. And I would say the market's actually betting here that the Fed is overdoing it because of what you see in that blue line and that the economy is going to slow the lag effects of this tightening have not yet been felt. And so this gets back to the question we had before, which is where are we in the cycle, whether or not we're going to continue to have growth. Now, really interesting, Jason, Bloomberg's headline today was the summer of disinflation.

1:29:48And we said on this pod six months ago, we said it's more likely by the end of 2023, we're going to be talking about disinflation, then inflation. And lo and behold, not only are we seeing signs of disinflation, air tickets down 18 % year over year. But China just posted actual disinflation. Yeah. Right. So if we're... So if prices are coming down, people are going to be surprised that there's more products or services available at lower prices, which then could affect salaries. Because hey, we're not making as much money at this company. We got to cut salaries. I mean, we know that the Fed at the start of COVID was more like the curses of disinflation are almost bigger than the curses of inflation.

1:30:31And China just saw CPI down three tenths of 1 % in the month this week annualized. That's over three and a half percent. That is a major problem for China. So I think you have some yellow flags here, right? That say, do we have too much tightening? If one of the global engines of growth is experiencing this level of disinflation, that's gonna impact the global economy, global demand, et cetera. So yeah, I think it's been the pattern of the Fed, right? They they seem to react late and then they oversteer. This has been the theme and so There's also just to add one other Cloud to the silver lining.

1:31:11It's the amount of debt that's out there correct So both private debt and government debt. Yeah consumer debt is high this real estate commercial real estate time, get dead everywhere. And people are going to have to belt tighten and maybe austerity and stop spending on some yolo trips. But if salaries keep going up, hmm, let's let's bring this piece in a Kona Koa. Who is this? Who are you? Saring it's not a Kona Koa link is it? And a great Kona Kyo. Koba EC letter. Oh, Koba EC letter. Hold Koba. Ashe here. Koba. Ashe. Yeah. Koba. Ashe. Let's go 300 ,000 followers. So we have record, household debt, 17 .1 trillion record, mortgage debt, 12 trillion record auto loans, 1 .6 trillion record student loans, 1 .6 trillion, which as Dr.

1:32:00Kimmiller points out, have to start being repaid, I think as of December, because stream court overturned Biden's unconstitutional debt forgiveness, record 1 trillion in credit card debt. That I think should be pretty worrying because credit card rates are now around 25%. So credit card debt gets the interest on that is obviously floating. And so when rates go up to where they are now, then it gets very putative. So David precisely, and this is, remember, we're seeing inflation roll over huge and we have a chip sacked in an infrastructure. We have massive government spending going on and we still see inflation rolling over.

1:32:41So I just find it interesting that within six months we've gone from worrying about hyper inflation to Bloomberg running a headline summer of disinflation. The last piece of it is government debt. So at the rate that the government is racking up deficits, the Treasury is going to have to float something like three trillion of new T -bills by the end of the year. And we're rolling something like nine trillion of old government debt over the next 18 months at new higher interest rates. So there's a lot of debt and we'll continue that discussion next week as well as the global warming one, hearts and prayers out to the fine people of Maui who invite us to come to their incredible paradise.

1:33:23We hope you all say, Staf, and have a great recovery. You're in our thoughts and prayers for Raghursner, the fifth bestie for the architect David Sacks and the Sultan of Science. I am the world's greatest moderator and efficient if you're getting married. and four, they'll growl. They'll growl. You have some anecdotes about the All -In -Pond. We were talking about that. Close on, closing on an anecdote here. Close your alley. Close the south, you know. Obviously, huge. It's a success you guys have had. When you first mentioned you were going to do this, I don't think anyone had any idea that you would reach this level.

1:33:58And I know the hard work it takes to, for you guys to do this weekly, it's amazing. But I was walking down the, you guys share anecdotes about people mentioning all in, I was walking down the street in Austin a few months ago and a guy came up to me, go, so are you Bill Gurley? I go, yeah. And he says, you're that guy they sometimes talk about on all in, right? So the guy they sometimes talk about, all in his yurks, there's your subtitle of your book one. The guy they talk about, all in sometimes, sometimes. There's your tips. to your point Bill, it took 10 years of hard work by Jake Alphard, the rest of us we just walked in off the street.

1:34:39Exactly. Thanks. I got you all on my shoulders. That's why he thinks he deserves more than 25%. Holding you all on my shoulders. But he don't get more than 25%. Jake, where are you running off to? Why do we got to shut this down? Sax, Sax, it's early and I may stay and just keep talking. Don't go down the world's greatest moderate. And we'll see you all next time on the All in Podcast. Bye. Bye. I'm going to the beach. We'll let your winners ride. Rainman David Sack. I'm going to the beach. And it said we open source it to the fans, and they've just gone crazy with her. I'm going to the beach.

1:35:13I'm going to the beach. I'm going to the beach. What, what, your winners ride? I'm going to the beach. Besties are gone. I'm going to the beach. That's my dog taking it. I wish you drive away. Sit down. I'm going to the beach. Oh man, my ham is a bit asher when we get to the place. We should all just get a room and just have one big hug or two because they're all just like this like sexual tension that we just need to release our house.