The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:47:23 · Scott Wilson, Harry Stebbings
[00:47:23] S0: Well, there's, there's price and value. I think you gotta separate the two. Right? If we think companies are, like, you can buy it at a 100, we think it's worth 300, and we think it's compounding value at at a significant clip. Like, we think that's a much better investment than than buying something in The US that trades at five times the multiple that's compounding value at the same rate. Does that make sense? [00:47:43] S1: It does. So people understand, how do you determine the difference between price and value? Value is what it's worth and price is what someone's willing to pay. [00:47:51] S0: Price is what you pay. Value is what you... And it's very subjective. And I think you have to be pragmatic about valuation, but for the same quality of assets, and you can think same growth rate. And, you know, over long periods of time, what they call core KPIs of the business will drive returns more than the original entry multiple. So if you get a much cheaper multiple on the entry price and you get the same growth over a decade, you're gonna do a lot better. [00:48:15] S1: Do you have much in China?
00:48:15 · Harry Stebbings, Scott Wilson
[00:48:15] S1: Do you have much in China? [00:48:17] S0: We don't, we don't have a ton in China. We have an office in Shanghai. So we, we cover that region really well. We have two guys there permanently, and and we certainly look at a lot of stuff in China. We probably have more than our peers in China, and we've been active, you know, since Jamie Dimon said China's uninvestable. We've added a decent amount of capital. And I think China was one of those markets. You know, the the geopolitical risk was always there. The fact that it was a little bit more visible. Like, if you spend enough time in Asia, you know, you wanna do stuff that you think is either under the radar or supported by the broader political parties. So I I think you have to be rational there. But when you can find a good company that can actually return capital to shareholders and and, you know, has a pragmatic view on the world, we think China's a great place to invest. [00:49:04] S1: Why does everyone else not then? I I know. I I... Again, I I so enjoy this show. Dude, why do people... People often ask me, like, why do you love doing the show? I'm like, because I have conversations like this. Dude, the world is saying no. Run. They kill education overnight. Whole sectors get taken over. Xi Jinping has, like, unlimited power and control, and everyone's like, get out. Respectfully, you know, you're not. What do you see that others don't?
00:49:04 · Harry Stebbings, Scott Wilson
[00:49:04] S1: Why does everyone else not then? I I know. I I... Again, I I so enjoy this show. Dude, why do people... People often ask me, like, why do you love doing the show? I'm like, because I have conversations like this. Dude, the world is saying no. Run. They kill education overnight. Whole sectors get taken over. Xi Jinping has, like, unlimited power and control, and everyone's like, get out. Respectfully, you know, you're not. What do you see that others don't? [00:49:31] S0: Well, you see that, but, like, we... You know, we've seen worse behavior in very developed markets like in The UK where there was, like, offshore, like, in the Northern part of The UK where they had the offshore oil and whatever energy assets, and they took the tax rate from 25% to 75%. I mean, that's basically confiscating half the company. I've never seen that behavior in China. And they more or less did the same thing in Norway with certain types of assets. Like if they take the tax rate from 25 to 75%, that's the equivalent of of confiscating half the company. [00:50:02] S1: Do you mind that... And I bet you weren't expecting to go here, but my knowledge of investing in Chinese funds is actually surprisingly solid. Yeah. When you invest in a Chinese fund, there's a dollar denomination, there's, like, an RB denomination. And now the average is $1 to 9 RB. Do you mind that split? And if you're not allowed to invest in chips and some of the most exciting things with the dollar denominated fund, does that not take out all the alpha of investing in China?
00:50:02 · Harry Stebbings, Scott Wilson
[00:50:02] S1: Do you mind that... And I bet you weren't expecting to go here, but my knowledge of investing in Chinese funds is actually surprisingly solid. Yeah. When you invest in a Chinese fund, there's a dollar denomination, there's, like, an RB denomination. And now the average is $1 to 9 RB. Do you mind that split? And if you're not allowed to invest in chips and some of the most exciting things with the dollar denominated fund, does that not take out all the alpha of investing in China? [00:50:32] S0: Yeah. I mean, I think there's a natural, like, to some agency problems. But I think for the most part, the entrepreneur prefer dollar and it's a way for them to get assets offshore if they're in the VIE structure. So you still get access to really good companies and that's a good good market. And we don't have a ton of funds in China, but we're certainly not afraid of it. And we... We've done more kind of co investments and one off stuff in China over the last five years. But, yeah, it's a huge market is what I would say. But you have to navigate it on the ground and and be realistic. [00:51:00] S1: Do you have to have a team on the ground to do China? [00:51:02] S0: I don't know if you have to have a team on the ground, but you certainly have to invest through local partners. [00:51:08] S1: Listen, dude. I wanna do a quick fire round with you. So I say a short statement. You give me your immediate thoughts. What fund are you not in that you wish you were in? Benchmark, probably. You're not in benchmark?
00:51:08 · Harry Stebbings, Scott Wilson
[00:51:08] S1: Listen, dude. I wanna do a quick fire round with you. So I say a short statement. You give me your immediate thoughts. What fund are you not in that you wish you were in? Benchmark, probably. You're not in benchmark? [00:51:19] S0: We're not. No. I mean, I wish we had, like, a bigger allocation to the early stage founders funds as well. [00:51:26] S1: How did you get... You got Cerebras through Foundation? [00:51:29] S0: We got Cerebras through a fund called Eclipse. [00:51:32] S1: Oh, yeah. Leo. Yeah. You can put all of your money in only one fund. Which one do you choose? Private or public? One each. [00:51:42] S0: I will say addition of our our core partners. I think he's the best investor in our portfolio. He's just very pragmatic. He's disciplined around price, but will pay up for super high quality assets. And I think his underwriting process and and just the way he dissects companies and business models and management teams is is really impressive. And so of the people I've spent a lot of a lot of time with, I think he's the... He's probably the most talented investor in our portfolio. [00:52:08] S1: Are you ready for a hard one? You have an amazing board. Who would you most like to have on your board who you don't have on your board today? [00:52:15] S0: Probably it would be somebody with real industry expertise like, Elon Musk or, Thomas Reardon. Somebody who I think has like real deep industry knowledge that we could use and could help us diligence a variety of investments. I mean, as it is, my board is is really great at that.
00:52:15 · Scott Wilson, Harry Stebbings
[00:52:15] S0: Probably it would be somebody with real industry expertise like, Elon Musk or, Thomas Reardon. Somebody who I think has like real deep industry knowledge that we could use and could help us diligence a variety of investments. I mean, as it is, my board is is really great at that. [00:52:35] S1: Which other endowment fund do you most respect and why them? [00:52:40] S0: There are several. You know, think what Eric's accomplished in Michigan, what Robert's accomplished at Virginia, Seth at MIT, Jane, now Josh at Brown, like those those teams have just done unbelievably well over the last twenty years. And I think that's, you know, ultimately that's what you're judged on is the, you know, multi decade performance of the portfolio. [00:53:00] S1: You have like a CIO dinner party? Like, all get together and shoot the shit. [00:53:04] S0: Well, I've been involved in, like, various little groups over time and a couple, like, one off chat groups where I keep track with some of my peers. And, you know, my daughter goes to school in Boston, so I'll meet some of the folks in Boston when I go out there. But but, no, there's there's not, like, an organized, like, regular CIO dinner. I think most of us spend enough time on the road that it's, that'd be tough to organize. [00:53:27] S1: You've worked with incredible managers. You've met and, yeah, worked with incredible founders. Final one. When we think about the best advice that you've been given that sticks with you every day, what would the best advice you've been given be?