Why we made Phoenix Court a limited company | Saul Klein

0:00My guest today is Saul Klein. Saul is an entrepreneur, operator and investor with over 30 years at the coalface of European tech. He's probably best known nowadays as the co-founder of Phoenix Court Group, which comprises three funds, Local Globe, Latitude and Solar. Phoenix Court Group is also an LP in over 80 emerging fund managers through its fund-to-fund strategy Basecamp. And Local Globe itself is ranked in the top 15 seed investors globally, according to Dealroom. Sol has backed many companies, including Olex, Clio, Monzo, Wise, Mistral, Figma, and many more.

0:41So the question I want to launch into, so in 2002, you launched Video Island. Mid 2004, maybe the decisions were happening earlier in the background. You've merged with Screen Select, Alex Chesterman. William. Yeah, kind of the who's who of British tech nowadays and you form Love Film and then you leave within a year. Walk me through the 12 month period before like running up to that decision. Before leaving? Yeah. So I mean, this is interesting because we were talking this morning about, you know, when founders and CEOs kind of tap out. Right. And I mean, just to sort of go back slightly, my first experience of a startup was in like the early 90s, joining a spin out from MIT, which we then end up selling to Microsoft.

1:31And I was kind of employee number one there, effectively. So I wasn't a founder, but I was effectively part of the founding team. And I kind of went on that journey. It was my first experience at venture capital, selling the company to Microsoft, et cetera, et cetera. So when I came back to the UK in 2002, just after I'd gone married, I was kind of like, what the hell do I do? I didn't have a job. The telecom dot-com bubble had crashed. Right. So the idea that you could start an internet company was like a joke. I mean, no one was funding internet businesses. I mean it was like everyone was dancing on the grave of the internet because all of the internet kids as they were Thoughts of and described in the late 90s early 2000s like they disappeared and like Everyone in on wall street everyone in the city is like thank god these like fucking arrogant kids have gone telling everyone They're idiots and they need to do things differently and do it the internet you know sock puppets Pets.com be like all these idiots they're gone.

2:38Yeah, so like it was impossible to start a business to get a job. And I'd come back to London from living in New York, where I was in New York during 9-11. My wife was living in Johannesburg. We're like, are we going to live in New York? No. I didn't want to go back and live in South Africa. I'd left when I was six. So we agreed to London. I'm like, OK, what am I going to do? I'd come across Netflix when I was in the US. It was a public company, I could look at all of the S1s, all of their reporting. It was a really easy business to explain to people because it looked and smelt like Sky or Vodafone, i.e.

3:26it was a subscription, consumer subscription business. There was this real thing called Blockbuster on the high streets. And so, I mean, I thought, okay, well, I like movies. this is something i can explain to investors even investors who were like really scared of the internet and that's what i did with video island and i knew nothing about the movie business so a friend of mine introduced me to someone who had just produced bend it like backham so he knew something about the movie business great film but it was like you know he was young like similar ages early 30s and then you know i basically started what was what was video island with a few dvds that we had at home that's so good in a in a in a in a basement in naroji street which is near where our current office by the sorting mount pleasant sorting office because we were like shipping dvds through the post and is this the same place you met the tesco execs and no no no because that was moved offices no no we we went so to to have supply right we did a supply deal with a video rental chain right and i i don't remember the name and to call them a chain is probably like a big stretch because i think they had like three shops one of which which was off Tolworth Broadway, which is like in South London, where I grew up.

5:01And we took, I mean, to cut a long story short, we felt like if you were, I felt, if we were introducing a new category, like DVD rental by post, which, what the hell is this? It would be better to have big brands like Tesco, like MSN, like ITV, like Odeon. So these were all powered by video island partners right to sort of do the marketing for us but then we would supply you know we would white label everything and then how how did the to fast forward a little bit how did the merger with so so basically there were three of us at that point there was video island and i managed to raise money from index and what was then benchmark europe now balderton Right, right, right.

5:48And I raised money at Index from my friend, Danny Reimer. So Danny and I had met each other in Boston in 94, 95, when he was an analyst at H &Q and I was at the spin-out from MIT. He and I came back to London at the same time, 2002. He was setting up the Index Office. So this video island became his first investment. He introduced me to George Coelho, who was one of the partners at Benchmark Europe. So they became my investors. I hired someone from Blockbuster to do our buying from the studios and and we pursued this white label strategy and then Alex Chesterman and William Reeves started Screen Select right and they went direct right they wrote better software and they were scrappier than us and they actually I mean talking about SPVs you know they had about 30 angels on their cap table because that's how octopus worked in those days octopus was basically in i mean effectively i guess an eis spv vehicle but you know while we had more capital we had better distribution partners you know we were at best neck and neck with them right uh i mean i would say bluntly they were better operators than us right and i say that because having then worked with alex multiple times you know with zoopla and then worked with William now.

7:14He came and helped us redo Good Lord. I mean, they're brilliant operators. They're way better than me. And then we got to a point after we'd merged where, again, I've always taken the point of view and I always had this discussion with our board. And I was very lucky. I had Danny, I had George. And I'd always said to my board, like, I think I can probably take this business to a certain point. And like part of me wanted to raise X amount of money, recruit and manage Y amount of people, hit X amount of revenues. So I kind of like hit these personal milestones. But I always sort of felt like if I look myself in the mirror and there are five or ten people who can do this job better than me, then it's time for me to move on.

8:02and you know I was lucky that there were two people in the business who are much better operators than me William and um and and Alex and actually Simon Murdoch was also on the board because Simon was um their investor and you know we ended up actually recruiting a CEO um to take over from me this guy Simon Carver who I had met he'd been like a VP at Pepsi at Dell like serious operator and then he came in to be the CEO William was the CEO Alex was a chief commercial officer I went to join Skype and then we merged with love film and we took their name and they took our management team we kept some of their management team and then yeah I mean we ended up growing the business and then many years later selling it to Amazon but at that point I was on the board right did you come kind of back in well I came back in because well when I left and actually one of the my most memorable meetings professional meetings was maybe a year a month or so have after leaving the business and and I joined Skype formally at that point although I'd been working with Nicholas maybe for three or four months before joining So were you kind of already thinking, okay, we merge and then I'm going to kind of manage my way out and I want to go and work at Skype?

9:32I don't think it was as clean as that or as simple as that or as linear as that. It's like while we were merging, post-merger, Danny actually said, look, I've met these guys in Sweden. They're moving to London, Skype. You know, what do you think of the products? Will you meet them? And he had been an analyst at Netscape. He'd kind of written the analyst report that took Netscape public. So he'd worked very closely with Mark and Ben or Mark. Ben was like sort of a bit more junior. And I'd also worked with Netscape in like 94. And I think we both saw a similar thing. It's like when I downloaded the Skype software, I'm like, whoa, this is like literally the coolest piece of software I've used since Netscape.

10:24okay this kind of feels like magic yeah it's just like this is and I said you know I mean I said to Danny you know yeah of course I'll meet with these guys I used to meet probably every two or three weeks with Nicholas help him on you know on the marketing side etc one of my friends came in to do an interim marketing job and then did you know was there was the agency at Skype and you know after a while Nicholas just also said to me it's like why didn't you come and do this full time. And I'm like, I'm running this company that started. But, you know, it was clear to me at that point, A, I wasn't the best person to be running the company.

11:00And then B, you know, Skype was like, you know, I think I said to Danny, it's a rocket ship to the moon. And, you know, I would work there just to put stamps on envelopes because it just felt to me like the first time I had seen anything outside of the Bay Area. And by the Bay Area, I mean Seattle as well. like the west coast that was capable of being a sort of a global internet phenomena and and you know that's so that was part of the transition and initially I was a board member for like a month or two and then I just Skype was like sprinting up a mountain so I stepped off the boards Danny was obviously maintained the index board seats and then many years later after skype had sold to ebay and then i'd gone to index danny became a board member of sky and so you know he stepped off of the love film board and i went back on the love film board so i kind of did the last i can't remember maybe the two or three years prior to our exit to amazon right primarily because I mean obviously I need the business but you know Danny you know couldn't both do a public company board at Sky and be on the Love Film board yeah yeah yeah do you think um that that that process of saying okay I should let other people run this do you see that in your portfolio now at Local Globe do you have those kind of conversations you picked up which I I think is very much I consider to be a trait is I'm pretty comfortable starting things and then handing them on or starting things with other people and then letting people take them on so I think you know the next time I did that was pretty much immediately was with Reshma at seed camp and then obviously I mean really since after I helped Reshma recruit Carlos and then I helped the two of them raise fund three which was the first sort of institutional fund that EIF came into you know pretty much went into the background and we like seed camps well 18 years old when we started local globe that's become Phoenix courts one of the things we said to LPs is that in every fund we will do at least one build right so you know we'll have core investing you know where we will look to sort of lead or co-lead around and that'll be call it 75 percent of our capital we'll have strategic investing where we will sort of be a smaller partner but we'll look to kind of um you know be a good supporter and then we'll you know have maybe one shot of fund where we'll make we'll build something and i wanted to have that agency because i like building stuff and i like operating stuff and I also felt like it would you know retain a level of empathy you know with founders who obviously our core business is backing founders as early as possible and you know one of the things I'd noticed over the years is that the some of the tools the infrastructure the methods that you use to start businesses just kept changing and sort of the half-life of actually being a useful advisor to a founder, you know, was quite short, right?

14:24You know, because the things that mattered five years ago or 10 years ago, 15 years ago, it's like, oh, yeah, when I was like, starting Cisco's X division, we did a, b, c, or d, or, you know, when I was starting Deliveroo, even, you know, we built on this stack and we use this approach and some things are timeless, but a lot of the tooling, we all know this is I mean now it's changing every six to 12 months never mind every two so so I wanted to be able to do that and then in the first fund in 2015 I I started with um a guy I'd gotten to know in the music business platoon which we ended up selling three or four years later to Apple in the next vintage the 2017 vintage you know co-founded with Paul and Ella Zink then you know we've co-founded Newton Venture Program with London so some of it has been kind of not-for-profits and some of it as being businesses.

15:17But, you know, just keep retaining that muscle is something I've always felt was really important. But then also, hopefully, I've got better over the years at sort of helping to start things, but then, you know, really letting go. Letting go. Yeah. Yeah, because I saw this pattern, right? You did see. Yeah, no. It's interesting that you saw that pattern because most people don't see that pattern. Yeah, I think it's really like this point where kind of like capital allocator and operator to intersect is very interesting. And I think some of the venture firms that you see that do very well have quite unique models in that and around that space.

15:53Sutter Hill Ventures is probably like the canonical example. So, you know, Joel and David are founders and operators. You know, Hammond is a founder and an operator and he thinks about and he talks about what they do as products for founders. And I think some people look at GC and say these guys are just collecting AUM. And I look at GC and saying they're building capital infrastructure to support the needs of the founders that they have, including buying a hospital system. Yes. Yeah, exactly. Or like what new types of company can we build with a very different capital infrastructure? Yeah. And obviously, I think there's a very small number of firms that operate like that and think like that.

16:40I mean, Thrive is one, GC is another. Obviously, Andreessen was probably the first, at least sort of at the institutional VC level. But, you know, I think obviously YC is like that. I think there were elements of that in SeedCamp. And one of the common characteristics, which is, you know, a decision we made 11 years ago, which was, you know, is only really starting to play out visibly now, is deciding to be a company, not a partnership. Yeah. So by being in a limited company, where you can go into Companies House, look up Phoenix Court Group, you can see our balance sheet, you can see our P &L, we have a board, we have board subcommittees, we're a company, is fundamentally different from being an LLP.

17:25And it allows you to make decisions, business decisions, because you're a business, not a partnership, that are geared towards long-term thinking. Yeah, I can see that. There's a nice segue into that. Should we talk about it? So you announced this restructure kind of this year. I would say, which I think was the title of the letter, was that we were crystallizing our governance. So this restructure was 11 years in the making. Excuse my choice of words. No, no, I mean, words matter. Yeah. And, you know, as an English literature student, they really matter. I mean, if it's my wife, who's a lawyer, they really matter.

18:10To me, they're just words on a page, but they do matter. Okay, you're crystallizing this long-term plan. And obviously, it is a long-term plan. Yeah, because that's part of the point for me is that actually, and this is often the case, when there are 20 ,000 different ways to operate a venture capital firm. So I think PitchBook, and deal room look at 20 ,000 VCs globally, active VCs. You know, the number of active VCs that are companies, not LLPs. I mean, from what I can make out, you can add them up on one hand, maybe two hands. And then when you look at firms that are not just companies, but share profits, yeah you know share ownership then you know and i had this experience talking to the journalist from from pitch book you know when we announce the crystallization of our governance you know she said i've done the research there are 20 000 vcs in the world i can't find many that are companies and then of those that are companies i can't find many if not any that share ownership and then I definitely can't find any where the largest shareholders the foundation so being in a universe of zero or one is kind of a lonely place to be and it's not that easy necessarily for if you're you know the our industry which is not that old I mean I know you know Sebastian Malaby and others have written great books about how you know you can trace the of the roots of venture back to like the whaling industry and this, that and the other.

20:04But I mean, this form of venture is 50, 60 years old. And, you know, we're trying to do something different. We're not trying to be different for the sake of being different, but like, you know, I think people like Hemant and Lightspeed or maybe Hemant and Josh at Thrive and Andreessen, I think we're operating on first principles and we're saying like, what is the business we're trying to build in terms of capital allocation, who is the customer that we're trying to serve? We're very clear to the founder and their teams. And then what are the products and services that they need beyond capital?

20:40And what is the team and the governance structure that best supports that? What is it about the structure that you think makes it more likely to be durable? Obviously, there's a combination of your philosophy, I think, and who you and who the clients are as people that feeds into this. But there's also like, okay, you've chosen a limited, because you see durability and you want to build something last. Well, I think it's not just durability. I mean, obviously there are companies that go bust every day. Yes. You know, so it's less about durability. It's about, I mean, if you're just being blunt about it, you know, when you get to a point in asset management, let's talk broadly about asset management, or even any kind of partnership business, consulting law firms etc where you are profitable an llp structure allows you to and i use the word advisedly evacuate your profits on an annual basis because it's tax efficient and it means that the partners the members on an annual basis are taking out yes a lot of money so out of the business So incentivize as a kind of more extractive mindset.

21:59Well, I don't think it's about an extractive mindset. It's about optimizing for tax efficient annual capital distributions. Right. Okay. Whereas a company allows you to decide if I make a profit. So, you know, do I add that to my balance sheet? So, you know, we've got plus or minus, I can't remember. So you can look at the annual report, 12, 14 million on our balance sheets. You know, we have an FCA regulated threshold, which I think is 3 million. So like, let's say we're plus or minus 8 to 9 million on top of our regulatory thresholds. Plus, we're profitable. What do we do with our profits? We pay our team quarterly a profit share.

22:46Yeah. We pay our foundation quarterly a profit share. And then we still have cash on our balance sheet. What do we do with our cash? Well, we have this great space called Phoenix Court, which our team uses and our Portfolio uses except you may have been there. We've got a team by the way of 29 FTEs So while people move on people join We have 11 years worth of software data and systems which we believe brings us a competitive edge But all of those things one can do in a limited company structure if we were an LLP We'd be sending out You know five ten million a year To our members or to our partners, which is what?

23:3719 ,999 other people are doing and this is not a VC thing. This is a hedge fund thing This is a PE thing. This is a law firm thing. This is our partnerships. I don't have to tell you about this. So, you know, when you decide to be a business, I think you are, it's about transparency. It's about governance because as a company, you need a board. I mean, I remember saying to some of our LPs four years ago, we're going to have a board. They're like, why would you want a board? Like, for governance? and then you have the ability to invest for the long term and then when you overlay on top of that shared ownership where everyone in the company is a shareholder and the largest shareholder is a foundation that makes 80 percent of its grants within a mile of your office you're not just working for yourself and for one another which is called a startup but you're also working for your your neighborhood, your community.

24:42And I think, you know, that keeps people grounded. And it gives people long term thinking. And we as part of this transition to shared ownership, which is, you know, what we talked about in Q1, we also have a stewardship charter. And the stewardship charter preserves some of the long term values of the business, including, you know distributing to to the local community including preserving distributed agency within the business which gets to the heart of how we invest and letting people back their own conviction you know we talk about the platonic version of our business and it's very hard to do is that everyone who allocates capital should feel like a solo gp operating on an incredible platform so you know with the agency like I had my dad had when we were angels or when we work with one another it's like if I wanted to allocate capital I knew I could do it in the room yeah even though I'd walk out of the room and he'd say like what the hell were you doing well sure if you want to do that I've got you yeah and that's what we wanted to be able to model and 11 years in you know we've allocated over a billion pounds and everyone who's been an allocator has just made their own decisions.

26:06You know, I think if you have an ethos of conviction and distributed agency, you know, if you are managing the space, you've got capital allocation decisions to make every day. It's like, who do I buy supplies from? You know, should that be double checked? You know, if you're running the finance function or managing payroll, you know, should you have to like get sign off on who will payroll software? You know, people are making capital allocation decisions in companies all day. I mean, I know the widget that we make is allocating capital to founders, but that's part of the business. The business, the ethos is, you know, is this ethos of shared ownership is letting people back their conviction.

26:50It's hard to do, but that's the ethos. I want to pick on something you mentioned within this specifically, which is like examples of other firms you've studied that have gone with a model like this. I think there's quite a lot of it in the UK as well. If you look historically, there's like Peabody Institute, you know, there's these kind of organizations that have taken a very similar philosophy. I think modern capitalists actually seem to do this less maybe than we used to in the past. Well, modern American capitalists, not modern European capitalists. Historic American capitalists used to do it a lot as well.

27:19Like in Pittsburgh. Carnegie, Rockefeller, right? Yeah, Hershey's. Yeah, exactly. And it seems to have withered on that cultural philosophy, the thinking behind it seems to have withered on the vine for some reason. You mentioned, is it Sumimoto or Sumitomo? Sumitomo. Sumitomo and Novo Nordisk. Yeah. And Bailey Gifford. Right, Bailey Gifford. Right, I didn't see that one. Yeah. I've also looked, there's some interesting business. Did you ever look at Morningstar in the US? No. Quite interesting. I don't know of them, yeah. They have a very employee operated, very independent, a lot of agency for every employee in the business or the employees are owners.

27:58So there's a lot of echoes of ways of thinking about it. What did you see in those businesses as patterns that you kind of drew from specifically? Well, I mean, I've always, I think from an investing perspective, the more I've gotten to understand Bailey Gifford, the more to me they've always been a North Star. In terms of investment thinking, you know, for several reasons. Firstly, they are over 100 years old and they're up in Edinburgh. And I think there is real value to being outside of the bubble if you're thinking long term. and having worked in the Bay Area a lot and, you know, having worked inside a bubble in Redmond, you know, they're positives to being inside of a bubble, but they're real negatives.

28:52And I think, you know, they've just done an incredible job as investors. And I think they have a couple of really fundamental insights, at least over the last 15, 20 years, you know primarily popularized by James Anderson who was you know the person who led Scottish Mortgage Investment Trust and made investments that they made into Tesla and to Nvidia and to they're really on SpaceX as well SpaceX I mean if you look at their 13 F's and you look at the average hold of their top 30 positions it's about 11 years 19 years and when I say their average positions, they're like 5 billion into MercadoLibre.

29:37Yeah. Who, by the way, I was like, who are they? But they've like owned that stock for maybe a decade. You know, Spotify. I mean, when everyone else was like, why is Elon Musk smoking weed on YouTube? You know, they were 15 billion into Tesla and holding. So you know, they think super long term. The weighing machine or the voting machine. total weighing machine investors, but they also really value research and sort of academic research. And through them, I kind of became aware of Bessenbinder's research. I don't know if you know Bessenbinder. No, I saw that in your writing, but I won't agree with it.

30:19So his research, he basically looked at every stock, public stock since 1926 in the US, and based on his analysis, he discovered that there was a power law effectively in public markets. 2.4 % I think. Well, he then did further research globally, where he looked at 64 ,000 stocks globally since 1990, and 2.4 % of those stocks accounted for$76 trillion of value, like 100 % of the value. Yeah. And, you know, what I find fascinating about that, like my conclusion from that number is Norway was right. In terms of the sovereign wealth? By the index. By the index. OK, OK. State Street was right. Vanguard was right.

31:08BlackRock was right. It's like you can't do better than buying the index. How do you think that applies to venture? Well, I think let's just, I mean, before you go there, how much money and how many jobs were tied up over the last 40, 50 years in active allocation in the public markets? Yeah. Well, a decreasing number though, right? Sure, but like the the you know the index the passive index products has been around for like 30 years And so you really in the last five years maybe that people are going oh Why the hell what do you think I can beat the index even if I was a flash trader? Yeah, so I think you know these Insights actually take a long time to filter through so you know my view if you look at where we are with venture first you've got to say machines took over the public markets maybe 30 years ago yeah um yes but the long tail of humans still thinking they can beat passive machines at that level of fee is like a lot of people still think they can do that half the fucking city yeah but only five percent roughly of those professionals are doing it somewhat successfully and even over the long term They tend to wash out, right?

32:27Bailey Gifford's one of them. Right. What they started to figure out, I mean, before we go back to Bailey Gifford, is then look at hedge funds. You know, from Millennium onto Citadel, onto XTX, onto Jane Street, these are machines that are trading, and humans are designing machines to trade and take the fee structure is transaction fees at basis points. So the machines have pretty much shown that they've solved it. Well, they do a good job in hedge funds. They create, they create like to, you know, to counteract that, you know, they create some risk though, right? And then also, you know, there can be like big sell offs and then the machines drive it, you know, very aggressively.

33:12Obviously, that's the voting machine, you would say. Super voting machine. Yeah, I mean, I was talking to someone the other day who had been at Jane, was either at Jane Street or one of those funds. and I was asking them, you know, what was the average hold for a stock? And it was six weeks. Yeah, yeah. So, like, that's very different from Bailey Gifford. Yeah. And then, you know, where I get to then is, okay, then you go into the private markets and you say, what impact are machines going to have on PE and VC? Right. And you've spent time with Ziv. Yes. You know we've been preparing for this moment for 11 years.

33:47Yeah. He's building a lot of stuff internally. Yeah, we've been building stuff for 11 years, all of which obviously in the last three years where he's really lent into managing the product and ensuring we have the latest AI tooling. And by the way, in a FCA regulated GDPR compliance cyber ODDed way, because if you've got 2 billion pounds of unrealized nav, you can't just use the latest model without all of this. Well, you can if it is properly compliant, well-governed and secure. So, you know, we absolutely believe in the next decade, you know, the machines are coming in PE and in venture. Yes.

34:36And, you know, we want to keep doing what we do really well and use machines to our advantage. Picking on that thread a little bit, obviously people build indexes or indices and people build ETFs. Seed investing, I think by its nature, because it's so unpredictable, like you need lots of people you trust out there kind of just making allocation decisions. Is your view? When you say you, are you talking as a fund of funds? Are you talking as a GP? The market and LP kind of needs that happening, right? Yeah, but effectively it's an interesting way of thinking about it because I think most people don't think of the best fund of funds in emerging managers as effectively selling an index to their clients.

35:23But that's what it should do. Well, it is. Yeah. I mean, literally it. Yeah. Because they charge whatever the basis, like 50 basis points, 75 basis points. And they say, okay. One at the top end. I mean Local Globe, 0.9, Floodgate, Founder Collective. There's a lot of concentration happening at the moment, though, in a way which I think there's a lot more opportunity. It's interesting, you guys have seeded, what, 80 emerging managers from your balance sheet capital? Over 15 years. Where does that feed into this kind of like long-term strategy? Well, I mean, if you follow all of the logic of the Besson binder data.

36:05Right. So the Besson binder data, which, by the way, that's how Bailey Gifford invests. Right. You know, they're looking for some of the asymmetry of private market knowledge, you know, which is their Shehalian fund. And they've always had an allocation for private markets in all of their funds. Right. Always, for the last 10, 15 years. And I think this was their big insight and big innovation. It's like it's a lot easier to hold Tesla and Wise and Spotify if you've seen them at their DEF. You're investing in lines, not dots, basically. Yeah, and you know the team, you know the management, etc.

36:45But I think if you then look at what does that data look like in venture, I mean, if you look at the deal room stats, there are 150 ,000 still living VC backed firms. So your universe, your index, let's say, is 150 ,000. Yeah. The likelihood that you will, one of those 150 ,000 companies will get to 100 million in revenue. we call that a thoroughbred and you'd invested in them at seed is 1.3 % so lower than the public market index the likelihood of investing in a unicorn at seed is 1.8 % so again if you're gonna be investing in the index of VC backed private companies you want to make sure you're investing in the funds who have a sustainable track record of picking I mean we would argue if early is the best as early as possible ie seed you know for thoroughbreds and unicorns because as the stages get later theoretically it gets easier to pick a thoroughbreds It gets easier to pick a Decacorn.

38:10And, you know, I think the top platforms now, obviously they're doing it all. Yes. But, you know, our track record is there are the 20 ,000 funds active globally. I think 21 have picked more than 10 thoroughbreds at seed. Right. 0.13 % of funds. Right. And we've done 21. So we're the only non-US fund in the global top 15. And we're the top in EMEA two years running. So I think if you want to find the index where your universe is 150 ,000 plus, which is much bigger than 64 ,000, because arguably it's even bigger than 150 ,000. Yeah. You know, the pickers really matter. Yes. And do you think about, like, drilling into specifically, okay, that you've seeded these emerging managers through Basecamp.

39:17Do you think about Latitude and Solar as, like, vehicles to follow on into their portfolio? Yeah. I mean, the way I've always sort of thought about it is, and I know you also picked up Andy Radcliffe. Yeah. Yeah. So Andy was one of the co-founders of Benchmark. Yeah. He left his previous fund to start Benchmark because, you know, again, I think he sort of felt like, you know, there are always ways to sort of innovate in venture. And we used to, at Index, we would have our GP off-sites in SF maybe once or twice a year. And, you know, one of my former partners, Mike Volpe, knew Andy really well from, you know, they were both on the Opsware board for Mark and Ben when they left Netscape.

39:56and Andy would talk about you know I just like a lot of things he said really stuck with me but one of the things he talked about was backing surfers not waves mm-hmm like if the wave is big enough AI yeah cloud quantum whatever they're gonna be thousands of surfers on the wave yeah by definition and you know the job is like how do you pick the surfer that will still be riding that wave 20 years from now so you know that that to me is or has really helped to kind of reinforce our founder conviction like why the founder is the most important thing to assess do you think about base camp investments in the same way um yes because i think i think of just like uh you know when we we started as angels then as super angels they used to call them then as micro vcs you know we've been on that journey and i think building a fund is building a business and you know the base camp managers the solo GPs are entrepreneurs so we think of them in the same way that we would think of founders but you know what what we would also say is that if if seed is the beach at the at the edge of the private market yeah you know it's like the cold face or whatever is the front line you know if you're backing surfers right okay right waves you know where the surfers you know they live on the beach you want to live on the beach if you want to meet the best surfers and living on the beach is like literally insane you know it's really nice to go for the day for the day or like a romantic campfire or when the weather's nice but like what idiot lives on a beach 24 7 365 a seed fund you know if you are a series a fund you have beachfront property think malibu beach yeah you know you go down to the beach you come back to your beachfront property you have a jacuzzi you know you invite people up for drinks and now those are the platforms okay and then you know we would to me that was series A and then latitude was you know the hills and solar was the city bill right okay and is that why you're kind of like we're not leading those rounds what you know we're kind of going into the people on a beachfront property yeah yeah and then you know carrying on for the ride where we retain conviction that in the case of latitude we can get a 5x or above from the entry point and solar 3x and above right but we the emphasis is you know we talk about defend the beach right and you don't have to be a military historian to know that defending a beach is again basically impossible so i would think of local globe as a permanent structure on the beach right as permanent as a structure can be it's like you know people who run a cafe on the beach yeah and then base camp is access to towels and umbrellas okay well let me just think through that analogy isn't base camp other people on the beach yes living on the beach sure but it's you know typically i mean it depends some of those base camp managers are now on fund three fund four but typically you know are they all going to last i I don't know.

43:22I mean, I know it's not a cakewalk. And I also think, again, we were sort of talking about this on the way here, is that arguably seed stage, inception stage venture is a commodity. You know, what is your product? It's like you're allocating cash. That's it. It's like when an emerging manager comes talking, is like you know the big question I always say is like if there are 20 ,000 active VCs think about each one of them as a hairdresser it's like what do you do oh I cut hair yeah no I cut hair yeah no I can't hair but like I do a head massage no I can't hair but I give coffee away for free it's like it is literally one of the most undifferentiated product categories in the world so you know i always try to say to people like what is your edge yeah you know because you're walking down a road of 20 000 hairdressers like what is going to make the best founder say oh that's why i want to cut my hair what do you think makes the difference look i think it it depends and you know i think ultimately it depends on the founder it depends on the sector you know the thing that we believe very strongly is the ability to recognize support great founders to help you know go on that 20-year journey join us for part two where we'll be covering fund size and how that influences the way he thinks about building Phoenix Court his favorite emerging managers and how he's experienced LPs adding value