What is happening in VC today and the role of wealth management in growing the private markets?

25:16And I think that really needs to be significantly revisited in order for it to be a viable asset class for investors. Because you need to make money. You need to make cash returns at the end of the day. I think a lot of the marketing around venture capital and startups, it's about founders, creativity, taking risks, company building. But it's an asset. It's an asset class. You've got to make actual tangible money at the end of the day. All that stuff leads to making money. But people need to get some cash back at the end of the day. I forgot who put this on Twitter, but I think it was Josh Koppelman from First Round.

25:51And he basically put something and was like, what is the IR based on how long it takes to return money? And it was like, if I return 5X or 3X or whatever it is, and the longer it is, obviously that impacts IR. But to the extent that it almost makes the asset class non-investable, if somebody is a seed fund and holding for 15 years, a 3X is terrible. That's a terrible type of return, especially if most of those distributions are coming at the tail end in years 13, 14, and 15. And so I spent a lot of time thinking about secondaries, thinking about sort of the trends within secondaries, where venture goes relative to private equity.

26:35Obviously, last year was a huge secondary year with about$150 billion between GP-led and LP-led. Venture was a small piece of sub-10 % of that. That's changing. And so these are the things that fundamentally we have to think about as that this industry starts to really gentrify and become much more of a Main Street asset class. And I feel like they're talking about people being critical about certain managers. Like in private equity, I know I've seen the stat of like the average private equity backed company has traded hands like three times before like exits the PE industry. So it's fairly common in PE.

27:13It's like you've got a lower middle market fund that sells to a middle market fund or whatever. And then they hold it for a couple of years and then they sell it to like Apollo or Blackstone or an upper mega fund, bio fund or whatever. And then they might take it public or however it kind of trades hand or be acquired by someone. So when you talk about, you know, venture is just kind of borrowing from how hedge funds evolved, borrowing from how PE evolved. this whole like secondary and like you're getting liquidity from sort of within the same asset class. Like I feel like it's generally par for the course of kind of how other assets have evolved, other asset classes have evolved.

27:51It's good portfolio management. So when we meet with the managers, so part of what we do, as I mentioned, is curate opportunities. One of the key questions we do ask is what is your methodology of liquidity? Meaning when do you sell? How does it need to impact the fund? At what stage are you doing it? Why are you doing it? Why are you not doing it? There was a lot of emerging managers that raised funds in 2015, 16, 17. They had massive opportunity to actually get liquid in 2021 during these big growth rounds, by the way, many of those rounds will be the highest valuation that company ever receives because we're at peak syrup at that time.

28:36You look back and I met with a manager recently and I'm like, what would have happened if you sold every single company that you could where there was a secondary tender in 2021? This fund today is probably a 2.3X right now. And it would a dpi to north of forex and they sold you know some of the positions and i get like you want to hold like you don't know which companies are going to do but you could take some money off the table i mean your benchmark has done it uh usv has done it it's just proper portfolio management and i think the stigma you know it definitely needs to retire because as a seed stage manager for example at the series d what value are you you're probably not at you've probably you're probably three funds in at that point.

29:19You have hundreds of portfolio companies. You're focused on that zero to one. From an entrepreneur standpoint, in some ways, I'd like to replace you with somebody that is more appropriate for my stage that could help me where I want them to have more skin in the game. Do you think there's a sort of dynamic, though, where let's say I'm a seed fund, but I don't have a seed fund-like return at that later stage? Because let's say I invested at 100 million posts and the company's worth$2 billion at the Series D, you would think, oh, Series D, it's worth$2 billion. Seed fund, get out of here. You made your money.

29:53But I feel like maybe some of our entry multiples, especially within the last five years, might have been a little bit too high where you almost can't do that. I mean, the seed rounds have not gone down in overall sort of valuation much, even despite this 22, 23, 24. I think Carta puts out some pretty good numbers on this, but you know, the West coast, like the average seed round is at a 20 post. And so when you're at a 20 post and you're putting in a million bucks, you own 5 % of the company might buy the series C, maybe it's 2 % of the company. So in that case, if you're, you know, the company's at two billion, you get 40 million bucks back.

30:28But if you have a$200 million fund or$150 million fund, it doesn't really move the needle that much, but it's still meaningful. And, and so that's why, you know, making sure you understand sort of the fund size, the ownership. Ownership does matter. And I think sometimes people are just like, hey, look, I really like the entrepreneur, whether it's a 20 or 30, it doesn't matter. It actually does matter. There are times to obviously make exceptions. You want to be disciplined, not dogmatic. But yeah, I mean, the equation of if I sell in a secondary, is it returning at least a third or half of my fund?

31:01And that's when it becomes reasonable to start thinking about taking money off the table. Especially in some of these super hot sectors, like with AI, there's a lot of dispersion. We talk about dispersion returns of funds. There's dispersion in valuation bands within certain subsectors. I got a friend who I'm an LP in his fund, extremely small. I'm most likely the smallest LP in his fund. Don't do very many fund investments. So I gave him a little bit of money. And he has an AI company that he actually sold shares in, in the Series B. He'd invested before we were excited about AI, and it was a pretty reasonable entry price.

31:39And he returned a nice chunk of the fund. For me, I was like, oh, nice. I've got a significant little tiny amount. My tiny share, I got a significant amount back. So it's almost to the point of borrowing from other asset classes. I feel like if you look at how PE has evolved, a lot of these early stage or lower, lower middle market PE funds, when you look at kind of the data and private equity, some of the returns are come from revenue growth. Some come from, you know, cutting expenses. Some of them come from like debt leverage and stuff, but a significant amount of the returns just come from like multiple arbitrage of like buying it three times EBITDA and selling it at six times EBITDA.

32:17I feel like there's an element of that in venture that we can kind of borrow from is just like, what are some low, like hype multiples or like low, because there's no, there's not, there's not always like even talk to go off of, but are there lowish multiples that we can play in at the early stage? And then you do benefit as maybe a sector comes, becomes a little bit more exciting to people. When you're taking chips off the table, you get a little bit of that multiple expansion to kind of get a little bit of a return boost as you're kind of taking secondaries. Personally, I mean, I haven't gotten to do this because I'm really only a couple of years into this, but I think about it a lot of just like, you can't really control that entry price or sorry, you can't control the exit price, but you can control sort of what your entry looks like.

33:03So you kind of got to make sure that if things go well, you want to make sure that you're not just like, oh, this is kind of okay. You got to make sure that like, oh, this went very well. Yeah. And I'll take it even a step further. And this was like a funny analysis that somebody did that I was talking to. They looked at their seed funds back in, I think it was 2022. They looked at all their seed funds and said, for 19 and 20 vintages, let's look at sort of the graduation rate from seed to series A. And during 21, the graduation rate shot up to a point that I've ever seen it was like 70 80 in some funds and not only was it graduation but it was the step up in valuation from that c to a which is often like five you know five you know five times in fact it was almost like comical to see companies raised in six months from the seat to the series a with a valuation that was like 80 to 100 million and they looked at the analysis and they said okay well what if this particular fund sold all of their companies at the series a and it was like a two and a half or three X type of return that they would have gotten in six months.

34:12Yeah. Like a hundred percent IRR. Right. And of course that's, you know, anomalous and we had a, you know, crazy time, but you know, there are, you know, certain areas and, you know, you mentioned this, you know, hot area, like AI, of course we know is very hot. And there's this concept of the tale of two cities, which if you're an AI company, you are getting a significant uplift in valuation relative to non-AI companies. And so you do see some of these Series A companies or Series B companies. I mean, Cursor, everybody knows about, Glean. These companies are going from zero to$100 million in revenues in record time.

34:47So even selling at that Series B could actually be as good as a normal IPO if that company is raising, I don't know what Cursor was, was it 10 billion or something astronomical. If you came in at that first round and you invested in, let's say, $30 million per year,$40 million per year, whatever it was, you haven't taken that much dilution. That could return your fund and then some. And so that doesn't mean you sell all the shares, you keep some. But those are the type of things I think in certain areas will even present themselves at the Series B. And I had Eric Vichery, a benchmark on the podcast, probably like maybe three, three episodes ago, four episodes ago, if people want to scroll back and listen to that one.

35:27But one of the things he said, they have, he said there's about half a dozen companies in the benchmark portfolio that did that. They went zero to 100 in less than 12 months. I'm just like, just insane how often it's happening. And his general sense of it is that AI companies are growing somewhere between five and 10 times faster than SaaS companies were. So when you just say, okay, are they overvalued? Are these unreasonable valuations? Ultimately, the multiple that people are paying, it's like it's a function of the growth rate. So there's probably some instances where you could say, like, if this is a really strong business, the multiple is only two times higher than what you would have paid in SaaS land, but it's growing 10 times faster.

36:10It's actually a significantly good deal, like significantly underpriced. So to the point of there being dispersion between subsectors, even in the hot sectors, you could argue that some of the best in class assets are actually underpriced. The only caveat, and again, there's exceptions, like Cursor is one of the most loved tools out there, and there's a number of them like that, is a lot of these AI companies that are going from zero to two, zero to five, zero to 10, they are getting this high multiples. The issue I see is a lot of that is, we talk about ACV, I think of that as an annual curiosity revenue, and there's like, curiosity, okay.

36:50It's easy for me to use a tool. It's just easy. But if there's nothing really of real utility, it's easy for me to cancel. And so you look at sort of the cohort analysis and say, okay, the cohort is like six months old or nine months. I don't know what the renewal rates are going to be. And my view, and again, I don't know what this is going to play out at, a lot of these companies that went from zero to 10 aren't real companies in the long term. They haven't built anything defensible and you're going to have massive amounts of churn. So that's where I get, And as a seed manager, you have to look at that and say, is it time to potentially take risk off the table, even if a company is doing$15 million and getting valued at, let's say,$200 or$300 or even$400 million?

37:30That might be a reasonable way just to hedge against the case that there might not be defensibility for that type of AI application. Yeah, the interesting parallels, if you just look at kind of the crazy wave right before this with like crypto stuff, you know, growing really fast. There's a lot of companies growing fast, but also like excitement around the space. If you're a company like Delta and you're like, hey, let's make each ticket an NFT or something like it's a fairly reasonable person would say, you know what, that's actually probably not a good idea. But if you're like, hey, we need to figure out how to like use LLMs to price our tickets better or make our roads better, like the reasonable person would say, oh, there's actually probably something here.

38:09So it definitely leads to sort of this more curiosity to explore things. So I think that's definitely leading to the faster growth. And there are cases where some of them do actually work better. But then there's also cases where they might be trying six vendors and they switch the one that actually works. This is true for every hype cycle, though. I mean, there is hype. Now, I do think there's the short term, which is like, yes, there's a lot of hype. There's overvaluation of a lot of these companies. Without a doubt, though, if you think about sort of super cycles, and Brad Gershom talks about these super cycles all the time.

38:43Every super cycle kind of builds on the last one. So if you think about going back to semiconductors, to mainframe computing, to personal computing, the internet, obviously mobile cloud. Well, everything kind of led up to allowing things like GPTs and transformer technology, reading of all this kind of data that's out there, whether it be text-based or not. And so to me, there's no mistake, at least in my mind, that the next 10 years, We're going to see more technological innovation than ever before. Things are going to change. White collar, obviously, jobs will be affected in mass. And we'll see, you know, people are pretty resilient.

39:20We'll figure out things to do. But the, you know, short term is probably things tend to overhype based on an economic standpoint. But the societal change that AI will bring is going to far outpace anything we've seen in the past. But, you know, we have to go through a lot of things. I actually was trying to use an AI tool the other day. I liked it for a month. I thought I was going to do a bunch of things. Then I realized it didn't do anything. I went to someone else. I canceled the first one. Then I used something else. And two weeks later, I canceled that one. So it just kind of shows the volatility of the revenue itself.

39:54And I don't think SaaS is dead. I just think that in today's world, anybody starting a company or even thinking about scaling their company has to take the mindset of AI, not just traditional SaaS fixed ways of doing things. UI, UX is different. The way people will interface with your technology has to be different. And that's why some of these AI companies that just started are far outpacing their SaaS equivalents. It's just for people that just started three years ago. Yeah. And actually an interesting example of that where I needed to remove the background and get a transparent image. And I tried a couple different tools.

40:30And this was around the time that ChatGPT got an image. And I was like, oh, let me just try ChatGPT. It was just like, remove the background and make it transparent. And it did it. And I was like, oh, this is amazing. I feel like everyone kind of has those moments with these tools. But it's like an interesting example of like, you know, two years ago, three years ago, to remove the background from an image, you'd have to open up a image editing software and you can just throw it in ChatGPT. And it's like emailing your designer on your team, like, fix this up, clean this up. And over the past couple of months, when ChatGPT has gotten more image capabilities.

41:06I've just been using it for a lot of that stuff. It's like, I don't even need to open the software. Just do this for me. So it works. It does things for you. And I think it's like who kind of captures the workflow, who captures the use case. And this statement is not going to be the most groundbreaking revelatory statement. But if there's an existing tool like OpenAI or ChatGPT, if it can do something, I think you do if you're a founder doing something, building something, you need to make sure that it doesn't fall within their existing kind of wheelhouse or workflow. The tools have come a long way in a very, very short of time.

41:41I've just never seen it. I mean, Claude, obviously, Anthropa came out with the new version. GPT continues to come out with things. We had, you know, we do this annual kind of summit called the Beyond Summit, where we bring together a bunch of LPs and GPs, about 260. You know, Kevin Weil, who's the chief product officer of OpenAI, came and spoke and just kind of blew our minds in terms of all the things that are coming and how quickly things are moving and so the rate of innovation is so much better like think about now we have access to phd level intelligence my own sort of like use cases i can't live without ai probably use it constantly throughout the day my efficiency is probably two to three x what it used to be because i'm able to do things that used to take me hours on spreadsheets hours on document you know, generation, even, you know, things like blogs, you know, content you can do in seconds.

42:33And it is, and it's gotten smarter and smarter, even, you know, because now it includes memory, for example. So it remembers everything I've talked about. And so I, you know, I, you know, I just kind of look at, you know, where we are right now and, you know, to kind of bring it, you know, sort of like through analogy of like how far AI has come and sort of the prevalence of using it things like chat gbt which is very consumer focused we were in hawaii and we you know my wife and i were there and there was a couple kids like you know probably in their i don't know maybe nine ten years old and the one kid asked the other kid hey like you know we're in hawaii like you know what kind of fish are in in this kind of one you know sort of beach and the other kid said oh just uh chat gbt it and in the past what would people say google it people don't want the blue links where they have to go through and kind of parse through data.

43:22I want to be able to interface with it through something that just gets me right to the answer and I can go back and forth. And so it just shows how far it's come in a very short amount of time. Yeah. And I'm curious, like when you mentioned some of the ways you're using AI in basically building allocate, like what kind of things do you find have been most productive and just actually getting efficiency out of it and getting stuff done? So there's probably three main things. So how do we actually organize and build things? So, you know, we came up with a full product roadmap of how do we actually build this?

43:53How do we kind of, you know, figure one thing after another? If I want to build this tool, what do I actually need to do? What are all the steps? What are the tools that I can use to, you know, fast track that? The engineers obviously use cursor, right? So they use cursor to be able to build things, you know, incredibly quickly. Second is like, you know, one of the things I think about is when you invest in private markets, it's not just about, you know, you know, Turner, here's like this great fund you should invest in, but what does it fit your portfolio? What's your portfolio model? So I was able to create a sophisticated portfolio model using benchmark data that basically can say, Turner, this is your list of questions that you answered.

44:29You're a moderate profile. Here's your asset allocation. Here's what you have in your portfolio. This is how far you are from your objective. This is your pacing. This is your volatility that you should expect. This is your TVPI you should expect. This is your net IR. And this is your average time to first liquidity. And this is the fund you should probably do? Yeah. So if I show you that fund, it'll say, well, this is where the fund falls into because you're underexposed in fintech. And you have these other three funds that do a little bit of fintech, but they don't overlap with this manager because they haven't done a lot of follow on.

45:02That's pretty cool. Yeah. And it's sitting on all the data. That's all it's doing. Right. It's basically taking that, you know, and then we create sort of the instructions on how to think and, you know, our own portfolio model theory. and that would take years to build in a typical SaaS way. And now you can do it in, you know, like it's not minutes, but it's, you know, he wants to be able to build something like that. Additionally, like workflows. So who've, you know, you've, you've mentioned you invested in a couple of funds. The sub doc process is still like super painful. What if you had an international passport or passport of some type that had all your information that you could go to a sub doc anywhere and say, autofill this for me, pull from all the documents and it'll just map automatically with all the answers and all you have to do is sign.

45:47That'd be amazing. Let's say people, entire staff on their team that probably does that full time. It's not too far away. And so, I mean, I don't want to give too much away in terms of what we're building, but these are the type of things that embedded to normal workflows to create so much automation that used to be paper-based and then it was SaaS-based with normal sort of like subscription flows and now moving to an AI-driven way of doing it? I saw a really interesting stat the other day. This is from 2019. So I think a little bit dated. Numbers are probably actually bigger, I would assume. But it showed the percentage of IT spend and technology spend by sector.

46:24And it was like, I don't know, retail, high tech was one of them, financial services was one. And there's maybe a couple other like healthcare or something. Financial services was actually the highest percentage of revenue that they were spending on technology or like innovation or whatever they called it. And this is in 2019. I think it was 8 % to 11 % of revenue in financial services was spent on technology. So it's probably a little bit higher now, but to the point of like, there's a lot of opportunities to make the technology better in financial services, how much people are paying. And the technology that's out there, I mean, having been in financial services my entire life and now running a fintech company.

47:04It's spreadsheets, basically. It's spreadsheets. I always tell people the most the most successful software company of all time in FinTech is Microsoft Excel. It's what everybody still uses. And, you know, I, you know, I remember when I started this company, I started talking to a bunch of people like, what do you use? And what is your stack? And I couldn't believe how, you know, even when they're using technologies, all primitive stuff, it literally felt like you logging into like a, you know, Windows 95. And, you know, you remember sort of like the first generation of like, you know, computers and how it looked in the terminals well that's what a lot of it still runs on and it's it's crazy because it even in what the wealth tech industry so you think about walltech more broadly over 100 trillion is managed by these advisors and they're still using tools that don't talk to each other tools that are were made 15 years ago and are deeply embedded but don't actually do much anymore and and so that spend will just continue to go up money is one of the the biggest sort of industries in the world, if not the biggest industry.

48:08Obviously, it's the biggest industry in the world. But the infrastructure and the rails are just really, really old. That's why companies like Coinbase and Robinhood have been such breakout companies. I saw another set that was pretty interesting. It was something like only 1 % of financial services revenue was generated by a technology company or a technology native company. I don't know how they measured this. Maybe it was start date or how it's classified in like the NAICS codes or whatever. But so it's like 99 % of financial services. Revenue was generated by non-technology companies. So it's like, you know, if we want to like paint a massive tan for this thing, it's like, it could be 100X bigger if it grows from one to 100%.

48:50I think so. And the other thing is like the people that own the wealth are very different than they were 10 years ago. Now you have about$80 trillion going from one generation. So baby boomers to millennials, meals, Gen X, Gen Y. And folks like ourselves, we invest differently. We interact with brands differently. My dad used to go into a branch every day to do a deposit. I don't think I've been to a branch for 10 years. I don't want to go through a branch. I don't want to have to call somebody to do a wire. I want things quickly. I want them through my mobile phone. And so fundamentally, as consumer behavior changes, so does investing behavior.

49:30But the technology wasn't made for this new group of investors who exhibit, for example, more of an affinity to invest in things like private investments. It was made for the institutions. And so everything needs to change. And we're probably in the second inning right now of really seeing that overall architectural change and allowing that to happen at a huge scale. So question, it's not quite related, but I'm just going to pretend. So can we pretend this is a good transition? I saw you tweet once about sort of SPVs and what's kind of going on. Maybe it fits in the liquidity, how the technology of the industry is changing.

50:08But what are you kind of seeing happening right now in sort of these late stage SPVs? I know you're smiling. So what's the, yeah, yeah. So what's going on? Well, I think I've been offered by every broker, every single sort of deal out there. And here's the issue with SPVs. So number one, there's a lot of adverse selection that happens, right? So the reality is when there's excess capacity, especially at like series A and series B, unless you know the GP, you have a relationship, you know, there's something that you're doing, you're more likely getting adverse selection. And so if you're in Topeka, for example, and you see a deal and it's some series like C deal, and it's at this crazy valuation, no one's really leading it, but someone's doing an SPV for it, like that's a red flag.

50:52And so the other thing I see sometimes is stacked SPVs. So I was talking I knew a family office recently, and they had an opportunity to go into one of the hot companies. It's called the top five hot companies within the AI space. And I was like, okay, well, tell me what the SPV manager is charging. They're like one in 10. I'm like, okay, well, that's pretty reasonable. That's around the ballpark of what is reasonable. It's a one-time 1 % fee for admin. I'm like, okay, so they have direct access to the company. And they were like, oh, it's a good question. Let me ask. what we found out it was an SPV investing into another SPV, which invested into another SPV, each had their own fee stack.

51:36And it wasn't really disclosed to the investor. And I'm like, okay, now you're actually paying one was one in 15, one was zero and 10. So like, if you stack them all up, I'm like, think about what this does to the investing sort of profile of this deal. and you have zero, no one has control either. The only person that the SPV that's going into the direct company probably has some control. The second layer SPV is relying on that first person. And then the third level is now relying on it. And then you're the fourth one down now. You have no control. That shouldn't even be legal. Like multiple, because I remember the first time I heard about an SPV investing in another SPV.

52:15I was like, you should not be allowed to do that. Let alone another SPV adding into that. Yeah. So, I mean, SPV into another SPV, it just depends on the fee structure and like, you know, the relationship. But when you get forced, forced acting SPVs and you have no clue who the original one, that becomes a huge fundamental problem. And I see in, you know, excuse my language, but I see this shit all the time. And it really, really upsets me when I see people putting hard earned money and they're just being pitched by people that are just, you know, incredibly, incredibly, you know, focused on just getting, because they have no, there's nothing to lose for them.

52:51They don't report the SPVs if the SPVs work. They get 10 % carry on that one deal. If it doesn't work, sorry, it didn't work out. And they move on to do something else. And I think adverse selection is very, you got to be really careful in the SPV. Now, I think there's some great managers that do great SPVs and it's like incredible. So this is no sort of like, you know, widespread sort of feeling that SPVs are bad. It's just, you got to know what you're getting into and you got to ask the right questions. So then on the other side of this, what would like a good SPV, like if somebody is coming to you and like, here's a setup and you'd be like, oh, you should consider doing this.

53:26Like, what would that probably look like? So number one is like, you know, you get the SPV from, let's say a GP that you've built a relationship with. So the first question is like, why am I seeing it? So, well, maybe I'm seeing it because I built a relationship and I'm an LP in that fund. And as part of what they're doing, sometimes their fund is going to be limited in size in terms of what they can do for follow on. but they, you know, have seen the company since the beginning. The company clearly has the metrics that are very healthy. Maybe it's led by another tier one firm that is leading the round.

53:58So there's, you know, obviously, you know, that where it might be Sequoia leading the round and you're able to participate in an SPV at the same round as Sequoia is, but at better terms. And if I went into Sequoia, you know, directly in that case, and then you get transparency from the, from the manager of what the company is doing. I've seen some managers actually do webinars with the founders. Oh, I've seen that, yeah. Yeah, and that's super helpful because then you can hear from the founder, you know what it is, and you can make sort of an informed decision. So that's a great example of one.

54:30So I think it comes down to transparency and understanding the why of why you're seeing it. And I kind of want to hit on sort of like the back half of this conversation, a lot about more like the emerging manager segment. in. I know that's a big thing you guys focus on. At a high level, what drives most of the returns in venture? What should I be thinking about if I'm approaching this for the first time, trying to figure out what does good look like? How do I make money on this? Where do most of the returns generally come from? Venture itself, obviously, extreme power law driven. And when I say venture in this context, I'm really thinking about an early stage venture, which is much different than I invested in an opportunity fund that's doing pre-IPO, that is less power law driven, very consistent.

55:15So when you think about it, a lot of the venture returns, I don't know if there's one sector or these things change over time, but it typically is you have to get into that top 5 % to 10 % of company every single year, and you have to be able to get enough ownership and you have to be early enough. And so sometimes you'll see these venture funds where you'll see these great logos, and you're like wow these guys got into some incredible companies then you realize their entry price on average is 1.4 billion and they were at series c and later right so what we really look for are people that have you know at the seed level so think let's take seed for a second it's 2 000 plus seed firms in the us you know number one is you know we look for managers that are that know the what how and why so like what inspired you to to create this fund, like you're, you know, you have a fund, like what, what caused you to want to do this versus something else?

56:15Because you have opportunity costs. Raising a fund is not just raising a fund. You're actually going on and embarking on a journey to do a firm, right? So like really thinking about what led you to build a firm. The second is like, why are you distinctly advantaged in this particular thing you're doing? So if you tell me you're doing AI, okay, well, how long have you been studying AI? What are your networks within AI? what allows you to be able to understand, you know, is it the app layer, is it the infrastructure layer? Do you have the ability to not only see these opportunities, assess these opportunities, but do you win?

56:47And so what we find is like seed funds that do really well kind of nail two out of the three at least, which is. Sourcing, picking or judgment, and then winning. In the early days, I think picking is probably the least important, candidly. Not because judgment doesn't matter. It just takes a long time to understand if you're any good at this. And it's probably three fun cycles, 10 years before I know, did you get lucky or are you consistently good? And so I need to see that body work. I think everybody is fairly smart, generally. If you look at the pedigrees of people, people are smart. They get it.

57:22So it's less about you're going to differentiate just because you're a little bit smarter than somebody else. I mean, there's a few people that are on the spectrum that can win based on their intelligence in certain area. But it's, are you seeing the right deals? And can you win those deals? And so that's what we've seen pretty consistently with emerging managers. If they can see deals within whatever thesis, and they have something real or perceived that allows them to win consistently, that's largely all the battle. And if you can then augment it with great picking ability, now you have the ability to get that top 5 % to 10 % of companies within a certain sort of sector or a theme.

58:01And those are what drives the returns where now you do get those 3Xs, 5Xs, 10X type of funds. Yeah, what are you seeing then in terms of, how would I do that? Like if I'm like, okay, I wanna have good access or I wanna like show that I'm getting in front of these good companies or winning them. I think winning is maybe more clear, just like you're investing in things. So how do you think more like about access? Like, how do I prove to somebody that I have good access? Or what would you be looking for on the LP side to kind of vet that out? So there's this concept, like, you know, when VCs look at founders, it's like founder market fit.

58:35Like, what, you know, like, what is that distinct advantage? Like, why does this make sense? And so going back to sort of the analogy, a lot of seed funds are kind of theme-based or their sector focus. And so you're just looking at, like, okay, can I see this person actually not only see the deals, but do they have some kind of personal brand that's going to allow them to win? Do they have the network? I think network is really important because you have network. People can reference you, you know, pretty easily. And, you know, at the beginning days of a startup, like I, and I do view funds as startups.

59:05Like if it's a fun one, fun two. At the end of the day, a lot of it's just personal brand. And so you think about, you know, your firm, like your personal brand is much stronger than your firm brand right now. And it's because, you know, you tweet, people know you, you do podcasts, you do all those things that people feel like they already know you. And so you bring a certain level of credibility and the fact that if you send a tweet, maybe a company gets X amount of views, that is a tangible way that I can say, this person is more likely to win the companies that they want to get into. And then you look at things like fund size, or is the fund size something that's going to allow them to win?

59:44So if you raise a$500 million fund, I'm like, well, now you're competing with a bunch of people. You got to lead rounds. You can't be a nice co-lead or part of a syndicate. And so all of those things, it's like, what is that winning equation? And what is that GP market fit that allows them to win for a given fund size for a given market? And then there's that qualitative and quantitative analysis to be able to assess, has this person done it or have they built things that are tangible? Is there a good, if I'm an LP looking at a fund, is there a good way to size up appropriateness of a fund size.

1:00:16I don't know if there are certain questions. Actually, it might be interesting if you want to ask me and we try to figure out what my fund size should be. I don't know if that's an interesting thought experiment, but how would you kind of suss that out when you're meeting a GP? Yeah. I mean, the first thing is just intellectual honesty and inventory of who you are, right? So some GPs make the mistake of saying, okay, I'm going to raise a fund of X based on the fact that certain institutional investors say they need to write a$10 million check. They don't want to be more than 10%. So I want to raise a$100 million fund.

1:00:46Yeah, I've gotten that advice a lot of times. It's like, Turner, you should be raising this size of a fund because I can't invest. And I'm just like, that's too bad right now. And it's just not LPGP fit then. Because if you do that, and let's just say for thought experiment purposes, you're able to do that. Let's say there's a big difference between saying, I can't invest because my check size versus actually investing, right? There's a big sort of bridge you have to cross. But let's just say, you know, thought experiment, you can do that. You raise$100 million,$10 million each from 10 different investors that are institutions.

1:01:21But let's say you right now are still early and you're building your network. You're not right at the point where you feel confident you can lead deals in the hottest companies. When I say hot companies, like, you know, companies that are, you know, great founder, great TAM, like they've built something, made it some traction. Well, now you're competing in a game that you're unlikely to win. You're probably better off being a syndicate to build the credibility within that, get those founder references over time. And that's when I look at it and say, as a GP, I should be asking my question, what is the game that allows me to most likely win?

1:01:59Because you're, be short-term focused, long-term greedy. If you're only focused on raising one fund, you're gonna maximize and optimize in this fund size. You're going to max those management pieces up. Exactly. But if you're thinking about this as a 20, 30-year journey of building a firm, who cares if you raise 20? But if that 20 acts as the catalyst for returning the highest amount, getting to the best companies, well, you can scale over time as you continue to get, you know, whether you add people, whether you build your brand, whether you build credibility, your focus, you can do that over time.

1:02:36And so focus on a fund size that allows you to win. And that requires an incredible amount of self-awareness of saying, can I compete? Like if I have to now write a$2 million check into Seed Sage. You got to lead rounds probably. Now I'm competing against everybody else, including the big firms that are now leading and probably going to write a$5 million check or$10 million check at 3x the valuation I'm willing to pay. Do I really want to play that game? So it's basically thinking like, what can I actually work with founders on? And then you probably go and build your fund size from there. So it might be, I think I can pretty reasonably write a hundred K checks into million dollar rounds,$2 million rounds.

1:03:17I'll do 30 checks. So that's maybe you say it's like a$3 million fund, a hundred K times 30, maybe you reserve a little bit for follow on, maybe plus or minus some of the check size, like$5 million fund or$3 million fund. That's generally the practice you'd suggest going through. Yeah, well, that's exactly so think about like, what is your initial versus following? So again, like, you know,$50 million fund, maybe that's 70 % initial 30 % follow on for a few of those companies. And then you say, okay, 70%, 70%. Remember, there's management fees. So like, even to get to 50 million invest, you got to recycle capital, but let's just say you can do that.

1:03:52And so$35 million is going into initial checks and you're doing 35 companies, now you're looking at a million bucks per company on average, right? Maybe it's$750 to$1.25. Can you win at that check size? And if you're pre-seed, and let's say the pre-seed round is$3 million, you're effectively like a co-lead at that point. And so do you have sort of all the requisite characteristics to play that game? And that's kind of the rubric I sort of think about. And when I meet a manager, Or, you know, like, are you playing a game you can win? Because like, it'd be like a seed stage company. If someone came to me and said, hey, Samir, like you're raising the seed round, but I only write$25 million checks.

1:04:34So will you take my$25 million check? If I took it, how would I responsibly deploy it? Because now the expectations are, I'm going to hyperscale, I'm going to grow it. And now to get to the next sort of inflection point, I have to do so much. And now I've taken too much capital that I can actually responsibly deploy. So that's where the discussion happens between LPs and GPs often. And so you had this one thing that you tweeted. I think you tweeted on LinkedIn. The post ripped through the timeline on both platforms. So it's a pretty interesting take or interesting observation was that about 80 % to 95 % of emerging fund managers, they just can't raise any money right now.

1:05:13What is going on? Yeah. So the tweet I put on, it's like a week ago, it was like 85 % to 90 % of venture funds, forget about just emerging, are having a really, really tough time raising capital. The exception is, and we're in an amplified time of tale of two cities, both the company side, if you're AI versus non-AI. And then within the venture universe, is it, are you somebody that is obvious as somebody people want to back during times where you know, there's some volatility, you want to back things that are more of a sure thing, right? And so what I'm seeing is, let's call that first, let's take the 10 to 15 % first.

1:05:53I'm seeing some of those funds raise at a time speed that I've never seen before. Like, I mean, we're talking about like, open a data room and two months later, they're done. And it is just so extreme. That's a very small universe. And that's some emerging managers that, you know, like I spin out of light speed i spit out of index i had a great track record guaranteed those funds are going to raise incredibly quickly and sometimes they're done before they start the big established funds they can raise very quickly and often are multiple times oversubscribed because the capital is starting to go toward perceived or real quality now the 85 or 90 well let's talk about what's happening so one the market's been really shitty the last few years right so if you look at 2021 was a great year.

1:06:41You had a lot of liquidity that was coming. Forget about the entry points, but there was a lot of liquidity in 2021. 22, markets changed, the interest rates shoot up. And so 22, 23, and 24, we haven't seen much liquidity come back in an asset class that's already getting battered because of what happened in 2021. So there's a negative bias that's associated with, hey, I put a lot of money in 1920. I've made all these capital calls. I'm not getting your money back, I can't do anything more unless it's pretty obvious. The second thing is with the protracted illiquidity that's going on, investors are also making the decision not based on manager versus manager, but they're looking at an asset category versus asset category.

1:07:25Today, the risk-free rate is much higher. If you look at lower middle market private equity, the benchmarks are between 15 and 23 percent net IR. Well, why wouldn't I just put my money at that if I'm just looking at financial return on a risk adjusted basis versus putting it into this venture fund, which is going to have a lot of volatility, going to take 14 years to get that cash. And ultimately, if I don't have some picking advantage of getting the right funds, like I'm just throwing darts. And that's a very reasonable take. So a lot of money has been extracted from just investing in venture.

1:07:57And a lot of the people that were actually backing these emerging managers, they were family offices, they were individuals. Well, those people, and especially the individuals case have houses, they have mortgages, they have things that they need to do that even the in the contemplation of like investing in another long only sort of fund where I haven't got any money back is really hard. And so if you're an EM, you're going to get hit because most of your capital, unless you're a spin out, is going to come from non-institutional capital. And when that non - institutional capital dries up, then you're really reliant on the long tail, which is number one, hard to find the right people that fit what you're trying to do.

1:08:37So it's like needles in a haystack. And a lot of the folks just aren't investing. On top of that, institutions are going through the E &F, right? So endowments and foundations, obviously, with the new administration, they're going under a lot. So whether it's Yale or Harvard, having to sell off massive positions to rebalance their portfolio because they're overweighted in a certain asset class. So you're sucking a lot of the LP capital out right now. And the people that do benefit are the people that are very obvious, you know, merging to establish everybody else. It is a grind. It's not uncommon to see fundraisings for an emerging venture fund to be two years.

1:09:15And that's why we see the, you know, the mortality rate from a fund one to fund two be 50%. Fund one to fund four being, you know what 20 % of firms that start a fund want to even get to a fund for and that's probably going to be the case until we start to see the liquidity problem start to you know resolve which I thought it was going to be this year and then liberation day came and it kind of threw the markets in a tizzy and we'll we'll see what happens sort of in the public markets I'm sure that yeah the public market IPO market so what do you think is the right way to raise a fund right now like if I were to come to you say Samir I'm one I'm either it's like fund one two three I'm not sure if this is different.

1:09:55Maybe that's an important thing to kind of characterize here, but how would you recommend somebody do a fundraise process today if you're maybe more on the emerging manager side? So I think about it very similar to a sales process, right? At the end of the day, you are selling. Now, in this case, you are not selling your product. The product, if you want to draw the analogy, is you, right? It's a people business. So it's a blind pool. I have no clue what you're investing. So I have to believe three things. I have to believe in the thesis that you're, you know, you're going after whatever, if it's sector, it could be geographic, whatever it is, like whatever you think is the main theme that you're rallying your investment effort around.

1:10:34The second thing I have to believe is that you've appropriately structured this, you know, fund in the right way that can result in a great return. So like, you know, it's things like the terms and, you know, the, you know, the, you know, things like your, you know, terms being managed for you carry it is, you know, the portfolio construction, you know, things that just relate to the actual product. And the third thing, which is probably the most important is, do I have a clear and tangible view that you are the right person or team to be able to prosecute the strategy? And those things have to be clear.

1:11:08And you have to, you know, when you, before you start the fundraise, you have to put yourself in the LP shoes and answer those questions. And if you cannot, and this is where you have to take off the rose-colored sunglasses. And, you know, what I actually do, and I tell the GPs to do this, go to chat GPT or Claude or whatever, you know, your favorite tool is and put your deck in and then put in the prompt saying, you are an institutional LP that's looking at thousands of funds. You know, put a very skeptical eye on why this is not going to work. And what you will get is actually pretty good feedback.

1:11:47It's not always easy to see that, but it is so incredibly valuable to do those things. And so now you have that access to intelligence before you start to fundraise. Okay. So now let's say you figure all that stuff out. If you've got the fund sizing, you understand exactly why you're doing it. You understand what the thesis is. And now it's really a function of like, who are the people that are most likely to invest in me. And so then it's like the LP fund fit. If you're raising 20 million bucks and you're going out to the pensions and the big foundations, like you're just wasting your time. You may do it because they're a friend and you want to get feedback.

1:12:26That's fine. But ultimately you have to know that it's more likely individuals, it's going to be family offices. And then you need to build a sales pipeline of people that are more likely to be folks that are investing in you. In the family office market, there's influencers. And these are family offices that are fairly sophisticated, where other family offices follow them. So who are those nodes that you should be looking at, where you can be, they can become your champion and start to, you know, introduce you to other families, because now you're getting the transfer of trust. It's all a trust-based business.

1:13:01And the reality is when people are raising the funds, a lot of GPs go straight into the pitch without really understanding what you're really selling is the you as a human being first, first and foremost. And so when I meet with somebody, you're selling to my heart, not my mind, my heart will make the decision, you know, at the, at the core of it, my mind will look to justify it over time. And so, you know, as you go to the fundraising, so number one, figure out who your LP fit is, who are the nodes, which you can ask other GPs. And then from there, be able to have these conversations with people and get to know people as human beings, ask them what they care about.

1:13:43And so when you go right into the pitch, it feels very transactional. And that's not going to work because you're selling to the wrong organ. You're selling to the brain, not the heart. Yeah. It's interesting. So you think identifying the nodes, probably a crucial piece of this. One thing I always do is when, whenever somebody cuts a check, like they're in, they've, they've signed the docs, they've wired the first capital call. One thing I found works pretty well is like, Samir, like, decided to have you on board. Like, are there like one or two other people that maybe I should talk to? Because they're just more likely to, you know, they feel like they kind of have skin in the game.

1:14:15And if they think it's a good investment, maybe they'll know other people. And it's just like a way stronger ask than just like, hey, you think that I suck at this, but who could you introduce me? So people like it's a little bit of a weaker ask when they're not actually in. And the other thing that I would just saying in terms of identifying nodes and leads, it's actually better to go to other GPs if you're a GP that not only have a good relationship with, but are probably not having a tough time raising. Because the people that are tough time raising are going to be very protective of their relationships if they are actively raising at the same time.

1:14:51And the signal is less. So, you know, the reality is if somebody from, you know, name your brand name firm that you're a friend of, Andreessen, Sequoia, whoever, let's say they have some family office contacts. If they make the introduction to the family, there is a certain level of credibility that's now being driven versus another emerging manager that's struggling to raise that puts you in front. So you have to think about things just like anything else. This is sales 101. Capital formation is in effect sales. Like you are selling yourself. Now you're selling that if you provide me with capital, I'm going to provide you with an outcome that on a relative basis is better than whatever the opportunity cost is.

1:15:34So I did the thing you suggested with chat GPT, I put in my deck. I said, as an institutional LP reviewing, I said, pretend you're an institutional venture capital LP, give me a skeptical opinion on why this will or won't be a good investment. The general takeaway is the summary of the skeptical take. This feels more like a content driven influencer play than a rigorously institutionalized venture fund. Distribution is clearly a strength, but is it repeatable alpha or just noise? It's like, okay, that's a good, good critical take on this. And then it actually, it gave me a breakdown of like, there's five kind of big points of like too much emphasis on personal brand, track record still immature, portfolio construction, discipline, evolving content as edge is not proprietary.

1:16:20Management fee structure feels high. Okay. This is a good, good takeaway. If you sent, if, so if you send me a deck, I've also built an underwriting model that basically takes all the information we have on various funds, applies different parameters and scoring. So after this, send me your deck and I can actually put together a full scoring model that'll go more in depth than what you just did, which is kind of more based on general, you know, it's, it's, it's general research. Yeah. So how does that work for people who hear that? Cause when you say that to me, I'm like, oh, nice tell me tell me what goes into that how do you how do you build that out and what is like what's all going into that yeah that's a great question so number one is like you know benchmarks which we have a lot of benchmarks and funds now because we track so many and you know we have all the data so it's anonymized and aggregated data like you know what's working you know portfolio sizing follow-ons all that kind of following rates things like that you know co-investors and then what we do is build that rubric of like the five or six things that matter the most and underneath that there's some points that say you know in manager sourcing how do we define what manager sourcing is like is it their network is it their brand is it you know their reach all these things that go into any unique parameter that is then pulled off the data rooms or the decks and says okay this person is a 4.2 out of 5 based on these things it actually provides me the full summary of like what it's actually now it's not 100 of the way i think but it's probably close to 90%.

1:17:44And that, what it can do in sort of distilling down what a manager is doing, because, you know, a lot of what we do is pattern recognition. So if you can then apply that pattern recognition to a large language model, and then be able to take data that then goes into that, it's remarkably helpful. And so even for GPs, being able to do that and use our model, like, that's why I'll send you this afterwards, because I think you'd love to see the output. And it just makes you a better GP because it starts to then identify where you need to firm up the story or just improve the business model in some way.

1:18:19Yeah, that makes sense. And it's interesting because like in this one, some of the skeptical takes is it's like portfolio construction discipline is evolving. And it's because I specifically say in the deck, like how I've been increasing the ownership size. And it's like, you got to have strict ownership. So it's like, is that just like an LN like hallucination thing? Like, does it truly not understand? So, well, it's not trained. So it's not trained in any way, right? So you're not providing any instructions of how to think. So like, if you look at my chat, GBT, you're an institutional investor, but underneath that, it has all sort of the, you know, the entire rubric of like how we look at it.

1:18:55So, oh, if fund size goes up by this much, you know, what you're really looking at is, okay, are they increasing ownership targets commensurately? Are they leading checks? Were they able to lead checks the last time around? So it's not just, oh, Turner, because you did 8 ,000 companies in the last one and you're doing 30, that's a bad thing. It just means that you've evolved your business model. And so it would actually capture this type of, not hallucination, it's actually doing what it's supposed to be. But it wouldn't know because it's not applying direct knowledge that, yeah, fund models will change over time as fund size grows.

1:19:29Interesting. Okay. Yeah, that's a good point. I know one of the other one of the AI companies I've invested in, like a big piece of the tool is this like creating the rules that go into how it performs the job, which I think is like a very, very hard piece to kind of get right with a lot of this stuff. So then just maybe in the sense of what you get from your tool and what you know about the universe of being a good venture investor, what do you see as being the traits of some of the best investors right now? Or how would you stand out as a top emerging manager right now today? I mean, it's understated, but it's grit and hustle.

1:20:06I mean, I think that the best managers, even the ones that have been around and been successful, the ones that just want to compete and win, it's less about like the dollars. It's less about, you know, what I would consider vanity metrics. Like I do see a lot of, you know, GPs, oh, vanity metric. We had a bark up of this and like we're doing expert, you know, and I'm like, you're a year in, it doesn't really matter. Like, think about what is the long term. Now, if you tell me like, you know, this company that you got in, you made seven customer introductions and you hustled to get them in front of things that led to deals.

1:20:39Now this company went from a million to 4 million in AR and you were a big part of it. Now that's something repeatable. It's not like something that I feel like, okay, well, that's great. Well, what did you do? And so the best managers are always looking for the edge of how do I provide a service to my founders that offers them the ability to go from whether it's zero to one, one to two, two to five, whatever. the number is and be the best at something. And so if you're great at go to market, like, well, what are the OKRs that you're looking for in helping these companies? How do you identify the KPIs to know what you're doing is successful?

1:21:15Because as you know, the feedback loops are incredibly long on venture. I mean, you've been doing this for a while, but you don't really know if you're great yet. And you won't until if you haven't returned a single dollar, by definition, you're not a great VC yet. I have a couple single digit DPI returns. And I shouldn't say that because like, yes, if you're in the seed rounds at some of the best companies in the world, yeah, you're probably going to get there. And it's very clear. But it's more a function of like, have you really identified your strength? Are you leaning into those strengths?

1:21:47And is it a repeatable playbook that you're building that you can track against? And I see the best managers. I had Mamoon from Kleiner, for example, on my podcast about a year ago. And I asked the question, I'm like, what are the OKRs? How do you even know what you're doing is working outside of the fact that these companies will be marked up and they grow? It's like, oh, yeah, the first thing we do is like anytime a Series A is raised and it's like one of our big sort of tier one competitors, we also ask, did we see it? If we didn't see it, why didn't we see it? What did we get wrong in our go-to-market?

1:22:20And that's one of the OKRs that we track. And so identifying those metrics for success is really important. And then building an entire business plan. And then at the end of the day, you can't teach grit and hustle, but that's what really separates, you know, good from great. How do you, and you kind of talked about this a little bit, but cause I, I asked this because I've heard some people say that grit and hustle, it's like, it's kind of like table stakes and you can't really have that be the thing that you differentiate on. So how would you assess if somebody truly has grit and hustle? Because like, if I'm like pitching you on my fun, And like, what am I going to say?

1:22:56Like, I don't try hard. Like, oh, I only work a couple hours a day. And like, you know, I don't really care if my companies do well. Like, how do you actually assess like that they actually care and try? I mean, it's part of this pattern recognition. Part of it is also references, like references, offshoot references are like what a lot of institutional, you know, LPs do. So if I wanted to, for example, you know, diligence you, I can probably reach out to 30 people without you knowing I did that. And they all know you. And I and I know them so well. they're going to be providing me with a real take.

1:23:29So, you know, for example, I, you know, just did diligence or, you know, somebody on my team did diligence on a manager where, you know, we did a bunch of references and it was just very clear that this person not only does what they say, but they go well above and beyond. In fact, they said they were going to make a few introductions. They ended up making 37 introductions to this person that resulted in like a million bucks. And like, there's degrees of everything. There's grit and there's real grit and hustle. There's people that fly across the world to meet with an entrepreneur for breakfast to win a deal.

1:23:59That is a lot different than, hey, I'm gonna get on a Zoom call next Tuesday if you have time. And so you can ferret these things out, but that's why you have to have the time to be able to do this. You have to go really, really deep. No, it's not enough. Like grit and hustle is not enough, but it's a big variable that does go into the success equation. Yeah, you still have to have the right fund size. You still have to go into all the things that we had talked about before. portfolio construction, the right to win, what is your sourcing advantage? All those things matter. But if I were to index between someone that's really smart and then someone that hustles really hard, the latter is going to win in my mind all day long because the person that has grit and hustle, they're probably fairly smart.

1:24:41And most people in this industry are not people that have IQs of like 80. These are people that are smart, educated, they get it. And so what you're really looking for is that, you know, sort of nice sort of Venn diagram between intelligence, hustle and self-awareness. I've heard my old boss at a floor on a mantra. He said he looks they look for obsession, which is kind of a little bit tied in. It's like it's a characteristic of just like not giving up of just like, are you obsessed with this on the founder side? Like, are you obsessed with the problem that you're solving? Are you obsessed with what you're doing?

1:25:13And I mean, obsession can kind of get you through anything. It's just like things don't go your way for a long time. If you're just obsessed with what you're doing, you won't give up. And, you know, that's not all of it, but it's a big piece. It's true for founders too, right? So when you're a founder, you have one asset. You have your company and it's going to either succeed or not. And as a founder, you're going to get punched in the face multiple times. Things are not going to work. Macro headwinds may come, micro headwinds may come. And if you're not really obsessed with the problem or passionate about what you do, You're going to give up and things are going to start to fall off the rails.

1:25:49Well, as a VC fund manager, you're going to fund one. Like that fund one may be around for 15 to 17 years. So are you really passionate about what you do? Are you obsessed with winning and creating sort of like a, you know, not just for yourself, but legacy, right? For, you know, helping founders, you know, creating real value, driving value to LPs. if you don't care about that stuff, like it's not going to work because the moment like it becomes tough to fundraise, you're going to give up. And that's why so many, I see all these LinkedIn updates. Someone raised a fund one. Then I see the LinkedIn update.

1:26:24Oh, I just joined a product manager at Meta for fun too. I'm like, well, I thought you're going to be a long-term venture manager. What happened? And then I thought to them, they're like, nah, it's just too hard fundraising. And it's just like, I don't want to do it. I'm like, well, you weren't obsessed then of creating a firm. Yeah, the one way I kind of describe what it's like fundraising as an emerging manager to founder friends. Like, you remember when you raised your pre-seed, you had to raise like a couple million bucks and a bunch of small checks. And a lot of people said no, but like eventually you got there.

1:26:51Just imagine instead of going to 2 million, you had to go to 10 or something. And it's like five, it's like a full year instead of two months. That's how I usually describe it to people. And like, oh, wow, yeah, that does sound like it sucks. And it's like, yeah, you just, you got to kind of just do it. And you're also going to be dual headed, right? So you're, you know, think about it. And this is one of the analogies with founders actually makes a ton of sense because you're doing everything. If you're a solid GP especially, there's not a big IR team that's going and raising capital, right? You are the person.

1:27:20You are also the person that concurrently, if you do a first close, is also sourcing opportunities and trying to win deals and assess deals. At the same time, half your time is going to be fundraising and talking to net new LPs. And you have to modulate your time on a week-by-week basis. And by the way, now you have to think about like paying bills and setting up a management company and hiring and, you know, all these things that come into business building. And again, that's where the obsession comes in. If you don't like doing those things, you're not willing to do those things, then don't raise a fund.

1:27:48Yeah. Like I, when I'm talking to friends who, you know, they're like a partner associate, like a big fund. They just have like the thing, all the things they have teams for, like they have a marketing team, they have a platform team, recruiting, the IR team, like they've got the operating partner. It's just like all those teams that you have is something that you have to do by yourself as a solo GP. So that might sound really fun. That might sound terrible. And it's just it's like reflecting. It's like, do I want to do all those things? And I mean, I think a lot of the times, honestly, even with me personally, a lot of times like, man, it does suck.

1:28:23Like there are a lot of things that just are not fun that you just kind of have to do. But it's like every job. Like my first job was at a, or my first, I worked at a PE firm and I was an intern and it started with like, they just gave you a spreadsheet of thousands of investment bankers and you just had to cold call them and ask if they had a deal for you. Like the success rate was literally zero. Like, I don't think anyone got a deal that way, but it sucked. And my boss told me, he's like, oh yeah, we just kind of see, we make you do it for the first week or so. And we use that to see if you're any good.

1:28:56And then if you're good, we'll move you up to the next thing. If you're not good, you just do that all summer. You still have to kind of do it throughout the course of the job. But it was like one of those things that, you know, you kind of just have to do that kind of shitty part. And, you know, and then you can do the more fun stuff, which I don't know if people think updating spreadsheets at a PE firm is fun, but you get to do some slightly more fun stuff. It's part of building, right? It's like anything else, like, you know, as a founder, like I remember when I first started because I've worked at big organizations.

1:29:24and you know like when you go from a big org to starting your own company it is totally different like you know everything from like oh i gotta figure out an incorporation oh i need insurance oh like we have to basically do this thing with you know i have an employee over here there's state laws over here like oh then i have to basically you know you know as we were picking you know different spaces even co-working spaces now i gotta negotiate this oh and then some the bank is asking me to print out something, PDF it. Now I got to walk into the brand. I mean, you know, thankfully I didn't have to go on the branch in this case, but these are just examples of stuff that aren't, I don't want to do these things, but you have to do these things and you have to be comfortable that that's part of the journey.

1:30:05And so that's the one thing I think a lot of emerging managers have underestimated is all the other shit that's not investing that you have to do to run a firm. Yeah. And I'll plug the sponsor for this episode is Warp. It's payroll for founders. So one of the things that hit me really hard was I was using a certain payroll provider and I had an employee. The employee was in New York and I had to do things in Delaware and California. And I live in Michigan. So I had like four of these different state things. Like it was like a worker's comp. It was registration type stuff. And I missed it. And I got fined or whatever.

1:30:44And I didn't, and I didn't even know about it for two years until they actually started mailing me. And like the, you know, is it on me is on the payroll provider or whatever. But so it's like this, to the point of like all this extra stuff that you have to do, like, it was like, God, I don't have time to deal with this. Like, just can the software please do it? Can someone else please do it? But anyways, so I've got a question for you. We talked a little bit about AI. I'm curious. I've kind of been asking a lot of people this. I kind of see a lot of VCs. I think you actually tweeted about this.

1:31:15There's a lot of people tweeting about how AI is changing the way that VCs do things. What have you kind of seen on that side? There's kind of like the hot take out there, which is, oh, by 2028, you know, VC is going to be the traditional VC is dead because artificial intelligence is going to be able to source pick and all those things. I don't believe in that. I think there's, you know, it ignores the human element, you and I sitting together, me providing empathy, thinking around sort of the corners. We're not an AGI yet, you know, to be able to do those type of things. But I do think it fundamentally will change the efficiency of how VCs work.

1:31:56So think about, you know, we've mentioned some of the things that we do internally to be able to accelerate and do things with more intelligence. So within a VC firm, if you look at those three, you know, different levels of things you have to do source opportunities, you got to be able to assess, you have to be able to win them. Well, all of that can be enhanced by the use of artificial intelligence. So for example, if I want to be able to parse all of sort of, you know, companies that, you know, if I want to track, you know, when somebody puts stealth on their LinkedIn, right, I can start to be able to build these, you know, tools that allowed me to see things that otherwise, I would have to manually kind of figure out or rely on my first degree networks.

1:32:37Second, you know, to be able to pick opportunities. Well, if I have a big enough corpus of data, I can train on that and say, what are some of the characteristics similar to what I do with scoring model that helped me filter through the noise and also do competitive, you know, analysis of like what else is out there to be determined, like what are the tailwinds and headwinds of this, this company may face. and then you know even winning for example like winning you know part of winning outside of just being somebody that people want to work with i mean a lot of it is that like you know i do i want to grab a beer with this person do i like them do i want to give them part of my company like i'm giving i'm selling them part of the company i'm going to be with them for a decade probably yeah yeah and it's hard to kick people off your cap table right and so you know ultimately it's like how well do you know my business?

1:33:24So if you now have done all the research and, you know, like ChatGPT has research functions, right? If you come to me and you show me that you know so much about my company that now you can now, you know, do within a two minute sort of query, like I'm more likely to want to work with you because now you've shown me you've done the research. There is a very successful emerging manager out there. They run like 15 to 20 page research reports for each company to which they send the GP. I'm sorry, they send the founder and say, here's what we found out about your space. This is how deep we've gone.

1:34:00They do market mapping and say, these are the different layers. This is how we see your business evolving. These are the tailwinds. These are the headwinds. Here's what you have to think about. As a founder, if I'm getting that, I'm like, oh my God, they really understand my business. The chance of me picking them over some other VCs that's like, we like you. We like what you're doing. It's big market, big tam. We like you, like your energy. Who am I going to pick if these are both lead checks? It's not even comparable. Yeah. And it's interesting because a lot of venture funds do that. Usually they'll send a deck when they're trying to win the deal.

1:34:34And it's like, they've got all their public company logos and they slot your logo in there and try to make you feel all good about it. And they've done their research on a market. But it's usually very service level. It doesn't go deep enough. And if you're basically just telling me why I should pick you based on who you are, that doesn't actually mean that it's relevant for me. So if you show like, hey, I'm in these great companies and like, that's why you should pick me. No, no, no. Like I want to pick you because number one, I think you're in this case, like I'm just going to use you as an example, a fundamentally good person that's going to be there when I need it through thick and thin.

1:35:07When I text you, you're going to respond. You're going to do what you say. I can trust you're going to be empathetic toward my journey. and then by the way, you know my business inside and out and you've evidenced that even before you wrote the check. Yeah, I mean, I think it's so like in this age of AI, the thing that I've tilted more and more towards is human relationships. Like I just kind of can assume that like it's kind of gonna get commoditized. Like everyone's gonna kind of have better technology, the AI, like everyone's all gonna kind of benefit from it. And I feel like people are gonna, some people might miss that or they might like kind of forget about how important kind of the relationship is.

1:35:46So I was thinking a lot about like, how do I do more in-person events? Or even like with this podcast, you just get to hang out with someone for two hours and ask them a bunch of questions. Like it's kind of fun getting to know people better like that. So there's no substitute to that. I mean, like I saw this and this is why we spend so much time building community. We do 30 to 40 events per year. And part of it is to create meaningful human interactions, which you can't disintermediate just by using technology. Technology can enhance those relationships, but it's not replacing. And so maybe that changes five, 10 years from now when there's HEI.

1:36:18But I still think that we have millions of years of like even going back before humans, like there's a social construct that's really important with any living thing. And so, you know, fundamentally, I think that as a VC, you need to think about how you're going to lever AI, but I wouldn't be worried that it's going to replace you. Yeah, you're going to be sending my humanoid and your humanoid. we'll go to an event together and they'll debrief and come back to us or whatever. I hope not. And you actually have a podcast. What's your podcast called for people interested? Venture Unlocked, which has started back in COVID.

1:36:53I'd have been thinking about it for a number of years. And during COVID, I was at home, like, I'm better just go ahead and do this. And the whole concept is, you know, let's, you know, bring on, you know, GPs to talk about the art of building firms, right? Like what goes into decision-making, investment committees, building a firm, hiring talent, So we're about 140 or so episodes in. And it's, you know, it's a, it's a passion project of mine. So it, it can be found at substackventureunlock.substack.com. Okay. Yeah. We'll throw a link in the show notes for people who want to check it out. And there's, there'll be, there'll be a couple other links for some of the other things we've kind of referenced.

1:37:29We'll throw them all, all in there. What have you learned from the podcast? Anything? Does it, does it benefit anything or? Well, number one, I think being a podcaster makes you a better, you know, in terms of engaging with people, you're a better listener, you're forced to listen in podcasts right to the guests. Oh, yeah, you can't zone out. Yeah, you can't zone out. So it's actually made me better at asking the right questions and building those meaningful relationships. But I also just learn a lot from people. Like, half the time, I'm just sitting there, I'm like, this sounds really good. And now it's forcing me to think in a different way and challenge some of my sort of heuristic views that I might have developed over a long period of time.

1:38:13So it just made me better when I think about sort of all aspects of life, not just investing, but in a lot of our conversations, we go into the people side of things, the human side. And you've probably noticed this too. You're probably a better investor, but you're probably a better human being too, having gone through all these conversations over, you know, the course that, you know, you've, you've started this podcast. Yeah. I think, I don't know. My wife would agree. No, my, my wife wouldn't either. Trust me. My mind's like, you're, you're like the same guy, like you're of worth. And I'm like, okay, thanks.

1:38:46But I feel like I am. So, you know, yeah, no, I think it's a lot of the same benefits. Like you just, like, it kind of forces you to like sit down, like just preparing for this. I was like, what can I like kind of learn from Samir? What can I ask him? Like, what are other people going to like hearing from this? And then you kind of give the people a platform too. It's like, hey, a couple thousand people will listen to this. So hopefully you get some benefit out of it. So yeah, it's kind of turned into... It was like something I was really interested in. I kind of had the hypothesis that I think this will be beneficial for the fund and for portfolio companies.

1:39:17And we've actually had a couple. I think the biggest one is people like regular listeners of the show will... Remember, we had Dan Lawrence at Chain Guard on a couple. He's actually been on twice. He's the only two-time guest. and the first time he came on was November of 23. They just kind of announced their Series B. So the thinking was, oh, I'll give you like a platform to kind of announce it. People can learn more about Chain Guard. And a couple of months ago, he was telling me, oh, we hired like 10 people from that episode. And I was like, what? Like, why are you just telling me that now?

1:39:47First off, but also that's awesome. So I had him on again. He's like, all right, let's announce a Series D. Like, let's talk more about the company and what you're doing. So it kind of turned into this distribution channel to actually help portfolio companies aside from also just being kind of fun and benefit everything else. And it feels good when you hear those stories. I had a GP that I had recently and they're like, you know, after the podcast, I had seven, you know, inbound LPs that wanted to get to know me that I'd never met before. And they heard me on the podcast. They like what I said.

1:40:17So that's another thing that just kind of keeps you going. Forget about your self-improvement. Like, can we help a lot of people through education by bringing on a great guest and have those great guests. That's why we have a lot of emerging managers on the podcast too, because it's like, is there this additional benefit they can get? Because there's so many great EMs out there that no one knows about. And when you get their voice out there and people hear it, you can start to see the benefits that people can get. Now, again, that's not why we do it. We do it primarily just to educate the market.

1:40:51And we have a lot of fun conversations and I like it, you like it. but it's been a it's definitely been a labor of love over the last four years oh well it's awesome yeah we'll we'll throw a link in the show notes if people want to check it out this has been a lot of fun thanks thanks for doing this at any i know you're on twitter or x linkedin both people should follow you there yeah at samir kaji on twitter i don't call it x and then linkedin is just you know you know samir kaji and then the venture unlocked so i appreciate you having me on this is a lot of fun yeah this is a lot of fun we'll have to do it again sometime.

1:41:23Awesome, man. And thank you for listening. If you missed it, check out the last two episodes with Anamitra DeFore and Eric at Benchmark and tune in over the next few weeks for Ryan at 3Flow, Grant at Gamma and Matt at WordPress. If you like this conversation, please leave a quick review or comment. And if you don't want to miss one of those future episodes, 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 in the next episode. Bye.