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.
00:40:11 · Larry Aschebrook
[00:40:11] S0: I think part of that is, I call it chasing ghosts internally because a lot of what you're saying is is is noise, and it's not real. It's kind of the retail movement trying to get access to a very tightly controlled business and cap table. And so you see that in many of the businesses that become mainstream is is is logo recognition. Yeah. I would say, Elon backed businesses have taken it to a new level of of this, and others have seen that business model and are replicating it. So I think from a regulatory standpoint, yes, Europe loves their regulations. We have a business in Europe. We've had an office in Zurich since 2017. We've backed many of the terrific businesses in Europe and the founders, and and I think what you'll continue to see is a significant number of those founders continuing to come to The US to set up their businesses and operate because the shareholder agreements are more flexible. Raising capital is easier. The regulatory environment to operate in is is less controlled. And I don't see a very heavily regulated secondary market. They're private transactions. It would be like controlling you selling your home to someone else and then having regulations of of somebody... Just the government deciding how you can sell it and when you can sell it. That doesn't seem like a democracy or free trade to me. So I don't think that that that happens. What I do think will happen and continue to evolve is the idea of some type of exchange that works. Today, there's a lot of ideas and a lot of capital flowing into it. Outside of kind of the tokenization, there's issues with exchanges to trade private securities, mostly because of the settlement. We don't have a t three settlement period. The best you can get probably is a t 14, and that's what
00:42:22 · Guillaume Moubeche, Larry Aschebrook
[00:42:22] S1: What does that mean? What does that mean? Like [00:42:24] S0: That's a transaction plus settlement. Like, in the public companies, if you buy a share of Meta, it settles within three days that stock trades hands for you. Right? So in the private markets, that doesn't exist. It's all paper still. Yeah. Right? Robinhood has figured out how to tokenize it and and others, and that's super interesting. But at the end of the day, you're not owning actually any paper of the companies. And until... Specifically in Europe, until the early stage managers in Europe change the way they deploy capital into companies, you're not gonna see a very robust secondary market, and you're not gonna see the ability for companies to have an opportunity to get to the place that would be the holy grail is a trading platform. In The US, we're probably closer, but I still don't think by the... You know, I'm forty eight, fifteen years in managing G Squared. By the time I decide to to walk away, hopefully, twenty years from now, I don't think you'll still see it because it's very difficult to settle private transactions. And the way the shareholder agreements are constructed, it's nearly impossible to do it outside of of of approvals that are needed.
00:43:36 · Guillaume Moubeche, Larry Aschebrook
[00:43:36] S1: And what I've seen, you know, in in private market is a lot of different layers. So with G Squared, I'm assuming that you're always like direct capital. So you're... You have like the proof of shares, you're, you know, like, everything is super clean. But what we're seeing is like layer one, sometime layer two, sometimes layer three, and people like exchanging, you know, those shares just because it's easier and it doesn't, you know, like, it's not under the company's right to choose, like, who's selling, who's not selling. How do you see, like, that kind of secondary market, but that's a lot more on the on the layers of SPD? [00:44:15] S0: Seattle market, the SPD market. Look. I think that that's gonna be very difficult to control. I think as anybody out there is trying to buy stock from someone, know what you're buying. Do as much research as you can. It reminds me today of similar to when the first kind of craze was happening with this with the Twitters and the Facebooks and the LinkedIns and the Spotify's and the Palantir. This early movement that took place in the twenty ten to twenty fourteen period, and when it all unraveled, there was there was a lot of fraud. Yeah. And I think in in, you know, retail investors that are out there that listen to your podcast or just even small firms, like, careful. Partner with good partners. Do your research. Do your due diligence. Dig in. And know what you're buying. And I think that's the biggest issue with that.
00:44:15 · Larry Aschebrook, Guillaume Moubeche
[00:44:15] S0: Seattle market, the SPD market. Look. I think that that's gonna be very difficult to control. I think as anybody out there is trying to buy stock from someone, know what you're buying. Do as much research as you can. It reminds me today of similar to when the first kind of craze was happening with this with the Twitters and the Facebooks and the LinkedIns and the Spotify's and the Palantir. This early movement that took place in the twenty ten to twenty fourteen period, and when it all unraveled, there was there was a lot of fraud. Yeah. And I think in in, you know, retail investors that are out there that listen to your podcast or just even small firms, like, careful. Partner with good partners. Do your research. Do your due diligence. Dig in. And know what you're buying. And I think that's the biggest issue with that. [00:45:12] S1: So your your your process, if someone is entering, a layer two or something, it's to check who's on top, like, make sure they have the proof of fund, etcetera, etcetera. [00:45:23] S0: In one of your listeners' shoes, I would I would start from the first entity. I would dig through it. I would ask for all the documents. I would dip... Get all the way down so you can follow the tree all the way to the cap table, tie it out, get audited financials of each of the vehicles. It's it's onerous, and most people don't do it. And there are these SPV shops that are out there that this is their business, and many of them are great, and they serve a place in in in in the ecosystem. But there are, you know, not so great ones.