00:15:43 · Guillaume Moubeche, Larry Aschebrook
[00:15:43] S1: Nice. Yeah. And who do you... Who did you, like, purchase from? Like, at the time, was it employees or other funds who were looking to Other [00:15:51] S0: other funds that... Yeah. I I think that, you know, today, it's very commonplace that funds have very little DPI. You know? And when this time period was taking place, you know, two thousand twelve ish, thirteen, fourteen, it wasn't as a big of a problem. I think some of the the large investors got a little spooked and read the tea leaves slightly differently than we did. And there probably was a higher possibility or per chance that they were correct, by the way. And they needed... You know, they wanted to sell. And so we found a large block the company sent to us. It was a 150,000,000 in size from a very well known Nordic venture firm. And we... You know, the Spotify had an interesting transfer process because it was a Luxembourg company. So you would notice your transfer. It would be approved, and then there was, like, a sixty day settlement. [00:16:50] S1: Okay. [00:16:50] S0: So during that sixty days, we went around the world and rounded up a $141,000,000, and we had not... We were 9,000,000 short, and that's the shortfall that I backfilled with a loan. [00:17:04] S1: Okay. And that ended up being one of the best investments
00:17:04 · Guillaume Moubeche, Larry Aschebrook
[00:17:04] S1: Okay. And that ended up being one of the best investments [00:17:07] S0: you've from? Being a life changing event, thankfully. You know? But at the time, you know, you know, half of nothing's nothing. So Yeah. You know, there wasn't a lot to back up the loan, and so I wasn't I wasn't too bad off. But... Yeah. No. It was a... It was an amazing opportunity for us that they gave us, and, you know, our team worked tirelessly for those sixty days, made it a very large position in our third pool of capital that we had managed. I think it was 40% of that vintage and 30% of earlier vintage. So concentration, I love. I'm a very concentrated bet person, kind of my personality, and the law of large numbers worked out for us there. [00:17:58] S1: Nice. And how exactly is is the whole business structured? Because you started with investing. I'm guessing you had, like, an early fund, then you raised, like, several funds. And on each opportunity, when you can increase your position in terms of size, do you, like, raise with existing LPs? Do you bring, like, new LPs? Like, how how is the world structure [00:18:24] S0: like that? The the pools of capital were small. Okay. The first pool of capital we deployed out of when total size was close to $35,000,000. But our LPs, you know, our investors alongside of of that vehicle invested several 100,000,000 in co investment. [00:18:43] S1: Wow. Okay.
00:18:43 · Guillaume Moubeche, Larry Aschebrook
[00:18:43] S1: Wow. Okay. [00:18:44] S0: As the business grew and we had success, it kinda normalized. And today, our vehicles are, you know, truly committed capital, two and twenty funds, about a billion, billion and 0.5 in size the last several. And our LPs still enjoy a very robust co investment business where they they top up. Now we've learned a lot of lessons along the way in how to manage that co investment because it can be a big risk to your firm if handled incorrectly because LPs love the shiny logos. You know? It's... But for instance, early days in Uber, great business, but we lost money. And that's... It's it's a head scratcher, right, because it's such a fantastic company, and we bought it at such a low value. But at the time of the exit, it's just the public market wasn't receptive. Now it's a juggernaut. So the thesis was right. The execution was not. [00:19:43] S1: So Because at the time, whenever it got public, I'm guessing you need to, like, hold the share for maybe, like, six months or something like this post IPO. But after that, for you, the goal is to sell and get liquidity and DPI. You don't have, like, a structure that says, hey. Let's let's keep holding on those public stocks because we believe they're under [00:20:02] S0: You're not a public market investor. Right? So [00:20:04] S1: our
00:20:05 · Larry Aschebrook
[00:20:05] S0: honor value add to companies is helping them stay private longer, consolidating their cap table, doing a lot of tenders, one off transactions, helping with early shareholders need liquidity. The price of of of admission, so to speak, is we need the data to understand what we're doing and connectivity with management. And then the companies, they get to a stage in in scale where they need public market investors, and they just have a different, you know, goal and and thesis than us. You know, we're we're building our business still today on a north star that's a DPI number in a five to seven year period, and that's what we do. A lot of firms and a lot of institutional investors, by the way, are confused by it. But what we're trying to do is build a a business that's like the Jim Simons of the Renaissance Capital. I wanna have realized IRRs in the thirties every year, 30% plus, and and have a track record of ten, fifteen years of doing that. And and, you know, it's it's maybe a multiple that's two and a half to three x in that period. It's not chasing, you know, five, six x multiples over ten years. So it's just we're solving for something different for a different type of LP, and the companies inside of our business that we choose to participate in, for the most part, they get it, and they they want the help and consolidation of their cap table. And and today, it's a massive industry and a big business. In the beginning, it was really just me trying to change my life, liking businesses, using the smart device to change change how we consume, and trying to find an opportunity to take the little bit of money that I had and turn it into something far more.
00:21:49 · Guillaume Moubeche, Larry Aschebrook
[00:21:49] S1: And that worked. [00:21:51] S0: Well, not always. It doesn't always work. I mean, we've had some really pain... You know, and, like, when you invest in... With concentration, 10 companies will make up 80 or 90% of our risk in our funds. There's always the good stories of Spotify's and the Coursera's and and and alike and and Toast and Wiz and Anthropic and OpenAI and all these fantastic businesses. And I'm... I I hate naming logos because I'm leaving out 50 other amazing founders and businesses that we were supportive of, and and and they did great work for us and created a lot of value for our LPs. But for all of those, there's, you know, Gorillas and Getir and Pagaya. There's just... There's many scars and 23andMe, and there's the one... Yeah. So [00:22:43] S1: the How how can you walk us through maybe, like, one of the story where it didn't, like... When when, for for example, you start seeing a company that's not performing as well as it should, You're potentially heavily invested in it. I know that because what you were saying about DPI, like, I've invested in many VC funds and obviously, like for them, they love to share, you know, like, paper games. [00:23:09] S0: Everybody's got to win. Nobody ever loses a dollar. I mean, come on. Everybody's perfect. [00:23:15] S1: Yeah. Exactly. First, nobody ever lose, but also, like, they love to share, you know, their NAV and how much technically on paper, you know, they've made. But I know you also, like, balance your portfolio, so maybe we can go to that a bit
00:23:28 · Larry Aschebrook
[00:23:28] S0: later. But I think that that... Look. As a as a GP, raising money's hard. Doesn't matter what your returns are. Raising money and raising capital from LPs is is difficult. Investing it is easy. Selling it is hard. And, typically, you know, your opportunities to sell are when everybody else wants to buy. Yeah. And the herd mentality of Silicon Valley can be difficult to abstain from. And I think one of the benefits we have with being headquartered in Chicago, most of our our our team members are Midwesterners and have a different kind of risk tolerance, is it's it's less about, you know, what is in your book, so to speak, and what dinner parties you go to, and and and how much money you're managing. And it's more about what what are you doing to create real value for your LPs, True alpha. And that is a difficult, difficult item to find. It's real true alpha generation, not beta. And so as the markets are up into the right in privates, just like publics, it's not alpha. People can pat themselves on the back all they want, and we've been guilty of it too. Oh, we're so smart. We're so good. Everything's working. Look at the MOIC. But the real true real true outcome is what is the value of it when you sell it. Yep. And in some of those losses, painful ones, and I wear them every day. And my my... Oh, I have a terrific co PM in Spencer McLeod who's, I think, besides my wife, one of the smartest people that I know. He does a fantastic job of helping us build our portfolios. I think my value add to our partnership is my willingness and desire to do the hard things, and I think that's from being a former athlete. Like, the grind is... I enjoy the grind. I enjoy the the the wins, but the losses haunt me. And when I look back at the failures at our firm, even with good process, you're gonna have bad outcome. I can handle those. It's the bad process that creates a bad or good outcome. You don't reassess on the good outcome with a bad process. It's the bad outcomes that you really look in and say, hey. What did we do wrong? And how... In our business, secondary focus, 70% of our funds are secondary, try to underwrite like a primary investor. So we can't use the excuse of we didn't have enough information or we didn't have the interaction with management. It's it's truly our mistake, and it's the price we paid. Because in in in...