LIQUIDITY: Major challenger to OpenAI, xAI, closing on $6B in funding | E1944

0:00All right, everybody. How are you doing, David? it. Doing well. How are you doing? How about those Knicks? Man, a long-suffering Knick fan. We got a little brief moment of joy during the Carmelo era. And before that, it was obviously Patrick Ewing and the Charles Spreer, Alan Houston, Oak Mace, all that great time period in the 90s. This is my favorite Knick team since the Ewing era. It's right up there because the heart they play with, the grit, none of them were a top 15 pick. We're taking apart the MVP of Philadelphia, but I just want to say to the people of Philadelphia, you're the sixth borough now.

0:33We own you. And that's it. It's our town now. I'm joking. Did you make it to any of the games? Yeah, so I don't go to any Knicks games during the year. So I season tickets. So I kind of treat myself because when they get to the playoffs, I save up all my Knicks ticket budget for the playoffs. And I made friends with a guy named David Adelman. He's a really, really gentleman and a fun guy. We met. actually remember the party we had at uh eye connections conference in miami yeah he was at that party which was a pretty cool party i mean don't say where that party was but in terms of elite attendees that was pretty crazy yeah and so my friend antonio gracias from valor introduced me to him you know we've been texting back and forth about the nicks in philly we had a dinner bet a dinner bet two of us uh one pays for dinner then he asked me am i coming to the game and i talked to my wife and i was like you know i just got invited to the game you know i'm kind of making this new bromance and so sure enough she gives me the the pass to go uh my nicks hall pass as it were and i zip zip zip to philly and there are and i'm gonna buy a courtside seat for myself but there were four seats behind the next bench that's my favorite seat in the world like when i go to the warriors game i love the seats right behind the warriors bench because i'm into the game i like to see them draw the plays you want to smell the sweat yeah i just want to be i want to be like i'm the coach you know or an owner someday and so i'm there and it was game four was unbelievable after like games one two and three being unbelievable and then i went to the garden for game five and i watched that four point play and that whole thing and then i was gonna go but i had to get back to my kids and i was gonna go to the game last night but i think it's taken about four years off my life but man that was one of the best series i've ever seen in my life and i just think that that kid maxi is is an all-star man there's a lot upside there and joelle's a warrior i mean i don't like some of the dirty players if i'm being honest but what a serious did you do you watch the series how you guys i did and now it's nicks uh nicks pacers pacers are my team so you talk about the 90s that's my childhood well i didn't realize that because the highlight of my childhood yeah oh it's reggie miller on the pacers uh so anyway i mean we were we were going to sweep the pacers obviously uh but i'll talk to my i'll talk to brunson on the um on the group chat and i'll just let him know we'll do the gentleman suite we'll let you split a game okay when we go to your arena we'll let you win one and then we'll just do the we'll let the games do the talking oh do you want to make a dinner bet david would you like to get it on the action because jake i was gonna be eating i have looked up the odds okay so straight up dinner bet max per person is one thousand dollars okay per person so it's basically like a two dime bet that's not the better with david by the way it's just we're like gonna do philly cheesesteaks or new york pizza but you want to make that nobu you want to make the omokase bet You feeling bold, David?

3:17Straight up. Let's do it. Let's do it. Okay, there it is. Omo Kase Bet. Omo Kase Bet. And you know, listen, that can get dangerous. All right, let's go. Can we start the show here? We've got so much to talk about. Big, big, big week. Let's get started. This Week in Startups is brought to you by OpenPhone. Create business phone numbers for you and your team that work through an app on your smartphone or desktop. Twist listeners can get an extra 20 % off any plan for your first six months at openphone.com slash twist. Netsuite, the number one cloud financial system, bringing accounting, financial management, inventory, and HR into one platform, giving you one source of truth.

3:57By popular demand, Netsuite has extended its one-of-a-kind flexible financing program for a few more weeks. Head to netsuite.com slash twist. And Adio, a radically new CRM for the next era of companies. Head to adio.com slash twist to get 15 % off your first year. Welcome back to this week's liquidity podcast. With me today, I have Joshua Berkowitz of Berk Corp, a family office LP and to some of the top VCs. Next, we have Donald Stalter, partner at Global Founders Capital. And of course, we have Jason Calacanis from the Launch Fund. I'm your moderator, David Weisberg, co-founder of 10x Capital.

4:38Today, we have a really exciting show. We have several interesting topics on the docket. We have Elon, your friend, Jason. His OpenAI competitor has raised$6 billion. Now we have data suggesting that VC emerging managers, managers in the first three fund, three vintages of their fund, are outperforming established managers. And we'll end, of course, with everyone's three latest investments. Let's dive right in. Elon Musk's AI competitor to OpenAI, XAI, has reportedly increased its round size to $6 billion for their upcoming raise. Jason, you and the besties discussed Zuck's scorched strategy, scorched earth strategy on the All In podcast.

5:18What do you think about Elon's aim with XAI? Well, I don't have any inside information. Disclaimer, disclaimer, disclaimer here. Just zooming out a bit. I think what we're realizing is a lot of these LLMs are going to be commoditized, right? And they're going to do an equally good job at whatever your task is. So we've seen this with Meta releasing their open source project. We saw it when Claude leapfrogged, you know, chat GPT 3.5. So what I see from startups is they're willing to swap these things in and out. So then what's left? I think, you know, having a unique data set, say Twitter, Reddit, Gmail, if you're allowed to use Gmail, I'm not sure, YouTube, I'm not sure what their terms of service allows them to do.

6:05So being able to have a unique data set combined with that gives you the ability to make a unique product in the world. But there's a big gap between how much money is being spent and the amount of revenue being generated right now. So some of these companies are losing very large amounts of money because it's so capital intensive. And it's going to be a war of attrition. And I think that's what we're starting to see here is who can raise the biggest war chest, who can build the biggest cluster, who could have the biggest data set and it looks like you know licensing data sets is becoming something that open ai is starting to get better at i saw this week they did ft obviously they're at war with the new york times who could probably win an injunction against them i think um given how debt to rights they have them so you put you put all that together um there's going to be three or four at scale players here and then there's going to be a bunch of open source verticalized ones i'm happy to leave those giant opportunities to the giant players sovereign wealth funds it's not a venture game this is like this is a game for amazon elon tim cook you know sundar this is not a game for vcs and and most lps there's a rarefied era of lps specifically sovereigns you know maybe on the margin some high net worth individuals like let's say a larry ellison who likes to make bold bets but most high net worth individuals that they don't like to make billion dollar bets and so it's going to take a lot of money uh it's going to take a lot of time and i think what everybody's playing for is you know some version of agi a generalized intelligence and so i i i've told people before never underestimate since we've been friends for close to three decades now not the person you want to underestimate he will be the number one two or three player in this and if you make this bet and this is not investment advice uh you will have that in the number you'll have you'll you i think by default if you back elon you'll you'll win the gold the silver or the bronze and if you look at his companies he got the goal with tesla got the goal with spacex so and i think you know neural link is a little bit young right now i think there's no the medals haven't been given out yet a pretty good track record of winning the gold so if you're going to place a bet that's probably the best possible individual you could place a bet on.

8:31And I'm not just saying that because we're besties, but it's just the objective fact, right? And I'm interested in what our panel thinks. Yeah, I think the difference between this one and his other companies is this one, he's coming from behind. With Tesla, it was effectively the first electric car company. It was SpaceX. It was the first private rocket company. I think the same goes for the boring company Neuralink too. He's got a big lead to come back from here. And his competitors are else is super well funded. So not saying you can't do it. It's always scary to bet against Elon. But I think the starting position is very different here than in the past.

9:01That's a great point. Yeah, I'd agree with Josh on that. At the same time, it's interesting. Elon's got this network of Tesla, Twitter, Neuralink, Boring Company, and all these others who he's umbilically connected with. And so he's got this proprietary data set, especially from X, where he's able to build out Grok. He's got sort of this open source platform. Good luck, Mistral. I feel like he's going to be able to leverage a lot of his network to come at it from a completely different angle. I think he's a sci-fi fan, obviously, and thinking about Neuralink and its connection to this new technology is exciting, if not a little bit scary.

9:40So I think there's a massive vision behind this that we're probably all not that familiar with. But if you Google it, if you read online about it, there's definitely something exciting ahead. Juggling multiple devices and apps to run your business is a mess. OpenPhone is here to make it simple by simplifying your business communications with one easy-to-use app. OpenPhone has rethought every detail of what a modern business phone should be. And here's the magic. It works through a beautiful, elegant app on your phone, or you can just use it on your desktop, making it super easy to get a business phone number for your entire team.

10:16And you know how brilliant OpenPhone is? My teams use it every single day. My sales team loves it. My ops team, they use it all day long. And here's the features that we love. You can create a shared phone number, like customer support, with multiple employees fielding all the calls and all the texts to that one number. At my investment firm launch, we pride ourselves on replying to every single call or email instantly. And OpenPhone is the number one rated business phone on G2 for customer satisfaction. So here's your call to action. Super easy. open phone is already affordable starts at just 13 bucks a month but twist listeners get an extra 20 off any plan for the first six months at openphone.com slash twist and if you have existing numbers with other services no problem open phone is going to port them over easy peasy lemon squeezy no extra cost head over to openphone.com slash twist to start your free trial and get 20 off in terms of coming from behind you know he was the co-founder of open ai so in a way he kind of was first to the party again it just got a little weird with this opens uh with this uh open source turning closed source etc you know another major issue here is what's going to win the day open source or proprietary data you can look at a lot of different categories and say open source uh wins but there's a lot of categories where we're being closed with wins you know you look at google search that's a closed you know black box of a system um same with tiktok same with facebook so a lot of these consumer products are closed black boxes then you look at the tech stacks you know it's obvious that like you know a lot of the open source projects just demolish everybody and and we're seeing that in corporate america now so we do have to think about if you're in corporate america and you want to compete pick a company lvmh i don't know walmart any company and they need ai they're going to use a proprietary uh platform where they're going to just get charged more and more or they're going to be locked in and they're you know could get rug pulled or i think it's gonna say screw it i'm forking whatever's on the open source deck right and i think in decade three of corporate america embracing open source and man i remember the early days where the it departments laughed at it we'll never use that blah blah blah and then all of a sudden it was like hey um uh you know for this small project we use this mysql open source we use wordpress for this publisher but hey we tried this thing over here uh this linux thing hey we're using some open source storage cluster we got this hadoop thing going and uh you know they use it for some small project like what did it cost and it's like well it's open source don't cost anything free but where's the license bill like no no we're hosting it on our servers it's basically free and they're like oh can we get some support for that they're like yeah there's a couple of companies that could support us, but we just hire two people from the open source project, here's a list of the people working and contributing on it.

13:04And they're like, oh, yeah, hire two people. So now corporate America knows this movie, and they know it's actually safer in a lot of instances to go open source. So I am fascinated to see if that plays out here. I'm interested in what you think, David. One way to look at this that's really drew my eye is Sequoia is leading a$6 billion round at an$18 billion valuation, essentially for an early stage pre-revenue business. And you kind of step back and think about why is Sequoia doing that. And the first thing that you really have to come to grips with is this is not a venture investment. This is a traditional growth equity investment.

13:41So something, a very different dynamic with a venture investment, you're trying to get the 100x, you're trying to return the entire fund with a power lot outcome. With a growth equity investment, you're trying to get more of a 3 to 5X with downside protection. But then you look at it and it looks absurd because how do you price in downside protection into a pre-revenue and early stage company? And then you have to really look at Elon's track record. Jason, you mentioned SpaceX Tesla. He's also had basically since PayPal, none of his projects have actually failed. If you look at SolarCity, Boring Company, Neuralink, even OpenAI.

14:17So I think Sequoia is really making a bet that this cannot go down to zero, there is going to be terminal value and downside protection. Of course, they're investing on a preferred share. But it is interesting to look at Elon, how he's able to attract this amount of capital for a pre-revenue company. And the next war is obviously going to be, can he win the war for talent? If he's able to win the war for talent against Anthropic and against OpenAI, he will be able to catch up very quickly. If he's not, I think he is going to have trouble here. Probably. It's a dogfight out there for talent, but people want to work with Elon and the artist working people who want to work for Elon and the people who are phoning it in are not going to last working for him so he's got a really interesting approach which is like you're all in or you're out right I think um might be one way to say it and uh you know he has committed as he is and you know his commitment level is second to none I mean he's just a samurai in that regard and so and you know back to my analogy of gold silver bronze like he if he's if he gets the sense he's in second or third he's going to go into beast mode to get that gold and you know i don't know you can say that about a corporation with a hired gun ceo right they don't have founder authority they don't have to drive so i like your assessment david you know there's some downside protection here the track record i think also on the fundraising side he's sort of done And Elon's like two hype cycles in one with this, right?

15:45There's the whole LLM hype cycle where funds of family offices and institutions suddenly feel like they need an allocation to one of the big LLM companies. And that's sort of pushing capital into the space to almost all of the companies that are raising here. And then you have Elon himself, who is a known quantity. Lots of people want to back all over the world. And you put those two things together and you create a situation where there's so many pools of capital all over the world that want into this thing. And I've spoken to lots of big family offices that I would never expect to be interested in something like this.

16:18But because it's Elon, because it's LMs, you put them together, they feel like this is something they want to be a part of. Because it's just sort of so of the culture and of what's hot right now, rightly or wrongly. Yeah. I was also going to say, I think it's downside protected given its connection with the Tesla's, the massive public company that has a huge balance sheet. So ostensibly, a strategic investment or whatever could be in the cards. Elon can make decisions that no one else can as part of this business. So I feel like there's just a really interesting, very powerful sort of virtuous cycle.

16:53What do you think, Donald? You're on more cap tables than 99 % of Silicon Valley. What do you think about Sequoia being an open AI and then backing its main competitor, XAI? How do you look at that? Look, I mean, I think that Sequoia is in the business of making money for its LPs. And I think, you know, sort of cut and dry, they've been very, very successful with Musk over time. They've made money, as you said, and I think they probably also believe that they're going to make significant money on OpenAI. OpenAI is connected with Microsoft on another level, SAM is a force in nature. So I just view it as an economic decision more than anything else.

17:31Moving on. PitchBook just released a report titled Establishing a Case for Emerging Managers. In it, PitchBook presented a compelling economic case for investing into emerging managers, which are managers in their first, second, and third vintage. Empirically showing emerging managers have outperformed established managers between both the top and bottom quartile. Joshua, I know you're very active in the emerging manager space. why not just invest into the large multi-stage firms and tell me a little bit about your strategy yeah so first i would put this report in a category of reports that like this let's run a correlation report the results of the correlation and then make a whole bunch of inferences from that and so from like the gp standpoint it would be like hey there's a bunch of successful founders from stanford so let's only invest in stanford founders or mit founders or waterloo founders or pick your whatever um and so yeah there's a lot of really successful emerging managers?

18:26Of course there is. Does the fact that there's a positive correlation means you should only do one or only do the other? I mean, I think it's just sort of a really big oversimplification. It's interesting data, but I think it's one of many, many data points that should sort of help you figure out who you should back and why. So I just sort of start there. And then you go, what other data points are super big influences to this? Well, we know venture is a power law outcome. We know that the best venture capital funds tend to persistently outperform year over year. We know that most of the returns fall to the top 10 % of venture capital funds.

19:05And so each of those different correlations tends to push you to a different category of from to back. And which of those categories you want to back depends on your situation and status and who you have access to, right? And so if I had access to Sequoia, yeah, it would probably makes sense for me to put a ton of money into the big, large mega cap or mega VC fund like Sequoia. I don't. And most LPs don't. And so you end up playing a different game, trying to find really talented emerging managers to back. And luckily, they can perform really well too. And how do you know, a lot of people know about VC's portfolio construction as an LP, how do you construct your portfolio of managers?

19:45I tend to think the right mental model for an LP is you're investing in the underlying companies and you're using the GPs to do that and paying them 20 to 30 % of the profits for the privilege. If you believe that venture follows a true power law outcome, then what's unique about a power law distribution is that the more N you have, the bigger your sample size, in other words, the more investments you make, the higher your mean return. Very counterintuitive, it doesn't work that way. So as long as you can invest in great companies, you think you can invest, you should invest in more of them rather than less.

20:15And so on balance, I try to have a very diversified portfolio, as long as I can invest and find top GPs who I think are investing in top companies. That's sort of subject to, you know, administrative headaches and relationships I can maintain and what have you. But I sort of believe more is better subject to those types of constraints. And so that for me ends up being about 10 to 15 funds a year. All right, let's do some quick math, everybody. the less your business spends on operations and multiple systems and delivering your product or service, the more margin you have and the more money you get to keep.

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21:51By popular demand, NetSuite has extended its one of a kind flexible financing program. For a few more weeks, head to netsuite.com slash liquidity. That's netsuite.com slash liquidity. need. Jason, you're in a couple dozen funds yourself as an LP. What's your breakdown of emerging versus established managers? Yeah, I'm in two of the highest profile mega funds as a friend of the fund. When you're a GP who can provide deal flow, you can get some kind of unique access to those ones that are like the classic large ones. And then the rest is a long tail of 25 to 250K checks. And the reason I do it is I like to build those relationships and understand how emerging managers are looking at the space.

22:33In other words, it's really not even for deal flow because our deal flow is second only to Y Combinators. We're getting 20 ,000 applications for funding now. We're getting so many applications for funding as a 21-person firm that my team has said, please stop tweeting that we have meetings open next week because we want our response time to be reasonable. We've now gotten it to 200 applications to one investment. yc is investing in one percent we're now at 0.5 and the reason i did that was after a long heartfelt discussion with ruloff at sequoia and he told me what i was doing was you know he's been mentoring me for a long time on this i was obviously the first sequoia scout and moritz and doug leone and getting to watch you know jim getz and all this this group and obviously bill girly um as you increase the deal flow and i i say this thing all the time to new fund managers I tell them deal flow is destiny.

23:25It's like deal flow is destiny or deal flow is your denominator. And the more you can look at and the more you say no to, the ones you do say yes to have just more elite criteria. And so the other goal I've had is to, is to, is to get up the number of meetings. And, you know, I do learn some things from emerging managers about their approach, but what I found recently is, you know, I'm kind of doing it to pay it forward because the, lessons i'm getting are are not um you know they're neophytes in a lot of cases they're figuring it out so i'm getting less and less of like the knowledge exchange and so therefore i add one per year one new manager per year i get probably three or four hundred people contact me it's nice to look at the deck my team meets with 10 of those we meet with maybe 30 a year and we pick our favorite um and so you know i i i don't want it to be a distraction for me i don't do the meetings my team does them and it's an intelligence wisdom generating effort for us it's a way for us to just participate we have a saying that michael moritz told me very early on maybe 20 years ago no conflict no interest and so you know if you have some conflicts right and you're both competing for deals and i'm an lp like that messiness from the outside is actually a way of building a really deep web and not missing deals so you know when somebody's like i'm like oh who's investing like oh this person this person's but i'm like oh i already have shares in your company from these two funds that's really powerful right so now i'm already on the cap table i can have a really thoughtful uh discussion um i also think these emerging fund managers today are scrappier and more resilient and i would tell you it was the opposite for the last five years or five years before i i'll put everything as silicon valley bank uh bankruptcy like b s v b a s vb right that i i use that as my like before and after christ before well yeah you know uh s vb went down you know there's a lot of folks who were playing the role of venture capital it was almost like cosplay you know they're like sending me these updates and you know i'm like i forward to my one of my managing directors and i'm like oh are we an lp in this and then i'm like no i'm like oh i tell the person hey you know you sent me this update he accidentally put me on the distribution he's like oh no no no i have like 300 people on it who aren't our lps like why you're giving this data out or whatever and he's like yeah and they were up seven you know they were seven x on paper like year over year because of some crypto investment i was like if you're 7x sell half that position ppi three and a half lock in the wind he's like oh yeah no our tokens are locked up like for how long five years i'm like how much can you sell can you put it into an spv how do you sell some of course that went to zero so you know the lessons after 400 investments i'm on my fourth fund plus the sequoia fund so i would put the first three together so i'm kind of on my third fund.

26:29I'm just leaving emerging. I'm on the doorstep of being established versus emerging. And I like the ones phrasing money now. If you can raise 5 million, 10 million now, Sophia Amorosa comes to mind. Other folks are out there grinding. Love those grinders. Yeah. I mean, I agree with you. We've invested in maybe 20, 25 funds, emerging managers, and the ones prior to the market crash were definitely more of the hand wavy type. they weren't as hungry as dogs. As we see right now, we've got all these just hard fighting emerging managers who are bashing down doors to get into deals, learning about all the new industries that are emerging so rapidly, and just getting their clutches onto the best opportunities.

27:13And they're already inside companies like Stripe talking to people on the engineering team, figuring out who's going to spin out. They're already inside of OpenAI. So some of those emerging managers are really, really good. The ones that have come out over the past three, four months. I find that there's been a pretty big generational shift with some of the larger venture funds, the multi-stage funds where maybe they're not as hungry. Maybe they're looking at fewer opportunities and doing a lot more portfolio management. So from a deal flow source standpoint, the new breed of emerging managers has been fantastic, I found.

27:47And, you know, I think philosophically, you know, the piece that PitchBook put together, you know, would align with that. From a statistical standpoint, you know, it's probably just a, you know, small portion of emerging managers who are really that scrappy, who are really that good. Yeah, when you see Carta, PitchBook, all these folks putting out data, they all have partial data. I would not, it's no dick to either of those companies. Survivorship bias. yeah there's the data is incomplete so you know they do their pitch book they do the best they can but i'm more like talking to gps and then you'll get a better sense of this what i'm seeing because we have a list of 11 000 investors in the syndicate.com or syndicate investment club 4 000 have done an investment and then we have a list of 2 000 um venture capitalists from the top funds in a google sheet that we just give to our founders when they're in our accelerator or founder universe when after we invested and we give them that sheet and we have a fundraising process mentorship process that we talked to them about i invited all those to liquidity summit and we just did an email i was shocked at the number of people whose email addresses were no longer working or i'm no longer at this firm the i think there's probably been an attrition of between 10 and 20 percent of managers at funds and then there's probably another 20 to go that are kind of window seating or babysitting and just living off the trickles of the management fees.

29:13And they're basically zombie funds. I think we're going to identify the zombie funds pretty quick because we as a fund, when we introduce people to them, we say, we look for their last investment. It's a little trick, right? If we're going to forward somebody to another fund, we just try to figure out what their last investment was and the date of it. I think just also understanding how the ecosystem worked. In 2021, it was very easy to raise a fund. Tons of people did it. Venture capital became a very cool thing to do. And a lot of it was also enabled by all the liquidity in the growth stage.

29:43And that you had wealthy executives and early employees that were happy to plow the money back into the ecosystem. And often the way they did it was through emerging managers that were sort of tourists in the ecosystem. I think all of those folks, if they haven't washed out already, are going to wash out in the next few years. And while it will be sad, it'll probably be much healthier for the ecosystem to get back to the people that really, really do want to do this. They're committed for the long term. And quite frankly, there were probably too many venture capitalists, just as there were too many startups for a while.

30:14And so it's always painful to transition, but it's probably going to be good for the long term health of the ecosystem. Yeah. And what's been interesting is these multi-stage funds who are sort of dormant, raising their subsequent funds right now through big investment banks or through other parties, whereas you know that they're really not deploying all that much capital. That's something that we've had our eyes on and why we've enjoyed investing in really scrappy emerging managers. And I think we focus primarily on that. Startups and small businesses, listen up. You want a CRM that neatly organizes all your customer data so that you can avoid missed opportunities and you can deliver a personalized service.

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31:29It's also going to let you quickly build zappier style automations. If this, then that type of automations. The next generation deserves more than a one size fits all CRM. Join 11 labs, replicate modal and more, and get ready to scale your startup to the next level. head to adio.com slash twist and you'll get 15 % off your first year that's attio.com slash twist yeah and i think fund size really matters i think it's we need to talk about that as well i have the ability to raise decent amounts of money i have the ability to merge our fund with some like very large multi-stage funds and i looked at the economics as a solo on a solo gp anymore i have a partner now actually thanks if you know but as as somebody who's traditionally been a solo gp and now a bunch of managing directors and a very large investment team for a$50 million fund, because I don't need the management fees, right?

32:19Like I've already had some big wins. So I am focused on, I think I'm never going to raise a fund above 50 million, because I think it keeps you more focused to put 25 million into 200 names, find the best ones, you know, might be 40 companies coming out of there, give them, you know, 250k, 500k each, We talked about my portfolio management strategy before, and then find the top three, and then just put another$2 or$3 million into each of those. I was speaking with a really well-known seed investor just this week. His journey was the classic seed investor journey where he started off by raising, I think, a$10 or$15 million fund, writing$150K checks into early-stage startups with all his friends, raised a bigger fund after seeing some success, doing$300,$400K checks, and then raised, say, a$60 million fund, writing, I think,$1 to$1.5 million checks and leading deals.

33:13And that transition from this fund two collaborative checks to fund three, where effectively you're not competing with all your friends, meant that he couldn't work with his friends, meant that his deal flow dried up a lot, meant that he had much bigger obligations to all of the founders. And at a time where he thought he should have been feeling successful and like a winner because now he was leading deals, he just started hating the job. And so three years after raising that fund, he just like, you know what, I'm done. I don't want to do this anymore. I want to go back to basics. I want to go back to the collaborative checks, sort of rebranded this firm, what have you, and is now loving life and working with his friends again, writing the small collaborative checks at the early stage.

33:54And it was like a really, really interesting lesson. Because what the VC guys tells you to do is raise bigger funds, go from collaborating to leading. And I just don't think that's the right approach for so many people. You're so right. Donald, what do you think? I agree with that. I think that it's really about the energy of the investor and making sure that you're doing it because you love it, that'll help you get those economic returns. You have to make rational decisions around whether you're going to do a secondary at some point in time, call it an investment you make in the early days, or whether you're going to maybe double down on the next round like you do, Jason, in some cases.

34:31But if you hate your life, you're never going to be successful. So I think, you know, in this particular case, you know, with this manager, you know, I wholeheartedly agree that he should have retrenched. it's nice to have a hurdle that you can hit and get into the bonus for everybody your team etc and you know and also i find with the management fees it gets a little pernicious when you know you start layering them on top of each other and it starts increasing and then you're like oh there's a bunch of money sitting here should i hire another person or i can put it in my pocket oh you know it's like okay um i'm coming out of pocket for a million dollars in salaries a year because i have such a great success with the media side of the business that's very profitable i just underwrite like a million dollars a year in extra salaries because i'm like you know what i'm gonna hit you know more unicorns hopefully more decacorns and then someday i'll hit another 100 billion dollar company and this time when i do i'll own 10 or 15 percent of it not you know basis points and so it's very easy for me to do the math to contribute you know essentially a million dollars a year to my funds because i know the value that can come out of this and and that's where i find when a manager figures out like their economics and what they love donald to your point you kind of get very dialed in and you don't need these external virtue not virtue signaling but status signaling moments like i don't care about a tombstone that says we raised 300 i like what i care about is how many bets did we place and who are just get me the 20 breakouts and get them you know in uh get them to our jam session i want to spend two hours with them i want to hear about the business i want to meet the management team and so now it's like back to your point donald you have to love doing this because it's too hard and painful and arduous as people are learning and it's too stressful if you don't actually love it you're going to do a bad job about it i wake up every day can't wait to see that week which five companies my team thinks are the best out of the you know we're up to 70 first meetings a week and i'm like give me the top three four five and they get me them with a little summary a little mini deal memo we decide who goes to the next round you know of um meetings man it's so enjoyable um and and that is a critical critical part of life and specifically the life of a venture capitalist there's so many things are out of your control um so you have to focus on process the things you can control how many meetings you take how thoughtful your decision making is how hard you work for the company and then how thoughtful you are about doubling down and um you know it's it's it's not that difficult of a business if you keep it simple do a lot of meetings give a lot of no's and when you do invest just bust your ass to get them to pull through to the next round of funding and that's literally you know every time we talk to him and i tell you what i'm working on the thing i'm working right now on is pull through um which is what a lot of venture firms will look at they'll put tech stars y-combinator launch you know other accelerators next to each other and say how many of them get their startup to the next round of funding it's very low you know 10 or 20 percent made it to that next round of funding how many make it to series a now you're at five percent how many make it to series B 1%.

37:52And then for, you know, seed stage firms, how many make it to series A, you know, whatever, 30, 40%. For series A firms, how many make it to series B, okay, 50%, whatever it is. And so, you know, you have to get good at each of those functions. And process is what it's about. Yeah, I'd also kind of add that, you know, philosophically, you know, back to the kind of the happiness point, if you're happy, if you're enjoying what you're doing with your fund, then that's going to trickle down to your founders and you're going to be a great champion for your founders. You're going to bring that energy to your founders.