How I Invest with David Weisburd
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?
00:25:23 · David Weisburd, Jack Selby
[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? [00:25:40] S1: AI has become so ubiquitous, so pervasive. So even in the noncoastal geographies where I invest, I see it as an ingredient in the recipe of basically every single company I look at. And I'm pleasantly surprised by that, and it's happened more quickly than I would have probably originally appreciated. But I think at some point, we're going to stop talking about AI as an independent dynamic or component. It's gonna... I think very similar to what the Internet was in 2001. It was just so pervasive at that point. Everyone just assumed the Internet was involved in almost every aspect of business, and in this case, your question, venture capital. So I think if we're not there... We're there yet, I think we're very close. [00:26:16] S0: But in terms of team construction, so you could argue from both sides of it. You could say, well, because of AI, now the 10 x engineers are a 100 x, and now you have to be in San Francisco for the network density. Or you could argue the exact opposite, which is now because you could build a $10,000,000,000 company with 15 people, there's certainly 15 great engineers in Milwaukee. Yes. And you don't even need anyone to move.
00:26:44 · Jack Selby
[00:26:44] S1: I'm certainly in the latter camp. Right? And so I think you can build companies with more efficient rosters, smaller teams to be precise, and you can get to outcomes that still generate very good venture returns. I'll give you an example. So I was speaking at some MIT event earlier this year, and the guy next to me, not to name his name, but he made a preposterous statement on stage. He said, you know, venture is going to evolve to finding the next trillion dollar company. And so there were gasps from the audience like, oh, wow. That's such a bold idea. It's a terrible idea because it is so self unaware about what has been going on in the venture capital industry. So to be precise there, what has been going on is that the industry has done an exceptionally poor job of generating returns, of actually getting money back to the pockets of their investors, DPI. And so when you sit on stage at MIT and say, well, no problem. These billion dollar companies that we've been trying to build and get money back to, good news. We're gonna go find trillion dollar companies. And so is that more probable? No. That's even less probable. So this again goes back to the analogy of finding Elon Musk at age 24, and you think that makes the duration longer? You bet it does. So investors are gonna tolerate, again, the improbability of you finding the next Elon at age 24 and, what, wait thirty years to get money back?