How I Invest with David Weisburd
00:31:51 · Gavin Ezekowitz
[00:31:51] S0: It's very, very similar to the way we we think about the world. So I I think that the very difficult part for investors is to understand that venture is a great twenty year asset class. In any given period, with any given fund, you may have a flat spot. Even the best managers, it is not as perfectly predictable as as people might like. What some folks do... You mentioned five. We use 10 in in our strategy. But what some folks do is say, well, great. Well, I'm gonna go and buy an index of venture of some kind. And so what you lose in that, which is the problem, is because of the dispersion, you end up losing all the convexity. And the only reason to do venture is convexity. It is you want the shot at an anthropic. You want to make sure that the the potential is that the weight of that anthropic ideally will be great enough that even if it was in one of your funds, that it would still give you a an an exceptional return. You would still have a much better return than you would have if you'd been invested in Nasdaq or or some other benchmark asset. And I think that's the first key. I think the second key that's really hard for investors, and I'm sure you've seen this in your portfolio, we see it in our own, is that it's always tempting to think there's a right time and a wrong time. Right? I shouldn't invest in the benchmark fund. It's the top of the market. AI's in a bubble, whatever. Yeah. Or or it's a terrible time. Companies are having trouble raising money. This doesn't feel like a very good time to be investing in venture. Or I've just lost a bunch of money. Now's a terrible time. Pacing and sizing. Pacing and sizing is what Matt Cortola, my partner, and I talk about all the time. It's the great advantage the individual investor has because they can set their portfolio. So pacing, develop a program, multiple funds, multiple years. Sizing, ensure that the size is adequate, that you can continue that program over time. And then if you're sizing individual positions, you know, size them on a on a matrix that that allows you to take sufficiently sized bets over time such that no one bet wipes you out. You know? As I say, the dead don't compound. So, you you know, you can't get... You gotta survive.
00:34:39 · Gavin Ezekowitz
And so I think when people think about that corner of their portfolio, then they can start to make probably what I would consider more appropriately aggressive allocations with the recognition that they... It's gonna have a very different return profile than perhaps what they're they're used to.
00:35:03 · David Weisburd
[00:35:03] S1: So so many great points there. On the indexing point, I think the biggest myth in venture capital across the last ten ten or so years is that every... Any manager could get lucky and to get into the greatest companies. And not only was I think this was a myth a decade ago, today, it's almost impossible. These these companies become so consensus so quickly Mhmm. That unless it happened to be that you... Your Stanford roommate just happened to be, you know, Evan Spiegel or or something like that. Like, that... That's the level of luck that you need today to get into a company that you don't deserve to be in Right. From a brand perspective. Even a decade ago, I think that was much more likely the case. We just know the counterexamples are just so memed sometimes for Uber. Everyone knows that Uber was going around and and raising in 25 k checks, a lot of people that weren't even, you know, restaurateurs and people like that got into got into the company. But how many stories are there like that? Not that not that many, especially in the last ten years. And on top of that, you learn, and frankly, I I was heartbroken to learn that Airbnb itself was also... You know, people love this, like, story of the David versus the Goliath Airbnb. Nobody loved them, and, you know, they... It took ten years for them to get all this attraction. When you actually look at the facts, and I was told this by by early investors because my my interpretation of the story was wrong. Yes. It is true. Airbnb, when they went to pitch to Paul Graham at YC, he didn't really like it. And then they're like, well, what do you have there? And they had these cereal boxes and that that Obama owes and the McCain, and he's like, holy crap. You guys are selling cereals in order just to, like, make make it and kind of the tenacity that you need as a start up. But they were hot at their vint... At their y c class. In fact, Sequoia, I believe, invested. They didn't even go to demo day because they got that investment from Sequoia. So even these stories that are supposed to be these great counterexamples, these great examples that anybody could invest in these great companies that they are on the lookout enough. Even they themselves are not are not true. So I think that's the problem is when people hear indexing, sometimes they start to think, okay.
00:37:06 · David Weisburd
Let me just say yes to every manager that I get, and I'll I'll get exposure to that. And that has not been done well. And I I think that's a trap that you fall into if you... If and when you start to subscribe subscribe to to this this indexing. Indexing. One thing that I've learned from talking to hundreds of investors, founders, and business leaders is that planning for the future isn't just about growing assets, it's also about protecting the people who matter most. Life comes with a lot of important milestones. Maybe you're buying a home, starting a family, planning for college, or simply thinking more intentionally about your financial future. As those responsibilities grow, it's worth making sure you protect those you love. Not sure what kind of life insurance you may need? Concerned about how much it may cost? Think life insurance is too complicated? Your local State Farm agent can help answer those questions. They can help you explore your options for life insurance and choose coverage that you can adjust as your family's needs change over time. Financial protection for your loved ones when it matters most. Learn more about life insurance@StateFarm.com. Like a good neighbor, State Farm is there. Support for today's episode comes from Square, the all in one way for business owners to take payments, book appointments, manage staff, and keep everything running in one place. Whether you're selling lattes, cutting hair, running a boutique, or managing a service business, Square helps you run your business without running yourself into the ground. I was actually thinking about this the other day when I stopped by a local cafe here. They use Square and everything just works. Checkout is fast, receipts are instant, and sometimes I even get loyalty rewards automatically. There's something about businesses that use Square. They just feel more put together. The experience is smoother for them and it's smoother for me as a customer. Square makes it easy to sell wherever your customers are, in store, online, on your phone, or even at pop ups, and everything stays synced in real time. You could track sales, manage inventory, book appointments, and see reports instantly whether you're in your shop or on the go. And when you make a sale, you don't have to wait days to get paid. Square gives you fast access to your earnings through Square checking.
00:39:11 · David Weisburd
They also have built in tools like loyalty and marketing, so your best customers keep coming back. And right now, you could get up to $200 off Square hardware when you sign up at square.com/go/howiinvest. That's square.com/go/howiinvest. With Square, you get all the tools to run your business with none of the contracts or complexity. Run your business smarter with Square. Get started today. Support for today's episode comes from Square, the all in one way for business owners to take payments, book appointments, manage staff, and keep everything running in one place. Whether you're selling lattes, cutting hair, running a boutique, or managing a service business, Square helps you run your business without running yourself into the ground. I was actually thinking about this the other day when I stopped by a local cafe here, they use Square and everything just works. Checkout is fast, receipts are instant, and sometimes I even get loyalty rewards automatically. There's something about businesses that use Square, They just feel more put together. The experience is smoother for them and it's smoother for me as a customer. Square makes it easy to sell wherever your customers are in store, online, on your phone, or even at pop ups and everything stay synced in real time. You could track sales, manage inventory, book appointments, and see reports instantly whether you're in your shop or on the go. And when you make a sale, you don't have to wait days to get paid. Square gives you fast access to your earnings through Square checking. They also have built in tools like loyalty and marketing so your best customers keep coming back. And right now, you can get up to $200 off Square hardware when you sign up at square.com/go/howiinvest. That's square.com/go/howiinvest. With Square, you get all the tools to run your business with none of the contracts or complexity. Run your business smarter with Square. Get started today.
00:40:54 · Gavin Ezekowitz
[00:40:54] S0: So I think it's true. I... You you bring up a lot of a lot of things that are really curious in in that conversation. Because I think one of the pieces of that puzzle that is super interesting, certainly in in Silicon Valley, is there are these amazing super angels, and they are they are real taste makers at at the seed and pre seed level. Now we're in a very crowded time in the market. I think it's always we need to be really careful that we're not just sort of judging that it will always be The Us and so forth. But I think that there is no question that well connected folks with really a good sense of what makes for good companies can at the pre seed and seed level still do important things. And small funds, early funds, well, managers with a very clear network can do... Can produce really incredible outcomes by being close to founders. And I think one of the one of the myths that is also, goes around is that, you know, well, Sequoia is gonna see all the best companies, and Reese and Horowitz is gonna see all the best companies. And I'm like, well, let's imagine they do, and let's imagine that they, in fact, even invest in them, which they don't. Neither is true. But given the scale of the funds, the scale of the investment, what it would require in order for them to carry that through and so forth, it may not even be the case that that really great or good company delivers the kinds of returns that you might like at fund level unless they really prosecuted it well. Whereas in manager with really great taste and network precision of process, maybe network to some angels, maybe network to some communities that can be... The communities can be varied, can find these really interesting companies at an early stage. And I think that there is a bit of a myth that, look, if you're a third time founder, you know the market, you've got lots of... You got a team, you got access to all the pieces, and you get called by one of the big firms. You're just gonna go with them. It's just simply it's just simply not... I don't... It doesn't bear out. Founders choose VCs for all kinds of reasons that we we make choices, relationship, the help they need, the kind of person that they want at that time of their firm, their knowledge that perhaps some of these larger firms made very early checks are not as helpful as they may advertise or differently helpful.