How I Invest with David Weisburd
00:19:21 · Jack Selby
[00:19:21] S1: So this is the core of it, and so I don't care about what what type of investing you do, but entry price matters. And if you can invest at 10¢ on the dollar versus what's going on in Powell today, that makes a huge difference versus, if you're investing in thinking machines in a pre series a round at a $14,000,000,000 valuation, how does that work? How does that math work? Is thinking machines going to be the next SpaceX? I don't know. Maybe. But it has to be for the venture math to work. Full stop. And people don't talk about this. So my math is very, very, very different because my entry point is so much less expensive. I can usually buy between 1020% equity in a noncoastal series a deal for an average ticket of $3,000,000. Those are the brass tacks. I think that is something I can do with relatively good probability compared to Silicon Valley, BC today, and very importantly, because I was lucky enough to be a series a investor in SpaceX, which by the way was almost nineteen years ago. So so much of Silicon Valley, the pitch today is like, I'm gonna go find you the next Elon Musk at age 24. That is a terrible pitch because the probability of that is basically zero. Peter can find the next Elon. Marc Andreessen can go find the next Elon, but the handful of folks that can do that in terms of true access is very, very, very limited. That's one. Two, you pair that with an outrageously long extended duration. That's a poor parent. So what I think I can do is I have better odds because my minimum bar that I need to cross, that $500,000,000 threshold, is easier. It's more realistic, and importantly, I can get there more quickly than telling you I'm gonna find you the next Elon, and by the way, that's gonna take two two decades from a gestation perspective.
00:21:02 · David Weisburd, Jack Selby
[00:21:02] S0: Yeah. There's a joke. Three x over twenty years is not a good return. [00:21:06] S1: Well said. [00:21:06] S0: Certainly, it's not controversial what you're saying in terms of valuations are low outside the coast and, apparently, 90% lower, which is a bit surprising to me, but believable. At which point does the arbitrage actually take place? In other words, at which stage for a company, revenue or fundraising milestones does a Carvana start to be treated like a truly Silicon Valley company? One thing I've learned from talking to hundreds of investors is that great investment firms aren't built on investment returns alone. The firms under are great at the things most people don't see, their operations, their relationship with LPs, and the quality of information they use to make decisions. And here's what AI has changed. Every firm now has access to the very same models, so the intelligence isn't the edge anymore. Edge is what you could feed it. Firm with its fund operations and data in one connected record can actually put AI to work. A firm running on disconnected systems simply can't. That's why thousands of GPs run their funds on Juniper Square. Juniper Square puts your fund operations, data, and administration together in one connected record. That means less time managing disconnected systems and more time investing, working with LPs, and building your firm. This episode is brought to you by Juniper Square, the operations partner for private market GPs. Learn more at junipersquare.com/howiinvest. That's junipersquare.com/howiinvest.
00:22:33 · Jack Selby, David Weisburd
[00:22:33] S1: Yeah. It's a good question. And I think, you know, if it was a KPI for what we're doing at Copper Sky, if you fast forwarded, say, five or ten years and you saw more coastal firms coming to the interior, to the middle market to quote unquote compete with us, I would view that as a successful outcome for what we're trying to do. Because the reality is right now, you know, essentially, a venture capitalist has two core jobs in my opinion. You're sourcing deals, and you're competing for deals. [00:22:58] S0: Do you know this joke about the further a VC is from their board, the the better the company does? [00:23:03] S1: I'm very well well aware of this joke. Yes. It's an excellent joke. [00:23:06] S0: It's an expert... It's very spot on. Joke because it's actually empirical. And the reason it's empirical, there's different theories about it. Right? You could debate the causation. But the the official, I think, academic interpretation is that VCs, once they get to a certain level of success, they become lazy at the margin. And if you could go in your coffee shop in Palo Alto and meet a company versus go to Milwaukee, Wisconsin, and then have to go to Milwaukee, Wisconsin in the next fourteen years, two, three times a year, then you're gonna be more likely to stay in Palo Alto. And because of that, you're willing to pay up a little bit for for lifestyle reasons.
00:23:06 · David Weisburd, Jack Selby
[00:23:06] S0: It's an expert... It's very spot on. Joke because it's actually empirical. And the reason it's empirical, there's different theories about it. Right? You could debate the causation. But the the official, I think, academic interpretation is that VCs, once they get to a certain level of success, they become lazy at the margin. And if you could go in your coffee shop in Palo Alto and meet a company versus go to Milwaukee, Wisconsin, and then have to go to Milwaukee, Wisconsin in the next fourteen years, two, three times a year, then you're gonna be more likely to stay in Palo Alto. And because of that, you're willing to pay up a little bit for for lifestyle reasons. [00:23:40] S1: Let me be fair. There is so much talent in the Bay Area that the top tier Sand Hill Road guys do not need to leave Santa Clara or San Mateo County to find amazing deal flow, in fairness. And so they don't need to get on a plane and fly to Milwaukee or Phoenix or Cincinnati. They just don't need to. And so You know? And they get... Like I think you said, there's a degree to which they get a bit lazy, and they like to ride their bikes or at most [00:24:05] S0: Some some could argue efficiently lazy. [00:24:07] S1: Sure. And there's a degree of efficiency, I think, in the approach, but they prefer to ride their bikes or at most drive their cars to their board meetings and not have to get on their g five and fly to Milwaukee. And that's fine, but therein lies the opportunity.
00:24:07 · Jack Selby, David Weisburd
[00:24:07] S1: Sure. And there's a degree of efficiency, I think, in the approach, but they prefer to ride their bikes or at most drive their cars to their board meetings and not have to get on their g five and fly to Milwaukee. And that's fine, but therein lies the opportunity. [00:24:18] S0: You're obviously Jack Selby, and you have this reputation. You worked with Peter for all these years, and still... I feel like you still have to have these arguments day in and day out. What's the best counterargument to your thesis? [00:24:31] S1: The best counterargument is that no one has done this successfully in putting up solid top decile numbers yet, and that's what I'm trying to do. So it's difficult to disprove that. [00:24:43] S0: In other words, interesting theory, but show me the proof. [00:24:46] S1: That's right. And so no one has done it. This is hard. Raising money for a noncoastal venture fund is hard. There's a, you know, there's a phrase called the flyover states. It's pejorative. It exists. I'm acknowledging it. It is what it is, and I'm not saying all investment sentiment is dictated by the coasts, but I would be naive to say that it's not to some extent. And so when I sit down in a fancy boardroom here in Manhattan and I look across, you know, at the CIO and I try to convince him that there's some smart people that actually live in Milwaukee, I often get looked at as if I have three heads. That's the reality. But I acknowledge it, and it's just part of the job.
00:24:46 · Jack Selby, David Weisburd
[00:24:46] S1: That's right. And so no one has done it. This is hard. Raising money for a noncoastal venture fund is hard. There's a, you know, there's a phrase called the flyover states. It's pejorative. It exists. I'm acknowledging it. It is what it is, and I'm not saying all investment sentiment is dictated by the coasts, but I would be naive to say that it's not to some extent. And so when I sit down in a fancy boardroom here in Manhattan and I look across, you know, at the CIO and I try to convince him that there's some smart people that actually live in Milwaukee, I often get looked at as if I have three heads. That's the reality. But I acknowledge it, and it's just part of the job. [00:25:23] S0: Speaking of tropes, one of the biggest tropes today is in a post AI world, everything changes, and funding changes, strategy changes, hiring changes. How does a strategy change or evolve in a post AI world?