Only 21 in 20,000 funds can repeatedly pick winners | Saul Klein

0:00Welcome to part two of our conversation with Saul Klein. This has been a really interesting deep dive into how he thinks and how he runs his business. So I really recommend you check out part one.

0:14On that point of recognizing great founders, maybe grounding this in like a specific experience, you backed Wise at Seed, right? Do you remember the first meeting? yes but you know to be clear the first meeting with the team was probably eight years before we invested in wise because tarvitz was employee number one at skype and he and i had worked together yeah yeah so you know by the time wise showed up at seed camp at our demo day you know and then my dad sends me an email having seen tarvitz and christo presents and you know yan at Index was there. You know, my dad said to me, like, what do you think of these guys?

0:59And I just wrote back. I'm like, I literally backed Harvard to chop lettuce. Like, it really doesn't matter what they're doing. And so, you know, we invested, I think, three different ways in that round. Local Globe, Index Invested, and Seedcamp Invested. Right, okay. Yeah, I mean, then we got to know Christo, who, I mean, is just like a remarkable founder and operator. who obviously is still running the business. And yeah, I mean, our story with Wise, in my view, kind of canonizes the, you meet the surfer on the beach. Yes. You know, and then you just, you know, you keep going. In fact, one of the inspirations for Latitude was we'd done an SPV in the Series C or the Series D to invest in Wise, because we were sick of looking at the monthly numbers that were growing 10 % a month and not having capital to invest.

1:59And we're like, this just makes no sense. This is an incredible company with incredible found. This is going to keep growing and growing and growing. It's going to keep growing. So, you know, it became the inspiration for Latitude. And then even when they went public through their direct listing, you know, we bought shares through Solar into the IPO. And I remember, I don't know, like around the IPO time, sending tarvets or christo maybe both of them that email i'd sent to my dad because it was funny and like that was the conviction it was like i'd known this guy he was brilliant and then we got to know christo and we got to know harsh and we got to know and you know it's just like not just the founders the team the product the operations all of the things that i would use we would use for a waiting analysis of what makes a great business you know they were just knocking it out the park and Bailey Gifford actually did the series C or D.

2:52And yeah, I mean, they were operating in a multi-trillion dollar market and just, you know, having done the FX, then they were building rails for people who couldn't do the FX at their rates, you know, like Shopify and Melio and banks. And then they were taking deposits and making it easy for people to buy ETFs from BlackRock. good you know like this is just still a great business i don't even know how long they've been public now and we're still shareholders yeah we we use it for some of spv's fun yeah what about when you don't have the luxury of of having known the person and having built that deep conviction over years of working with them like is there something you're able to with years of doing this like what are you pattern matching for if anything no well look what's your process I think pattern matching is really interesting now because pattern matching has always been some conceptual abstract term that lives inside an individual's head.

3:54Right. What we've built in the last 11 years is institutional infrastructure for pattern matching. Right. Because if you're one of the 0.13 funds who've invested in 35 of our portfolio now doing over 100 million in revenue, then you're starting to not just have patterns that exist inside people's heads, but you're having patterns that machines can analyze. you can have a founder evaluation framework, which we have. And you can start to assess as you have conversations with founders and with their teams, like, does this look like a top decile founder? At least within our universe. And our universe is quite high signal.

4:42So I think what we've been trying to do is to move from the humanities, which is where I start, to social science, to science. And this is where I think the next decade of venture or capital allocation, we've been there in the public markets for 30 years. Hedge funds have started to be, it's coming in the private markets. It's how you quantify the qualitative in some way. But it's also not being afraid of the fact that these are very kind of qualitative, I mean, they're sentiments. So we collect sentiment along 10 dimensions. Right. And we've been doing this for 11 years. And that's documented sentiment from the side of the allocator?

5:27No, it's our subjective sentiment. The investor saying, this is what I think. Not just the investor, the team. Right. OK. Because like, guess what? A lawyer has a point of view on how a founder or an operator is doing. It's like your talent person does, your marketing person does. So it's anyone in the business can offer sentiments, you know, post meeting. So it's not quite like Bridgewater was trying to do with like. But, you know, we've basically been collecting this first party sentiment for 11 years. We have evaluation models, you know, where we do, you know, founder evaluation models against characteristics that we believe are, you know, probabilistic, predictive of like what makes a great founder.

6:20We have framework evaluations for what makes a great investor. Every year we run our progression framework for everyone on the team, which looks at not just what people do, but more importantly, how they do it against our purpose and our values. We have outcome tables. So we use all of these frameworks. Obviously, they're all subjective frameworks, but we're using these frameworks to help us organize our thinking and then sort of make better decisions. But also, obviously, you know, when you've got 11 years worth of data and then you start to move into machine learning era where you can have machines learning, you know, what looks good, what doesn't look good, when you can benchmark that, V oversee, etc.

7:07You know, you're starting to live in a whole new world of sunlight. Have you got all your no's and reasoning? Everything. So have you back-tested what you've built against the deals you regret? And it's like, hmm, actually it's telling me I should have said yes there, that kind of thing. Yeah, but a lot of that stuff one would have known anecdotally. Now agents can watch and then say, oh, you know, you might be making the same mistake again. You may want to just rethink that one because some of the signals that are observable are things that in the past have been good predictors. Now, remember, you then have to go back to the data that you'll be right 1.3 % of the time in terms of getting to 100 million in revenue.

7:53You'll be right 1.8 % of the time getting to a billion in valuation. I think that this is the other thing, which is where I see the kind of the craft, as Benchmark would call it. you know or usv who you know probably one of my favorite yeah funds and people i admire the most andy and fred and both have that similar discipline of like staying small staying focused on well just i think really you know assessing and analyzing the people right not just the markets you know it's not about the wave it's more about the surface yes um and i think you know obviously the machines, especially if you built a system over 11 years and frameworks, now is the time where, whoa, this is like seriously augmenting one's capabilities.

8:45But I think, you know, you're still fundamentally assessing people and what they've made. Yeah. And it's still probably going to work better with a human in the loop for a decent amount of time. Well, Ziv uses this really brilliant term I love. You know, he talks about a, you know, an investor being a human radar. Right. And, you know, it's about being in the room and asking the right questions. Yes. And then the questions, the answers to the questions in the room, if the room is granola. Yeah. For the sake of argument. Or if it's an email thread, or if it's a messaging thread, those are all first party observed behaviors.

9:26Yes. which one can then run through sentiment analysis, framework models, back tests. So that becomes very exciting. Are you at the stage where you're able to feed that back to the question asker? Yeah, we're beginning to get there. Our software, which we've been building for a while now, we call Nazare, sticking with the wave analogy. It's the biggest wave in the world, 100-meter wave. Are you a surfer? Definitely not. I've just used the analogy. I just like analogies. I know your family's from Cape Town and everything as well. So it's kind of like... Well, Joburg. Right, oh really? We go on holiday.

10:05I assumed Cape Town because of your Twitter handle and everything. Because Cape, yeah. I do like Cape Town. So Nazare is our product. Right. And it's currently able to do a lot of these things. But we still consider it to be a 0.4. Right. Because for Nazare to be a 1.0, which is getting quite close to, to be fair, you know we it's the product vision is that it's a trusted team member yes okay and then from there it can become a coach okay so it needs to be able to fairly autonomously be making good decisions is that what you mean by suggestions and and there's some elements it's definitely doing that no question and i i think it's time time for an upgrade you know when it comes back from paternity leave, I think we're probably ready to 1-0 it because, you know, it's trusted by all the team.

10:58We run our business with Nazare. Right. What's exciting now is, you know, if you've got 11 years of first-party data, if you've got frameworks, if you've got signal from local globe, previously met companies that we didn't invest in, base cap managers, now you're starting to see the highest signal to noise ratio in the private market. And let's discuss what we just discussed off camera, because I very much agree with this. I feel like what happened in the 70s, well, really 80s and 90s onwards with Vanguard, BlackRock, etc., is coming for privates. Definitely. And it's this kind of combination of data and this quantitative approach with the right people is going to allow you to kind of index the private markets.

11:46Yeah, but the question is if only 0.13 % of the managers are capable of picking a thoroughbred at seed, careful who you index. Yes. Yeah, yeah, yeah. It's all about who you index, basically. It's all about who you index, whereas if you're indexing the public markets, you're indexing everyone. And then the problem in the private markets, or at least in the venture market, it's like, you know, it's 1.3%. So how do you get access to that 1.3 %? Because these managers, we're very disciplined about fund size. Your fund size is your strategy. At Seed, Local Globe is like plus or minus 150 million pound fund.

12:33Like it can go up to 170, 150 to 170. We don't want it to be bigger than that. You know, because it does its job at that level. and if it's bigger it's going to start not doing its job well enough latitude is 200 million and that's at early growth and we don't set the price we participate solar is 250 right and then base camp is around 25 right and you know again when we said to our lps in the last fund cycle here are our fund sizes for the next three fund cycles they're like what yes what why are you telling That's what the fund is like. Because that's what we think the right fund size is. It's interesting.

13:16My impression was Latitude and Solar were bigger than that. But you're keeping them better. And they won't get bigger than that. That's yeah, that's very focused. And then the other thing is, you know, we, you know, Solar is 75 basis points. And in our Solar Pilot Funds, 10 of the 12 companies are already doing over 200 million in revenue. And just to frame what we discussed as well off camera, your vision is kind of like with Basecamp plus everything LocalGlobe as kind of the leading seed investor, let's be honest, in Europe. EMEA. In EMEA. And globally, right? You're in the kind of top 15. Top 15 globally.

13:51Right. Only non-American funds. Your view is, okay, you build this pipeline at seed and then you have Latitude and Solar to kind of follow on into whatever comes from LocalGlobe, any of the base camp investors. Yeah, but by the way, the reason why we keep those funds, why we want to keep latitude and why we want to keep solar the sizes that they are. We have no ambition to go bigger. It's because for every dollar that, you know, LPs are investing in our platform, most long term asset owners wants$3 of co-invest for every dollar in the platform. Okay. So, you know, we built infrastructure. Okay.

14:32And we've built access for co-invest. And because we are not hungry for fees, because we're profitable, comfortable, we're not optimising for fund size. We're actually optimising for right-sizing the funds, right-sizing the fees, and then opening up co-invest so LPs can do direct as well as investing in the platform. Let's talk a bit about venture and what's happening at the moment in terms of like the platforms just getting bigger and bigger and raising more and more money. Obviously, you know, your philosophy is very much more the benchmark and Union Square Ventures, you know, philosophy of like, OK, there's a right size for these things.

15:17I think it's an interesting analogy that like Renaissance Technologies at some point was just like we're not taking any more LP cash because we cannot, our model will not work. Right. Like we're only able to deliver these returns because the fund is right sized. So now we're just going to reinvest our own cash in this strategy. I think, you know, what's your view on how venture kind of scales and what's happening at the moment? I don't really know. What I see is that businesses like ours, or, you know, when I look at how a GC or an Andreessen or Thrive are scaling, You know, they're looking at, you know, in different ways.

15:59And I really, really respect the way GC thinks about this or how Matt thinks about this is, you know, making products that their customers need and using the strength of their balance sheets or their ability to raise capital to, you know, as they've done with their credit fund or as they've done with the hospital system. And I'm sure they will keep finding products, you know, that their customers need to keep growing their business. And I think, you know, Josh and Thrive are doing something similar in a slightly different way. I think, you know, from our point of view, firstly, we are only 11 years old.

16:39So, you know, I often say to the team, you know, we're like, if this was America, we're kind of in middle school. If it's the UK, we're kind of like, we've just done our 11 plus. and you know we're not in our at university like we're not 20 like atomico we're not you know just a young professional like benchmark we're not grandparents like sequoia or axel you know we're still really young but i think you know our path and it started with latitude and solar is to add products that help founders, i.e., oh, you know, I'm at an early growth stage. You know, if we're going to be helping Matan at Melio, you know, put a Series B together, you know, we should participate.

17:30If Wise is going public and we still think it's a good investment, we should be able to participate. So, you know, just having that sort of funding continuum always made sense to me. And then I think from an LP perspective, actually for a certain type of LP, an asset owner, as opposed to necessarily a fund of funds, an asset owner who is looking at long-term capital allocation, who's looking at not just being in good managers, but being in good companies, you know, having the ability through our platform, including Basecamp, to open up co-investment opportunities. you know massively impacts the way that they can get their heads around fees and IRR and by the way you may be surprised people are surprised that solar is 75 basis points they're shocked to know that base camp is zero is base cap base camp all external capital no it's currently all internal I thought it was all balance sheet capital it's all balance sheet capital but as we start to talk to institutional investors about having, you know, participating in Basecamp, we're not going to charge a fee.

18:38Yeah. Have you spoken to Gabby at Stride recently? He was, there's something interesting happening in the LP funder funds world where it's like, I think a lot of GPs are recognizing the need for a product that looks quite different from the current funder funds product because they've seen it, you know, from the other side of the table. and like it's looking much more I think like low fees. We have a lot of the most sophisticated fund of funds as LPs in our business. I've also seen how their businesses have evolved over the last 10 to 15 years. And you know they are, if you look at people like Adam Street for example, you know they've been doing primary direct for 30, 40 years.

19:23You know they've been doing secondary for decades. So I think a lot of the bigger groups you know the Adam streets the Stepstones the Wilshers you know the younger groups like the top tiers you know they're really sort of looking at having a much more sophisticated product offering not just for GPs but also for their clients right and many of their clients now will both invest through them but also invest direct. So we have a number of LPs now who are both indirect through one of those firms, but also increasingly direct as well. And there's no notion that that won't continue to be the case. Because a lot of the ultimate sources of capital are so big, I'm talking hundreds of billions, that they are very happy allocating both through an Adam Street, a Stepstone, a Wilshire, a Top Tier, an Amundi, as well as allocating direct.

20:34Right. And I think, again, this is what we've been building our business for. Something I wanted to come back to, you've used the Sumitomo analogy. Is there something about the Kaibatsu that you like, or is that kind of a coincidence? Like I can see some interesting parallels with like seed stage venture firms, you know, especially something more like Y Combinator or maybe Seedcamp where it's kind of like the, you know, the portfolio companies all sell to each other and there's a network and there's kind of a value in them kind of being an insider group. Obviously there are downsides and risks with that, right?

21:13You end up with like ossified kind of structures and it's very difficult to, you know, it creates a kind of conservatism, which I think is like why, maybe why the Japanese economy is kind of stagnated, right? Part of it for like, you know, the last 30 or 40 years. Or is that just, you know, a coincidental kind of pattern? Look, I think I've got lots of thoughts on this, but, you know, fundamentally gotten to know Sumitomo over the last three or four years because they were co-investors with us in M. Copa, which is a company we did at Local Globe, then at Latitude, then at solar it's one of the two companies that started in africa that are doing over half a billion in revenue wow that people haven't heard of yeah i haven't heard um and profitable at group level i should add and sumitomo have been you know the the main investors in their last two rails interesting and then you know we've co-invested with them on a number of other businesses we They co-invested with us in Human Native, which was sold to Cloudflare in the last six months, and others.

22:19But really, we've kind of connected around sort of like I've been fascinated by the way they think long term. And Sumitomo Corporation is 450 years old. It's 200 years older than America. Their first business, their founder started. He was a Buddhist monk who had an apothecary and bookshop in Kyoto. Their second business was a copper mine. Their third business was the port of Osaka. I mean, literally, because they needed somewhere to ship their copper from. Their fourth business were warehouses at the port of Osaka to hold the copper. It's very unique to Japan, this kind of very broad holding company.

23:02The point I'm making is it's all logical. The fifth business was an insurance company that insured the goods that went on the ships. And now they are 10B business units, 900 subsidiaries in 100 countries. And some of their spinoffs, like SMBC, are the largest banks in Japan. So what they've done is they've kind of evolved, in their case, over 450 years. And they've just kind of followed. I mean, they're like literally an organic VC. They just go to the next thing that makes business sense and supports the business that they were in. And then obviously over time you would divest. Now just to be clear, Warren Buffett now owns all five trading companies and has said he will never sell any of them.

24:02that's part of his like i guess in his 90s like guys this is one of the things i think we should do right but i you know i just love how long term they are in their thinking and how they are really driven by partnership and by relationship more than transactions that they can like see beyond yeah see beyond the transaction did you build that procurement platform with them in mind the thing you built internally for your startups? They're a good example of an incredibly complex, yeah, like 10 business units, 900 subsidiaries. How do I navigate this corporate structure? How the hell do I go from A to B?

24:47And we work very closely with their CVC, who obviously is the human navigator. And so we've worked with them closely on that. But we've also been doing similar work with other large complex multinationals and then also effectively showing the government domestically how that can work. Because we think beyond capital, if you go back to the 20 ,000 hairdressers, what's the most valuable thing in our view that you can help a founder and their team secure? It's not the next stage of capital, which is obviously important. and most VCs are pretty decent at helping to move capital upstream. You know, like from our point of view, the Series A funds, if it's Local Globe, etc.

25:30But helping people get contracts, that for me is a massive, massive obsession. It's actually way more valuable. Way more valuable. I really like the way you constantly bring it back as well to Colts and Thoroughbreds and this thing of like, how much revenue are these businesses doing? Like, you know, as a metric, it's just so much more important and relevant than valuation over the long term. But what I find astonishing, and I've seen this even in the last few weeks, is that most VCs do not know how to value a contract. Like, you know, we've got a company that we seeded in the last 18 months. through cold outbound on LinkedIn, the founder has secured a$60 million POC.

26:16Yeah, wow. Which is part of a$300 million multi-year contract from a prime, neoprime. I was going to say, there's something industrial, yeah. You know, when he talked to investors, they're like, oh, come back to me when the POC is live. And I'm thinking like... Yeah. You're on your mind. Well, hang on. What is the EV multiple on a$60 million POC? I mean, actually, why are you even talking to investors? Go to a commercial bank whose literal job is to finance contracts. So, you know, the myopia of people who have been brought up in the bubble, you know, they used to know that, you know, the thing to do is CAC to LTV ratios, amount down ratios, SaaS metrics, all of that stuff Model ML can do in five minutes.

27:13Better than the 50 best equity analysts from Goldman Sachs and JP Morgan and partners at McKinsey. A lot of it may be decreasingly relevant anyway when the types of businesses they're funding are starting to change as kind of software monetizers. Either way, all of that stuff is easy. What's difficult is contracts, capital formation. Like, not who do I introduce you from an equity perspective. I mean, again, I was talking to a founder the other day. He was looking to raise$100 million. He's going to end up raising$180 million. And I said, you know, who's your bank? Because obviously they're going to get a big fucking deposit when the round closes.

27:58it's like oh you know we're working with a major american innovation bank jp morgan like why are you giving jp morgan 180 million from treasury i mean by all means give them 60 or 80 but like if svb taught us anything don't put all your regs in one basket i'm not saying jp morgan's going anywhere but at least you will get a better deal from jp morgan if you are going with two people. But even just the interest on Treasury, you know, is going to be half of his OPEX. Yeah. Now, no one was saying to him, like, think about that. Mm hmm. Yeah, yeah, yeah. It's like, oh, yeah, bank account. Yeah. No big deal.

28:42Yeah. Is that is that because those people don't have the right operational experience? What do you think it is? well

28:53I don't know I mean but you know to me it's like this is why the sort of again you know Mike Moritz and many others have said this and it's great advice is the sort of the do no harm is job number one but if the best you can do is do no harm then what are you doing in this business yeah you know because you have to be able to add some value yeah even if it's just saying you should have a second bank account. So one question I had actually, before we move on to some of the closing questions, is if you could sit down with yourself starting Local Globe 10, 15 years ago, I guess there was a period before you had your institutional funds where you were kind of, you know, it was a bit less structured.

29:41What would you tell yourself to do differently? I mean, as a rule, I don't look back. then i have no regrets so i don't really think about it i think about always making new mistakes so i i did think about this because i read the questions and and there's i mean there's really nothing that that stands out i mean obviously one makes bad decisions every day like probably i mean i know we're enjoying the surfer analogy or the beach analogy let's roll with it let's roll with it you know the best surfers fall off their board five or ten times a day yeah i think you know i can't they're not really big things that i look back at the last 11 years and say i really wish we hadn't have done a b or c because i think the main decisions like be a company be limited don't don't just be an LLP have a foundation you know that has profit share has carrying the funds ultimately as a shareholder you know have a team that is integrated not back office front office you know you asked I think one of the things is like what are the things that I didn't take from index hmm so I I mean, Index is not alone in having a front office and a back office.

31:06I mean, everyone kind of does that. I always felt like we wanted to be an integrated team and that everyone in the team, you know, we were talking about capital allocation before, being like what groceries you buy, what payroll supply you have, not just who you allocate capital to. So I think, you know, all of those things, the purpose, the values, all of these are the big decisions. And then obviously day in, day out, week in, week out, you're making mistakes. I mean, but, you know, hopefully you're learning from your mistakes. Some of the things I think now with our systems and with our data and with the ability to start backtesting, particularly kind of capital allocation.

31:49I mean, one of the kind of, you know, not instinctive, but now much more detailed analysis we've been able to do, particularly even in the last month, as the systems have improved is like properly analyze our anti-portfolio. It's like, boy. Yeah. Like, it's kind of depressing. It's painful like that. But now being able to understand those triggers and feed that literally into reinforcement learning, not like metaphorical reinforcement learning. That's really like, OK, great. It's like as long as you can look a mistake in the eye and say, OK, I can see why we did this. You will always make mistakes.

32:29It's all training data. But it's like, you know, one of the maxims, and it's not mine, but it's from someone who I massively respect, Esther Dyson. You know, she used to say, always make me mistakes. And I think, you know, to me, that is a it's a maxim to live by. I don't look back. What new fund manager out there today do you particularly admire? Well, I mean, there are lots because, you know, obviously we work with a lot of them. And I think, you know, in a sense, there's this sort of like real flowering of talent out there. And particularly in our part of the world where, you know, venture is still.

33:07a relatively recent phenomena. Let's call it 20 years old. So I think, you know, the number of people who are doing a great job, you know, finding early stage founders, working with them, creating value, there are a lot. You know, some of the ones, you know, always recency bias, love what Jamie is doing at Creator Fund. I mean, I think he's just brilliant. And we've co-invested with him in some amazing companies like OVO in Munich and Maven on the West Coast. And I mean, he's just got a brilliant nose for science. And we think science is pretty important always, but very important now and going forward.

33:56And one of the core strengths of this geography. Do you think AI is a real platform for science on that point? Yeah, for sure. Look, there are a number of companies in our portfolio. Cusp is one we've done, Local Global Attitude and Solar, that is using AI to invent new materials. Sakana, which is a Japanese AI company, was one of the first sort of applied frontier AI companies to do an AI scientist. So, yeah, I mean, I think obviously there are aspects of science. You know, Physics X is a great company, not an investment of ours, where you've got these very specific, complex data sets in biology, in chemistry, in physics, etc., where machine learning has incredible opportunity.

34:45Although he would be annoyed if I didn't point out, this is Lee Cronin from Chemify, who's a professor of chemistry in Glasgow, that you can invent all of the molecules that you like, but if you don't understand how to actually make them, good luck. And Chemify makes the molecules. Remember that name, guys. Well, you know, we're not alone in Chemify. I actually think we're in Chemify with Jamie, and also one of the... He's not an emerging manager, but he's, like, I think one of the great people that people in the UK don't know about, David Gammon. Right. Okay. Do you know David? No, I don't. Angel in Deep Mind.

35:28Right. Okay. He's just angel investing generally. Okay. Yeah. Yeah. He's amazing. But yeah, I mean, what's interesting about AI and science is, you know, you can come up with these really cool new ideas. Like, here's a new material. Here's a molecule to, you know, a new drug. Then you've to make it yeah and so you know lee is doing that at chemify and then people like chad at casp and the physics x guys and obviously you know demos of isomorphic yeah so i think yeah it's super promising so jamie creates fun jamie and then you know there are new managers well they're not new managers but they're incredible managers who are leaving the big platforms to you know apply their trade as solo GPs.

36:19You know, I think one of the most exciting people in that space will be Paul Murphy. Right. Interesting. He's just an incredible investor. And he's spinning out now. Yeah. Is Basecamp backing Paul? No comment. Hopefully. It will take your money. What's a piece of advice you have for solo and early stage GPs just getting started? Get started. I mean, seriously, it's like I always say this, is that in my view, at least for your first few funds, the only thing that LPs can diligence is are you getting into great companies and do founders rate you? And you don't need a big check to get into a great company.

37:07I mean, you can get into a great company for 5K. Yeah. And I think, you know, people who are brilliant angels, including in Hogarth, who's now a brilliant VC, you know, that was Ian's approach. It's just like show up, show how valuable you can be in super valuable and write a small check and don't overthink like, oh, what's my fund size? And, you know, who's going to do my fund admin and all of this stuff? All of that can come. Yeah. But ultimately, you're judged by who did you invest in and what did they say about you? because that's all that can be diligence for the first two funds. And I think people overthink all of the other stuff and they should just get going.

37:48And I mean, Ian also wrote a brilliant post on his blog, I think in 2013, where he kind of hypothesized, you know, if you were giving capital, giving equity to an investor, how much would you give them? And I think it's always a good discipline actually for a founder to think if these people weren't giving me any money, would I want them on my cap table? And if so, how much equity would I allocate to them? Because actually, an investor should be more than money. They should be doing a job for you, otherwise known as value-error. Yeah, yeah, yeah. I think they all talk about. And I think that's, by the way, will also ultimately be true of LPs.

38:30Yeah, that's not something we managed to cover, right? But I did ask about it. I did have it in my notes. Do you think that's changing? Well, I think it will have to change because, again, I think because of the fact that the best funds, well, by definition, venture is an asset class about scarcity, scarcity of the outliers, scarcity of the companies, the funds that can pick the companies, the fund sizes. It doesn't scale like other asset classes. So I think if LPs are going to want to get access to the best managers over time, They're gonna have to bring more than capital. I saw I read something good.

39:13I think it was in a Kaufman Foundation report something originally, which was, you know Ventures unique as an asset class in that the seller cares who the buyer is and that operates obviously at the level of the founder and the investor But you know at the level of the GP and the LP it feels like it, you know It can only trend in that direction as well, right? Well, I think that for sure But that's also why, you know as an angel LP through Basecamp, we've always said, we're never going to be your biggest check. In fact, the check is almost irrelevant, you know, but we want to be one of your most valuable LPs.

39:46I think that's what angels do. What's a great example of LP value add you've seen in your portfolio? Of LPs to us? Yeah, or to your founders. I mean, I think so many different examples I can give, you know, I mean, when we have some LPs who are mega corporates, as in they are asset managers, they are commercial banks, they spend tens of billions a year on tech. Now, these are all different parts of an organization, but, you know, customer introduction that turned into a contract that then turned into a co-invest. Awesome. You know, looking at new markets. Number one thing founders always want as well, right?

40:29Looking at, you know, introductions to being open with introductions to clients. Like I said to you, these bigger, more sophisticated, multi-decade platforms that do GP commits, direct, secondary, thinking of SMAs for their clients. I mean, these are partners. They're not just investors. So I mean, we see it often. And then, you know, as we navigate our governance structure, you know, with a foundation, you know, many of our LPs are, you know, asset owners and foundations and have gone through the exercise of, you know, what does it take to be sort of long term sustainable? So they've been valuable to Phoenix Court Group as a, you know.

41:18Not just currently, but going forward because, you know, it's obviously always going to be a work in progress. Yeah, yeah, yeah. Interesting. Okay, final question. If your thesis is right, and the world, the market, you know, goes the direction you think, what does the world look like in 10, 20 years? And what does your business look like? well within it i don't know what our business looks like and one of the exciting things to me about the next decade is you know this transition of you know a board um you know working with an operating team is you know it's down to not just me but to ziv and nin and rian and paul and you know, Matt and Kira and, you know, the team, the operating team to sort of take, you know, take the business forward.

42:11I think we've got quite a clear purpose. We've got clear values. We've got a very strong business. We've got a really strong, we've got 2 billion of unrealized nav. I mean, if something scares me a little, it's the 6.4 billion of follow-on in the next 90 days which i've seen twice in 33 years high covid and dot com but can save that for a different discussion so i think you know i'm excited to see what what happens i think there are versions of the future some of which you've touched on that we're well positioned for but i think you know more generally what i'd be really excited to see is many new palo altos not just one which is you know the five-hour train ride from King's Cross I think you know innovation inclusive innovation is global should be global and the Silicon Valley model which has dominated the innovation narrative for the last 60 years which is when it takes all and it and it's extractive quite libertarian philosophically as well just yeah I mean I think you know move fast and break things and try being a monopoly at two very good summaries.

43:26And I think sustainable innovation, the innovation that happens over centuries, like Sumitomo innovation, Novo Nordics innovation, Bailey Gifford like thinking, those new Palo Altos where we're able to harness all of these new technologies in a way that really benefits people. It drives progress, right? Yeah. And at a local level. yeah yeah i think it's the thing that gets forgotten sometimes right it's like uh okay sometimes i wonder what's the benefit been of what we've done in or what what's happened in venture in the last 10 15 20 years there's been a lot of like 50 casino economy kind of not very value additive things that have raised a lot of money and it's like okay you know what are we even doing here you know yeah no i think we always say you know when i've i've done a lot of government advisory work over particularly the last decade in the UK and every chancellor we've ever worked with would say oh we want to be the next Silicon Valley.

44:25I'm like no. Worst idea ever. We want to be a different Silicon Valley and the difference is you know if you don't innovate with values what's the point? Like you said what's the point? And are you delivering what people actually need you know versus what you think you can sell them? You know the framing of growth in every postcode which the new Prime Minister has and the new Chancellor has I think that's really good framing I mean it's bloody hard to do but I think it's a good aspiration yeah well Saul thanks so much for your time and yeah where can people find you on Twitter they can find you at Cape and then you're on but I'm not on X very much anymore I'm doing most of my thinking out loud on Substack okay so look up Saul Klein on Substack otherwise you know follow us on Phoenix Court of course all right cool thanks very much thank you