The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:36:48 · Scott Wilson, Harry Stebbings
[00:36:48] S0: You know, if we think that they're deploying capital at really high returns, like, we have no problem with really fast deployment. And if we think if they're deploying capital at poor returns or poor expected value, then we don't care how fast it's deployed is what I would say. We have a bias for smaller funds. Like we'd much rather have someone who raises, you know, a billion dollar fund when they could raise 4,000,000,000 and, and comes back every eighteen months than, than someone who raises 10,000,000,000 and comes back every three years. We, we just think like the ability to write like a small check-in a venture portfolio and have that be a super meaningful outcome for the whole portfolio, you know, a fund returner is is much easier in a billion dollar or less fund than it is in a $10,000,000,000 fund. [00:37:33] S1: Do you look at it through the look through perspective? Being if I have a billion dollar fund and I get 10% in every company that I invest in and you say, well, we're a $100,000,000 check of your billion dollar fund, I'll look through. Obviously, I'm just explaining it for everyone listening. You've got this already, is 1% in every underlying company. Is that how you think about it? [00:37:54] S0: That's exactly how we think about it. We hardly ever talk about, like, fund performance. We we only really talk about the underlying exposures in the portfolio. So we aggregate everything up, and we know that we have x dollars of SpaceX or Cerebras or Anthropic in the portfolio, and that's that's how we think about it.
00:37:54 · Scott Wilson, Harry Stebbings
[00:37:54] S0: That's exactly how we think about it. We hardly ever talk about, like, fund performance. We we only really talk about the underlying exposures in the portfolio. So we aggregate everything up, and we know that we have x dollars of SpaceX or Cerebras or Anthropic in the portfolio, and that's that's how we think about it. [00:38:12] S1: Can I ask you, on your, like, Cerebras, how do you think about performance being challenged? And I'm not saying to comment on Cerebras at at all. But when you have a company that is hit by bad tailwinds in the public markets, how do you think about whether the stick and hold or actually a fiduciary duty to just cash your chips in? [00:38:30] S0: Yeah. I mean, Cerebras specifically of... Like, for us, that, that was a really big position at the IPO. And so we took some chips off the table and put some hedges on even pre distribution, but we like Andrew and the team. So we'll continue to hold some of that. And I think, you know, it's, if you look at the current kind of KPIs of the business relative to expectations going out the next four or five years, it's tough to justify the valuation, even at $2,530,000,000,000, wherever it's at today, based on what they've done the last twelve months, you're, you're betting on the, the come, so to speak. So that that company has a lot to prove, but it's clearly a great company, and we have lots of confidence in in Andrew and his team to produce good results over the next decade.
00:38:30 · Scott Wilson, Harry Stebbings
[00:38:30] S0: Yeah. I mean, Cerebras specifically of... Like, for us, that, that was a really big position at the IPO. And so we took some chips off the table and put some hedges on even pre distribution, but we like Andrew and the team. So we'll continue to hold some of that. And I think, you know, it's, if you look at the current kind of KPIs of the business relative to expectations going out the next four or five years, it's tough to justify the valuation, even at $2,530,000,000,000, wherever it's at today, based on what they've done the last twelve months, you're, you're betting on the, the come, so to speak. So that that company has a lot to prove, but it's clearly a great company, and we have lots of confidence in in Andrew and his team to produce good results over the next decade. [00:39:08] S1: Scott, if you could do anything without retribution from any stakeholders, students, board, team, What would you do differently?
00:39:08 · Harry Stebbings, Scott Wilson
[00:39:08] S1: Scott, if you could do anything without retribution from any stakeholders, students, board, team, What would you do differently? [00:39:16] S0: You know, I would I would probably... There's this natural tension between what, like, we're here to support the mission of the university, and that's why we exist. But I also think, like, a 5% payout in certain market environments is, is tough long term, depending on gift flow. So I, I probably smoothed the payout over a longer period of time, but I understand that tension and, and, you know, it's great to grow the endowment and, and be able to see the impact on the institution. So I think that's a natural tension. I I don't think there's really much at WashU that if it makes sense for for the stakeholders and for the team, like, we... We've been able to accomplish everything we wanted to accomplish. [00:39:55] S1: Scott, you've seen many cycles now. You're a pro. Does this have a shakeout, or do we keep going on the meteoric wave that is superintelligence and AI?
00:39:55 · Harry Stebbings, Scott Wilson
[00:39:55] S1: Scott, you've seen many cycles now. You're a pro. Does this have a shakeout, or do we keep going on the meteoric wave that is superintelligence and AI? [00:40:04] S0: Yeah. Well, I I think there will be a shakeout. I don't know what the timeline of that is. Like some of these industries that have just had massive runs, historically, they were not great businesses, you know, and that was for like three decades. They were businesses that probably barely returned their cost of capital. And at some point they'll go back to being not great businesses, but in the short term, you know, if you used to sell a chip or memory for $3 and now you sell it for $30 and all that excess just falls to the bottom line. I mean, think you see that in the multiples. Like, I think some of these industries, right, you you buy them at very rich multiples and you sell them at low multiples because that's how cyclical companies work. But how long the cycle actually lasts, I think that's anybody's guess. [00:40:45] S1: Can I ask you, given what we said earlier, you mentioned, like, Nubank or, say, I'm just choosing, like like, an Uber or an NVIDIA of the world? These are comparatively very cheap companies based on a fundamentals basis actually, today. And then the privates are exorbitantly priced if one looks at fundamentals. And then I look at your statement earlier of wanting to be 70 to 80% in privates, and I just try and juxtapose.
00:40:45 · Harry Stebbings, Scott Wilson
[00:40:45] S1: Can I ask you, given what we said earlier, you mentioned, like, Nubank or, say, I'm just choosing, like like, an Uber or an NVIDIA of the world? These are comparatively very cheap companies based on a fundamentals basis actually, today. And then the privates are exorbitantly priced if one looks at fundamentals. And then I look at your statement earlier of wanting to be 70 to 80% in privates, and I just try and juxtapose. [00:41:09] S0: We are deploying all of this stuff that we're generating liquid back into public markets right now. So, like 70 or 80%, I, like, if we didn't have any liquidity constraints, think over time privates would grow as a percent. I mean, we're at the end of our fiscal year, we were 70 in privates, but a bunch of that has become liquid. So we're redeploying that. And we think the opportunity set in publics, particularly like non AI AI infrastructure related publics, it's a really good time to be investing in in sectors completely that we think are relatively protected, if not immune from AI. [00:41:45] S1: It's a bit of a blunt question, but you've had such a meteor... Like, $11,000,000,000 is an incredible capital accrual value appreciation for for WashU, and it's it's an amazing journey. You could do anything now, Scott. You could have every trillionaire, billionaire in the world pay you an exorbitant amount of money to join you on their superyacht and run their family office. Yeah. With respect, why