This Week in Startups
01:02:28 · Jason Calacanis, D.A. Wallach
[01:02:28] S0: Ackman is public, I think, Pershing Square. [01:02:30] S1: Ackman took his thing public in a closed end structure. Now I think you're gonna see Andreessen try to go public and you may see other traditionally venture funds because try to go that's how you monetize the equity that you've built up as the last generation founder of one of these things. And that just fundamentally changes the nature of these businesses. I think ironically what it creates is sort of an emerging for small agile funds who are just playing the old venture game. Small funds deeply in the social networks of the most compelling young founders in the world. And they're the ones who are gonna have a really good shot at getting this you know, sort of alicorn class. [01:03:15] S0: Tomas, sounds like your fund. Sounds like what you're doing.
01:03:15 · Jason Calacanis, Thomas Tunguz
[01:03:15] S0: Tomas, sounds like your fund. Sounds like what you're doing. [01:03:18] S3: I hope that's what it is. Yeah. We we... I mean, we're, you know, we're only about three years old. We've raised a little less than 800,000,000, and, we don't invest in very many companies. We put about 10 companies per fund, and and then we have a team that's actually forward deployed. That's great experience, it goes and builds the go to market functions of the companies. So it's not necessarily these businesses that reach profitability, I don't think we have a lot of conversations around how quickly a company can get to profitability. I think on the B2C side, so selling to consumers or product led growth where you can grow by yourself, there's no doubt that those businesses will be incredibly capital efficient and can finance their own growth. But a lot of software, even today because of the way that we're sort of educating people about how to modernize their businesses, requires lots of increasingly expensive people. [01:04:05] S0: I wonder how much of what we're experiencing is the tension between public markets, classic private markets, and this new weird thing in the middle, which is the trading of secondary. And so if we're sitting here, Elana, and you're doing a syndicate, sometimes are you buying previous people's shares or are you just doing primary?
01:04:05 · Jason Calacanis, Elana Gold
[01:04:05] S0: I wonder how much of what we're experiencing is the tension between public markets, classic private markets, and this new weird thing in the middle, which is the trading of secondary. And so if we're sitting here, Elana, and you're doing a syndicate, sometimes are you buying previous people's shares or are you just doing primary? [01:04:27] S2: I had at my previous syndicate, we did Anthropic and or all SpaceX. At my current one, we've been going direct, not really looking at secondaries too much. It's an interesting market right now. People are paying crazy prices. I think the really interesting thing I'm seeing is to get access to the next round funding. So many founders are like, oh, just do an uncap with a 10% discount or 15% discount. And then you're like, Okay, they just raised the round. It gets two weeks after it closed. You have no idea when they were going to raise their next round of funding. If you're etched or instinct, maybe it will be like three days from your last round. But I think it's super interesting that now you're seeing these uncapped saves and a lot of LPs are taking on this risk saying, Hey, can they execute? You have no additional numbers than their last round. And you're disagreeing to get into their future round of funding that you have no idea the price on. And I do think there's some opportunities that you say, Yeah, sure, we'll do uncapped. It's generational business. We truly believe in it. But seeing it more and more is pretty interesting. I don't know if they'll
01:05:29 · Jason Calacanis
[01:05:29] S0: That's a top of the market, we just don't do them. We don't do deals if we don't have pro rata info... Some basic information rights. I'm just like, life is short. Like, why would I do that? But it was really interesting, D. A, is as this middle boiler room kinda before public after the VCs have done this work, there's just like this boiler room of people who are just trying to trade in and out of the stock and get a percentage. So they're like, unlike us who, you know, we want to be fans of the company, we want to know the founders, we want to be part of the team, and, you know, even if we're not working there every day, and it's like... There's a great esprit de corps around this concept. We've now inserted a boiler room trader mentality to the industry where just... I'll take 10% of whatever I sell. So you want $10,000,000 in this robotic company, dollars 10,000,000 in SpaceX. Yeah. Great. I'll just take a million dollars now, and I'll get the trade, and there'll be some fees. And who knows if the SPV is gonna be recognized by the company or not. Not my problem if it gets unwound.
01:06:35 · D.A. Wallach
[01:06:35] S1: Yeah. It's... I think it's crazy. And it's... Look. On the one hand, you've got the the investor or sort of so called investor side of this, which it occurs to me is almost like freelance investment banking. It's like there's this new industry of freelance investment banking where people's... They're not investors, brokers. They're unlicensed brokers who charge a fee and they make their money on the trade. And it's an interesting thing that has emerged, I think exactly as you alluded to, to fill this gap between public and private markets. And it really speaks to the failures of the public market system that we have today. I mean, what should have been happening for the past decade is these amazing growth companies should have gone public much earlier. And the average American saver should have had a shot to participate in that growth and see their retirement account go up as Palantir goes up, as SpaceX goes up. But instead, the, you know, the poor lowly public markets investor is left with the dregs after all these freelance investment bankers take their cut. And the reason it's been allowed to happen is because the founders have had so much leverage and everyone has been so permissive to enable these founders to have dual share classes, complete autocratic control of their companies. So it's like, why would the founder go public? They don't have to, they're in control of their business. Money is easy to find anywhere. They can have all these supplicants who are fee takers on the deal, who are doing, you know, freelance investment banking out there wherever. And and so it's like, you know... And by the way, you know, like, my my... You know, I've got the cleanest dirty shirt, but mine's a little dirty too. I've done a couple of these. Right? Everyone has because it's been free money. And so it's like... But it's not a good system. Like, what we want is shareholder capitalism. Like, America needs to innovate. We've got amazing entrepreneurs. The broad public should have a shot at participating in these companies. They should go public earlier. Sequoia doesn't need a $10,000,000,000 fund. Let your great winners go public to get all that growth capital.
01:08:52 · Jason Calacanis
[01:08:52] S0: Better system. I agree. I I think what they need to do is get rid of the concept of accredited investors. And this is another thing that Trump was really making great progress on, being so pro capitalist, that will probably revert under Democrats and be protectionist again. I've been shouting, why can't people who have under a $150,000 a year salary or 200,000 a year salary on the weekends take a course and become a sophisticated accredited investor? If you want to take that course, you wanna learn how to your own money to work, and then you want to start a syndicate and you're not an accredited investor, or you want to buy into these companies, let them join that class. And then let venture capital firms have 10,000 members. Why can't I have 10,000 people in my venture firm and have them put 1,000 each? This could get very interesting. You could have a much different world if people who are quote unquote poor, middle class, too stupid to invest in this class. Well, if they could invest in a venture firm and pay their 2 20? Put a thousand. Put 10,000 to work. Do five years of $10,000 capital cost, $2,000 each. Like, an Uber driver could participate in investing in Uber because they were driving Uber and they saw how popular and how much the customer love was. You're an HR person. You see LinkedIn having an impact. You're able to buy $25,000 worth of LinkedIn with your four zero one ks. You know, they should allow anybody to get in here. That would be another way for there to solve your problem, D. A, which is give access earlier to a wider swath of people. And I've thought about starting my next fund offshore. And there are some countries, I wouldn't be able to have American LPs, but there are other countries that allow anybody to participate, or they have a sophisticated investor test. We got to get this done. Talked to the head of the SEC about it. They're working on it.