How I Invest with David Weisburd
00:12:02 · Gavin Ezekowitz
[00:12:02] S0: I would be have to be completely honest that we didn't think about revenue or any metric of that that kind, probably a little like you. We we said, this is clearly a well funded, well supported, very capable business that given the scale of these businesses, this feels like a good next bet. So that... In in that case, it's not a good analog for our for our process around most companies. Right? That is... There's not a good good process in that regard. It was also one of the first companies in the space that we invested in. And so I would say that our our overall underwriting process was... I would say that we benefited from being naive, right? We benefited from being naive when the company accrested a 100,000,000,000. You know, was like, oh, I'm not sure, but this seems a little crazy. Right? And and it took me a little while to sort of catch up in my own understanding from the one seventy to the three eighty to kind of go, alright. We're seeing something completely different. I have to think about it differently. Today, I don't underwrite quite that way. But what what I try to do and what we what we do understand, I think, quite well, is that the current revenue and revenue projections are so imperfect both on the part of ourselves, other investors, and the company themselves that that you you have to say, you know, what what is the circle of of probability around the next couple of years? What are the milestones? What's the likelihood? What are the unlocks? What are the challenges we see if it's an enterprise company going after new logos? Scale of the the new contracts? What do we see the go to market team look like? There's a company we just recently underwrote. It was quite interesting. We knew the management really well, but we actually started using the the product within our within our firm. And the company had arranged for their head of sales and and one of their sales folks to get on the phone with us. And they weren't... We said, look, this got nothing to do with us an investor. It's our CFO making the decision. But I was on the call. And I was just so impressed with their sales process. I was like, well, these guys are killers. They're amazing. They're prosecuting this call extremely well. The way they followed up was exceptional. I was like, this is a fantastic team.
00:14:48 · Gavin Ezekowitz, David Weisburd
Like, this gives me tremendous confidence in their ability to deliver in the enterprise space, which is where they're focused. [00:14:57] S1: You're recently sitting down with what I call a top 10 fund with one of the partners that runs the fund. He said that they look for companies that are capital magnets. [00:15:06] S0: Mhmm. A, [00:15:09] S1: what does that mean? And b, do you agree with this strategy? [00:15:11] S0: The quote from the individual was they look for founders that are capital magnets, and and those individuals that they think have have that incredible fundraising power. I would observe over my entire thirty year career in the investment world, there are really special people that can accumulate capital, that can generate investor confidence. They are not always honest people. They're not always good people. They're not always even good at executing. Occasionally, they're exceptional at all of these things, and they're wonderful entrepreneurs. But but this is certainly... There's a pattern that we can observe over time that it is not a terrible strategy. The challenge, of course, is that in the private market, when we make a commitment to one of these companies, we have very few exits. In the public market, you can put a stop in if you like, or you can do all sorts of things. Most often, we need to commit a relatively sizable amount of capital at a period of time, and then we got to play it out. Your conviction around that singular point relies on a certain capital markets dynamic persisting over the time period that the company will have to execute.
00:15:11 · Gavin Ezekowitz, David Weisburd
[00:15:11] S0: The quote from the individual was they look for founders that are capital magnets, and and those individuals that they think have have that incredible fundraising power. I would observe over my entire thirty year career in the investment world, there are really special people that can accumulate capital, that can generate investor confidence. They are not always honest people. They're not always good people. They're not always even good at executing. Occasionally, they're exceptional at all of these things, and they're wonderful entrepreneurs. But but this is certainly... There's a pattern that we can observe over time that it is not a terrible strategy. The challenge, of course, is that in the private market, when we make a commitment to one of these companies, we have very few exits. In the public market, you can put a stop in if you like, or you can do all sorts of things. Most often, we need to commit a relatively sizable amount of capital at a period of time, and then we got to play it out. Your conviction around that singular point relies on a certain capital markets dynamic persisting over the time period that the company will have to execute. [00:16:39] S1: You're making a macro bet. I think you're making more of
00:16:39 · David Weisburd, Gavin Ezekowitz
[00:16:39] S1: You're making a macro bet. I think you're making more of [00:16:41] S0: a macro bet. Now, I think if you've got that individual, those special individuals, and you talked about talent, I agree with you. They can attract talent. They can attract capital. That does have a flywheel effect, particularly at the scale of capital that we require in in the AI space. Very important. But you better make sure that those folks are able to shore up the rest of their business. And I would say that as an investor, I tend to be very focused on integrity, whether it's a venture manager or a founder. Maybe I'm a little quaint, but I, like, I very much value honesty, integrity, transparency, and sometimes those folks who are exceptional are not exceptional in that regard.
00:17:32 · David Weisburd, Gavin Ezekowitz
[00:17:32] S1: Yeah. I don't think you're quaint at all. And just take away the moral lens on integrity. I just think it's an efficient market. And when you're a top space engineer and you have the choice between working... Continuing to work at... For Elon Musk, So, obviously, this great high integrity founder literally sleeps on his sleeps on his factory floor or Brian Argus, former SpaceX guy, just like highest integrity guy or somebody else. They're gonna go... All things being equal, which they're not always equal, they're gonna go with the high integrity. I think there's an efficient market. They hit up three of their friends that work there, and they're gonna get the truth. Even though some investors may not get the truth, the employees, the source of truth, the ones that are actually building the foundational value in these companies, get to the right answer very quickly, and it's an extremely efficient market. [00:18:18] S0: I think that's actually a fantastic point, David. And and I think you make it really, really well. The market for talent at this... At the sort of at the at the tier of talent we're talking about, these are these are always the top folks, whether it's There's stakes hundreds of them. [00:18:33] S1: There's hundreds or maybe low thousands.
00:18:35 · Gavin Ezekowitz
[00:18:35] S0: There are very few of these people. Those folks know what's happening in those companies. They really know. And and I think that there is no question that if the company in their view is not seen as... Is presenting perhaps an incorrect or overly audacious or or potentially untrue reflection of its capabilities and timelines and so forth. I think that they will look at both their own moral compass, their own economic reality, and ask the question, do I really wanna be here through the part where reality meets? Having said that, when you speak to people from SpaceX, they will tell you that Elon Musk went around for many years saying, We're going to Mars. People would repeat that over and over again. And there were plenty of times where the things that they were hearing, you know, in in the public market didn't confirm confirm to what... Where they were at. But the difference there was I think that they genuinely believed they were gonna get there. Like, they they genuinely believe they had the skill set. They saw the talent around them, they said, well, look. Even if we're not gonna get there in three months, like I hear him saying, we're gonna get there. We like, you know, or I will die trying kind of thing. And I think that that that's a difference maker in that kind of company. And it is one of the things that you do hear most often from those employees about kind of why they loved it. Personal responsibility, absolute commitment to a goal, and some of that other stuff that was, you know, a little bit optimistic was sort of forgiven.