Kleiner Perkins and Penn’s Endowment on India, loss ratios, and the rise of secondaries | E1919

0:00Welcome back to this week's liquidity podcast. This week we have quite an all star cast with us. With me today, I have Mamoun Hamid, Managing General Partner at Kleiner Perkins, Thomas Scriven, Managing Director at the University of Pennsylvania Endowment, and of course, none other than Jason Calacanis from the Launch Fund and co-founder of the new Liquidity Conference, which is coming June 2nd to June 4th, liquiditypod.com. I'm your moderator, David Weisberg, co-founder of 10X Capital. Today, we have three topics on the docket. Middle East and sovereigns are setting their eyes on India. Carta has released their data on the 2018 startup class, and there are some surprises there.

0:39And the rise of secondaries as a large asset class, is it just something in this market, or is it here to stay? And we'll end with everybody's favorite segment, which is the last three investments from each of our guests. Let's dive right in. TechCrunch is reporting that Abu Dhabi sovereign wealth fund Adia is in talks to lead a new investment in India-based Pocket FM. This comes on the heel of PocketFM's$100 million funding from Lightspeed. This comes as many investors are writing fewer but larger ticket-sized checks into Indian companies. Mahmoud, you were born in Pakistan and are very familiar with the South Asia ecosystem.

1:18Are you bullish on India today? I am. I love India as sort of the next frontier of investment. and it really frankly has been for the last 15 years or so. You know, you've got 1.4 billion people. You've got a burgeoning middle class of, I think, close to 500 million. English is a spoken language that kids learn in primary school. It's quite the phenomenon. And I think I'm really bullish on India going forward. What do you think has been the source of a couple false starts? There's so much potential in India. What have been the false starts? You know, the last time I went back to India, or as you mentioned, born in Pakistan.

1:58So after 2008, I haven't been back. I would say my reflections were the infrastructure lacked. Roads, bridges, traffic. And I think there's still issues, but my understanding is that there's been tons of infrastructure improvements over the last five years. You go to a city like Hyderabad and it looks like it could be Silicon Valley or it could be New York City. And so I think there's been a lot that's happened on the infrastructure front. And also having strong leadership matters a lot. And India has had quite a bit of that over the last decade. Yeah, India is a fascinating country. There seems to be a couple of very important trends, Mamoun.

2:43Population is underestimated, I think, by a lot of people. They don't realize now India is larger than China, right? 1.4 billion people. And everybody seems to still think, you know, that there's a comparison there. China has negative population growth, right? Like they're contracting. India still growing. And the really interesting thing I think in India is the percentage of the population that is now living in cities. So the urban population now, it's getting close to 40 % of people are living in cities. To your point, Lamun, this is where infrastructure, a middle class, all start to emerge.

3:20And one in six or seven people, one in 6.5 people live in the world in India. So this is the giant market of all giant markets. Obviously, they don't have the spending power yet. And a pretty functional democracy, not perfect, but functional enough. Certainly more functional than, say, China, which is a communist country. So it has all the setup there. The education, tremendous. this English speaking, I think probably the most interesting thing, and I don't know if anybody has the statistics on this is, I've been watching these Android phones in India, and a lot of the richest guys in India now, it seems like their wealth can be traced back now to this, these affordable Android phones and service.

4:03So it used to be people just didn't make enough money to have an Android phone. So instead of the population just making more money, which has been slowly happening they drop the price of service down to a couple of dollars a month and my understanding is it's like a 15 to 25 android phone is available and with unlimited internet so you know you you put a a cheap android phone in a billion people's hands it's going to be quite a market and it's going to be wild to see what happens yeah may i just maybe add to that is india isn't just uh one homogenous blob it's uh i think like 20 plus states almost like 30 different languages uh even though hindi is a predominant there's like the other 50 is other languages so it's not a homogenous place and i would also add that uh the the west and the south is where the action is and the north and the east is where it's a little bit different so uh different uh you know gdp per capita and economic growth and especially through tech yeah and the large deal size what do we attribute that to i'm curious just people wanting to make safe bets i guess maybe they don't have boots on the ground as much as they would need to to make earlier stage bets yeah i think big obvious opportunities uh in telecommunications industrials um in education etc mamoon do you see indian startups fundamentally build around different use cases and different startups?

5:35Or is it just kind of the US ecosystem translate into India? I think the most successful Indian startups have been the ones have addressed the local market. You look at a flip card, and others, it's what we haven't seen as much, although there are examples like Freshworks of companies that have built for global scale, have built products, software products that sell all across the globe, like any american startup that gets going here take a slack or figma you know they build for global scale i would say the first wave of successes has come through companies that have done providing a digitally enabled product service flip cart you know grocery delivery food delivery amazon etc that first wave of internet innovation and uh but we're seeing a lot more of companies that are going way beyond just serving the Indian population and building software for global consumption.

6:31And Thomas, you literally just came back from India. What are your views on the ecosystem today? Yeah, I mean, it's really interesting. We've been invested for 15 years on both the public and private side. And I would have said until recently, it's really been a tale of two stories. We've done exceedingly well on the public side, where we could take advantage of our duration of capital and the volatility in the stock markets. And the private side has sort of been a tale of sort of unfulfilled promise. And I would say for the first time, one, I completely agree with Mimoon's comment on infrastructure build-out.

7:06You can really feel it, as in Mumbai, and they just opened this new highway along the waterfront that now truly connects southern Mumbai and similar things in Delhi. What gives me sort of hope is, and it has less to do with some recent venture-backed IPOs, because that's still not enough to back a venture ecosystem. It's really the revenue traction we're seeing in our portfolio companies. I still remember a trip in 2015 to one of our partners. And frankly, I was quite shocked how little revenue traction there was after all of these years of investing. I think they had two businesses that had cracked$100 million, so net revenue.

7:45and then more broadly in India, even if you hit product market fit, you're sort of plateauing at 20, 30, 50 million of revenue depending on your business model. Fast forward to today and that same partner is sort of 40 plus businesses with 100 million net revenue. Third of them are profitable or breakeven. And I think it's when you see that sort of change in addressable market, which I think has been one of the big hindrances for India the last few years change is what gets us excited about taking a bet on the next decade. And our perspective is we'll put more money to work in India in the next few years.

8:22Yeah, it's going to be a little bit of time, I think. I haven't actually been to India. It's super embarrassing. You know, so many places to go in the world. I'm spending a ton of time in the Middle East. But every time I'm in the Middle East, they reference the bridge that, you know, oh, Abu Dhabi, Doha, Dubai, Riyadh, we're very close to India. And if you look at the populations in those countries, the number one population is typically Indians and Pakistanis. And so there's a lot of cross-pollinization going on. And I think a lot of the entrepreneurs are looking at each other's markets, whether it's Egypt and Pakistan, Sri Lanka, India, and they're kind of thinking of them and the employees as kind of fluid.

9:03it's becoming a little bit of a block in that area. And it's been explained that way to me by the capital allocators in the Middle East. So I think that's super interesting. But when you look at the top market cap companies in India right now, it's oil, you know, oil, gas, steel, banks, the very few, you know, technology companies have hit scale there yet, which is probably the opportunity we'll see. But, you know, Infosys, I guess, is one of the top 15 there. but most of them are banks and industrial right so it'll be interesting to see the education system is the one thing i'm really interested in i don't know if anybody has insights into the ecosystem for creating entrepreneurs specifically because it's one thing to create computer scientists accountants people who work in business processing it's another thing the entrepreneurial spirit that i don't have enough insight into and thomas i'm curious what's the entrepreneurial vibes there?

9:59Like if you go to Dubai or Riyadh, you know, they're really like championing entrepreneurship. You go to Sydney, you go to Melbourne, really active entrepreneurial community. What's the entrepreneurial community like in India? Well, I think top down, the government supports there and you can see it in sort of the public market regulations that are trying to make it easier. And I think they would love to see tech companies not represent this 2 % of market cap, but a lot larger. So I think you have to support from that side. I think culturally, it's a big change. Risk-taking, not becoming a doctor is still similar to, you know, the process Europe goes through is still, is probably still a hindrance.

10:36I think what's really going to help is repeat entrepreneurs and people pointing to real wealth creation coming out of the tech space. And I think we're starting to see that happen. And the more that happens, that becomes sort of the flywheel that it's culturally acceptable to take risks um when you're in your 20s and 30s certainly happened mamoon in australia with atlassian and then canva you know you have now this uh diaspora i guess is the right word of you know those founding team members going and starting other companies is is flipkart the company in india that's that's causing other founders or uh that diaspora founders um i don't have too much insight into where flipkart founders have gone on um uh but but just to give you a sense i think the the indian entrepreneurial spirit is alive and well uh i i mean i just looked at um almost half of the founders that i work with are of indian backgrounds or south asian backgrounds whether it's indian or pakistani but predominantly indian in america in america yeah and but i i think if you you asked about the educational system or uh uh just to talk about that i mean the success of the iits uh yeah you know and that just goes back not just like the last decade or two it's we're talking about like 40 50 years of producing exceptional folks like going back to you know vinod kosala who graduated from iit in the 70s i believe so these are the institutes of technologies right like this is a the category or is it specifically iit iit the institute like the institute indian institute of technology across i think seven eight campuses maybe more i don't know exactly but they're spread across the country uh they're probably harder to get into than mit or harvard and uh they are just exceptional at producing talented people and i think turns out i think most folks like majority maybe more than 50 let's say come to the u.s for master's phds uh so just incredibly talented um folks wow there are 23 indian institutes of technology okay i didn't realize it was that big it's incredible how large it is i wonder also you know since we're on this if the best entrepreneurs in india leave to come to the u.s because the capitals here you know and the and the and the talents here i wonder if that's going to change over time because it could be a little bit of selection bias mamoon like yeah you're working with the ones who are like hard to make it work in india bigger opportunity in america well there's always the question the brain drain like so you have these 23 institutes where you have these incredible people leaving their country of birth and coming and building incredible companies here great for the u.s uh is it great for india what i haven't seen as much is folks from here the founders i work with saying hey i'm raising my hand i want to go back to india and build a company there no boomerangs so no not a lot of reverse brain drains i've seen that more from the chinese diaspora than from the indian diaspora yeah and this is where i think immigration thomas so important for the u.s to get right we're putting aside like politics it's pretty easy to get in the u.s if you come illegally try to come legally and start a company and man if you could just pay five thousand dollars to a technology coyote who would bring you to the u.s that'd be pretty amazing but instead you have to like go to canada first and so it's incredibly frustrating i think for all of us as capital allocators to not have the immigration easier and more fluid for these talented people that's i think both mamoon and i are glad we found a way to get get to this country so uh we totally agree all of us wow this keeps happening to me every time i'm in a group of four i'm the only person born here i'm like seventh or eighth generation irish we we were in the five points in uh lower manhattan so so you've got the swiss the german and david you're you're the what russia russia russia russia okay all right there you go all european passports now american welcome to this great country everybody yeah i love this next topic still a great country Speaking of great countries, part of that story was around sovereign wealth funds.

14:57And Jason, you alluded to it, they're really coming in a big way. Thomas, in many ways, sovereign wealth funds compete with the largest endowments like Penn. How do you look at sovereigns in the space today? And what are they trying to achieve in their strategy? yeah and i think we differentiate quite a bit between the sovereign wealth funds i mean i think there's those that have been investing in private markets for a long time and and specifically venture and then i think there's a lot of new entrants and probably say it's reflected in the quality of the respective teams and how we think whether they are sort of an enduring part of the venture ecosystem going forward or not a lot of them focus a lot more on direct investing into companies and then there's some that sort of compete with us on the fund side.

15:42And I'm not sure competition is actually the right word. They're writing a lot larger checks, right? I think one thing all of these sovereign wealth funds have in common is the sheer size. They have to put a lot of money to work and they have probably a slightly different cost of capital. So I think for us, it's probably, we don't think of them any different than other big pools of capital that have entered the market over the last few years. And if you go back a couple of decades, endowments were a very, very big part of the venture funding system. And today, in absolute terms, quite frankly, we're quite a lot less meaningful.

16:15That makes us worry, right? How do you stay relevant when your capital alone is not enough? And we spend a lot of time just saying, how do you be value added in a system like this? How can you differentiate yourself? And what does that mean in real life? That means when one of our partners is making the first drone investment, they should be introduced to Vijay Kumar, the Dean of Engineering at our school who runs one of the leading drone labs. Like if you're looking at healthcare software, you should know our CRO, CTO. And then I don't have to tell you guys, you get one or two value added interactions that are beyond capital provision.

16:51It's quite differentiating. And I think that's in a way the biggest influence a lot of these pools of capital have had on people like us. We need to redefine ourselves. else we can't rely on our historic reputation and just having a lot of capital we don't have a lot of capital in sort of the modern context um so we we worry a lot and thomas they they are in a way competition because when's the last time you've added a new manager right you have so many great managers on your roster that you very rarely add one and you what is the minimum check size for a new fund manager. So I guess that's like sort of two questions I'm curious about.

17:31How often do you add a new manager every year, every two years? And then what's the smallest check size you can write given your structure? Yeah, I mean, I think one, we're series A anchored philosophically. So I think it's less about competition. I think your second question, and we feel we have good access in that space. We don't add managers very often. Some years it could be numerous and next year it could be zero, right? And we expect our partners to be conviction investors. We're conviction investors. We find a small group of partners we trust a lot and know incredibly well and don't have to, quite frankly, measure them on quarterly marks.

18:11I think in venture, that's especially dangerous. This is a very cyclical business we're in. you want to know your partners well enough that in a down cycle you're comfortable with the strategy and in an up cycle you're comfortable with the strategy and sometimes good returns are luck and sometimes good returns are based on on on a strong philosophy and execution thereof so i i don't know if that answers your question but it's sort of it's an interesting bifurcation you know when i'm in the middle east i see all the young new managers you know and i don't see the kleiners i don't see sequoia i don't see and maybe they're there and i just don't see them but it just it tends to be like everybody who's on their second third fourth fund is in you know the the the typical cities from riad to doha abu dhabi especially and dubai and then when i see the existing managers are like yeah we we don't even go to that region that often and that's i think what's happened just as a function of and i'm just put this out here i'm curious mamoon's position as the venture ecosystem has now kind of codified into the legendary brands, the Kleiners, the Sequoias, and then the emerging managers in this new class.

19:22What I hear from the folks in the region, family offices in Saudi, you know, and, you know, Doha and Dubai and Abu Dhabi, Oman, they're like, yeah, we didn't have a seat at that table, we weren't able to lock in positions in those funds. So we're, we want to meet the new managers, and we're willing to write a five to $25 million check. And they see this as their opportunity. Like one, one very, very, very high profile person said, this is our opportunity to get the seat at the table. So I'm curious when how you think about it, because when you took over Kleiner, like there's a roster of LPs, you don't have to add LPs, right?

20:00Because you're keep the fund size reasonable, you're probably oversubscribed, I would guess. Yeah. And just on, you know, Middle East capital, and not only are their sovereign wealth funds, which are massive in scale, which actually have a problem investing in smaller funds because they're so sizable in terms of, we're talking about hundreds of billions, if not trillion dollars. And it's hard for them to invest in a new series A fund that's raising, let's say$150 million because just their minimum check size might be 100 million. So that's not going to happen. But there are a lot of family offices and other pools of capital associated with families that are in power or have built great companies there.

20:45And so I've heard a lot more of those folks who are building relationships with some of the more incumbent firms or the ones that have been around for a long time, but also seeding new firms. Because a lot of folks have been in the asset class also through their work at other places, let's say like the sovereign wealth funds, there's a high level of sophistication, I would say, around our asset class, right? And this is like, I think you've probably encountered it like on the ground. But my sense is that the capital allocators, they are very sophisticated. And this is not a, in fact, they sort of, when they see someone come over, it's like, well, don't think we're dumb money here.

21:24We see. They explicitly say that you're absolutely right. This is sophisticated capital. They've been, they've all been educated in the West. They worked at venture firms here. They worked at fund funds here. Totally. Yeah. They've done their tours of duty. Yep. And next up, Carta has released their data on the 2018 startup class broken out by the round of funding. Overall, more than 49 % of startups from 2018 are already dead. 45 % ongoing, 5 % acquired, and only 0.2 % public. Of course, this is a 2018 vintage. Mamoun, does this data surprise you? So just to clarify here, so if you started at the seed stage, 50 % are dead now?

22:06Is that how to read it? tracking outcomes for 3000 startups incorporated in 2018. So they were incorporated. Got it. Yeah. So they could have raised a seed or a series A, you know, sometimes if it's zero founders, they might have gone right to it's a funnel of sorts. Yeah. Yeah. So it sort of makes sense. Yeah. Like, after six years, if you couldn't go from pre seed to seed and series A, I think that probably captures about the right direction of the right way. I mean, I did a quick look on our own data and it's, you know, you'd expect us to be lower in terms of what's not hasn't worked out. But I would say directionally, that makes sense.

22:50And the number that surprises me is the M &A a bit, because there's a lot more M &A that happens, at least it's called M &A. and it may not have been a great outcome for investors. So our own data suggests that the difference between a company that closed and got acquired or acquired for a small amount is probably about the same, just as many companies get acquired for small amounts and just as many actually end up getting shut down. And maybe that's more reflective of our data where we have relationships with companies bigger companies or other startups that are looking to acquire teams or acquire companies so uh our data may skew a bit more than this it's absolutely correct mamoun i think here it says five percent m &a in year five or six that means one in 20 and i think the way they should parse this is meaningful m &a yes versus you know window dressing m &a it's a dark secret in our industry but you know and it's not done for i think nefarious reasons just sometimes founders like to have like um you know a graceful exit of their startups so they have a soft landing they get sold it gets put into m &a but it's not like a big company buying a big company for a big number it's maybe the investors get back half their money yeah one x yeah best yeah so yeah Yeah, this tracks.

24:19We're pre-seed investors, so we expect a much higher rate. Probably half of our baby turtles don't make it to Mamoon Series A, right? And then this is, I think, one of the things you have to look at when you're assessing venture firms. I'm an LPN 24, different firms from my family office. And, you know, if you're Series A to Series B, that's one statistic. But pre-seed or accelerator to pre-seed to seed to Series A, the attrition rate is like 90%. So you just have to understand which cohort you're sort of tracking between here. That's why this data is not super helpful because it'd be really good to see how many – you really want to see how many accelerator companies made it to seed, how many seed made it to A, how many A made it to B.

25:04Right. That would tell a better story. I think this data skews super early, right? So I don't think these are particularly surprising numbers. And I think if we set pre-seed to a proper institutional series A, if you had a graduation rate of 30 to 40%, that'd be pretty good. Mamoun, a lot of your peers, some iconoclastic ones like Founders Funds say they don't care as much about loss ratio. They're looking for the next$100 billion company. How important is loss ratio to your portfolio? Don't dwell on it, actually, at all. I would say you got to make every investment count, especially if you're writing a$10 to$15 million Series A check.

25:46There's no such thing as like, yeah, one in three of these companies will work out. I think every investment that we make, you go in with conviction, you're on a board of a company, you're trying to make it work. and you've come at it with a prepared mind to actually invest in the company. And most of us, when we lead a Series A, we know something about something to invest in that company. So if we're talking about three years out, it's a shutdown. We've done a few different things when we made the investment. So the graduation rate from where we typically engage at the Series A to a B, I would say is almost like, it's got to be like 90%, if not more, and to Series C.

26:27so it is way different than this data would suggest and that's why like our funnel looks a bit different and the mortality rate is just way lower yeah and our mortality rate is incredibly high you know when you run an accelerator or a pre-accelerator like we have half the companies i would say that go on to raise money have done a minor or major pivot so in fact we came in with a prepared mind we love the team we like their product velocity we like you know um you know we have 13 qualities we look for in early stage companies. The team, if they are a serial team, have they raised money before?

27:04Is it world-class design? Are they builder founders? Product velocity, a bunch of different things. But the truth is half of them pivot, whether it's Y Combinator or Launch or Founder University. People are doing a ton of pivots during that period. what i have learned and fixed in my game as a portfolio manager i'm interested in hearing thomas's uh view on this as you know when you work with managers like what they learned and after a couple of three funds and a couple hundred investments i realized i had a leak in my game i always had great affinity for the founders who don't give up and would always like to give them the financial support of that 100k for their next bridge round or the 50k.

27:49And it was really meaningful for them because they could say, Oh, Jake, I'll put 100k and 50k. And he's still supporting us. And what I realized was, I could put that 100k into another bet. And that would be in the better interest of our fund and our team. And so now, I have tightened the reins on that in the last fund. And I just told our team, we do not do bridge rounds we you know evaluate uh we only invest in the top five of our top performers and these are the specific qualities we're looking for if they're not in the top five percent they don't qualify for that and we'll have 200 names in this last this next fund um which means that's 10 companies and so our job is just who are the 10 companies out of 200 that are the breakouts and how can we put another million or two million dollars and get to 15 ownership in them and we are now i don't want to say cutthroat but we're very clear about the founders coming in we are not permanent capital there are other funds and we only invest in the top five percent of our portfolio so yeah i mean i think the reality is we the ecosystem is better off as an investor you're definitely better off if businesses fail early and capital concentrates and talent concentrates and in the business models that are sustainable that's of course a hard thing to convey to founders.

29:05But probably in reality, it's also better for them. If you can't pass the litmus test of convincing third-party capital and another set of investors, you should probably ask yourself some questions. So I completely agree with your philosophy. Yeah, so this is the key. You're actually not helping them because they need to prove to another set of investors and they need to underwrite the company and put a value on it. When you come to us at constantly for capital, you know, that's really problematic for the founder, they need to prove it with another firm. And yeah, we've become so much better at this.

29:45And I look at my first three funds, and I'm just like, if I had, you know, just taken, let's say 10 bets away in each fund, and put those 10 bets, which don't seem like a lot, right? When you're a seed fund 50k 25k 100k, it's not a lot of money. But if those 10 had gone into Robinhood, Calm, Density, Superhuman, you know, Uber, Robinhood, you know, like, oh, my Lord, if we had put that money into the Series B, instead of being a 5x fund for the first fund, we would have been a 15 to 25x. Just if we had made one more bet on the next round of Superhuman, Calm, etc. And we had liquidation events in some of those companies.

30:24So, you know, it's actually real money that could have happened. And I think that portfolio strategy is the thing that young fund managers don't there's not enough emphasis on fund strategy mamoon what is your fund strategy and your follow-on strategy yeah it's been pretty clearly articulated to our uh lps and hopefully thomas knows about it too but we tend to actually invest most of our dollars up front in that first round that we do the series a and uh we try to go in with conviction and write a sizable check to get to the ownership we want really which is what number ideally uh you know used to be 20 uh jason you know it's come down over time and it's you know you'd be pretty happy if you got to 15 these days on a series a right and 10 is typical right sometimes 10 is yeah it's like that's the really low end of uh where you going to be but yeah let's just say 15 so and our fall on strategy is uh you know typically it's a good company it's getting uh a lot of interest from other investors and uh they raise a really good series b and we actually in most cases won't do our full pro rata um we're trying to cost bring our cost basis down on our overall investment or we decide we love this company so much and we'll actually use our growth fund to double down in the company and make an independent and new decision to invest in that company with a separate team in making that underwriting yeah yeah or doing a new it's the same team but we're doing new underwriting uh with a a second partner on it to help the underwriting so that you're not going native on your own company uh but it isn't a let's just say uh we're not using that to do like prorata decisions on a fund like you know you own 20 % of company, it's raising$100 million, and your parada is 20 million.

32:21You're not just lazily walking into like, oh, let's just do a parada out of our growth fund. That never happens. It has to be a new decision that's being underwritten to actually lead the round in a growth stage or even a series B or C stage company, which we do very selectively back to your point of concentrating. If you know you've got something, a winner on your hands, Like, why would you not concentrate more? Because winners tend to follow the power law and series B is still early. Series C is still early. But typically on follow-on investments, just to give you, like, you're looking for leverage from outside or new investors when, you know, it's a good company.

33:02You just don't know if it's going to be an absolute home run. What about like a WhatsApp situation? Have you ever been in a situation where you've done, and I'm curious, Thomas, your thoughts on when you see a fund manager do this? we did the series a we're going to do the series b because this is so good and then is there an upper bound to the percentage ownership you think becomes unhealthy so thomas or mamon i'm curious happy to take a quick look thomas but yeah we've done it quite a few times uh with uh and that's just to give you a sense our growth fund almost half or even more of the dollars end up going into our best early stage companies so we're constantly doing the double down and increasing at ownership in what we believe are our best companies max ownership is there like a point which becomes dysfunctional in your mind i think you know these days you're not going to get more than 30 so um yeah if you're if you're we have a bunch of companies that are in the mid mid 20s um and but i think i don't i can't think of any where we're over 30 yeah what do you think about that strategy thomas no i mean i think there's really two two ways to create a top desk out of fund.

34:07One is you have high ownership really early on and or you double down correctly, right? And so from our perspective, we're over diversified. So what we want to see our partners do is develop conviction, take the closeness they have with these entrepreneurs and the businesses and pick those winners a little bit ahead of the market. And if they can do that, I think that they can outperform. You didn't ask the specific question, but I couldn't care less if a fund is 25 % in one single company. That's great. That gives me a great look through exposure. And I know my partner is really putting their reputation at stake.

34:47That one has to work out. That one has to be an exciting company. So I think we're very much aligned. And I think the later you go, the more high conviction you have to be. You can't talk about loss ratios anymore. So I couldn't agree more. You're seeing these simulations play across multiple portfolios every year. Do you see a correlation between high ownership and high returns? Are those high ownership percentages significantly more likely to outperform? I'm not sure I can actually run the numbers on high ownership. I think there's not much correlation on high loss ratios and successful funds.