Invest Like the Best with Patrick O'Shaughnessy
00:00:00 · Patrick O'Shaughnessy
[00:00:00] S0: Ramp is the only platform built to make your finance team leaner, faster, and better, saving businesses 5% annually on average so you can stay focused on growth. Ramp customers grew revenue 3.2 times faster than the average American business. Visa, Vercel, Cursor, Stripe, Notion, ElevenLab, Shopify, and 70,000 other businesses all run on Ramp. Mine does too, and so should yours. Learn more at ramp.com/invest. Felix Byrogo is a personal finance agent that turns a single prompt into finished client ready work using your firm's own templates, context, and standards. Send Felix an email like, take these comments and turn them for me, or update my tracker with the context of these emails, or run the ability to pay math on this buyer, and Felix sends back finished PowerPoint decks, Excel models, and sourced research. Felix works the way your team already does, delivering work quickly and accurately around the clock. Learn more at rogo.ai/felix. OpenAI, Cursor, Anthropic, Perplexity, and Vercel all have something in common. They all use WorkOS. And here's why. To achieve enterprise adoption at scale, you have to deliver on core capabilities like SSO, SCIM, RBAC, and audit logs. That's where Work OS comes in. Instead of spending months building these mission critical capabilities yourself, you can just use WorkOS APIs to gain all of them on day zero. That's why so many of the top AI teams you hear about already run on WorkOS. WorkOS is the fastest way to become enterprise ready and stay focused on what matters most, your product. Visit workos.com to get started. Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Invest Like The Best. This show is an open ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. If you enjoy these conversations and wanna go deeper, check out Colossus, our quarterly publication with in-depth profiles of the people shaping business and investing. You can find Colossus along with all of our podcasts at colossus.com.
00:01:53 · S1
[00:01:53] S1: Patrick O'Shaughnessy is the CEO of Positive Some. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of Positive Some. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of PositiveSum may maintain positions in the securities discussed in this podcast. To learn more, visit um.vc.
00:02:21 · Patrick O'Shaughnessy
[00:02:21] S0: My guest today is Jeremy Giffin. Jeremy has been on the show before as one of our most popular guests, and this conversation is every bit as enjoyable as the first. Over the last eighteen months, Jeremy has had hundreds of conversations with founders and the capital behind those companies. I don't know many investors with such a high rep count in the most interesting corners of private markets, so I asked him about everything that he has learned. We talk about what those lessons mean for founders and investors, why everyone has become subservient to the poster class, the hidden intellectual history behind Silicon Valley, and much more. Please enjoy my conversation with my friend Jeremy Giffen. So we're gonna have the chance to talk about, as we do on a daily basis, you and I, 57 different ideas. But I'm always interested to begin with you a couple questions about investing. I sit near you. We share an office, so I get to hear a lot of these stories every day. I think it would be really fun for you to turn your observations from all those, God knows how many hundreds of conversations with founders of these companies and with the capital that has backed them in the past to sort of share what you've learned from that frontier over the last eighteen months framed as advice for founders and advice for capital. I just don't know very many investors that are looking at situations like you are with such a high rep count. So what have you learned in the first eighteen months of doing this?
00:03:36 · Jeremy Giffon
[00:03:36] S2: You really realize in let's say long term private markets that the great filter for funds is their storytelling ability fundamentally because their product which is realized cash returns take a decade. The thing that you're selling in the interim whether it's through you know a quarterly update or your event or just your one on one conversations with your LPs is really just narrative. A particular situation that's very interesting that we've seen a lot of is companies where twofold. One is that the business is kind of old, but it started to do well recently. That's an interesting scenario because it's one of these instances where merely because the company, the story, again the narrative of the company is that it's seven years old. Let's say the company has really started to inflect. Maybe it's because of AI or maybe it's because of something else, but they're six or seven years into their life. It's very difficult for those companies to get funding because the story is well okay fine you grew 200% last year, in absolute terms you're only at 8,000,000 of revenue and you're seven years in. Whereas I think literally if you just change the name and told a different story and just sort of arbitrarily started the clock two years ago, that company would actually be like really hot. That's an interesting situation. The fix I think is just to be more flexible on narrative and story. A derivative of that problem is just the amount of businesses where they're in a spot where it's kind of working, things are starting to go well, but they're faced with three choices, which is basically they're not going to raise a significant up round, really they're staring down a bridge round, strategic like M and A, acquihire, or cutting to profitability, and those are just really hard situations. If you're in that situation, I think that's where you really want to get creative with the cap table. If you have some cash, buy back your investors, convert everyone to common, really start to spend more time on the cap table because otherwise I've been shocked at sort of how hostile insider bridge rounds really are, I think this is like an under discussed part of venture.
00:05:32 · Patrick O'Shaughnessy, Jeremy Giffon
[00:05:32] S0: How so? [00:05:32] S2: It's just they have 3x liquidation preferences or warrants or ratchets or other things. If you're extractive to the downside everyone sort of boos you, but if you're extractive to the upside where you say I want the right to invest at the same price in two years from now, They're both like similarly extractive but because one is like an optimistic extractive everyone loves that one. [00:05:53] S0: So what advice would you give to founders in thinking about their cap table from the start?
00:05:58 · Jeremy Giffon
[00:05:58] S2: We're obviously in volatile, highly uncertain period right now. No one knows if it's the death of software. I think it's certainly the most unprecedented and uncertain time since the transition the internet. What you want in that time is a lot of optionality and the ability to be nimble and the ability to really be able to do what is right for the business and not be constrained by the cap table. Maybe your business needs to become a services business, maybe you need to acquire other companies, maybe you need to run profitably for a while, maybe you need to change your whole business model. If per seat pricing goes away you need to pivot to usage. In volatile times it's always useful to have optionality. I guess the general piece of advice is unless you're certain that you want to just try this one thing and it's going to be huge or zero, you should think about optionality, which usually means raising less, raising from investors with a wider mandate, not getting stuck in all these weird problems where like you need to continue to raise more money and if you don't it's bad for employees, it's bad for recruiting, people's options get underwater, they start to leave. All those things sort of reduce optionality. It's funny because in general I think commitment is a much better strategy than optionality but I think in highly volatile times where it's hard to tell the future, you basically just want to control for being able to be super nimble, turn on a dime, do what you want, not be constrained by our capital set up in such a way that we can really only do this one thing which is also true for investors.