The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
01:01:32 · Harry Stebbings, David Morehead
[01:01:32] S1: Would that prevent you allocating towards European managers? [01:01:35] S0: No. We have allocated to long short managers in Europe precisely because I think there are gonna be some companies that win and some companies that lose. But I will also say that some of our bigger macro hedges are on European indices. [01:01:49] S1: So David, I could talk to you all day. I'd love to do a quick fire round. So I say a short statement. You give me your immediate thoughts. [01:01:55] S0: This could be, like, highly dangerous for me. [01:01:57] S1: Oh, don't worry. We've we've we've got... We've gone to Chinese permits. So trust me. The quick fire will be like a piece of cake. What have you changed your mind on in the last twelve months? [01:02:06] S0: Software was one. So software, we kinda leaned into pretty hard. We also took energy off at around the same time, sort of with the advent of the US Iran war, the Strait Of Hormuz bit. When crude kinda went north of a 100, we took a lot of our energy length off. We did add to private equity sponsors in sort of like March, April ish. So we don't really like private credit, but we do like the private equity sponsors. And so we've allocated more in that direction. [01:02:39] S1: What asset class do you think is overhyped today? [01:02:43] S0: Private credit because it's easy. [01:02:45] S1: Why do you not like private credit? I'm I'm not in it. I don't understand. [01:02:48] S0: I... I'm not in it, and I don't understand either.
01:02:48 · David Morehead, Harry Stebbings
[01:02:48] S0: I... I'm not in it, and I don't understand either. [01:02:50] S1: But is it just shit returns? I remember I had a girlfriend who did private credit, and she told me it was like crap returns. And I listened, and I was like, yeah. You're right. It's crap returns. [01:02:57] S0: Well, I think effectively what is happening is that you have credit exposure in companies that looks and acts a lot like equity to the downside, but you don't have upside equity returns. And so I think the risk reward profile is kind of off, right? So we prefer equity to that. [01:03:17] S1: What other endowment fund do you most respect and admire because of their build out? And why them? [01:03:23] S0: Brown, without I just have, like, a ton of respect for Jane and the team that they have built there. I mean, it's also the case that their returns are better than ours, at least over, you know, the last ten years. I think our returns might be better than theirs over the last five years, but we've got a lot of wood to chop to kind of catch up to where they're at. They are what I would describe as real investors. They'll do things that take a lot of courage. I'm not saying that they're riskier, but they're thinking through the risk return profile of things and like placing... But they've just done an extraordinary, extraordinary job. And not like I know Jane, we talk and chat and whatever. Just utmost respect for that team. [01:04:04] S1: Which fund are you not in that you would most like to be in? We mentioned some of the big names. [01:04:08] S0: Probably Benchmark.
01:04:08 · David Morehead, Harry Stebbings
[01:04:08] S0: Probably Benchmark. [01:04:10] S1: Be the same for me. [01:04:12] S0: Yeah. Ton of respect there. [01:04:14] S1: Final one for you. What are you most excited for in the next few years?
01:04:18 · David Morehead
[01:04:18] S0: I do think that biotech is going to be even more impactful over the next ten years than it has been over the last ten or twenty years. So we're spending more time on that. In fact, later this week, I'm headed to a biotech conference and then again in October. So biotech is something that we're actually spending a lot of time on. We certainly have like a lot of biotech exposure, but we're wondering if we should have more even. It seemingly is less correlated with certainly the science is less correlated with markets, but what scientists are doing these days and actually like solving diseases as opposed to simply treating symptoms is extraordinary. So biotech certainly is something that's like kind of high on the list and that we're spending a bunch of time on. Aside from that, like from a personal perspective, I'm really excited to see our team, our office build out over the next three years. As I've done this, I think that there is really a major inflection point that happens when you're $1,000,000,000 going to $5,000,000,000 And we're kind of like right in the middle of that. And so we're dealing with all of the issues around, you know, how do you grow a team? What systems do you set up so that when you're at 5 or $10,000,000,000, like you can actually keep track of everything? How do you systematize things so that this is a self perpetuating office, etcetera, but retain the creativity to continue to do the new things that you've done in the past to get here? There's a lot of decision making that has to go on between one and five billion dollars. And I didn't really appreciate that until kind of being in the middle of it over these last couple of years. We're sort of like halfway through it, but I kind of think in the next two to three years, we'll kind of get out to the other side and then be like off and running. So that at a personal level, that'd be tops for me.
01:06:14 · Harry Stebbings, David Morehead
[01:06:14] S1: David, I've so enjoyed this. I am very grateful to you for putting up with my varying questions, naivety in certain cases, but I've loved it. And so thank you so much for joining me. [01:06:24] S0: Yeah. No worries. We're here down in Central Texas trying to do a good job. So thanks for having us.