00:30:57 · Larry Aschebrook
[00:30:57] S0: it Yeah. So it's family offices to large global financial institutions. You know, Coursera is a great example. We were... I think we're the largest shareholder of Coursera at the time it went public, and we worked with the company in a very large sovereign wealth fund to come in and and transition our position to them. So we didn't, you know, sell it and drive the stock down over Yeah. You know, 180 days because I think that's one of the issues in the public markets today is there's just ultimately no liquidity for large scale positions. So, you know, you think about... And we're small. Right? And our... And still small. We're bigger than we were, but in reality, G Squared, you know, we're approaching 7,000,000,000 today in assets. It's still relatively small compared to some of the other players, but we do build very large positions, several $100,000,000 of cost basis. In in the case of some of them, it gets to be north of 1,000,000,000 in in net asset value in one position. When you go to sell that in the public market, it's almost impossible without moving the stock price. It takes forever. And if you are unlucky and have one of those great businesses go public in Frankfurt or the LSE, there is not enough liquidity. It's impossible. There is no liquidity. So this idea that the public markets create massive amounts of liquidity for GPs at large scale is is really false. It's a false narrative. And so what we've decided to do in our business focused on this DPI metric is when it's time, we work with the companies. We find shareholders that they wanna get involved with, and we help transition it to them in a win win, similarly to what they did for us building the positions. Now it takes time and energy and and and patience, but ultimately, we are stewards of of trust from the issuers. And
00:33:03 · Guillaume Moubeche, Larry Aschebrook
[00:33:03] S1: And and do you negotiate that from the start with the company? Because I'm assuming, you know, that obviously, you know, when when a company gets to a stage where it's like super sexy, everyone wants in, and they just want to raise, and they don't want, like, existing shareholders to to get liquidity. [00:33:21] S0: Easier on the way out than it is on the way in. When you're... Our business model is we run as... We refer to it as the land and expand. You kind of fire the rifle to calibrate the cannonball, so to speak. Okay. So we're dollar cost averaging in, very small positions up front. It's it's when we get to the top 10 or so per fund where we have, you know, a $2,300,000,000 of cost basis in a position, and we need to then start to trim it as it gets to massive and scale because we are... We have to have risk controls. Companies understand that at that point. In the beginning, if I were to show up and say, hey. You know, I'm like, I love your business. I wanna buy today. And eighteen months from now, I'm gonna sell the position to somebody you don't know. It's gonna be much more difficult, And then you just can't. You can't operate that way in our our industry today. It it is back to a club mentality, but it's more new line growth managers than I would say the old line traditional VC firms with a few exceptions. [00:34:31] S1: And when, you know, like, you reach that that two or three x in DPI, is it, like, per fund, or is it per position that you look at it from a liquidity perspective?
00:34:31 · Guillaume Moubeche, Larry Aschebrook
[00:34:31] S1: And when, you know, like, you reach that that two or three x in DPI, is it, like, per fund, or is it per position that you look at it from a liquidity perspective? [00:34:46] S0: Yeah. I mean, our fund models will kinda tease that out, but it's it's a holistic perspective on the pool of capital. Now each individual line item, need to to to meet a certain return, but they balance each other out. And still within concentration, we try to democratize the return a bit, but it's difficult across our four megatrends. They have different themes within the megatrends that are more, you know, are more prevalent during a certain time period. You know, it was heavy consumer in 2015 through '18, then it was a lot of sass in 2020. 2022 vintage has... You know, everything is amazing because we bought everything when the house was on fire. You know? There's a... You look at all the businesses, you're like, we're so smart. Well, no. I mean, you had... We were [00:35:40] S1: Everyone was scared. Everyone was scared, and that's...
00:35:40 · Guillaume Moubeche, Larry Aschebrook
[00:35:40] S1: Everyone was scared. Everyone was scared, and that's... [00:35:43] S0: You know, as a secondary market player, that's when opportunity takes place, is is when you have really high tenure yields and federal fund rates, and you have everybody running to cash and commodities for safety. It creates real buying opportunity. And then today, it's it's in the AI native businesses, which are unbelievable. But along the way, there's things from, you know, SpaceX to Anthropic to Spotify. And, of course, all of these businesses are unbelievable to be around, and the energy that the management teams bring and the value they create for their shareholders and and and their employees is unprecedented. We're just a steward of that during the process. [00:36:31] S1: And, you know, like, earlier you mentioned the fact that public markets didn't have, like, or don't really have now much sense, even when you look at liquidity and how liquidity is managed. We're seeing like some companies, like, I don't know if you look at Stripe, Revolut, etcetera, etcetera, like, sometimes I'm wondering, like, why would they go public? You know, like, they do tender offer every single year. Like, they can get liquidity for existing shareholder, employees, etcetera. They don't have, like, the pressure of reporting of public market. They can keep, you know, like, long term vision. Yeah. So from your perspective, because you've seen, like, that that market evolve, what does make one company go public? And do you think that's gonna change over time?
00:37:21 · Larry Aschebrook
[00:37:21] S0: I think when companies access the public market, it's... If... For their own reasons, and all of them have probably unique ones. Companies today that are accessing it for raising of capital likely have some CapEx intensive business model they need to to support. And you start to see some of the conversations today that are happening in the public media around some of the big private assets. It's it's really the ones that require an enormous amount of cash still to to continue to grow and to service their customer bases. And and I think, for the most part, segments of the new revolution in the AI industry have that, and and those businesses are probably gonna be better served as public companies. Companies like Stripe and Revolut, although they have an enormous amount of AI embedded in their in their DNA, which makes them great. We were fortunate enough to be early in Revolut, and we're in in Stripe as well. Those businesses accelerating at scale is probably the most impressive on a... That are profitable. And there's many of them like that. So, you know, I'd throw Databricks in that group too where you can stay private, not live your day in ninety day increments, invest in r and d, have great profitability, have programs for your employees that are similar to open periods of selling their stock as a public company, and not have to deal with the majority of the cost or the pain of of of being public. And I'd like to think that we're a small part of helping those companies do that from the beginning, helping kinda write the rules and the processes within the tender space and the secondary space and seeing it flourish the way that it is today in these fantastic businesses and the reward that the employees are getting for... And and shareholders for creating the value is is very rewarding for us.
00:39:26 · Guillaume Moubeche
[00:39:26] S1: And maybe it's a very European thing to say, but do you think, like, at some point, there's gonna be, like, regulation coming into play? Because if you look at... So I invest also, like, in secondary through, like, friends connection or whatever. But what I'm saying, it's like the moment, you know, like, Anthropic was at $380,000,000,000 valuation. The the price of people selling on secondary market starting climbing. You know, at first, it was like 400, then $4.50, then you see blocks of 500, 550. So the markets, like, on private market, there are, like, definitely, like, no rules. Things can be kind of like, manipulating and changing. So what what do you Yeah.