The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:49:13 · Rory O'Driscoll
[00:49:13] S1: I think you have to be a critical mass. You know, I was looking at it there. You have to be 800,000,000 plus or minus a billion of fee income. But that's the real question. Look, these companies, step back, there's a bunch of, obviously everyone knows, publicly held PE backed companies like KKR, Carlyle, Apollo, TPG. And then the question is, can you do a bunch of these for the kind of growth and venture perspective? And you know, the binding constraint is the fee income. And typically, public investors give you a lot of credit for the fee management fee income and very little credit for the carry, which is really odd in a venture in a venture perspective, but be that as it's may, to get to a market cap that matters because they trade at four or five times revenues best case. So you're probably looking at having to have 800,000,000 in fee income. Now you said yourself a 2%, what's that 50 times eight fifty times that? Yeah, you got a couple $100,000,000, well more of actual AUM. So it's doable, you know, Andreessen probably could get there easily from here. But that's kind of what you're looking at here. Now, maybe you'll get to be able to go on a lower amount of AUM because venture A, get paid slightly more and B, has carry that's more meaningful. So the very largest companies will do it, but not many is the answer. And that's just purely, that was a very financial metrics answer. Let me make a totally separate comment. It's really hard to do that, and not change the culture dramatically and become a more risk averse institution, right? You know, it may well be someone like Andreessen could pull it up, but it's just very, it makes it a very different company. So a second separate and probably more important criteria is, is that what you want to do, as a venture firm? I mean, I think it's great for the founders who get to take a ton of money off the table, but then you become a corporate venture firm, and that's just a different thing.
00:51:01 · Harry Stebbings, Jason Lemkin, Rory O'Driscoll
[00:51:01] S2: I don't know if there's a difference. I'm not being a dick, but I don't know if there's a difference between at the scale GA is at now. Like, if GC became a public company, I know compliance wise, sure, there's a bit more, but just like... They're just... They're such behemoths anyway. My laugh is you get in the lift, and you're like, oh, where do you work? And the answer is here. And you both go, wow. It's the same for both. So interesting. [00:51:24] S0: Is there... You know, I should know this, Rory, from from the public comps. When you do IPO, is there more fee pressure, though? I I assume when you're not public, you can play a few more games. Right? Because it's the LP is all no. But when you're when you're when you're public, everyone's scrutinizing all of this. Right? Where every single dollar goes. [00:51:41] S1: I don't think it's scrutiny. I think the comment is you always have to grow assets. You know, you're always launching products. [00:51:46] S0: Well, you always have to grow. All you can't you can't you can't just you can't just pay yourself 80 or 100 as the as the folks running it and kind of check out. Right? You've got to grow.
00:51:46 · Jason Lemkin, Rory O'Driscoll, Harry Stebbings
[00:51:46] S0: Well, you always have to grow. All you can't you can't you can't just you can't just pay yourself 80 or 100 as the as the folks running it and kind of check out. Right? You've got to grow. [00:51:54] S1: Yeah. I'll even say that like, put it this way. And it's a silly example because they're not big enough. But if old benchmark had gone public at 450,000,000 every three years, you know, Wall Street would have had a shit fit because they're like, come on, dude. And now finally, they're giving them what they want. Oh, good. Got the growth fund. Maybe you should do a crossover fund next. That's the way it would roll. [00:52:12] S2: Boys, what about Harvard's endowment? Harvard's endowment returned 27.1% to a $68,000,000,000, helped by venture space at a state worth about 2,200,000,000. They're an awesome team. NAV CIO is amazing. Love them dearly. Work with them. They're great. Anything here? [00:52:30] S1: Yeah. I mean, if you invest in Venture when you're in the big outcomes, it's good. And, you know, they've had a few lean years, but I you're going to see that. I think one of the other universities who went in direct into SpaceX have made out even more like a bandit. I think it's Washington University, I wouldn't swear on which university, but someone did really well. So yeah, I think it's going to be a thing. It's interesting when it's concentrated in only few assets. The good news, if you're an... If you're a manager, you prob... Not a manager, but if you're an LP, you probably have some exposure to that. So, yeah, you're gonna see a lot of this weakness.
00:52:30 · Rory O'Driscoll, Harry Stebbings
[00:52:30] S1: Yeah. I mean, if you invest in Venture when you're in the big outcomes, it's good. And, you know, they've had a few lean years, but I you're going to see that. I think one of the other universities who went in direct into SpaceX have made out even more like a bandit. I think it's Washington University, I wouldn't swear on which university, but someone did really well. So yeah, I think it's going to be a thing. It's interesting when it's concentrated in only few assets. The good news, if you're an... If you're a manager, you prob... Not a manager, but if you're an LP, you probably have some exposure to that. So, yeah, you're gonna see a lot of this weakness. [00:53:00] S2: If you are an LP and you do not have exposure to anthropic OpenAI, or SpaceX, you are you are feeling a lot of FOMO right now. [00:53:08] S1: Of course, you are. Yeah. [00:53:09] S2: And and I think the venture market's about to get a lot hotter, by the way, because a lot of people are starting to get cash back now from SpaceX. They're seeing Anthropic on the horizon, and they're hoping for OpenAI on the horizon in q one, q two. And I think we'll start to see that cash recycle back into the ecosystem that provided it. And I think LPs will come in with more money intervention.
00:53:09 · Harry Stebbings, Jason Lemkin, Rory O'Driscoll
[00:53:09] S2: And and I think the venture market's about to get a lot hotter, by the way, because a lot of people are starting to get cash back now from SpaceX. They're seeing Anthropic on the horizon, and they're hoping for OpenAI on the horizon in q one, q two. And I think we'll start to see that cash recycle back into the ecosystem that provided it. And I think LPs will come in with more money intervention. [00:53:30] S0: In 2021, the average college and university did 36.6% from venture and PE, 41% was top quartile, and Cambridge had 62%. So the Harvard's great, but I'm waiting for a banger '27. I want to get back to the nutty IRRs that we saw in the last boom. The outcomes here are an order of magnitude larger, maybe even more than magnitude larger, but I want to see 60% IRRs. Good job, Harvard guys, but this is no 2021 yet. I [00:53:59] S2: feel that 68,000,000,000 is pretty impressive, to be fair. Yeah. Yeah. It still matters. [00:54:05] S1: The 68,000,000,000, you do remember they are the oldest university in America, so they've been piling the money up for quite some time. [00:54:10] S0: Wesley, a 95.3% returns in 2022 from the 2021 invention p from 95.3% returns, Wesleyan. [00:54:18] S2: Wow. Any others that I've missed, boys?
00:54:18 · Harry Stebbings, Jason Lemkin
[00:54:18] S2: Wow. Any others that I've missed, boys? [00:54:21] S0: I think the... You know, the Tesla one, I think it's the last thing we're gonna see before the merger with SpaceX. I think it's the Swan Song, if you wanna know my view. And I think Elon said it. He said this is the last... He said China's going to take over the cars. This is the last car a human will ever drive. Both of which are clearly true, right? China is going to dominate global EV and autonomy. No one can compete with their cost proposition in electric and otherwise. No And one will drive their own cars in a few years, like literally no one. And I think this is a... I some of the... I don't know why I did all of it. Some of it's clearly for fun, but I think it's the last standalone big hurrah before it becomes one big company over the next six months, which was always Elon's goal. Having this company split up makes makes no sense for him. Right? They'll all be they'll all be merged. And so this is the last the last Tesla party as an independent company. [00:55:07] S2: Is it not the most masterful marketing from Elon? The the brilliance of Elon is the Elon premium and his ability to have extremely high valuations because of his presence. Doing these stunts justifies it like no one else can do and gives it life for another twelve months without any recompense. I think it was brilliant.