Inside Goldman’s $22B Bet on Venture Capital | Hans Swildens, Industry Ventures

28:41Turner Novak:And it sounds like the LP flow through was important to you because you would potentially be buying some things from like they were also kind of in your world, like for as a venture manager, you probably don't need just like as a GP investing directly in the startups, not no, no fund investments at all. No secondaries. The LP flow through might not be that interesting, but for you, it was because that was you're also buying from them in a sense. Yeah, so when we started, the dot-com collapse happened, and we started buying people out of portfolios of their venture investments. So I bought Enron's venture funds out of Anchor T, Enron Broadband Ventures.

29:17I bought InfoSpaces' venture capital funds off their balance sheet. I bought Electronic Data Systems' venture division right off their balance sheet. And so that's how we formed doing secondaries. And then we started buying... So like I bought Williams Communications, Will Tell's fund portfolio. And in 09, I bought Washington Mutual's LP portfolio. It was called Strategic Investments. And, you know, and so when you look at like, how do you buy this stuff? Right. It's very difficult because if I get your fund SOI, so like, you know, I bought a secondary in your fund, right? That's why we're talking today.

30:02And I get your reporting, right? and you're showing me, hey, here's all my deals. You're talking about your best deals. You've got three funds. You're highlighting each one of those in the report or maybe I'll talk to you on the phone or see you and grab coffee or lunch and we can walk through it or maybe I go to an AGM and we're always talking about these things. If you capture all the information and understand what's going on in all these funds at the company level and then also talk to the companies and verify what the funds are saying, And then also talk to the LPs who are trying to sell part of their funds, right?

30:40And if you can understand kind of all that, which is difficult to understand because everybody wants to keep their information private. The companies don't want to give the information to the public. The funds don't want to give the information to the public. And a lot of the LPs don't want to tell anybody that they're in funds. So there's like a barrier to like understand even what it all is, right? Like who owns what? now there's databases. So when we started like 26 years ago, Prequen didn't exist, PitchBook didn't exist, Crunchbase didn't exist. You couldn't go into an LLM and say, give me all the LPs in Banana Capital 1, 2, and 3 and it probably won't spit out much but it'll spit out something.

31:25So there's no visibility in databases around this stuff when we started. So we had to do our own.

31:32Turner Novak:What, when you talk about like the differences between what, uh, what an investor would say, like the GP and what the company would say, what do you find is like some of the biggest differences between GP saying something and then you talk to like the founder of the company, like, yeah, it's, it's not true. Yeah. I mean, that happens. My, um, my partnership over time, right. This is, this is when, you know, experience matters. my partnership over time and all the people that i work with here that affects also how we underwrite their funds think about their companies they're talking about so part of it's just getting to the point where you've already like if you're invested in flex right in your fund one and you know i go meet flex and then they're telling me everything about their business and i can ask them about you and blah blah blah and and then you're going to tell me about it you might not know i'm i'm talking to flex right and but i already have context there or i might be talking to another manager that's in flex like uh titanium is in it i think and so like i can be talking to them and they tell me one thing i talk to you you tell me another thing i talk to the company they tell me another thing and then i can start kind of triangling around like what do i think right so the one interesting thing about this job of being a primary investor, a secondary investor, a co-investor, a direct investor, is that you get to talk to all those people.

32:59So you can form your own opinion, your own kind of thesis and underwriting model on whatever you're going to invest into. And then you can kind of get everybody else's opinion on it. Typically, GPs are not able to do that, right? They'll do it sometimes if you're a growth stage GP and you're talking to the seed funds. But what we've learned over time is what the seed funds are saying to us is going to be different than what the growth funds say to us, depending on what stage the company is. Really? So what causes the difference? Because when they invested, they're both investing completely differently.

33:37One's going after the entrepreneur, how much domain experience they have, how much hustle they have, their confidence level in that person or people. If it's a group to go execute on this awesome opportunity and for some reason they can't execute their ability to pivot into a new business. And it's more of a, you're backing teams and you're backing people and trying to predict markets. That's like the early stage group. They're not doing comp analysis, capital market analysis, valuation analysis, CAC and churn, LTV, any of the analysis that a growth stage investor is doing. I mean, growth stage investors are trying to quantify how much value and growth and profits are in a business and how durable it is and then projecting it out and trying to pay a value that captures all that growth of revenue and earnings.

34:38And they can grow through their price if they're paying a high price. So, you know, a lot of what's happened in growth is that you have to pay a price above what the current value is of the business. And so, you know, a lot of them are trying to pay like two, one, two, three years out of that value. But then if they hold the security for seven to 10 years, it compounds and they make their three acts or five acts by just compounded, you know, revenue growth and earnings growth. And so when you talk to them, the five things they're talking about are completely different, right? I mean, management team and founders, obviously on the list, because that's critical.

35:14But then they go into all the other metrics about the business, right? How healthy is it? How healthy is sticky of the customers? What are the margins over time? What's the competitive dynamic? You know, there's a lot of like, you know, five forces analysis and financial analysis. And then you also have the capital markets analysis for short comparable trading. What's comparable? What does it look like? How does it compare to what's being already valued by the public market? How are M &A deals valued? What's the most comparable company to this in an M &A exit? Was it a PE exit? Was it a strategic exit?

35:51How strategic is this? Because if it's strategic, it might have a higher value. And that's like what the growth investors are all noodling on all day. and the seed investors literally don't do that. Yeah.

36:04Turner Novak:I've had one time where somebody asked me, what do you think about all the competitors to this company? I'm like, I don't know any of them. They started this company before they created the category. There's no one else. And I still don't know who the competitors are. There's a deal. That is not your job. I should though. I probably should go. I should be on top of it. I mean, we have found seed managers that are very good growth investors, But I would say it's less than 20 % for sure. And it's probably less than 10%. The skill set of being like an awesome seed investor and getting in this and the deal flow that's spinning out of whatever, opening AI now and Entropic and Google and everybody else, being with the right talent, with the right people and seeding them and convincing them that you're going to add value and that you should take your money.

36:53and having that, that skillset is a very different skillset than, you know, leading, you know, a billion dollar round and the next AI business, right?

37:05Turner Novak:Very different. And so speaking of that, is that what you think a good seed manager should be doing right now? Like, should I be trying to, if I, if I'm banana capital, right? I have a$10 million fund. Should I be trying to find the people leaving open AI and Anthropic to start the new, like vertical AI, Neolab, or like, what do you think kind of makes sense right now at Seed? Because I mean, there's a lot of stuff going on. It's a little bit of a crazy, crazy time in the world. I think that the Seed market now, it's even more important to have differentiation, how and what you're sourcing. So for example, you had Ollie on here, right?

37:41And with Neo, And, you know, he's got a lot of stuff going on at the technical founder kind of formation stage, right? Due to his whole strategy in terms of how he's sourcing deals, what kind of people he's looking for. He's getting them early. He's watching them. So he's got an angle, right? And it's not your angle, right? And so you've got to have your own angle. I think that there's also multiple, there's a lot of angles that work, right? I mean, we've been in funds that, they were people that worked at Google or wherever, and then they got to know everybody and all the talent and just funded all the best people that left.

38:29That's an awesome strategy, right? Because you know the people, you know what they can do. You've worked with them, you trust them. You know they can build something awesome. You know, they're probably top 0.1 % in what they do. And so like, that's a good strategy. I think, you know, there's a lot of different strategies. And a lot will work. But the most important thing is to actually have a differentiated one.

38:54Turner Novak:You know what I mean? Like if you're just another fund that's got 50 to 200 million bucks, and you're just like, I'm going to be AI, and you have no differentiation, you have no sourcing advantage, you have no access to the best talent advantage, You have no kind of curated deal flow that's coming from your networks or what you're doing to generate that. You know, that's not interesting. Is that a pretty down the fairway average pitch that you see today? It's like we're raising up, we're a hundred million dollar seed fund and we're investing in AI and there's not enough else around it to make it interesting?

39:27Well, I would say most of what we're looking at, we're looking at from referrals from the other managers we're in. so you know we've been we've been we've been we've been seeding the seed funds now for uh that's 2007 right that's when Roland started doing it so and then I started doing it in 2009 and and the rest of the team since probably ONAG as well so the um the uh since we already have over a hundred of them right and they're all working together and see because seed rounds are typically syndicated, we are getting pointed to people and people are being introduced to us as like we're a value-added LP.

40:13And so I think there's a brand advantage now we have. But in terms of like what we're actually putting checks into new managers, most of it's through our current relationships. If you think about it, so in the second bucket, which is spin outs. We're in 525 firms' funds now. And we can, when they spin out, what do they do? A lot of them call some of the investors they had in the funds they got to know. So, I mean, that happens here. And sometimes we're in the funds and in the spin out funds, right? So like we're in both, the main funds that have been around for a long time and then we're also in the spin outs.

40:58and we're able to determine which spin out to invest in because we just talked to the partnership and say there's three GPs that spun out of your firm in the last five years. Which ones have you written checks to and which ones would you write a check to again? So it's like diligence gets easier too, right? So the deal flow gets a little easier to see and the diligence gets a little easier to do because you're having a confidential relationship with everybody in the market anyway. It's the same thing with the companies, right? In terms of like new founders going out and starting a fund, the probability of us knowing one of their prior venture investors is 90%.

41:42So we can just talk to who funded them, you know? What were they like working as a CEO and a founder? And, you know, did they, you know, how key would they do the whole thing? Or did they become a chairman one year after they founded it and we're not ever there again? you know, I mean, it's a very easy, very easy call.

42:02Turner Novak:What do you see as one of the biggest mistakes when someone's doing that when they're starting a fund and they talk to you and like that first, the first conversation, I don't know if there's like a lot of patterns or if any one specific, very, you know, red flag type instance stands out. But like, what are some of the biggest mistakes you see people make when they're kind of putting that first fund together with their LPs? I just be humble, right? Like people that my team meets and I meet that are not humble and not respectful and not someone you'd want to actually work with. I think that's a big turnoff.

42:37And I think that, you know, a lot of the VCs and new VCs think that they need to come into the LPs and pound their chest and say, hey, you know, this is how I did this. I did that. I did this. I did that. You know, guess what? Like we meet like 10 people like that every day. so you know it's not different right i mean why people are doing what they're doing is because they already did that so it's like what we what we factor into is like do we want to work with this person do we trust this person do we if they're representing our capital are we proud of that you know what i mean are they treating people well right are they a good did they create value for the investments they make?

43:24How do they treat other people? And the last thing an LP wants is to have somebody that's going to mistreat them. I mean, you're talking about a 10-year commitment that really is 12 to 15 years if you stick in it the whole time and don't sell it in secondary as an LP. And nobody wants to be 12 years with someone they don't like and someone they don't trust I mean, this is just like, that's like the worst, right? It's like being in a bad marriage, right? Just trying to get out.

44:01So, yeah, I think, you know, so I think, you know, coming in and, you know, explaining your successes, because otherwise, you know, it's hard to have a track record to back, but in a way that is, I guess, just more level with the LPs you're talking to.

44:23Turner Novak:And this is a slightly different topic, but I didn't want to miss it because you said it and it was pretty interesting. So you talked about how you, I think this is when you're really early days of industry, you bought Enron's venture portfolio. So how does that come about? And how did that go? So, yeah. So, I mean, I was a little, so I end up in stock and I got lost my capital in it and I got kind of pissed off. Right. I mean, and so I went in and said, if this thing is bankrupt, what can I buy from it? That'll make me my money back. Right. And that's how that one started. And so I just went and called Ike Gody and I knew I networked all into the people and I ended up going right into the trustee of the bankruptcy and being aggressive and digging in the portfolio and found some investments there I really liked.

45:14you know the second company i have with my brother was called speed era networks and it was a content delivery network and so we basically you know we we dropped in um servers in all these different locations in the world and we had a caching system and then we you know bought bandwidth resold it um through our overlay network to speed up everybody's videos and and you know So you could listen to iTunes. We served iTunes. We served Netflix. We served DoubleClick, all that stuff. So there's no buffering, and you can get videos to people and large files to people quickly.

45:52Turner Novak:And this was back when the internet was slow, right? This is like in the late 90s, I think? Yeah, we started Speeder in 1999, and we competed directly with Akamai. We ended up getting acquired by Akamai. So it's part of Akamai. But the broadband, they called it Enron Broadband Ventures, right? So some of the stuff they own in there, we knew. So one of the assets was Interaction, which was the largest data center in Europe. And they had an ownership in it. So we kind of dug through the whole thing and negotiated a deal to buy the whole portfolio. And it ended up being a good transaction. You know, the thing that I missed there, though, like I've missed a lot of stuff.

46:40And the one thing that's interesting that I missed is they showed me the data center that was built in Vegas because it was also part of the bankruptcy. And it was also part of this like broadband division. And they said, do you want to buy that thing, too? And I was like, well, let me check it out. And it was like a fully built kind of amazing next gen data center sitting on, you know, one of the hubs of the Internet in Vegas. But it was empty. And it was losing money because it didn't have any customers yet. And it was like just brand new, spanking new thing with nothing in it. So I looked at it and said, hey, you know, that's a real estate deal.

47:25Like I'm buying, you know, tech stuff. and I didn't realize that thing. So there was an entrepreneur that bought it and it became Switch. And when he bought it, he cobbled together some money to buy it. And then he actually signed a lease. He leased the entire thing out to eBay. And he's created a multi-billion dollar data center business. he's one of the largest data center oh wow

47:58Turner Novak:imagine telling someone that today that you passed on an empty data center that was ready to go and you didn't invest in it today I mean I didn't understand at that point that I should be buying that it just looked like a hole in the ground I did the same thing with Whamu where they had a conference center right next to the airport and sea tack that they'd owned and i was in the i was buying their venture portfolio and they're like hey here we have a wind farm we own they owned a wind farm asset and they owned um this conference and at least there's a hotel in it it's huge it was huge it's like and a family bought it killed it but uh but it was like it's distressed because they were using it as their corporate kind of hotel conference meeting center next to the airports you'd have to go up to seattle and so you'd fly in because you know waymond was so big you would just go over to their you know kind of corporate you know conference and meeting and hotel that was huge center i think when you went bankrupt like it was it was empty and uh some of the hotel had some had some people saying it though and um but it was just one big loss looked like a hole in the ground and a family bought it and and i think they i think they made like 250 million dollars and this was just sitting there for you in the bankruptcy and you didn't take it yeah but i didn't have it at that point i was just struggling with trying to build this thing and fund it and um buy investments just so focused on buying the venture investments i wasn't thinking about the other assets.

49:41Turner Novak:And was this like pre-fund? Were you still investing off of your own dollars or had you raised outside capital yet? No, at that point, we were doing SPVs. Okay. So you were like deal by deal. You'd go and like, I'm going to raise the 5 million, whatever the number is to buy this Enron portfolio that is at like 1 % of cost or something like that. Yep. That's exactly right. And we put actually the Enron deal and the InfoSpace deal into one fund. We ended up doing two deals and one FPV. Oh, wow. It was scrappy. I mean, most of these firms, by the way, and you probably know this, but if not, most firms, even larger ones, when they formed, it was a scrappy situation.

50:25It's like entrepreneurial. I think that entrepreneurial finance is underappreciated. And I also think, by the way, Goldman's history and teams and how they've been an entrepreneurial finance business is extremely underappreciated because everyone views the firm as like a bank or a financial institution or an investment bank or an asset manager, and they don't understand all the innovation and kind of creativity around creating new products, creating new businesses, entering new markets, and doing entrepreneurial finance activities. And I think that that's one of the things that has been eye-opening for me going from being an entrepreneur, you know, with my own funds and stuff to a firm that is large, that has a lot of fun teams, that has a lot of different business units, that has developed markets, right?

51:30A lot of the people in there that are senior in the org have built businesses from scratch inside the firm. And so that's one thing that's kind of underappreciated with some of these asset managers, if you want to call them, or investment banks or financial institutions is, you know, where did you think the businesses came from? You know what I mean? They didn't just show up. Like it's, it's, they had to be created by somebody and to be like a number one player in a segment, you need to be early and you need to be innovative and you need to be competitive. And, and, and, and, and so there's an entrepreneurial aspect to it.

52:15Turner Novak:Do you think that there are going to be more, uh, acquisition of venture firms over the next, I don't know, whatever the time period is, or like, like, is this a trend that's, that's going to really start to take off or it's already been one i would say well it will accelerate it's probably going to keep its current pace i mean you're going to see other um firms in the venture growth space be acquired for sure i mean i would say if you look at the if you look at the asset management landscape none of these firms were publicly traded until like 10 20 years ago right Right. So, you know, you have a, you have a new cohort of asset management firms that are publicly traded.

53:06Some of them came from the buyout market. Some of them came from the credit markets. Some came from the real estate market. Some came from multiple parts of the markets. and then they've added new businesses to their entrepreneurial finance again. They've added new business units. They've added new ways to make money. They've added new strategies. For example, there was sports investing was a new category, right? Buying minority equity positions in professional sporting teams. That was a new thing that happened over the last 10 years. That's now in KKR. for example. And Apollo and Arias have efforts.

53:47The GP stakes business of like, hey, you have these private GPs that are like you and like I was, but can you fund them as an equity investor and be a growth investor or a venture investor into the GPs, which are the fund managers? And how does that investment structure look? How do you make money on that? How do you deal with kind of over time monetizing it? You know, that's all was a new category in the last 15 years. And so, you know, these businesses are being built in an entrepreneurial way and they're adding new business units in different categories. But if you look at the macro trends, everyone has a pretty sophisticated buyout business.

54:33business, everyone has a pretty, most have a pretty sophisticated real estate business. Now, most have a pretty sophisticated credit business, right? Today. And so when you look at, you know, where they have a, most of them also are having an infrastructure, you know, business in terms of like funding infrastructure, your funds. And, and, and, and, And so who has a venture growth business, right? I mean, there's a lot of holes in these asset managers as a, you know, because they want to have, they're building multi-asset management firms that can leverage a corporate infrastructure of accounting, finance, compliance, fundraising.

55:21There's all these services and people and technology needed to execute and help execute fund strategies. And they have the infrastructure for that. And so if they can add boutiques in different areas and then leverage all that, it's actually a win-win for both the investment manager that's the boutique, as well as the larger corporate that's scaling. And so I think that you're going to see more and more of these. I mean, I know because I've been talking to all of them and some of the CEOs are in my fund as LPs afterwards and still. And so they're all looking at venture growth, trying to figure out how to do it.

56:04I would say there's a lot of them struggle with the scalability issue. There's a scale issue. If you're going to rank it and you're going to say, hey, would I rather do data center business that can be huge and fund all the new AI data centers or do a venture business? A lot of them are like, yeah, I'll do the data center business. It's like a ranking of what are they looking for?

56:29Turner Novak:Yeah, I've seen multiple times people proclaim, you know, like the CEO of an asset management business on a stage at a conference, right? They proclaim that, you know, data centers and compute is like the biggest asset class ever in humanities in history. So like you should fund that. Without the AI wave, we'd have flat GDP. Yeah. Well, so one question based on that line of thinking is why acquire someone? like let's say like banana capital i get acquired by like i don't know ox if or like just like some i know like a publicly traded like hedge fund or whatever so you have a meeting business and then you have your investment business and so you do you do probably have some enterprise value right in your business i think it's actually a lot higher than what other people would pay like in my mind i'm like i mean this is like extremely valuable i would i would never sell this and someone might look at and be like yeah here's your pino like i'll give you a million bucks for it and i'm like no way it's like that's not i'm not doing it that's what i felt and then some you know i decided to at one point sell it right but we still have ownership moving forward in our carried interest pools and things so it's a little different because you've got two different so you know uh these fund businesses have two different um revenue streams you've got your management fee revenue and you've got your carried interest profit sharing revenue.

57:55And those can be decoupled, right? So you can have a partner in your management fee revenue, but they're not a partner in your carried interest. And then you can have the reverse, which is partners in your carried interest, but not in your management fee.

58:10Turner Novak:I didn't think about that. Yeah. That's what makes these businesses really interesting is, uh you know there's two different you know and one is long-term capital gains if you hold the securities long enough the other one is short-term um ordinary income and depending on what state you're in that matters a lot so um but but but by holding securities longer than three years or five years and you know funding the securities early you can you can uh you can claim long-term capital gains on your investments. And do you, so you think it will mostly be acquisitions of these firms, not people starting internally, like, you know, the, cause Goldman kind of already had one internally.

58:55Turner Novak:It's both. Yeah. I mean, our team internally here, you know, not our team, but the, the, the, the group I'm in looked at doing this themselves, of course. Right. Why would, you know, if you're going to buy something, you have to consider building it. And the challenge with building this is pretty hard challenge, right? It took us like two decades to get approved and into the market with scale. Maybe we were at scale after like 10 to 15 years. But 25 years later, we've been at scale with information flow and things for probably about 10 years. But it took over 15 years to get there. And I think, I think that, so there's a barrier to just being in the, in the market, right?

59:45Owning all the funds, having transferred into all of them. And then there's also a technology barrier to like how you're processing that data, how you're, how you're using that data for making investments. Then there's actually, there's the other thing, which is really a pain, which is, you know, getting the right capital, right? From the LPs and having scale and raising capital. to fund and grow your business, both in terms of your profit pools and the carry-house your management fee and earnings. And so you need a base. And then there's the track record, which by the way, as you know, is the hardest thing in this market.

1:00:25It's the chicken and the egg thing that is the thing, which is, are you proven to make money over cycles? Have you proven in a 20-year period through multiple cycles of multiple drawdowns, capital market crises, GFC, COVID, everything, that your funds will make money in compounded rates that are appropriate for the risk and the lockup. And so there's the track record. And that relates to investment management and it relates to experience in your team. And so all those things are difficult, right? Because you have to have expertise. You have to have, you know, the way we do things, it just takes a long time to get it to a point where it's systematic and repeatable and scalable.

1:01:20If we were just a small fund and we had like 50 million bucks and we had no systematic repeatable stuff, no one would want to invest or buy it, right? So a lot of it's about creating. I mean, this is actually something I have a lot of conversations with, with managing partners that are managing firms. Because I actually went and created a managing company and a holding company and then looked at it like an entrepreneur would, which is an enterprise value and how to create enterprise value at the firm level. Most VCs don't think about that, which is shocking. The irony of this is that VCs fund entrepreneurs to create enterprise value.

1:02:07but they don't figure out their own enterprise value. They're finding their firm, but they're not thinking their firm as a firm.

1:02:16Turner Novak:They think of it as like an LLC or something. Yeah, I mean, it technically is. Well, I know, but you can convert it into a limited partnership, which you should, and that creates a different tax structure as well as you can start creating more of a firm because you can share partnership, to make sure it's with others easily compared to an LLC, which is difficult to cut up weight or share with it because it could max issues. It's funny. You see a lot of entrepreneurs will comment on like, there's these VCs that are like, they're backing like AGI. And then you talk to like, their firm is just like some dude sending emails to like sit around a table.

1:02:56Turner Novak:It's like the opposite of the technology business. So one, I think interesting question is today, We haven't really talked about the secondary market much today, but how do you think about the secondary market today? What is it, I guess? We actually never really defined what a secondary transaction is for somebody who's never heard this word before. And then how big is the market? How does it work? Just for someone who's coming into this for the first time. Yeah, this was for me after the dot-com collapse, which was at that point, we were in a market. the venture capital business, the industry itself, was primarily a primary investment business.

1:03:41Turner Novak:Where you bought shares from the company? The LPs were buying a partnership interest when the funds started with nothing in it and a primary investment. The funds, the managers were buying into the companies directly to fund them with the capital for a primary investment. When I started doing this, that was pretty much the whole market. There didn't really exist a functional secondary market. Right? The first year I started doing it, there was$250 million of secondaries we estimated transacted in the entire year. So it's very small. Right? Because it just didn't exist. It was like a nascent thing.

1:04:25That could be like a single Series A today. Oh, just like tiny. I mean, just one continuation fund now, like we're looking at one right now, it's$750 million. Just one deal. Three times larger than the whole market was in 2021. Sorry. So, yeah. But what's happened is, and this has been just fascinating and just exciting and interesting. just like every other software market or technology market or whatever market, it developed and grew over time and had multiple segments develop. And so just like Ventures segmented into seed, early growth, crossover, buyout, tech buyout, because it has segmented now, right?

1:05:21And now you have funds that are in each one of those segments, focusing on those segments, or they have full stack, you know, platforms focusing on all of the segments. When, when 26 years ago, there wasn't that. It was, Hey, your funds should be small, no more than like 400 million. And you're doing primary investing. That's the whole market. We didn't have crossovers. We didn't have, I didn't have any hedge funds. We didn't have that. The corporates were like Intel was the biggest one. You know, it just didn't look like today. But what's happened is the secondary market also developed into a huge market and then also segmented.

1:06:00And so, and the segmentation in the secondary market is different than the primary market, interestingly, because the segmentation in the primary market segmented by stage, right? When you invest, it's by stage, right? And in the secondary market, it's actually by transaction type. And because you have pretty much one transaction type, right? It's like you buy the stock from the company and it issues it to you. In the secondary market, we have transaction types based on different types of securities and different counterparties of sellers. So our segmentation in the secondary market, it started as like corporate CVCs that you're buying out and then some hedge funds and mutual funds.

1:06:51And then it went to like venture funds selling some things. So like there was this Facebook moment when there was a count issue in Facebook and, you know, there was a regulatory count that you had in terms of number of shareholders and they're going to break it. So they had to have a secondary process to keep their account into the regulatory window. And then they had VCs started selling Facebook stock pre-IPO. And that's when the other VCs said, wait, I can sell my venture stock pre-IPO? Someone's going to buy that? And then the whole institutional VC market started selling stock. It started slower.

1:07:31Now it's all over the place. And then I started buying the stock too, by the way. So both selling and buying. And so when you look at the segmentation today, we have things like direct secondary market, which is one-off direct secondaries. So if you want to buy XYZ shares and XYZ company, and you can go directly into either from the founders, from the employees, from the tender offer into the company, from a venture fund, from a CVC or whatever, just one-off. I want XYZ stock and you just buy the securities for whoever's selling them. That's direct secondaries. Then you've got continuation funds.

1:08:09These are venture funds that are at the end of their life or don't have much DPI. A secondary manager like us can go in and buy and restructure the partnership itself by tendering the LPs, restructuring that we re-amend the LPA, create a new term, a new set of time periods, as well as a new set of GPLP economics. We can take the partnership agreement and just amend it and modify it and redline it, or we can create a new partnership, and then it is buying everything from the old partnership, and you just do a transfer affiliate from one partnership to another, and you're still the manager from one to the other, right?

1:08:53You're still the manager, so it's an affiliate of yours. And so there's different ways to do this, like continuation fund, you know, taking a partnership that owns securities that are 15 years old and great. And they, cause they wanted to stay private longer and whatever. They're one of the top 20 companies in the world and enterprise value that are venture funded. And you like put them in a continuation fund. So there's that part of the market. And then there's a part of the market, which direct portfolios that are being bought without a GP attached. Okay. And so like, you know, a hedge fund portfolio and that hedge fund won't manage it anymore.

1:09:28They just want to take the private securities and their hedge fund and just blow them all out at once, for example, to be a pure play public market investor again. Or they got overweighted in it. Then there's the LP-led secondary market, which is LPs selling to another LP in a secondary or LP selling an entire portfolio of LP interests, like a whole portfolio of funds at once. then there's also structured equity solutions. This is one, I mean, there's so many different segments. I've never heard of this before. Yeah, the structured equity solutions. That's actually a big part of the market. It's not debt, but it looks like debt in a way because it's structured equity.

1:10:15And so there's a structured return to it. And those things are typically on top of portfolios. So like if you are a pension fund and you've got a billion dollars of private equity or venture or whatever, what you do is you just transfer all these things into an LLC or a partnership. That's now, you know, you own that, a hundred percent of it. And then someone comes in the partnership and restructures it with a preferred equity tranche that is, you know, compounding, that's a compounding pick and then a participation on the distributions. So it looks like a loan, but it's not a loan. It's a preferred equity.

1:10:54It looks like a Warren Buffett kind of deal where it's like, hey, we'll drop a preferred on top with a interest rate, minimum return threshold. And then there's a profit share on the back end of the net asset

1:11:08Turner Novak:value when it gets distributed. So this is like, it accrues interest like debt would, but you don't have to actually pay. It just increases the balance over time. You can do it either way. You can have it pay interest or not pay interest. you can you can have it be non-interest varying for five years then pay interest if you can giving this you can structure however you want it's just a you know special situation structured equity instrument and then there's the debt side so there's the loans so there's actually like secondary loans so like loans against your common stock if you're an employee to have an option exercise um you know there's there's loans against portfolios right the 25 percent loan to value on top of a private equity venture portfolio you know there's there's the actual debt structures too to get liquidity to people i mean there this whole thing got developed into a massive business we think last year there was probably over 150 billion dollars in transactions that closed just in venture growth and so it's approaching the size of the whole primary business.

1:12:18And we've had a thesis for 20 years. It's taken a long time, but it's been keggering at an amazing rate because it went from nothing to like 150 bill. But we think there's an argument that the secondary market will be a multiple of the size of the primary market because every other equity or debt asset class, that is the case. So if you look at the stock market, it's all secondaries. If you look at the real estate market, it's predominantly secondaries. If you look at the debt markets, it's predominantly secondaries, right? I mean, everyone's trading what's already been built or already created or issued.

1:13:00And so we think that over time that this market would be larger than the primary market.

1:13:05Turner Novak:Is it probably bigger than most people think it is? Like, is this size of the market that shows up in reports most likely underreported? Yes. And why that's the case is because brokers have been the ones historically that reported the market and the brokers in the secondary market predominantly broker private equity secondaries. And it used to be predominantly only the LP led secondaries. Now they're doing the LP led and the GP led, which are the continuation funds. And they're predominantly doing them in private equity, real estate infrastructure and whatnot. and to a lesser extent, venture. They do capture venture deals, but a lot of them are through these multi-asset portfolio sales.

1:13:53And a lot of what's being transacted in the venture business is never registered through a broker and not registered with the government. It's just being registered in the private partnerships and in the private equity structures. And so it doesn't have to be reported. And so it's very hard to track. And so like, if you're just looking at like brokers, brokering LP stakes and looking at that size of the market or continuation funds and LP stakes, you're missing like a massive part of the market. They're not even reporting the direct secondary market. So they don't report the enders in the companies, for example, which should now obviously huge market.

1:14:29Right. And so what you have to do in this market, which we've got frustrated and made our own reports over time, is break all these segments down, size them all, and then add it all up in a bar chart to get your aggregated market size. Okay.

1:14:46Turner Novak:What are the biggest sections of this? Where's the most capital moving right now? Is it the LP led? Is it the GP side? Is it the direct from the company and the employee side? Or is it all, is it kind of like one thirds each? all three of those yeah those are the bulk of it kind of equally splay roughly and then there's all these different smaller pieces but yeah i would say that the fastest growing segment which if you take the bar charts and you look at how it's going to grow in the next five years we think the fastest growing segment is continuation funds so this is essentially just um when you think about like when you talk about this like every other market has secondary purchases and it's the bulk of it so it's basically someone issues the primary you buy the primary and they just hold forever until there's an ipo this is basically you issue it and you hold it to not quite forever someone starts to buy and then they start to trade once it's traded you're selling it in a secondary the ipo can be primary and secondary together or it can be secondary only but most of the time it's primary only, but it could be all that stuff.

1:15:54Once it lists, it's a secondary. The entire NASDAQ and NYSE is secondaries.

1:16:03Turner Novak:Yeah. And it's interesting because you think of as of today, maybe it'll go public after this gets published, but six months ago, we'll say SpaceX, super popular company, everyone wants to own part of it, but it's difficult. There's a ton of friction, But just suddenly at IPOs and you can anyone in the world can buy and press a button and there's probably going to be billions of shares or volume, probably hundreds of billions of volume traded per day in SpaceX. And you think that that's just going to start happening before the IPO. There's just going to be more liquidity, more trading of the shares of like well-known assets.

1:16:38I already have.

1:16:40Turner Novak:And it'll just get more prominent. But every year it is. Yes. I mean, I've had for 20 years, this is like, now I'm like, gave up. It's like, for 20 years, I've had, let me go raise our capital, or we go talk to people that don't understand the market. they've said well this is going to slow down or this is going to go away or this is just a flash in the pan or if the regulatory restrictions get lifted on compliance that everyone's going to list and then there's no secondary market and and and you know when these big ipos happen there's going to be no secondary market and it's like every year this thing keeps growing and growing and growing because the number of companies that get funded grow the amount of capital that goes into the primaries grow and that keeps funding the derivative market which is the secondary market and they're just like assets that people want to own like people want part of this good asset it's investments yeah just it's simple investments the thing that also is interesting about the secondary market it for venture growth and private equity and stuff is is you can have the same security held in different structures trading so you can have like a company a stock in the companies trading in a secondary.

1:17:54And then you can have the fund interest that holds the stock trading itself as well. That holds the company that's trading. So it's multidimensional. So like you can, and then those two things might trade at different prices too, right? Because a buyer that wants to buy the stock directly might not want to buy into a fund that has a fee and carry on it and has other assets, right? Most of the time they don't want that because they don't want they don't know how to underwrite the other assets they don't want the other assets they sell by one asset but they have to take everything else because it's a fund interest right they can't like separate it out although people are starting to try to separate things out now inside the fund stakes but that's a whole nother a whole nother conversation okay there's like there's like a little bar chart the little bar that's starting that's derivatives and futures and do you think that'll get pretty big i don't know i i kind of don't i would rather just buy the title to the securities and own the vanilla securities either the fund interest or the or the direct stock certificates or baskets of them so maybe we're just old and and and uh used to that but like in terms of derivatives and and forward contracts and things it's a small piece but it's growing you know it could become big we also decided a long time ago not to do a lot of these option exercise loans.

1:19:20So we don't do that. And that is a segment of the market, which is the employee stock option exercise loan market. And we just didn't, because you have to be a lender and there's regulatory stuff around that. And we just wanted to be an equity investor. But yeah, so there's a derivative market, there's a loan market, there's a structured equity market, all in these different segments that people don't see if you're a primary investor.

1:19:52Turner Novak:So one of my friends, Zach Coelius, he's he said that he's worked with you guys on some stuff in the past. He said, you're one of the most creative second, like the one of the most creative like deal terms, dealmaker, investors he's ever worked with. So how do you typically approach a secondary transaction? Like when you guys are coming in, like what are you specifically looking for? How do you think about making sure everyone's happy? Because you could argue that someone's getting a bad deal in any transaction that happened, whether it's like the company, the LP, the GP you're buying from, you guys are maybe getting a bad deal.

1:20:29Turner Novak:Like, how do you just think about structuring one of these things and approaching it? Yeah. I mean, I come at it from like a solution provider perspective. Like, you know, what do we need to do to help you, right? If you are a seller of anything, why are you selling? What do you want to accomplish selling? And then how can we help you do that if we want to buy what you have? So I think that's the first thing is just approaching it like a partnership of like, you're a seller, we're a buyer, we're trying to solve your problem. We're trying to put together a solution. And then we have to be competitive because there's other buyers, right?

1:21:11And so I think one of the reasons why Zach might have said that is that we've always looked at it as how can we solve this and win? I mean, because otherwise you never invest. And so I think we're willing to do special structures with people. If you say, hey, I'm getting a divorce and I want to keep my voting of the certificates and I'm a founder and I own 20 % of a business that's worth$2 billion. So it's, do the math, 400 million bucks on paper. And my husband or wife is getting half of that, so 200 million bucks. But I want to keep the votes of that. We'd be like, fine. You know what I mean?

1:21:59as long as it doesn't impact our ability to exit at some point and get our cash back and we do the diligence around it, that maybe we're fine giving you the vote. We just give you our proxy. And we could give you our proxy for a period of time and then it revokes. So a lot of people wouldn't think about doing that. I mean, literally. Same thing with funds. It's like, oh, I want liquidity in my fund. I haven't had any DPI. Like if you have a fund that has no DPI, but the one asset in the fund that is sellable that people will buy, I don't want to sell. But I want to try to keep it. Right. But I still want money from it.

1:22:40So what do you do? How do you do that? That's the point. You have to sell it, don't you? We can say, hey, just go to your, we will assign a deal with you that you go to your investors with because you have to get their approval because you're going to get compensated. compensated. You're selling and you're getting compensated. So you need approval from your investors. And we will lift out that investment from your portfolio and put it in a new partnership that sits next to your portfolio. Let's say it's called Banana Capital Fund 1, and I'll create a Banana Capital Fund 1-A, and I'll just move the certificate from the 1 to the 1-A, or you're going to ask the company to do that.

1:23:18And then you've got to ask your LPs, hey, if you want to get liquidity on this thing and get two times your money back. I'm willing to do that. These guys want me to manage it and they're going to compensate me for doing that transaction. Here's what I'm doing. You know, it's fully disclosed. Here's how much money they're going to pay me. And you're, um, you're going to have to approve this and then we're good. And you can, you know, the asset will be sold and moved into the fund. And you can say, cause some of them might say, I don't like it. And you say, well, then great. You can just roll your stake in there and have the same economics as you had before and you're net neutral.

1:23:52So the people that want to sell in your fund can sell. The people that don't want to sell, don't sell and nothing happens to them. They're not forced into new economics or anything like that. They're just net neutral. And then we could do like a deal with you and help you with that liquidity issue. It's also like another one's like you're a corporate venture investor. You ran out of money. Your CEO is new and says that there's a billion dollars of venture out of your balance. you're publicly traded, and there's probably$500 million of unfunded to keep funding all around so you don't get wiped out.

1:24:25And the corporate entity doesn't want to do that anymore. And we can go in there and say, hey, we'll put up the$500 million to fund all your unfunded obligations, and we'll do that in a structure with you. We'll take your securities, put them in a fund, and we'll negotiate terms and payments around how our capital is being invested and called and when we get it back and at what rates and with what splits and what percentage of the partnership we own over time and what our return profiles are and stuff. And we will remove your unfunded 500 million liability. And here's an equity structure for that.

1:25:02And it looks like that. And so like, because we, because the market was, I think we do this so well because when the market was so small, there was no transactions. happening and we had to like solve you had to like make a transaction yeah yes but what happened is these transactions we were doing became segments right and then became their own markets and that's like the amazing entrepreneurial journey in this adventure right i mean we've been on this like 25 year adventure and like the mountain keeps growing as we climb it and so like We keep thinking we're going to hit the peak and then the thing grows another mile.

1:25:46And it's been an incredible journey, honestly.

1:25:52Turner Novak:And so thinking about like the mountains going to keep growing, right? Whether this is in 20 years or even, yeah, even in the next like 12 months, we'll probably have, I don't know. I never know the timing of this stuff, like SpaceX, OpenAI, Anthropic. It seems like they'll all go public within the next 12 months. Who knows when? Maybe there'll be more. like what what's kind of going to happen over the next next year or so are the things you're kind of expecting or or looking at working on waiting for well at a high level the thing that's the most concerning about the venture category to invest into is for the since 2001 so it's been five years.

1:26:35The distributions coming out of the industry have been 75 % less than what they need to be to be healthy. This is each year it's below what it needs to be. We need about 20 % of all the NAV in the market to exit each year to have a healthy market. Because if you exit 20 % of all your NAV in your fund every year for five years, you'll get your fund capital back. And then for the next five years, you will get your returns back. It's very simple. That's the math. For the last four or five years, it's been five years now, then on average, like five to 7%. So you have a situation where most venture funds might have 20 cents back in the last five years.

1:27:24The whole industry hasn't produced the distributions of cash that's needed to have it function correctly. so um whether or not these so there's going to be have and have nots in this thing right like whether or not these companies you mentioned go or not i can't comment because of where i work but you know not every venture not not all the venture funds are invested in these companies and if you have them in your funds you're probably going to have if they if if they do what people think distributions. And so you're going to see, I think it might create a bifurcated, more concentrated venture market because what's happened, the really interesting thing in the last like three years, and you can, you know, this is a whole nother conversation, but it's super fascinating is like, I believe that the market's bar belt.

1:28:17So it's either you're very small and very, you have a very strong advantage doing a specific thing and you're very differentiated and you can still get the great deals at the early, you know, or you're like a huge platform that you're full stack all the way into the seed market and into the crossover market. And so these larger platforms have just been treasuring everybody in the middle and everybody down into the seed market even. And if those are the people that own all the equity in these businesses, they're just going to get bigger. And so what's going to happen is you're going to have more pressure to keep barbelling in the market and everybody in the middle is going to get blown away.

1:29:03And so, yeah, I think that it's kind of fascinating.

1:29:10Turner Novak:Because it seems like those big ones that have sucked up a lot of the capital, they're also the ones giving capital back so like they're kind of i don't know in a way they have ball control over that flow of funds and they're giving money back so it's like do you want to put it somewhere else or do you want to give it back to them like what's what's the call are you gonna so as an lp like because you know i'm an lp who are you gonna prioritize something that gave you all your money back or somebody hasn't given you anything back yeah that's fair pretty simple right like yeah so yeah i think what the markets the markets so one of the reasons why we decided to do the one plus one is three with um with the firm here is we believe and we got to a place we thought this entire industry is going to be very institutionalized kind of already is but it's going to be even more so and and then you have to be more at scale and have more proprietary information and more proprietary deal flow to compete over time.

1:30:14So, you know, we needed to decide if we were going to get bigger and more competitive and, um, having more capabilities and, and it's in front of everybody. And we decided that it was a good time to do that.

1:30:31Turner Novak:Uh, do you, this is a little bit on that comment before. So what would you do as a seed stage manager that is trying to continue to compete against the super, you know, dominant platforms that are returning a ton of cash? Like, how do you, how do you think about putting a stake in the ground and like actually competing against them with a realistic strategy? Well, if you don't have an answer for that, you should stop investing and go do something else. Literally, because you're just wasting your time and money, I think. Because, or you're just going to have to be lucky. And I don't think lucky is a strategy, but maybe for some people it is.

1:31:13I think that everybody needs to really, really work on how they're getting into the best companies at the early stage and what it will take for them to take your check. I think the market's changing in venture where it's getting more and more and more difficult to get in them, right? Because there's so many different people trying to put money in them that you have a hyper-competition dynamic. And in that case, the only way to win is to be super specialized, right? Carve out your own unique deal flow mode. It could be with proprietary AI technology. We've seen that. Some of our managers have developed pretty credible like sourcing and underwriting and transacting ai driven uh systems so that's that's one thing so that you know and and so like like we we have one that when we went through the whole thing we're like wow that's incredible like it is very very awesome and i think it's It's focused on sourcing, right?

1:32:27Sourcing and being first in the best. And doing that at scale so that even if they have hit like the thousand new companies that might be the next unicorns, that they actually can write a check into like 20 % of them. Because I think that the challenge now is not whether or not you can see them. It's actually whether or not you can get a check into them, right? when before the seed funds would see them be able to write a check because they were all like, there's a hot tub thing where it's like, oh, you know, I'll let Joe and, you know, Jennifer, everyone's going to come in and here's, you know, 500 grand, 500 grand, 500 grand, it was a hot tub thing.

1:33:07Now it's like, oh, this one manager wants to give me 50 million out of 250 pre and I don't even have a deck. I'll take that. So then it's not syndicated. Sorry. Right. So then the seed funds don't even, they can't even write a check. Right. So I think that that dynamic is new and it creates challenges because if you're a seed fund and you're not getting into the best companies.

1:33:37Turner Novak:And you, you probably do have to be taking quite a bit of risk then where you're taking a risk on a founder that they're not going to give 50 million to without a deck or in a category. maybe that's like a new category that's not like an instant instant check without even having a deck or product yet and those sometimes do work right that's the humbling thing about the market is sometimes those people are the ones that create the biggest and best businesses but it's not normal it's a hard thing to systematically repeatedly do yeah and you also it's not like you do that and then in three months it's like oh this works here's more money it's like you need to have a track record over a long period of time to prove that you've done it like once a year you know a couple in each fund so it's like takes 10 years to get there one or two and banana one one or two and banana two one or two and banana three you need to exit them you need to return like three four x net on your funds if they hold yours hold hold those securities for longer than eight years to get your 20 compounded ir or no one's going to give you any money is that probably the threshold you think in venture is the 20 % IRR you could get above that yeah you need 20 % IRRs high teens are okay but like otherwise why are you doing venture yeah you can easily get 10 % in the public markets yeah you can just go buy go buy distress debt today at 15 % returns I mean right senior secured loans why would you do that it's more liquid and it pays you know a monthly dividend and you can lever it make 25 but that's probably too probably too junky but like so yeah i think venture needs to be high teens low 20s and compounded over 10 years that's a big multiple yeah that's fair what then what is your kind of rough ballpark then is that like a 5x 10x over over the years like what do you think you should shoot for sell secondaries do a continuation fund do a secondary sale do a um you know move securities over to a side fund to buy out the lps and the main fund from that security that want to sell and get dpi for the ones that don't care about dpi that will just roll manufacture liquidity that this is this is something that people now by the way like the large platforms have dedicated teams and their entire job is to manufacture liquidity.

1:36:04So if, if you're a venture fund and you're a seed fund, and you're not thinking about manufacturing liquidity, you also are at a disadvantage to them there too, because they will have more DPI and distributions than you because they're manufacturing liquidity. Then you have another disadvantage against them. So yeah, you need to start manufacturing because when you look at you have to look at cash flow time and irr so like lps don't care if you give them a 5x multiple over 20 years they're better off buying muni bonds and like literally like it's your irs like six right i'm better off buying california muni bonds that are tax-free.

1:36:55I will make more money buying an automated muni ladder than putting money with you. And I get monthly income that's tax-free. So the multiple is one metric. The IRR is the other. And you need to look at both. Because if you're not compounding capital at 18 % plus, no one's going to give you money. I mean, maybe if, well, maybe they'll take a shot thinking maybe the next one's 18 or something. But like if you consistently have produced 9%, 10%, 12 % net IRR funds, that is not interesting.

1:37:33Turner Novak:How do you look at like a 19 through 21 vintage, like as a pool? Like what are you seeing as being interesting in terms of like the IRR in that pool? Because it was like a, it was a, it was a rough vintage. The funds that we're in that have manufactured liquidity are doing 10 times better than the ones that didn't. We're in a fund that's a growth fund, okay? Which you'd think got destroyed because most of them did. And it's like two and a half X net. That's a 2021 vintage. And it's almost fully realized because they did a whole continuation fund out of it. Well, it's already got 200 % plus DPI.

1:38:21Turner Novak:and they're out of the securities. They're sitting in the continuation fund, unless you roll. So this is probably like 50 to 100 % IRR, I'm assuming, based on when they did it? When I look at that manager, yeah, the IRR is awesome. The DPI is incredible. The multiple is good. I'm going to reload because that manager managed my money in an amazing way, but it wasn't through natural exits. it wasn't through an M &A exit or an IPO exit it was through secondaries and this is this is like a pretty new thing in venture and we probably like romanticize the IPO and romanticize like this incredible founder relationship for decades upon decades but in in private equity and like I feel like the way I think about it is like as a seed stage manager I'm like a lower bottom middle market private equity firm and the way private equity works it's like you sell to a firm that sits slightly above you in the stack.

1:39:16Turner Novak:And then you sell to a firm that sits slightly above. And you might do that like four times. And then it's like a public company. And that's like a super common. Like there's like five secondary transactions of the asset. It's like 60, 70 % of how people exit in that market. Yeah. And so you think over the next decade, this is just going to become like, is it maybe even today as a venture manager, you got to think about this. I don't think venture funds have a choice anymore. I think they used to have one until for five years, there's five to 7 % DPI coming out of the funds. If you're in year like 10 and your fund has like 20 % DPI, nobody's going to give you any money.

1:39:58Turner Novak:You would probably just need like an absolutely incredible asset in there to justify him not selling it, but you probably should have been trimming some overtime anyways to give you some DPI back. That's death to a firm. We have this one firm, which I can't even talk to anymore because it's like the fund was awesome. It was at like a 30 % net IRR. It was at a 4X. It was like four years in. I mean, it was cranking. And they had a bunch of SPACs in the fund, three of them, and they could have sold them all. and then all the SPACs melted, okay? And the fund's at a 0.8 with no DPI. And they could have realized like a 4X, it could be 400 % DPI.

1:40:50And the only reason why they didn't, they just decided to hold. I'm sorry. And it's just frustrating like as an LP because like I would talk to them and be like, just sell your fund cost out. Just take 25 % of your securities and sell them. Keep the other 75%. Just give us our money back. You're out of 4X. That's great. You're out of amazing gross and net return. You're a home run. You just won. You won the lottery.

1:41:25And the care and interest in that thing, it was like$200 million. So if you do the math, it was like$700 million of profits. It was$140 million of the GP that's now zero.

1:41:37Turner Novak:That's insane. That's really unfortunate. How do you think AI is changing this stuff? Is there any development around the capabilities of LMs that's going to impact the secondary markets and maybe venture as a whole? What have you seen already? All this stuff's going to impact you and me for sure. It already has, I think. I think we've been implementing... We have this GSAI internally we use, and then there's also Copilot and some other technologies, and there's a whole bunch of new stuff coming down the pike that is making underwriting easier, better. And we also are... I think sourcing is also going to become much more improved.

1:42:27I think the entire process of sourcing, selecting, underwriting, transacting, exiting, even with the different secondary categories and segments we talked about, some of it could be more automated. like if you just dropped your fund uh uh documents into quite an lom that was my own and you just like uploaded your audits and your lp reports for the last five years and all your one-pagers and all your financials and all your companies everything like that i just like would spit out a price or maybe i would help you value the portfolio i could actually have a statistical analysis of all that data.

1:43:18Turner Novak:Oh, that'd be helpful. Yeah. Where you are in your capital calls and distributions and your IRR multiples and at what points in time do you need to sell certain things or restructure things to get you and manufacture a 18 % net IRR on a low case so that you constantly are doing distributions and having a minimal return to meet the threshold of what your industries want so you can manufacture it out if you have good assets if you obviously have bad assets no one's going to buy anything but if you have like good companies that are compounding that you could kind of use it to like continue to optimize that multiple dpi irr matrix that'd be a very easy thing to do well i mean it's it's just like a lot of of work with all that.

1:44:05Turner Novak:And maybe if it's like a new relationship, you can just be like, to your point, give us all your stuff. We'll digest it all. And now I'm all be like, you know, this is directionally pretty interesting. Spend some time. Well, thanks for coming on the show. This is a lot of fun. Yeah, it was great to see you. And thanks for having me. And thank you for listening. Thanks again to this episode sponsors, Flex, Numeral, Amplitude, and Merge. If you enjoy this, please like, comment, subscribe, and share this in the group chat where everyone can manufacture some liquidity. Make sure to check out the back catalog of over 100 episodes with investors like Gary Tan at YC, Alad Gill, Chathan and Eric at Benchmark, and the founders of companies like Robinhood, Sweetgreen, and Mercury.

1:44:42Turner Novak:Tune in over the next few weeks for conversations with Peter Rahal, who started RxBAR and David Protein, Michael Tannenbaum, the CEO of blockchain lending company FIGURE, and my friend Shensi Ding at Merge. If you don't want to miss any of these, subscribe to my newsletter, The Split, linked in the description to get each episode plus a transcript emailed directly to your inbox every week. Thanks again for listening. See you next time.