Beezer Clarkson: Are LPs Open for Business & Why Do LP Incentive Mechanisms Need to Change? | E1073

1. 0:00 – 0:22

   Intro

   1. BCBeezer Clarkson0:00

      There is a class of LPs that need to write very large checks. Those are vehicles that work for that fund size.

   2. HSHarry Stebbings0:06

      Mm-hmm.

   3. BCBeezer Clarkson0:06

      Sometimes other folks forget that LPs are not in the same business of risk-taking the way that GPs are. You're trying to preserve capital at some level, for all the various reasons. There is a logic to if you need to write $100 or $150 million check and you want some alpha, but you don't wanna risk losing it.

   4. HSHarry Stebbings0:21

      (music) Pisa,

2. 0:22 – 1:07

   Introductory Remarks and Setting the Stage

   1. HSHarry Stebbings0:22

      I am so excited for this. Thank you so much for joining me today.

   2. BCBeezer Clarkson0:25

      Thank you so much for having me. It's awesome to be in your new office.

   3. HSHarry Stebbings0:28

      Isn't it nice doing it in person? This is so much nicer than Riverside or any online platform. And I, I wanna start about just baseline, as blunt as I can be, like who are you and what do you do?

   4. BCBeezer Clarkson0:39

      Well, I'm Pisa. (laughs)

   5. HSHarry Stebbings0:41

      (laughs) Lovely to meet.

   6. BCBeezer Clarkson0:43

      Yeah, lovely to meet, you know, many years after first meeting. So I manage Sapphire Partners, which is the LP strategy of Sapphire, and we invest in early-stage venture funds, US, Europe and Israel. And that's what I do.

   7. HSHarry Stebbings0:54

      Okay. So you've been an LP for many, many years and you have the chance now to call yourself up the night before your first day as an LP. Knowing what you do now, what would you advise yourself?

   8. BCBeezer Clarkson1:06

      I would say

3. 1:07 – 20:57

   Perspectives on LP Portfolios

   1. BCBeezer Clarkson1:07

      really understand the importance of the power law, which I know sounds like a bit of a nitty-gritty. And I'd gotten this advice from other LPs, which is the difference of having a power-law defining company in your portfolio and the experience of that for the GP along with the entrepreneur really changes the understanding of how a venture works. And you really just can't... Or maybe you can and we just haven't seen a fund that's sort of un- in the early stage, onesie, twosies it to outperformance. It's hard to walk that until you really feel it. And then you see these activities, you see the companies taking off, you see the difference in what it looks like to have that kind of a power driver in your portfolio.

   2. HSHarry Stebbings1:44

      I have so many things to unpack from such a small segment, uh, this will be a short show.

   3. BCBeezer Clarkson1:47

      (laughs)

   4. HSHarry Stebbings1:47

      Uh, onesies and twosies it to outperformance. What do you mean by that?

   5. BCBeezer Clarkson1:50

      Well, some, it... If you think of a growth-stage portfolio, it's not that one doesn't wanna have a power-law company and have it return 100X and be two to three times your p- your fund. It's just much harder when you have a large fund, so a lot of those funds end up having a number of exits that then end up adding up to driving performance. In a early-stage fund, if you... We've yet to see a fund that's returned three or more X that does not have a company that's returned at least one time in the fund. And that's what I mean by, like, you can't do the single and base hits, like, "Oh, I got a 2X on this deal, I got a 3X on that deal." Those are all great to add to the portfolio, but if you don't have a fund returner or a couple half-fund returners, it's, we haven't seen a fund that's hit outperformance.

   6. HSHarry Stebbings2:30

      Speaking of the importance of power laws within portfolios there, I often think that actually LPs are too diversified, given the breadth of, like venture portfolios, 30 to 50 companies most often. If you have ten managers, you have 300 to 500 underlying portfolio companies. I mean, that's a lot of diversification. Do you think that LP portfolios are too diversified or do you actually think that they're not diversified enough, given the importance of having just one of those power law?

   7. BCBeezer Clarkson2:56

      LPs are like snowflakes. No two are the same.

   8. HSHarry Stebbings2:59

      (laughs)

   9. BCBeezer Clarkson2:59

      So, some people do like diversification. I know some LPs that specifically look at the overlaps or the lack of overlaps between their managers, and what they really are trying to do is they cover the seed market for exactly this point, and they wanna make sure if they catch something, it happens. And then what the LP does is sort of a look-through on the math and says, "Well, what... If I'm putting X dollars into this fund and they're putting Y dollars into this company, what needs to be true for those companies to be productive on my side?" And I know other people that say, "Hey, I think this area's really interesting, so I'm fine if I've got two or three managers that invest in the same area, and even in the same company, because if they hit one, it's gonna be that much more productive." And it really comes down to how the LP wants to build their portfolio.

   10. HSHarry Stebbings3:37

       Do you think about it in buckets? I see so many LPs that think about it through, like, "Oh, I need early-stage consumer. I need, you know, series A and B enterprise." Do you think about it through that bucket lens?

   11. BCBeezer Clarkson3:48

       Well, we just do early stage, so we f- which, in our definition, that means s- we started out originally with series A and we've now moved down into seed and pre-seed. So within that area, we then look at what is the overall underlying, um, distribution of companies that we have. Like, do you want a lot of deep tech? Do you want some climate? Do you want consumer and enterprise? We tend to think in the consumer and enterprise as who's the end user of the goods or software, versus too many more specifics within it. And we've just done a lot of research in consumer enterprise and looking at how they return, how they grow. And you can get compelling exits in both, but they have different dynamics, so we wanna make sure we have enough to capture those. Do you want me to be more specific?

   12. HSHarry Stebbings4:27

       No, I think you're-

   13. BCBeezer Clarkson4:27

       Is this where the jet lag's kicking in? (laughs)

   14. HSHarry Stebbings4:28

       No, not at all. I'm just laughing 'cause I'm thinking, like, consumers fund, but B2B makes money.

   15. BCBeezer Clarkson4:33

       We are, um, proud venture geeks and we do publish some of our findings. So, last year, we re-ran our consumer enterprise report. It's out there on our website, if you wanna look at it. And enterprise does tend to have more consistency of exits, but you get the big spikes in the consumer ones. So if you... A Coinbase, right, for example, you don't get ten of those at the same time historically. The world could be different in the future. What we saw in 2020 to 2022, again, you had the Coinbase, you had a couple more if you got out when Peloton's stock was high. Like, there were ways of making money, but it's not as consistent as the enterprise. So we do want both in our portfolio, but we're conscious of the, of the exit dynamics.

   16. HSHarry Stebbings5:09

       When we look at, like, Uber... You were like, "Wow, this wasn't in the schedule, Harry, thanks." Uh- (laughs)

   17. BCBeezer Clarkson5:14

       (laughs)

   18. HSHarry Stebbings5:14

       Jet lag and, like, just w- uh, meandering journalist or, you know, interviewer. But, like, you know, when you look at Warby Parker, when you look at Away, when you look at, um, Allbirds, when you look at Hims, which has actually performed relatively well in public markets, but still. (sighs) Like, Sam Leson said on the show that actually a lot of these companies show that early-stage venture models that have been so prevalent don't really make sense. Even your Robinhoods of the world, which were supposed to be, you know, 30, 40 billion, I think Robinhood's are seven now. Which is, which is great and I'm not at all... But it's not what it w- was and what we thought it would be. Do you think Sam has grounding for that?

   19. BCBeezer Clarkson5:50

       I understand his point. I think from, a very specific LP, GP perspective, it, it's sort of defined on when you'd get out of the investment. We have managers that would have potentially sold into some of those later rounds, because if they could sell, I'm making up the numbers, but 10 or 25% of their ownership and return a fund or half a fund and still hold some for the upside, and then potentially distribute the stock when it's high. Again, you have to wait for a lockup and there's all these-... parameters that might not make it possible. And if there's a small float, it's also a little bit more tricky sometimes. But you can make money on those deals, absolutely.

   20. HSHarry Stebbings6:22

       I mean, we're gonna get into kind of lean in versus lean out. I- I wanna start, though, from the top, 'cause there's a lot of negativity and doom and gloom, and like no LPs are investing and, like, you know, this is the end. Is it true that no LPs are making new commitments? Like, how do you think about that statement?

   21. BCBeezer Clarkson6:36

       That's not true. I think LPs are being more selective in making new investments. I know we are. I know others that are. They're absolutely making new investments. They're just probably not doing... All the data's not in yet, but it doesn't look like the volume of dollars being invested this year into funds is anywhere near like last year. Last year was a very... was a peak. So, that's not s- wildly surprising. But they're still making investments.

   22. HSHarry Stebbings6:58

       (laughs) It's a question of, like, no m- no n- no managers are raising, though, really. I mean, there's a huge withdrawal in terms of net new manager raisings. Yes, there are still some. But the amount that have come back to market has changed significantly, which might correlate to the reduction in dollars.

   23. BCBeezer Clarkson7:11

       Correct.

   24. HSHarry Stebbings7:11

       Do you think that's fair?

   25. BCBeezer Clarkson7:12

       I think it's, um, kind of all tied together, right? If the entrepreneurs are slowing down their fundraising so that they can produce the metrics necessary to convince a GP to invest, then the GP's gonna call less capital and then deploy their funds slower, and then LPs are gonna be slower. We saw numbers around, like, 12 to 18 months, which is historically atypical, right? Usually it's three years. So if now they're lengthening back out to three years, yes, there's fewer funds being raised. And I think there's a lot of, we can get into this or not, of people trying to figure out what is the health of the underlying companies, what's really going on. And there's so many things going on about why LPs are slowing down. A lot of LPs also pre-spent future budgets, if that makes any sense. If you're raising a fund every 18 months and I thought you were raising every three years, I had two choices. Either I pull from future year budgets or I reduce my check so that I stay consistent in my deployment, even if you're raising faster, or I end up spending money or committing money earlier than I anticipated. And then, right now, given what's going on in the markets, a lot of LPs are feeling liquidity strains. I wouldn't say a crunch, but there's different demands on those dollars.

   26. HSHarry Stebbings8:17

       And so what you're saying is that most actually just pulled forward dollars from the future, they didn't reduce commitment size?

   27. BCBeezer Clarkson8:22

       People did both.

   28. HSHarry Stebbings8:24

       And now they're feeling the pain.

   29. BCBeezer Clarkson8:25

       Correct. Because you also, what you have at the same time is not only is people that are existing, established venture investors know that it can take 10 years for an exit to happen. Like, that's not a surprise. But if you've built a portfolio and you've got publics and privates and other areas, you can manage your liquidity by taking money from other places as it comes in. But if the exit markets are generally shut for everybody, you're not getting your privates, your private equities necessarily distributing capital, so you can't use that to make your capital calls either. And you don't wanna sell your stock when it's down if you... that's not part of your strategy. So there's just a lot of varying things going on that are hitting budgets. And a lot of LPs that manage, you know, endowments or foundations have a annual budget that they have to spend money on, right, for whatever their business is, so they still need to figure out how to make those payments.

   30. HSHarry Stebbings9:11

       Yeah, and like mandated outflows for scholarships-
4. 20:57 – 25:08

   The Landscape of Large Funds

   1. BCBeezer Clarkson20:57

      is a s- class of LPs that need to write very large checks. Those are vehicles that work for that fund size.

   2. HSHarry Stebbings21:03

      Yeah.

   3. BCBeezer Clarkson21:03

      We also have to understand, I mean, I know you get this, but it's, I think sometimes other folks forget that LPs are not in the same business of risk-taking the way that GPs are. You're trying to preserve capital at some level for all the various reasons. So there is a logic to if you need to write 100 or $150 million check and you want some alpha, but you don't want to risk losing it, why the larger vehicles can be a place to put your money.

   4. HSHarry Stebbings21:24

      And actually return rates comparative across, like, macro industries, whereas compared across real estate, it's compared-

   5. BCBeezer Clarkson21:30

      Yes.

   6. HSHarry Stebbings21:30

      ... across credit, da-da-da.

   7. BCBeezer Clarkson21:32

      Yes.

   8. HSHarry Stebbings21:32

      Your 12 to 15% is actually not bad.

   9. BCBeezer Clarkson21:35

      It can... Yes, the 7% interest rate market's playing with it a little bit, but, but take, just wave a magic wand and take that out of the equation. There is that way of, there is that way of looking at it. 'Cause you can't, if I have to, if I'm an LP that has to write a $100 million-sized check, unless you want to be 100% of a fund, like you just, you can't do it. It's really hard.

   10. HSHarry Stebbings21:52

       Yeah. No, I totally agree with you. Do you think we'll see the death of micro funds? We saw so many five to $15 million angel list funds where everyone was doing a fund. I had one call where I was pitched a company and a fund by the founder in the same meeting.

   11. BCBeezer Clarkson22:05

       Oh, so we've done reference calls with CEOs that pitch us their fund in the same meeting. (laughs)

   12. HSHarry Stebbings22:08

       Yeah. I mean, it's just like...

   13. BCBeezer Clarkson22:10

       We haven't seen it yet, and I really don't wish the death of micro funds. We are big believers in the power of small vehicles and that it can work. I think also what you have in the market today, as you mentioned, angel lists. There are platforms where if you want to raise a five or $10 million fund, you can. And that's with individuals. That's not really an institutional fundraise. But you also have a number of VCs who have built really replete LP programs, right? And that have 50 plus, um, they've made investments in 50 plus VCs. And granted these are deal sourcing strategies. They aren't necessarily launching funds.

   14. HSHarry Stebbings22:41

       Uh, do you guys buy that? Like, if you are investing in a fund for a deal sourcing strategy as a VC, you should hang up your boots. Like that is a, that adds a, that adds like admitting defeat.

   15. BCBeezer Clarkson22:52

       Um...

   16. HSHarry Stebbings22:52

       I will go on record and say that. (laughs)

   17. BCBeezer Clarkson22:55

       I don't know. I think there's quite a few. I think some people do it. I think it's, it's hard, right? The, as someone who invests in funds for a living, it's hard. There's a lot more to it than it looks on the outside, if nothing alone. It's c- how do you manage the data? What's the administration of it? How do you show up? And if you're trying, to your point, understand what 300 or 400 underlying companies are doing from a deal sourcing capability, you need to have your tools in place to do that and/or if I was doing direct deals at the same time I was doing fund investments, you can show up and it's the same brain, so it's a little bit easier.

   18. HSHarry Stebbings23:23

       Yeah.

   19. BCBeezer Clarkson23:24

       So I've seen people do some pretty interesting strategies around that. I don't know. We'll have to wait and see how many deals come out of it that they find really useful. I mean, back in the day, like Sequoia Scout program was very famous for them.

   20. HSHarry Stebbings23:35

       I know da- it was, but actually there was a b- a big problem, which is, like, their data monitoring wasn't what it could have been, and so they missed a lot of As and Bs and then did the Cs of companies that they did scout deals in. And so ultimately, yes, they got great returns on the scout check, but they missed a huge amount of alpha in the middle because they didn't have the data monitoring. And when you invest in 20, 30, 40 funds and they have 30 companies each, you've got, you know, 500 plus companies.

   21. BCBeezer Clarkson24:01

       Correct. No, uh, no joke. We understand. We have thousands of underlying companies.

   22. HSHarry Stebbings24:05

       Mm-hmm.

   23. BCBeezer Clarkson24:05

       It is a real challenge if you're trying to monitor that for deal flow. Plus...... we could bring the entrepreneur into this conversation. I don't know if they solve the same way, which is, "Well, just because so-And-so is an L- an LP in my GP's fund, I therefore am gonna pick that GP."

   24. HSHarry Stebbings24:18

       No.

   25. BCBeezer Clarkson24:18

       Do you know what I mean? I think they probably solve for-

   26. HSHarry Stebbings24:20

       They definitely, they go-

   27. BCBeezer Clarkson24:20

       ... who they think is gonna be the best investor for their business.

   28. HSHarry Stebbings24:22

       Yeah, who they like to work with, the personality match, what they bring.

   29. BCBeezer Clarkson24:26

       Yes.

   30. HSHarry Stebbings24:26

       No, I totally agree.
5. 25:08 – 40:36

   Dynamics between Founders and Investors

   1. HSHarry Stebbings25:08

   2. BCBeezer Clarkson25:08

      I used to have a less nuanced view on that, and you would think, yes, pick a, pick a wonderful endowment that is a great name and is a great portfolio, and say, "If they invested, obviously it's a great fund." But you have to understand why it works in their portfolio versus our portfolio. And so it's not necessarily playing the same role, and so you have to dig a little deeper and say, "Well, who are they and why are they doing this?"

   3. HSHarry Stebbings25:28

      You buy that?

   4. BCBeezer Clarkson25:31

      Well, we're-

   5. HSHarry Stebbings25:32

      I love you, but I'm like-

   6. BCBeezer Clarkson25:33

      No, I-

   7. HSHarry Stebbings25:33

      ... I know so many where it's like-

   8. BCBeezer Clarkson25:35

      Oh, I know-

   9. HSHarry Stebbings25:36

      ... "Oh, Yale, oh, X are invested." Whoosh.

   10. BCBeezer Clarkson25:40

       Correct. No, no, it's- it's a thing. I'm not saying it's not a thing. We just do our own work and wanna have our own opinions, and we ca- we want to understand who's around the table, but we're not gonna not-

   11. HSHarry Stebbings25:50

       Oh, no, you do.

   12. BCBeezer Clarkson25:51

       Yeah. But-

   13. HSHarry Stebbings25:51

       But you, but-

   14. BCBeezer Clarkson25:52

       But we're so-

   15. HSHarry Stebbings25:52

       ... but you're thoughtful. (laughs)

   16. BCBeezer Clarkson25:53

       Thank you. Um, we've also built a business that's dedicated to doing this.

   17. HSHarry Stebbings25:57

       Yeah.

   18. BCBeezer Clarkson25:57

       A lot of the other LPs are doing ventures, to the earlier conversation, against a myriad of things they're doing. And they don't, with some exceptions, have huge teams. So you... People have to pick ways of making decisions, and if they know if they co-invest with whatever endowment or foundation frequently, they probably know them as people. Like there's definitely folks that refer us deals that we co-invest with and you're like, "Oh, I know how they process, I know how they think." That at least gives me some level of understanding versus somebody who, when you call them and you say, "Why'd you invest in this fund?" And they say, "Oh, I'm only here for the direct deals. I don't care about the return as much." It's not that it doesn't matter, it just they're not doing it-

   19. HSHarry Stebbings26:32

       There's different motives.

   20. BCBeezer Clarkson26:32

       ... for the fund return. They're trying to write a $30 or $50 million direct check. We might like the same fund, but we're liking it for different reasons.

   21. HSHarry Stebbings26:38

       Who, when they send you a deal, are you like, "Oh, right. I'm- I'm- I'm involved. Like, this has got my attention"?

   22. BCBeezer Clarkson26:45

       Harry, everything you send me gets my attention.

   23. HSHarry Stebbings26:47

       (laughs)

   24. BCBeezer Clarkson26:49

       (laughs)

   25. HSHarry Stebbings26:49

       But, like, there are certain people, like j- uh, one of your managers, like Mike Chalfen-

   26. BCBeezer Clarkson26:54

       Yeah.

   27. HSHarry Stebbings26:54

       Mike does very few deals. He's very selective with where he spends his time, and he's really involved when he does. Holy shit, when Mike says to me, "Hey, Harry, I really want your time on this," like, you got it.

   28. BCBeezer Clarkson27:04

       Yeah.

   29. HSHarry Stebbings27:05

       Who is-

   30. BCBeezer Clarkson27:07

       Oh, I feel if I start naming names, I'm gonna forget good people, and that's not fair to them. Um-
6. 40:36 – 44:14

   Fund Management: Fees and Commitments

   1. HSHarry Stebbings40:36

   2. BCBeezer Clarkson40:36

      I agree. I think there's no one number that's, there's no one size fits all, and I definitely think for emerging managers, the management fee and the GP commit need to be looked at in the business case, like what are they using it for? I mean, I've literally, we've had some funds in our program where I'm a little worried they can't pay their rent.

   3. HSHarry Stebbings40:49

      Yeah.

   4. BCBeezer Clarkson40:50

      Right? (laughs)

   5. HSHarry Stebbings40:51

      Yeah.

   6. BCBeezer Clarkson40:51

      Because you're like, there's no way this management fee can pay for it. So it doesn't surprise me when smaller funds have a 2.5 management fee, because you just have fewer dollars. What you typically, as an LP, like to see is, as you layer the funds, the funds, the fees come down, or you stop pulling fees on some vehicles. But again, it's always in the context of, what is the fund trying to do? How many people are there? What are the cost structure? And to your point about GP commit, yes, it has been an unnecessary barrier to entry for too many GPs.

   7. HSHarry Stebbings41:16

      I'm amazed by how many funds get away with three and 30 now.

   8. BCBeezer Clarkson41:20

      Well, yeah.

   9. HSHarry Stebbings41:21

      Shocking, huh?

   10. BCBeezer Clarkson41:22

       It's impressive. It makes it very expensive.

   11. HSHarry Stebbings41:24

       Yeah.

   12. BCBeezer Clarkson41:24

       It makes, as an LP, if you're doing the math and what needs to be true, because the- the money you get back is net of all that, right? And so they've had to be able to recycle t- to make up for that, and then also, it's expensive.

   13. HSHarry Stebbings41:35

       Have you ever had a manager where you've said, "Hey, this is the benefits of being small. You should stay small." Have you ever had them go, "Yeah, you're right. I'm gonna do that."

   14. BCBeezer Clarkson41:45

       Yes. (laughs)

   15. HSHarry Stebbings41:47

       Who is that? They- they're shining a light, as like the beacon of, like-

   16. BCBeezer Clarkson41:50

       I can't name names. I haven't asked their permission. But, um, no, we know many, we actually, I take that back. We have many managers in our portfolio very thoughtful about their fund size, and we might have a difference of opinions of like 25 to 50 million here or there, but they're willing to have the con- they- they're thoughtful about it first, I think is the difference. And then if you can have a conversation and say, "Well, how are you thinking about this and what's your return profile?" Like, you- you get at all the important points.

   17. HSHarry Stebbings42:13

       I think you and me have a different view of what fund size you need to do a seed fund today.

   18. BCBeezer Clarkson42:17

       Well, I would say-

   19. HSHarry Stebbings42:19

       (laughs) From our last dinner.

   20. BCBeezer Clarkson42:19

       Well, I- I don't disagree, it also depends on if you're leading or if you're part of a syndicate. Like, there's all different strategies.

   21. HSHarry Stebbings42:24

       Totally.

   22. BCBeezer Clarkson42:25

       Right?

   23. HSHarry Stebbings42:25

       But I think if you're leading seed rounds today, you can't have less than $100 million.

   24. BCBeezer Clarkson42:30

       I agree, but then you need to be leading and getting... What we're seeing-

   25. HSHarry Stebbings42:34

       Mm-hmm.

   26. BCBeezer Clarkson42:34

       ... is leading and getting low-... ten- nine to 11% to 12% ownership.

   27. HSHarry Stebbings42:39

       A thousand percent, I agree.

   28. BCBeezer Clarkson42:40

       But many people raise bigger funds and have 5% ownership-

   29. HSHarry Stebbings42:43

       Yeah, the- the 11 will-

   30. BCBeezer Clarkson42:44

       ... or 3%. And then I do the math and I- you end up with the, like, well then now you need this very large exits, which I wish everyone gets. Like, there is no a button, there's no shortage of wishing this works. But it just historically, you're like, well, you're gonna have an incredible batting average.
7. 44:14 – 49:28

   Relationship Dynamics: Managers and LPs

   1. HSHarry Stebbings44:14

      managers are actually very good at making LPs fe- LPs feel quite scared about pulling out. "You won't be allowed back in. I'll blacklist your name in the industry." It's not- I think there's a real power coercion game. Um, I think there's that. Um, I think there's the fear of missing out.

   2. BCBeezer Clarkson44:30

      Yep.

   3. HSHarry Stebbings44:30

      There's always the Facebook 2005 fund.

   4. BCBeezer Clarkson44:33

      There always is.

   5. HSHarry Stebbings44:34

      And, and we-

   6. BCBeezer Clarkson44:34

      That example comes up all the time. (laughs)

   7. HSHarry Stebbings44:36

      It is just a cracker, isn't it? But it- it is true.

   8. BCBeezer Clarkson44:40

      But it's fair.

   9. HSHarry Stebbings44:40

      It-

   10. BCBeezer Clarkson44:41

       That's a good example.

   11. HSHarry Stebbings44:41

       And so, and so I think, uh ... And then I also think, actually, the incentive mechanism within LPs is completely broken in the large part, which is that actually I'm never gonna get fired for doing, you know, Redpoint or CRV as an OS fund.

   12. BCBeezer Clarkson44:55

       Correct. You don't get fired for buying IBM and a many f- and this is sort of, um ... I'm using Chris Duvaucel's line, so I just wanna give credit when I'm stealing somebody's words.

   13. HSHarry Stebbings45:04

       Moola and the Coolah?

   14. BCBeezer Clarkson45:04

       No, I was not gonna say moola and the coolah.

   15. HSHarry Stebbings45:05

       I tweet it every day.

   16. BCBeezer Clarkson45:06

       But- (laughs)

   17. HSHarry Stebbings45:06

       I get away with this copyright. I- I own so much money.

   18. BCBeezer Clarkson45:09

       No, he talks about is someone, um, is someone sort of investing the capital that they're really a manager of, or are you sort of an employee of a firm and you need to manage the business? So it's not saying they're not making thoughtful decisions, but it's a different viewpoint if you're like, "Oh, I'm gonna be here for three years." Do you know the average CIO is like a five-year tenure?

   19. HSHarry Stebbings45:26

       Yeah.

   20. BCBeezer Clarkson45:26

       I did- I actually thought they were like 15 years.

   21. HSHarry Stebbings45:29

       Yeah.

   22. BCBeezer Clarkson45:29

       I- but no, a friend of mine was like, "Oh no, it's three to five years."

   23. HSHarry Stebbings45:32

       Oh yeah, they really bounce. Which- which I find incredible because it's like, how on earth do you know if they're any good? I mean, I've- I've met quite a few where a three-year period and they've had four, and it's like three, four year-

   24. BCBeezer Clarkson45:41

       Correct.

   25. HSHarry Stebbings45:41

       ... three years in is full time.

   26. BCBeezer Clarkson45:42

       Correct.

   27. HSHarry Stebbings45:43

       Go on.

   28. BCBeezer Clarkson45:43

       Nobody goes to your point, which is then if you're- not those- I'm not picking on those individuals, but I'm saying if you're then in the stack and you're working for a firm and you're deploying capital as an LP, you're taking- you might be taking a different risk appetite than if you're someone who's like, "Hey, listen, we're gonna go find the next amazing fund and we're gonna be with them for a long time." And it's just a very different mentality.

   29. HSHarry Stebbings46:01

       Do you find it hard not doing a new manager's new fund?

   30. BCBeezer Clarkson46:04

       Not doing a new manager's-
8. 49:28 – 1:00:34

   Quick-Fire Round

   1. BCBeezer Clarkson49:28

      take a sideways answer to this. I hate being told something's not possible and that you can't do it just 'cause i- just 'cause someone hasn't done it before doesn't mean you can't do it. It just means it's harder. You are a case in point on this, right?

   2. HSHarry Stebbings49:38

      Yeah.

   3. BCBeezer Clarkson49:38

      I mean, what you've been taking to the market with the intermix of media and venture hasn't been done before. People have tried it in different respects, but haven't nailed it the way you have. And I'm sure t- I'm sure millions of people told you it couldn't be done.

   4. HSHarry Stebbings49:48

      What would you change about the world of LPs?

   5. BCBeezer Clarkson49:51

      Ugh. I wish the LPA was better. That's such a small little winchy-end.

   6. HSHarry Stebbings49:54

      The LPA was better?

   7. BCBeezer Clarkson49:55

      Was better. It's so hard to read. It's so complicated. It's so not useful. It's supposed to be a tool to understand how our relationship works, and it's just a big legal pile of documents.

   8. HSHarry Stebbings50:03

      And I always find, by the time you get to the granulars of, like, what happens if there's a fire and a grenade-

   9. BCBeezer Clarkson50:09

      Yeah.

   10. HSHarry Stebbings50:09

       ... you're fucked anyway. (laughs)

   11. BCBeezer Clarkson50:10

       Yeah. So this is, I know this is more of a tactical answer, but I think some of these things just end up being logjams in the ecosystem, and the point is, that's just not the point, and if you get to that place, it's, it's a big mess anyway, so.

   12. HSHarry Stebbings50:20

       What would you guys change in the world of managers most?

   13. BCBeezer Clarkson50:22

       I really wish managers, the, the great managers understand this, that who they are as an investor and how they build their firm is so specific to them, and then I really do think there has to be that interplay of the two of them for it to become a great firm. And I think a lot of people don't realize that, and they think it's just a- an easy business to pop up. And it can be, but then that's a smaller business, and it's not necessarily gonna become a long, enduring firm.

   14. HSHarry Stebbings50:47

       Y- you said pop up. I just think everyone misunderstands just how long this is. Everyone says 10 years. It's not 10 years. It's, like, 15, 20.

   15. BCBeezer Clarkson50:58

       And that's just one fund.

   16. HSHarry Stebbings50:59

       Yeah.

   17. BCBeezer Clarkson50:59

       Let's be clear. That's one fund.

   18. HSHarry Stebbings51:00

       Yeah, yeah, yeah.

   19. BCBeezer Clarkson51:01

       Oh, no, it is. I mean, it's sort of this, I find it actually a bit mind-boggling that people ... It's, it's long-term. I mean, if you wanna have a pop-up business, do something direct, right? Because even then, it's not short. Like, a- a job can be four or five years. You can try different things, right? With w- the way compensation equity structures work. But becoming a GP, like, yeah, it is. Assuming you're not doing off AngelList and it's not a small endeavor, if you're trying to bring in other people and other LPs, it's a very wide financial services business.

   20. HSHarry Stebbings51:28

       What's the biggest manager miss you've had?

   21. BCBeezer Clarkson51:30

       Ugh. This kills me. So I passed on the initialized Fund One, because we had just launched ... Yes, I know, I know. It was bad. Um, but-

   22. HSHarry Stebbings51:40

       Do you know it made 390 million?

   23. BCBeezer Clarkson51:41

       It was ... I know, I know. No, trust me, I know. But we were Series A, and we were looking for 75 to $200 million fund sizes, and they were sub 10 in seed. So it was outside of scope, but I we-

   24. HSHarry Stebbings51:53

       I get it. It's, it was fair reason, yeah.

   25. BCBeezer Clarkson51:54

       It was outside of scope, so it's, it's a-

   26. HSHarry Stebbings51:55

       And it's way outside of scope.

   27. BCBeezer Clarkson51:56

       It was a cr- it was a, and we'd, we were early, so doing the f- do a couple of things being super exceptions early on. But to the point of ex- to, I'm gonna quote Nikhil from your last podcast with him from Footwork, "Exceptions should be made for exceptional people." And yes, to this day, that always sticks in my head.

   28. HSHarry Stebbings52:11

       What's the strongest belief you had which turned out to be wrong?

   29. BCBeezer Clarkson52:14

       We've definitely tested a bunch of hypotheses and different things, and this would then go to the, I just, I keep going back to this, but it's so clear in early stage, if you're not taking a big swing for the fence, which doesn't mean saying taking, like, ridiculous, I-haven't-thought-about-it risks.

   30. HSHarry Stebbings52:27

       Yeah.

Episode duration: 1:00:34