How I Invest with David Weisburd
00:36:02 · David Weisburd, Matthew Harris
[00:36:02] S1: I didn't wanna disclose, my investment in Anthropic because I wanted to hear hear unfiltered unfiltered opinion, but let's assume that goes public at reported $2,000,000,000,000. I don't have any insider information on that. How do you think about the valuation and what will be the drivers on whether that's overvalued or undervalued? [00:36:27] S0: I think the valuation based on the reported revenue numbers and revenue growth is actually reasonable. You know, these are unprecedented. [00:36:36] S1: Is that just because the sticker shock on 2,000,000,000,000 is just so great they had to price it like that? [00:36:41] S0: To be clear, there is sticker shock about 2,000,000,000,000. But I think if you look at the underlying business momentum, other than the sticker shock of that being in a kind of an unprecedented number, it's actually reasonable. Like if you took three zeros off of all the numbers, you would say, well, actually, that makes sense. If that growth rate can continue or anything like it can continue, they will grow into and through that valuation in a very reasonable period of time. So I don't think it's unreasonable at all. You know, we have a hard time as investors pricing companies that are in hyper growth because it's really hard to do any kind of forward. [00:37:19] S1: Goes back to what we were talking before. Correct. Seems overvalued.
00:37:19 · David Weisburd, Matthew Harris
[00:37:19] S1: Goes back to what we were talking before. Correct. Seems overvalued. [00:37:23] S0: It might see overvalued at a moment. But again, if hyper growth continues, it'll quickly seem undervalued. So I think we just you know, we just don't know. And so I don't think it's unreasonable. And I am sure there's demand. I think what will be interesting to see technically is how much of the cap table is in strong hands versus weak hands. And therefore, what the supply demand picture looks like when the lockups start to come unlocked. You know, SpaceX has done well so far. But I just don't know enough about the detail of the anthropic cap table to know how many, you know, venture firms and other investors who haven't produced a lot of liquidity in the last, you know, five years are really eager to produce some liquidity. [00:38:10] S1: Another set of incentives. And as a small shareholder, not not so small outcome, I I could see if you invested 50,000,000 or a 100,000,000, that number is very difficult to walk away from even if you think it's undervalued. [00:38:27] S0: Yeah. I think that... And you're the LP and you're sort of saying, alright. It's a lot of TVPI, but we haven't had distributions from this asset class. So let's get going with this, and this is how this works. You give us money back, and we give it back to you, but you need to give it back. So, again, that doesn't make me pessimistic. I just don't know the math around this week. It's more [00:38:46] S1: of a short term volatility.
00:38:46 · David Weisburd, Matthew Harris
[00:38:46] S1: of a short term volatility. [00:38:47] S0: Correct. But these things can have a, actually, I'd say medium term effect if you have a cap table full of weak hands that need liquidity, particularly when the numbers get that big. Because how do you replace, you know, in a theoretical, say you had half of the company were liquidity seeking owners in a period of two years, you know, between IPO and two years after IPO. That means you got to go. If the stock stays flat, you got to go source another $1,000,000,000,000 of liquidity. That's not just a valuation question. That's just a like cash. Where's that coming from? Probably not coming from T bills. So it's coming from somewhere. So there's some like physics of the market that but by the way, that 50% was like total speculation. I have no no intuition that half the cap table is a seller in the first two years. But, you know, we're an unprecedented territory, and so we just don't... We don't really know. [00:39:45] S1: I'm still shocked that the standard of no liquidity for VCs, and then at six months, everybody gets unlocked. That is the dumbest model I've ever heard that that has persisted. Couple companies recently had... Have changed that. Cerrebris, one of our other companies that it did this unlocking over over many tranches. Some tranches were as low... As small as 6% Great. Of the holdings. SpaceX also did tranche. Do you think that this trend could continue, and do you see any of your portfolio companies speculating?
00:39:45 · David Weisburd, Matthew Harris
[00:39:45] S1: I'm still shocked that the standard of no liquidity for VCs, and then at six months, everybody gets unlocked. That is the dumbest model I've ever heard that that has persisted. Couple companies recently had... Have changed that. Cerrebris, one of our other companies that it did this unlocking over over many tranches. Some tranches were as low... As small as 6% Great. Of the holdings. SpaceX also did tranche. Do you think that this trend could continue, and do you see any of your portfolio companies speculating? [00:40:16] S0: For sure. Yeah. I think not only tranching, but price targets. We did an IPO in many IPOs, but one in particular in 2021, where we create a very thoughtful ladder of price targets and liquidity only comes with price targets and price targets that are hit with some duration and some level of volume. And so you you can actually really mitigate the risk of drawdowns when you do that kind of careful titration of how stock gets fed into the market. And there's no doubt that feeding stock in sooner in a titrated, careful way is way better than not feeding it at all and letting it build up. So I think it's actually the underwriters can be a little hard to deal with on this, that the investment banks, you know, who run these IPOs actually from a regulatory perspective, they are the underwriters. And so that that word has some meaning still, and they have to be very careful about this. They're often [00:41:16] S1: They're the counterparties to some of these transactions.
00:41:16 · David Weisburd, Matthew Harris
[00:41:16] S1: They're the counterparties to some of these transactions. [00:41:18] S0: They're the ones who'll get sued if something novel gets tried and doesn't work. So that's actually [00:41:24] S1: I could see how the conversation went with Elon and his team and the banks. Well, this is what we have to do. Well, this is what you're gonna do. Okay. [00:41:31] S0: Yes. And if Dario wants to play [00:41:33] S1: But sometimes that's how standards are set. And then everyone's like, I want I want Elon's deal. Completely. And then the industry changes like magic. [00:41:42] S0: And I think that'll... I mean, it happened for every run of the mill issuer, but surely either Anthropic or OpenAI or both could could get a similar deal. [00:41:51] S1: Going back to Anthropic and Anthropic's evaluation, not just because I selfishly [00:41:57] S0: am You love talking about this.
00:41:57 · Matthew Harris, David Weisburd
[00:41:57] S0: am You love talking about this. [00:41:59] S1: Not because I I need to do some tax planning and portfolio planning, but also because I had... I previously had Lucas Swisher who runs growth for Coatoo, extremely smart investor. And one of the things that he said that I'm still processing and blew my mind, is that despite these revenue numbers at these large labs, OpenAI, Anthropic, and others, He still believes we're extremely early. And the reason he believes that is because the majority of the revenue today is still coming from developers and engineers. And the penetration of those engineers is just so tiny, even in The US. So you're having a small part of a small market, and that's leading the revenue today. Now what happens when just all of engineers are unlocked and then all of other knowledge workers? I think there's only, like, 50,000,000 or so engineers on the planet out of 8,000,000,000. So you just have a small portion of them really doing a lot of token spend. What do you think about that? Could it could it really be that we're really that early in terms of token usage and AI adoption? [00:43:11] S0: I'd say I... The two countervailing things in my mind when I hear that. One is vehement agreement. And at a certain point, increasingly in our companies, there aren't even human users of AI. They're just agents doing stuff. And so it's not 8,000,000,000 that you're going, you know, that 8,000,000,000 humans getting more productive. It's actually 80 or 800,000,000,000 new entities being created.