Jason Lemkin: Predictions for 2024 - What Does a Trump Administration do for Startups? | E1099

1. 0:00 – 1:45

   Intro

   1. JLJason Lemkin0:00

      I know everyone said (cash register sound) they did more deals, but I didn't see enough greed in the markets in 2023.

   2. HSHarry Stebbings0:04

      This is Jason Lemkin, founder and CEO of SaaStr, the biggest platform for SaaS and B2B founders in the world. I sat down with him and recapped (typewriter sound) the biggest events in venture in 2023, and placed our boldest predictions for 2024. SaaStr early stage markets in 2024.

   3. JLJason Lemkin0:21

      Yes.

   4. HSHarry Stebbings0:22

      What do you think?

   5. JLJason Lemkin0:23

      This is the first year I'm worried. The deceleration that we saw last year, I am worried some of it may be permanent. You could only spend so much of the global GDP on software. I think 2024 is the year of, you might as well go public.

   6. HSHarry Stebbings0:35

      Who else is in the category of just do it, it's time to grow up?

   7. JLJason Lemkin0:38

      I think there's some fun ones. The first one was (beep)

   8. HSHarry Stebbings0:43

      Jason, I am so excited for this. This is our first show of 2024, so thank you-

   9. JLJason Lemkin0:48

      Wow.

   10. HSHarry Stebbings0:48

       ... so much for joining me today.

   11. JLJason Lemkin0:49

       Happy New Year. Especially after just a banner year for unicorns and startups that was 2023, right? It's good to be back.

   12. HSHarry Stebbings0:55

       (laughs)

   13. JLJason Lemkin0:55

       Thank you, Harry. How many unicorns did we have last year? A thousand? 800 in 2023? How many new unicorns were there?

   14. HSHarry Stebbings1:02

       I mean, I'm thinking of a new joke for my next investor update, which is like, yeah, 13 unicorns of which six remain. (laughs)

   15. JLJason Lemkin1:09

       (laughs) That's fair.

   16. HSHarry Stebbings1:09

       But that's a very confident start to an investor update.

   17. JLJason Lemkin1:13

       (laughs)

   18. HSHarry Stebbings1:13

       Um, listen, I wanna start briefly for anyone that doesn't know or hasn't listened before, um, before we dive in, Jason, can you just explain who you are and what SaaStr is? And then we're gonna dive in.

   19. JLJason Lemkin1:22

       Yeah. I was a, I was an early SaaStr founder with the generations of, uh, Aaron Levie at Box and Rene Lacerte and Drew Houston. Um, and then I accidentally sold my company, EchoSign, too early to Adobe in 2011. And since then, I've been investing. Harry and I have co-invested in a number of folks, um, and built this community called SaaStr that has, uh, it's the largest community in the world for SaaStr founders.

   20. HSHarry Stebbings1:44

       Uh,

2. 1:45 – 4:16

   OpenAI as 2023's Best Company

   1. HSHarry Stebbings1:45

      uh, listen, love it. Now I wanna dive in and we're gonna set the scene with two different parts to the show. We're gonna do-

   2. JLJason Lemkin1:50

      Okay.

   3. HSHarry Stebbings1:51

      ... one, which is a review, and then we're gonna do a predictions for 2024. So if we start on the review of 2023, I wanna start with a view of optimism. What do you think was the standout/best company?

   4. JLJason Lemkin2:04

      Well, look, I mean, uh, I, I, there's only so much we can talk about OpenAI, right?

   5. HSHarry Stebbings2:10

      (laughs)

   6. JLJason Lemkin2:10

      Um, but if, if literally they are... The funny thing about OpenAI is, you know, if they ended the year at 1.4 billion run rate, uh-

   7. HSHarry Stebbings2:18

      Mm-hmm.

   8. JLJason Lemkin2:18

      ... at which the information said, and let's assume it was a hundred, you know, a hundred million at the start of the year, then, you know, we thought it was crazy when it raised at 20 billion and then it raised at 80 and then it fell apart, the tender offer. Now they're raising at a hundred. But if you can grow at those rates, I mean, you know, I, I, I mean, every, every CEO I talk to at SaaStr that scale, every public company CEO is like tired of talking about AI, but we didn't know... If that revenue, I assume it is real, it's, it's, it's epic, right? It's generational growth of revenue, even if the gross margins may not be great.

   9. HSHarry Stebbings2:50

      I think this, I totally agree with you.

   10. JLJason Lemkin2:51

       Right.

   11. HSHarry Stebbings2:52

       The idea of scaling from a hundred to 1.4 billion in ARR in a year is-

   12. JLJason Lemkin2:55

       In a year.

   13. HSHarry Stebbings2:57

       ... un-

   14. JLJason Lemkin2:57

       Yeah.

   15. HSHarry Stebbings2:58

       Do you remember when we-

   16. JLJason Lemkin2:58

       In a year.

   17. HSHarry Stebbings2:58

       Did you remember when we did our double, double, triple, triple?

   18. JLJason Lemkin2:59

       I mean, it's the strangest thing. I mean, even my, my, my son found 20 bucks a month to pay for, uh, for, to pay for ChatGPT. (laughs) And he, like, I don't know where he got the money. (laughs)

   19. HSHarry Stebbings3:10

       Okay. I'm gonna give you an alternative.

   20. JLJason Lemkin3:12

       Yeah.

   21. HSHarry Stebbings3:12

       I think mid, mid journey, company that's raised next to no money or no money-

   22. JLJason Lemkin3:16

       Yeah.

   23. HSHarry Stebbings3:16

       ... at all, and now does I think 200 million in ARR. That is, that's more impressive to me.

   24. JLJason Lemkin3:22

       Of, oh, listen, of, of, of course. I mean, O- OpenAI is the weirdest. I mean, we, we still don't even understand how weird it is, right? With, uh, a nonprofit running a weird cap profitable sort of thing with 100X return caps, with unpaid CEOs and engineers making millions a year that can do tender offers on a seemingly monthly basis. Here's the thing, Harry, you, you've been running... How many, at least 20 VCs have you done?

   25. HSHarry Stebbings3:47

       2,938. (laughs)

   26. JLJason Lemkin3:49

       2,938. And the funny thing is, though, we all know as founders, you know, we don't... I mean, VC is a tool, but, you know, i- it's great if you never need it, right? That's your example. It's great if you never need it. Um, and, um, you know, it was so funny, I, I, Jamund did a little workshop with us from Altimity. He's like, "Listen, we, we really wanna fund companies that don't need our money. The problem is we'd be out of business." So it's a fine line. (laughs) Like, we don't really wanna fund the companies that need us.

3. 4:16 – 8:36

   HubSpot's Long-Term Business Model

   1. JLJason Lemkin4:16

      (laughs)

   2. HSHarry Stebbings4:17

      If you were to go to traditional company land and say a best-

   3. JLJason Lemkin4:20

      Yeah.

   4. HSHarry Stebbings4:20

      ... company, I don't think enough is spoken about about HubSpot. I think the continuing dominance of HubSpot is just phenomenally impressive.

   5. JLJason Lemkin4:29

      It, it really, it really, it really is. Um, and, uh, I think it's impressive also because people today don't even remember the old HubSpot, the HubSpot that got going the same time I got going, you know, this is probably two generations ago. As a founder, this was a blogging company, this was a website greater and blogging company. And if you, if you use HubSpot, most of us use HubSpot, if nothing else, we use it for marketing automation, right? For sending our customer community. That wasn't even part of the original product, right? That wasn't even part of the original product. Um, and then the fact that now they're doing 700 million, their CRM product, their CRM, which is the first real threat in some... To, at least to, to, to, to low end of Salesforce we've ever seen. It's, it's super, it's super impressive, right? It's super impressive on many levels. And my big learning is, if you really wanna take the takeaway, it's, um, this is what I learned talking with, I mean, you've talked with them as well, but when I got to interview Brian and Dharmesh, the co-founders together, what I real- the one thing I really learned was really, really, really, really going long. Really going long. And the fact that Dharmesh had already had an okay exit, right? A, $100 million or $80 million exit, and that they both from day one are like, listen, we're gonna build something big or that's it, right? We're not gonna, we're gonna go along. And so I met Dharmesh in 2013 or 2014 when they were thinking about CRM, right? And they'd met with Pipedrive, which was my first venture investment, right? Which eventually sold for a billion and a half, but lost to HubSpot Lo- interesting story. Lost, Pipedrive lost to HubSpot. That's how I met them. And the fact that they were willing to go so long, spend years with the free CRM, even though it was gonna detract resources from the marketing side, right? It has to detract resources and wait and wait and wait. And now that they're coming up on 700 million, it's the, one of the greatest second acts or second, and, and, and HubSpot really has five clouds, but it's one of the greatest second acts of all times because there's almost no synergy to the first act.

   6. HSHarry Stebbings6:24

      I remember Satya and Hunter at Homebrew saying actually one of the joys of their partnerships was neither really needed the money, honestly, coming into it.

   7. JLJason Lemkin6:32

      Yeah.

   8. HSHarry Stebbings6:32

      It actually meant they had a lot of mental and creative freedom around decision-making, and purity around decision-making, which one wouldn't have if it was really about the money in a lot of cases.

   9. JLJason Lemkin6:42

      Yeah, money's complicated. Bryan, um, Bryan did a, a, a, an interview recently where, you know, he actually did sell a bunch of his stock pre-IPO, I think to Sequoia, and he said it was the most expensive decision he'd ever made. So we need a little bit of money. (laughs)

   10. HSHarry Stebbings6:56

       (laughs)

   11. JLJason Lemkin6:56

       It's never quite that simple. Um, I actually think that, I'm not sure if in venture, if not caring about money is a positive. I'm, I'm not convinced. I think it has some positives at the pre-seed stage, right, going into seed. Um, but, uh, I really think it, to go long in this business, you, you've, you just gotta bleed money. You've gotta-

   12. HSHarry Stebbings7:19

       When you-

   13. JLJason Lemkin7:19

       ... want to put the zeros and ones in your bank account, or what's the point? What's the point of venture after a certain phase? You know, if you're a pre-seed investor, the founders forget about you when they get big. You, you get dropped off the investor updates, right? Um, so... (laughs)

   14. HSHarry Stebbings7:34

       Isn't it a deep insecurity to prove yourself? I find the ones that do overly optimize around money downside protect a lot. They continuously worry about portfolio management, selling positions early. Now maybe in the last years that might have been a good thing. Maybe I look at mine and think, "I should've done."

   15. JLJason Lemkin7:49

       Yeah.

   16. HSHarry Stebbings7:49

       But fundamentally, upside maximization is our game here. Holding onto HubSpot-

   17. JLJason Lemkin7:54

       Yes.

   18. HSHarry Stebbings7:55

       Holding onto Shopify. And when you don't really need the money, we both have friends who really do not need the money, they just go, "I see what Jason sees. I believe in this-"

   19. JLJason Lemkin8:06

       Yes.

   20. HSHarry Stebbings8:06

       "... in a way that one wouldn't if you needed it."

   21. JLJason Lemkin8:09

       For, for, for sure. I think there is a category of lifer VC with no other opportunity that are mediocre invest- investors that are, can be inadvertently toxic. They, they can be so focused on the downside, they need their million dollar salary. There's nothing, they have no other possible career path and they have no savings, right? So th- those folks I think are, are the most dangerous, this sort of, uh-

   22. HSHarry Stebbings8:31

       Are there many of them?

   23. JLJason Lemkin8:32

       What's that?

   24. HSHarry Stebbings8:32

       Are there many of them?

   25. JLJason Lemkin8:32

       I've worked with many. I, and they're especially frustrating in exit scenarios

4. 8:36 – 12:13

   Challenges with Wealthy Founder VCs

   1. JLJason Lemkin8:36

      for the reasons you say, right? But I think the problem, actually my, the folks that I know of, founders that are too rich that got into venture, it's a problem. Let's say, Harry, you were lucky enough, uh, you, you sold your company for a billion dollars. You made $200 million, okay? Uh, and you put it away. And, and actually last year was pretty good on NASDAQ. So last year you made $40 million in the stock market, and you raised an $80 million fund with four of your friends. (laughs) So five of you are splitting an $80 million fund. What's that? Fi- f- 16, 16 each, right? And after a decade, you do 3X growths, which is still pretty good. Like, it was terrible in 2020, but it's pretty good. So let's do the math. S- the, the $80 million, 3X growth, 240. Um, it's, let's call it, let's, let's, what's the gain on that? 160, but let's take out all the f- the fees and all that. So the gain's what? Uh, 100 million, right? Over 10 years. Divided by five partners, that's 20 million each. Over 10 years, that's an extra two million. Now two million's a lot of money a year, but it took you 10 years to get there. You had to, and he made two, she, she or he made $200 million on their exit, right?

   2. HSHarry Stebbings9:42

      And compounding 10% annually in stock markets and liquid vehicles.

   3. JLJason Lemkin9:46

      Yeah. So, and what's interesting now that I've learned, at first I thought being too rich was bad for venture. But now what I've learned, it took me a little while to learn it. Now if you're too rich in venture, you just have to raise billions and billions and billions. That's the only way. It's like, and I do, I, David Sacks, who I, I, I have a ton of respect for, you know, I, I, you know, he's raised almost four billion for Kraft since I started investing, right? So but why? I mean, you, you've got to to be impactful at that level, right? You've got to. Or, or Andreessen Horowitz, it's not as silly as it sounds, right? You've got to be.

   4. HSHarry Stebbings10:16

      Okay. Uh, I- I'm, uh, I'm just shooting from the hip here, but I had an LP email me this morning that said, "Of the multi-billion dollar funds-"

   5. JLJason Lemkin10:22

      Yeah.

   6. HSHarry Stebbings10:23

      "... which one are you most confident will do a 3X net?"

   7. JLJason Lemkin10:28

      Yeah, I wish I had the data. I think it's v- I think it's, I, I, I get intimidated by the raw math of what it takes to turn billions dollars fund into 3X. It's just so many decacorns you need.

   8. HSHarry Stebbings10:38

      I, I sa- I said one answer, I said Founders Fund.

   9. JLJason Lemkin10:40

      Yeah.

   10. HSHarry Stebbings10:40

       And I said it because of something that Bryan Zikmund told me, which is like, "We are unparalleled in the willingness to have extreme revenue, extreme capital concentration on a per- Sure. ... company basis."

   11. JLJason Lemkin10:52

       Yeah.

   12. HSHarry Stebbings10:52

       Which means we could lose a lot, but if we're right, we do get the same upside that a smaller fund would get. Because of the concentration we have. Um, and so I would have Founders Fund as mine. Who would you have as yours?

   13. JLJason Lemkin11:06

       I don't know. I, I, I usually have a pretty good answer. I think that's a good answer. I mean, Founders Fund, I haven't seen their returns in a while. Their, their returns from, from some of their bigger funds were epic, right, were, were jaw-droppingly good. So that, I think that's a, a good bet. Um, I d- I, I can't say I've seen, um, too many other funds of scale that have those sorts of numbers, so I'm not sure.

   14. HSHarry Stebbings11:26

       Okay, we're gonna move on in our awards ceremony from best company-

   15. JLJason Lemkin11:30

       Oh yes, please.

   16. HSHarry Stebbings11:31

       ... to best founder. Right? Whose stand out year was it in 2023?

   17. JLJason Lemkin11:36

       I mean, how could it not be the CEO of NVIDIA?

   18. HSHarry Stebbings11:38

       I agree. (laughs)

   19. JLJason Lemkin11:39

       (laughs)

   20. HSHarry Stebbings11:40

       Uh, I mean... (laughs) Jensen is busier than ever. Um-

   21. JLJason Lemkin11:44

       Yeah, how can, how can you not have, after all these years, gotten to a trillion dollar market cap and recognize that there's nothing harder on planet Earth than being a founder? (laughs)

   22. HSHarry Stebbings11:55

       (laughs)

   23. JLJason Lemkin11:55

       In the same year, (laughs) and really just recognize the two, the no bullshit, no, this is why, Harry, you've done, oh, well, how many of these 20 VCs again? Th- 2,000?

   24. HSHarry Stebbings12:06

       2,936.

   25. JLJason Lemkin12:07

       This is why I won't even talk or interview a founder below 20 or 30 million in revenue, because they're not honest enough. They don't have enough life

5. 12:13 – 15:17

   Highlighting 2023's Best Founder

   1. JLJason Lemkin12:13

      experience, right? To hear from NVIDIA, which you know, a- has, has b- been in a ruthlessly competitive market with non-recurring revenue, right, live or die on these margins, finally become one of the breakout top five tech companies of all time and say, "I wish I wasn't a founder." Not literally, but conceptually, (laughs) I mean, I don't know. It's gotta be founder of the year. Talk about going long, right? Talk about going long. (laughs)

   2. HSHarry Stebbings12:36

      Uh, uh, eh, sorry, I, I am interested. You said there you wouldn't speak to a founder beneath 20, 30 just 'cause the lack of wisdom or experience.

   3. JLJason Lemkin12:42

      Yeah.

   4. HSHarry Stebbings12:42

      What do you mean by that, Jason?

   5. JLJason Lemkin12:43

      They're always just selling themselves.You wanna hear, when you talk, when, especially if you're doing an interview or discussion, you, you don't wanna hear what's great about NVIDIA. You wanna hear about the mistakes. The mistakes are what's compelling in any journey, right?

   6. HSHarry Stebbings12:57

      Yeah.

   7. JLJason Lemkin12:57

      The mistakes are what's compelling. You know, we talked a little bit, or, or, or some folks talked about whether that Bezos interview the other day was compelling or not, right? I thought, I actually thought it was pretty good. But the problem with it is there weren't enough mistakes discussed, right? That's what's interesting. And I find that founders below 20 or 30 million, all they can do is do a commercial. All they can do is spew a commercial out of that. And 20, 30 million's pretty far from a founder perspective, right? Uh, I used to think 20 to 30 million was a lot of revenue until I remember talking to Todd McKinnon who's CEO of Okta, and he said it wasn't until 30 million that he thought they couldn't be killed, that they weren't an early stage startup anymore. And I used to think that was later in the journey, right? Um, and it was an insight. And it's also about the same time where you can start being honest and say, "Here's what I screwed up building the 20 VC fund. Here's what I screwed up earlier in my career. Here's what I screwed up at NVIDIA," versus, "I'm the world's best compliant software HR manager company in the world." No one wants to hear that.

   8. HSHarry Stebbings13:51

      No. Listen, I agree with you on Jensen.

   9. JLJason Lemkin13:53

      Yeah.

   10. HSHarry Stebbings13:53

       I'm gonna throw one hat in the ring also for Brian Armstrong at Coinbase. I just think given the volatility of crypto, the man is just an unwavering force of strength in the community with CZ, with SBF, with everything that he faces. Regulatory, he's stand out. He's a standout leader. There's so many things also that he's said. You know, he was killed for the no politics in Coinbase. Everyone now is saying, "Yeah, we agree. No politics in Coinbase."

   11. JLJason Lemkin14:21

       I'm not with you on this one, Harry.

   12. HSHarry Stebbings14:23

       Why? Hit me.

   13. JLJason Lemkin14:24

       I believe every crypto company that has an earn program is a fraud.

   14. HSHarry Stebbings14:29

       Hmm.

   15. JLJason Lemkin14:30

       How can you pay these interest rates? But I'm looking at their website today. I can get 10% AP- APY on my crypto, 10%. How is this possible? It's called fraud to me. So when I hear someone's a good one, and I remember someone was, I remember, I didn't know anything about Binance. And people back then were saying it was the good one. And I looked up on their earn program when interest rates were zero, was like 18%. How can I get 18% interest when the Fed was at zero, right? And even, I know Coinbase is the good one, but where are they getting this 10%? It's, it's a pyramid scheme. It's fraud. So I, I, I, I admire the fact that they are complying with some regulations. I love the market- I think the marketing positioning is genius, right?

   16. HSHarry Stebbings15:11

       Can I just ask you? You said before we move on about sales and marketing efficiency falling through the floor. And can you

6. 15:17 – 18:54

   SaaS Performance Trends in 2023

   1. HSHarry Stebbings15:17

      just unpack that for me and how you analyze that?

   2. JLJason Lemkin15:19

      The average public SaaS company was up 41% last year, even though growth plummeted. Growth was at all-time lows in SaaS, all-time lows in 2023. The average public SaaS company only grew 16% last year. It's terrible. But the stock was up 41%. (laughs) This is, these are weird datas, right? These are weird data. And not only did growth plummet, but stock prices went up. And, and, and the reason is likely efficiency, right? Everyone got so efficient. They got so fit, and they cut all marketing spend, and they froze hiring, right? There was a lot of PR about layoffs, but layoffs are a much smaller story than just freezing hiring. Freezing hiring for two years is essentially sort of like a layoff, right? If you grow 50% in over two years and headcount's flat, then you basically didn't hire that extra 50% of people. And so weird world where just being in public cloud stocks was great. Growth was terrible. But what happened was all that growth came from the base. It all came from price increases. It all came from, uh, pushing customers to sign long-term contracts they didn't wanna sign. New logo growth was very low. And so what happened was this weird world where sales and marketing efficiency, CAC, were at the lowest. Taxs were at the highest they'd been in my lifetime as a founder that we know of. It cost the most to acquire a new customer last year, um, because we sort of hit in our existing base. So we're, we're in a tough world in 2024, which is, um, we all got fit. We all got efficient. We all s- we all made those venture rounds stretch, right? Every unicorn that can't raise again, if they're not going under, they, they figured out how to at least grow a little bit with half the headcount. But how are we all gonna get back to growth? That's the story for 2024. How are we gonna get back? And everyone's hoping it's AI, like, "I'm gonna put some bots on my website and that's gonna create growth." Uh, I think AI can create some efficiency, but growth? Growth? Let's see if it can create growth. I'm skeptical of great growth, right?

   3. HSHarry Stebbings17:13

      Has the time come of get back to growth or still in survival mode? I speak to a lot of founders who think that we're still in survival mode of just batten down the hatches, survive, and wait until the good times come again. That's a lot of money.

   4. JLJason Lemkin17:25

      I think we're absolutely there. And I think, so I think, I think I've invested in six companies at the pre-seed stage that are now north of 200 million, okay? Um, and so they're IPO candidates, okay? And, uh, most of them, not all, mo- I mean, I'm not talking about 100 so maybe most is the wrong word. Uh, I would say a bunch of them are on the bubble. And what I mean is they're all cash flow positive now, all of them. Everyone got cash flow positive, okay? 'Cause you had to 'cause the next round wasn't gonna come. It actually wasn't that hard. You just paused hiring. Most of them didn't do layoffs. You just pause hiring and you get, uh, cash flow positive in SaaS at that scale at 200 million. But the question is, what le- you know, they wanna go IPO. And I have, you know, I've got $70,000 with you that there'll be 26 IPOs next year. (laughs)

   5. HSHarry Stebbings18:10

      (laughs)

   6. JLJason Lemkin18:10

      I, I, I, uh, I think my, I think I may have been off by six months, so I'm gonna lose. It's okay. But the question for these folks is th- they are back to growth because they have marginal growth now. They have marginal growth. And no one wants to IPO at 4X revenue or 5X revenue. And so yeah, they got, they're fit and efficient, but instead of growing 40% and, and losing 20%, maybe they're at 20 and zero, right, or 20 and five. And so yes, n- people don't have the an- here's the, the stressful part. People don't have the answers in 2024 about how to get back to growth. But, but the, the win- the, the, the, the good ones are there. You went on the diet and we hit our target weight, Harry. Now we gotta pump up.... you know? I mean, you're a fitness guy. Now we've gotta put on muscle. Like-

   7. HSHarry Stebbings18:51

      (laughs)

   8. JLJason Lemkin18:52

      ... we h- w- we- we cut, and then after you cut,

7. 18:54 – 21:29

   Insights from Bill Gurley's Exit Strategy Tweet

   1. JLJason Lemkin18:54

      you gotta pack on the muscle, don't you?

   2. HSHarry Stebbings18:56

      Do you not just wonder if this is a good business? And I don't mean to be depressing in that way, but like, you know, entry prices are as high as ever, I think. Like if you s- have great quality SaaS founders or repeat founders-

   3. JLJason Lemkin19:05

      Mm-hmm.

   4. HSHarry Stebbings19:05

      ... or coming out of any blue chip, they're as high as they've ever been. They haven't been depressed pricing really it seems. Maybe in some cases 10% or 20% down, but not significantly by any means.

   5. JLJason Lemkin19:13

      No, no decline really.

   6. HSHarry Stebbings19:14

      Okay, no decline. But then we've seen this compression in terms of exit scenarios, in terms of sizing and pipe, dramatically, to four or five X. Does venture even make sense as a business in that world?

   7. JLJason Lemkin19:28

      Well, it's funny. If one of the questions you'd asked me was what was, what was the most impactful tweet you saw last year on venture, right?

   8. HSHarry Stebbings19:34

      Yeah.

   9. JLJason Lemkin19:35

      And I'm gonna mis- completely misquote this and get this wrong, right? But Bill Gurley had the one about how the w- the way venture works is you just wait for the, for these little periods when you can actually make money and get exits.

   10. HSHarry Stebbings19:45

       (laughs)

   11. JLJason Lemkin19:46

       (laughs) And you gotta sell all your winners (laughs) or take them public in these little windows where there's bubbles, where there's 20X, 40X, 50X ARR, like 2021, and you really can't make money in venture outside of these windows, was kind of... I'm, I'm misquoting him, but that's what he said, right? There are these windows where you make money in venture that really... It hit me kinda hard, right? To your point. I'm like, you know, it doesn't feel like in beginning of '24 that venture's a particularly easy industry, does it? It feels pretty hard.

   12. HSHarry Stebbings20:13

       No.

   13. JLJason Lemkin20:13

       Right?

   14. HSHarry Stebbings20:13

       No. I- I mean, but it wa- it was never meant to be easy. (laughs)

   15. JLJason Lemkin20:17

       No. But at least when I started in 2013, at least when I started in 2013, the exits were terrible but the entry prices were lower, right? So, uh, I, I didn't actually... When I started investing, I didn't think I would be any good and I didn't think I'd have any great returns. Um, but I thought everything I did would make money. Every investment I do when I made... Just because the entry prices were, were acceptable. When I invested in Pipedrive in 2013, my first investment, it was 16 pre at 1.2 million ARR, okay? Go- growing 9% a month, okay? And we argued over the price. (laughs)

   16. HSHarry Stebbings20:53

       (laughs)

   17. JLJason Lemkin20:53

       Now, pros and cons, but it did exit for a billion and a half. So if you got in at 1.5 million ARR tripling, at 16 pre, you were gonna make money, right? You were going to make money.

   18. HSHarry Stebbings21:02

       Yeah.

   19. JLJason Lemkin21:02

       Now it's stressful, because I feel like most investments I make, I'm not sure they're gonna make money. I do wonder, going to Bill Gurley, if we're all just waiting for these windows. We're all just waiting for these windows to swing back, uh, these 12 to 24 month periods of hyperliquidity and hypermultiples. And because of that, honestly, I was reflecting on this deeply, I've changed my mind to founders. I think some of the worst advice I've given to founders is when to sell their company, when I look back on, on t- 10 y- 10 years of investing, 11

8. 21:29 – 22:49

   Updating Founder Advice

   1. JLJason Lemkin21:29

      years. I've given bad advice on when to sell your company.

   2. HSHarry Stebbings21:31

      What, what advice have you given that you would like to have changed?

   3. JLJason Lemkin21:34

      The advice I've given them is I made the same mistake so many founders turned investors do, is I give 'em the advice I learned, which is: if you have something good, if growth is high, if burn is low, and NRR is high, never sell, because you keep adding value. Right? If you're at 10 million ARR growing 100% with 110% NRR, then next year you'll be at 20 and then you'll be at 40 or 38 or 72, and that's how you build, that's how you build a decacorn. And so what t- tends to happen is just as it gets good, you get a couple M&A offers, right? And so, my advice to founders has always been, don't take, don't take it, um, unless you're worried. Like, unless you can't do it. Unless you see the, the, the industry shifting, unless your team isn't good. But you might as well go long, because that value keeps compounding, and that's what I saw in my space. But now I see so many founders that said no to offers in the 2020 to 2021 period that will never get back there and will have to work a decade to get to lower exit values. And now I, the Bill Gurley thing resonates. Like, if you get a good offer and it's in bullish times, take it.

   4. HSHarry Stebbings22:40

      (laughs)

   5. JLJason Lemkin22:41

      (laughs) Take it, because it may be a decade. I think we're gonna see 2021 again, and, and maybe AI will bring it back faster, um, but it, it could

9. 22:49 – 25:59

   Y Combinator: Leading Early-Stage Fund

   1. JLJason Lemkin22:49

      be a decade until we see the, another boom l- of that level.

   2. HSHarry Stebbings22:51

      I, listen, I, I totally agree and get you. Okay, we're gonna move on in our Oscar ceremony. What's the best early stage fund, 2023?

   3. JLJason Lemkin23:01

      Geez, I need your help. You, you have all, all the folks. These are tough questions. The best early stage fund? Um, look, it has to be Y Combinator. Uh, Garry Tan coming back to Y Combinator. Was that the beginning of 2023 when G- Garry came back?

   4. HSHarry Stebbings23:13

      Yeah. Yeah.

   5. JLJason Lemkin23:14

      Talk about, uh, right person, right time, energy, rebuilding the entire city of San Francisco. The energy that Garry has... Um, I remember the first time I met Garry, we did i- I did e- one of my first, uh, co-investments with him. I didn't even know who he was. But th- the power of his passion, his, his intelligence, um, and his incredible commitment to entrepreneurism, right, is just... It was next level. And the fact that ev- the weird thing when I first met Garry, which was probably 2013, too, maybe 2014, the weird thing back then was every founder loved him. Not loved him like, "Oh, that's a good guy, you know, my buddy, you know, whatever. He goes surfing with me," or whatever. No, they just felt like Garry was the one that had their back. Not one, but every founder I met that Garry was an investor in thought Garry had their back. I don't know how you do that. That's not me. Founders that I've invested in will tell you that I w- I, I, I deeply believed in them. I wa- I was the one that believed in them, that did all this for them, but you can't find 100 people that said (laughs) -

   6. HSHarry Stebbings24:16

      (laughs)

   7. JLJason Lemkin24:16

      ... th- that love me like they love Garry. However he reboots Y Combinator will add an order of magnitude of value to this organization. It's however m- this, this story might have... A- as important as it was, it might have been, uh, overlooked by OpenAI and, and all this other stuff, because, uh, YC is... I mean, it dominates this accelerator market, right? b- by, uh, by... I mean, it's logarithmic distribution in terms of returns here, right? Making billionaires, um, and then it leveled up? (laughs) That doesn't happen in venture. They all wind down or generational transitions are hard. Uh, but A+++ getting Garry to run Y Combinator, y- you know, and leave Initialized, leave a-... you know he ra- what did he raise? A billion dollars? And had a top ten fund, right, on many levels, right? For I don't, uh, you know- at least initialize too.

   8. HSHarry Stebbings25:05

      And he founded it. Lea- leave a firm you founded, like doing-

   9. JLJason Lemkin25:07

      Yeah. Initialize 1 is like 50X, tiny fund, maybe 100X, and Initialize 2, I bet is 10X net for big fund. Uh, I don't know the other ones but to leave that d- if you ask most VCs they would think it's crazy. Why would you leave that cushy job of managing billions with top decile returns to go be CEO of something that you didn't even start?

   10. HSHarry Stebbings25:29

       Yeah.

   11. JLJason Lemkin25:29

       'Cause he's probably not the boss. I love Gary. Yeah, and I, it's none of my business, but I think it's, it, he had such passion for this. He loves Y Combinator, you know. He said, "Y, YC made me," right? Um, but he didn't start it, so to go from something like Initialize, which you start, right? You are the managing partner, you are the director that he built, to then run something you didn't start, like that's, that's a, that's pretty e- epic for everybody. So that's got to be the, the, the quiet venture story, right? I would, if I could, you know, it's just I, I see another, at least a, another incredible decade for YC,

10. 25:59 – 30:21

    Kleiner's Remarkable Comeback

    1. JLJason Lemkin25:59

       and this was a genius move.

    2. HSHarry Stebbings26:02

       I, I, I agree with that. I would throw one other hat in the ring, and I don't know which, if they're early or late you could put them in either one bluntly, but I don't think enough has talked about Kleiner. When you look at what Mamoun has built-

    3. JLJason Lemkin26:14

       Yeah.

    4. HSHarry Stebbings26:14

       ... with the renewed Kleiner, the team is stellar. It's stellar from him and Ilya, but also, you know, you've got Bucky, you've got Annie. Uh, generational transition wise, they really tick the boxes I think. When you look at the portfolio, they have absolutely smashed it-

    5. JLJason Lemkin26:29

       Yes.

    6. HSHarry Stebbings26:29

       ... in terms of building a phenomenally exciting early stage portfolio with great ownership positions. I, and I don't think that's given enough credit, actually.

    7. JLJason Lemkin26:39

       I view M- Mamoun as, and this may not be, uh, it may, it may be the wrong term. When I think about a traditional fund and a traditional investor, I think top .1%.

    8. HSHarry Stebbings26:50

       Sure.

    9. JLJason Lemkin26:50

       Mamoun goes in and it's like, it's gonna be Slack, it's gonna be Figma, it's gonna be whatever, it's gonna be Rippling, and he knows the playbook. And he doesn't bend the rules, he doesn't lower the standard 'cause he didn't get a deal done last quarter, he doesn't do it for the fees, and if it's just a smidge below the bar, he don't do it, and he's a heat-seeking missile. And if that means... And I remember when I started investing, I would do a deal and Mamoun, uh, would be like, "Oh, can I meet them next week?" And he would mark the deal up if needed be, right? Not that he... He didn't care. He's like, okay, if there's 100X opportunity in Slack, it's fine. It's fine. And most folks don't have the ability to understand which one's a Slack or Figma, and they don't have the confidence to do that deal. The, the only thing I would say is I don't know, I don't know, I don't know. Uh, he, I think he wants to perfect the art of a, of traditional venture capital, right? A small number, not this ultra-concentrated thing, but a small number of just, just every year being in a couple of the best, right? Um, but I don't know, has he, has he 10X'd the amount of capital that Kleiner manages? Probably not, right? Has he 100X'd it? I don't know that he wants to build an Andreessen or a Bessemer or something like that, right? So the odd thing in venture is y- y- i- if you, if you stay in your lane, it's the best way to achieve returns for your LPs and everything, but there are a lot of pressures to not stay in your lane. There's a lot of pressures-

    10. HSHarry Stebbings28:09

        Um-

    11. JLJason Lemkin28:09

        ... to not stay in your lane.

    12. HSHarry Stebbings28:10

        ... I think Maritech would be another example though, of an under-discussed but hugely successful franchise which have stayed in their lane and delivered incredible returns.

    13. JLJason Lemkin28:19

        Incredible returns, yeah. But, you know, uh, where is your, where is your ego? What's your id? What's, what's the point of all of this? It's hard to stay in your lane.

    14. HSHarry Stebbings28:26

        Uh, it totally is. I think Jeff Lewis at Bedrock as well. When you actually look at Bedrock's portfolio, the dude's in Rippling, the dude's in Vercel, the dude's in, uh, g- Flock Safety. The v- he's f- continuously inves- he's in OpenAI. I mean, he's invested consistently in an incredible base of companies. And actually with partner turnover, I think he's just done an exceptional job.

    15. JLJason Lemkin28:48

        Yeah, for sure. The quest- the meta question is though, for, for some folks is, uh, what are we, what are we, what are we building? What are they building? Like, I know what Y C- I think I know what Gary's building, uh, at Y Combinator, right? I'm not sure what Mamo- Mamoun is, uh, uh, uh, you know if I, I, I, um, grate- he helped me, I think he's one of the best, I would, I, I've recommended him on the cap table many times, uh, but I don't know what he's building other than a great fund, which is a lot. (laughs) Uh, Bedrock's pretty interesting to watch from social media, right? Being not a VC. But, um, Mamoun wasn't really a founder. He's been a lifelong A+ VC since the beginning, since he was an associate, right? He crushed it at USVP. If you're a bit of a founder as a VC, you have to think about, "What am I building? What am I building and why?" Builders gotta build.

    16. HSHarry Stebbings29:36

        I agree.

    17. JLJason Lemkin29:36

        VC used to be a place to where founders would retire, but that's not true anymore.

    18. HSHarry Stebbings29:40

        I, I, listen, I totally agree with you. The question is then like, how open are you to tell the world about your vision? I often think this about what we do, which is like, you know what we do and you know there's a lot of things that we do. I don't think people think about that often and often put us in a media bucket or a, uh, podcast bucket. Sometimes I'm like, "Fine, underestimate us."

    19. JLJason Lemkin30:00

        Yes.

    20. HSHarry Stebbings30:00

        And then other times I'm like, "No, we should be doing more. We should be telling out our vision so founders know what we're building."

    21. JLJason Lemkin30:06

        Look, there are, there are many, you know, there are, there was something on, on Twitter today with Honam from Altos Ventures' incredible returns, right? Saying how they do, you know, o- outside of his closed Twitter, they do no PR, no this, no that, right? So you can have great returns and literally intentionally

11. 30:21 – 32:19

    Identifying Top Late-Stage Funds

    1. JLJason Lemkin30:21

       have no one hear of you, right? I think that if you're, especially if you're pre-seed to seed, it's, it's, it's work. It's work. It, it helps if people know of you. It helps, it helps to have high awareness. It helps with a bunch of things. Um, I think if you're later stage and you just cultivate relationships with the folks a stage below you, uh, maybe, maybe... I mean, when we did the fun one with, um, with TCV, right? And, um, and, uh-

    2. HSHarry Stebbings30:49

       Insight.

    3. JLJason Lemkin30:49

       ... yeah, insight. It was interesting that, that, that what is it Woody from TCV is like, "We don't, we don't PR." (laughs)

    4. HSHarry Stebbings30:55

       (laughs)

    5. JLJason Lemkin30:55

       I mean, TCV's tracking every company that's 24 months from IPO and 24 months after. It's a confined universe of 1,500 companies and they go meet with them. (laughs)

    6. HSHarry Stebbings31:06

       (laughs)

    7. JLJason Lemkin31:07

       No, no, I- I- I- it- it's a different world in that way. Well, you mentioned TCV there. W- what- a tough fucking last 12 to 18 months for any late stage fund. What do you think is the best late stage fund, Jason? Oh, you p- you, uh, I- I- I feel like a bad guest 'cause I don't know, so much has changed the last 18 to 24 months, right? That I- I- I don't really, um, I'm not sure I know the answer. Um, I'll tell you why I- I- I don't know the answer. If you, if you take AI- AI deals out of the equation, um, I think in 2023, very few deals got done north of 200 million valuations. Very, very few deals. Now they're inside led deals, right? And inside led deals have their own dynamics, especially if the companies are doing well, right? If I already own 20%, um, and I'm a multi-billion dollar fund, I might as well put money in at 600 or 800 or a billion, um, for a whole host of reasons. But I didn't see a lo- a lot of c- with the average public SaaS company trading at two billion, I just didn't see a lot of outside growth investors rushing to do deals north of 200 unless it was a bargain.

    8. HSHarry Stebbings32:12

       Hmm.

    9. JLJason Lemkin32:12

       I had portfolio companies where, yeah, the all the late stage guys would come in and they'd want to do it at 5X or 6X, and we'd be like, "Well yeah,

12. 32:19 – 33:16

    The Lack of Greed in 2023

    1. JLJason Lemkin32:19

       but we have three years of runway." (laughs)

    2. HSHarry Stebbings32:22

       (laughs)

    3. JLJason Lemkin32:22

       I don't need your down round because (laughs) we ha- we don't need it, like what's the... So I saw a lot of tire kicking in 2023 post 200 million, but I only saw aggressive investing up to about 200 million valuations in my- my little- my little ecosystem, in SaaS, just because I think people got intimidated that how they're going to get their 10X. How am I going to get my 10X if my comp's trading at 2.1 with dilution, with several rounds of dilution and IPO? How am I going to get my 10X? Like it- it- it- what's that?

    4. HSHarry Stebbings32:49

       So who would y- who- who would you give- who would you give best layer stage fund to, Jason? You got the award.

    5. JLJason Lemkin32:55

       Oh man, you're- you're mean. I don't know. Honestly, I- I'm embar- I- l- I- I don't know. I- I- I- I- I don't mean to be a bad guest, but I- I- I should have prepped more and looked at the charts 'cause I don't... All I saw was a lot of... I- I know everyone said they did more deals. I know ICONIX said they were way up, and Excel said they were back, and Salesforce, but I just, I didn't- I didn't see gr- enough

13. 33:16 – 34:27

    Surprises Emerging in 2023

    1. JLJason Lemkin33:16

       greed in the markets in 2023. I didn't see greed return.

    2. HSHarry Stebbings33:18

       What would you say is the biggest surprise that you saw in '23? What, when you looked at your phone, were you like, "Holy shit"? (laughs)

    3. JLJason Lemkin33:25

       The biggest surprise I saw, this is a, this is a- a- a- a tactical point, I was very surprised that huge funds were not doing, were not supporting their companies in up rounds, good rounds, that were very, very good companies, but not necessarily decacorns. I was surprised. I- I- I grew up in a world where big funds, if you- if you- if you doubled since the last round, tripled your revenue, right? And there was an outside lead or whatever lead, every big fund did their pro rata or they came close, right? "I've got three billion under management. I did 10- 10 million in the A. I'll do two million in the B or three million in the C or four..." Like I never saw a big fund not do this. And then I watched a deal, a very good deal, where a multi-billion dollar fund said they're gonna do zero. And I didn't call the partner out, but I- I asked him what happened. He's like, "Uh, we're just very particular. I've only d- uh, we're- we're generally not doing our pro ratas now. I've only done two or three recently." And, um, that is

14. 34:27 – 37:28

    Reserve Deployment: Identifying Winners and Losers

    1. JLJason Lemkin34:27

       a level of conservatism that doesn't make sense to me, right? On a bunch of levels. It doesn't make sense to me as an efficient way to deploy a large fund, and it doesn't make sense to me as a good long-term play. And it doesn't make sense to me as something that will improve returns, right? Uh, there are a lot of reasons to support your portfolio companies, right? And- and there are plenty of reasons to not support your dogs, your losers, right? I mean that, you have to be careful there, but to, anyone in the top quartile should get a ch- a- another check from a big fund. And so the fact that that wasn't happening, I- I, uh, I think it was, I think it was fear they couldn't raise another fund. I think maybe it's fear that they'd written too many bridge- bridge round checks. I don't know, but that was my shocker, was these automatic pro ratas appear to have gone on pause.

    2. HSHarry Stebbings35:13

       In the timeframe where reserves will be deployed, do you think your winners and your losers will be apparent? Like often it's traction investing in the world of consumer where it's like, "Oh, we hit X number of DAU or MAU." That's not sustainable. And then if it's SaaS, often it just, as you said, going long, it takes just a long fricking time. Yeah, they scaled and grew double, but it's not- it's not 5X growth.

    3. JLJason Lemkin35:35

       Yes.

    4. HSHarry Stebbings35:35

       And sometimes it- it's not obvious. Um...

    5. JLJason Lemkin35:38

       It's not. I do think that the sheer number of unicorns that were born in the- in the- in the- in the work from home boom broke reserve models. So I think you ha- you took, you have a thousand unicorns, fine, 200 of 'em are gonna die, right? 100 of 'em are gonna break out. But what about the ones, Harry, that, hey, they're at 16 million ARR, but they're growing 80%? Now they're not worth three billion, 3.2 billion like they were in the last round, but they're growing 80% at 16 million. I've alr- I'm already in, I own 18%. I gotta do some reserves for that one, don't I? And the sheer number of them, and the fact that they're not gonna get another round when the last round was at two billion, I think blew up, like I think the- the reserves for the middle corns, um, for the overval- the reserves for the overvalued broke a lot of reserve models. And so everyone was like, "I just don't wanna, like I'm gonna run out of reserves, Harry. It was not how I planned. I'm gonna run out, so I'm gonna say no to even winners if I can get away with it," right? 'Cause I may need that two million bucks, even in my big b- multi-billion fund. I may n- need that two million bucks for that unicorn that's struggling.

    6. HSHarry Stebbings36:39

       For founders listening, what happens then?

    7. JLJason Lemkin36:42

       What's that?

    8. HSHarry Stebbings36:42

       No one takes pro rata, no one does their reserves.

    9. JLJason Lemkin36:45

       Yes.

    10. HSHarry Stebbings36:45

        What happens in that world then? Founders come out into a new environment and have to reprice? Eh, 'cause it's very difficult saying, "Hey, n- very few existing investors are coming back at all."

    11. JLJason Lemkin36:55

        Yes.

    12. HSHarry Stebbings36:55

        It's a very difficult message.

    13. JLJason Lemkin36:57

        Well look, a couple things. First one, y- y- be honest, forget about what your existing investors wanna do. First of all, you have to be honest. A- are you fundable, right, at the margin? And you've gotta ask honestly, ask at the end of each board meeting, "Am I fundable?"And then, ask afterwards, "Would you fund me?" Don't, don't... You don't have to put everyone on the spot. Just go around the table, "Am I fundable?" And you won't get a completely honest answer, but you'll get a pretty honest answer, right? You'll get a pretty honest answer. And so, if no one thinks you're fundable, then whatever you got in the bank's (laughs) is, is gonna last, right? But what I have seen... Then, assume you're at the margin,

15. 37:28 – 46:33

    The Key Role of Supportive Investors

    1. JLJason Lemkin37:28

       assume you're fundable-ish, okay? You're not OpenAI, but you're fundable-ish. What I have seen in my, especially the last 24 months, but across my whole career of investing for 11 years, is there's usually only one investor that will stand up for you. There's usually only one. And I have had to do three... E- even though I have a pretty efficient portfolio, I've, I've had to do three of these in the last 14 months. I have had e-... And often, I'm the smallest fund on the cap table. I've had to be the catalyst, the one that stands up and say, "Look, you're at 30 million growing 90%? That's not bad."

    2. HSHarry Stebbings37:57

       (exhales)

    3. JLJason Lemkin37:58

       Okay? "I will, I will put the money in." And if one person is a catalyst, generally folks that are, that are humming and high and that are waiting, you got... The catalyst can force them to shit or get off the can, or S or get off the can, and that's how you coalesce the round. So, as founders, you've gotta know who's the one, not the back-slapper, not the one that always says, "Great job, Harry," at the end of each meeting. Not the one that responds to, in the investor update, with a thumbs up emoji. But who's the one that's really engaged and believes in you and that will burn their social capital and their time to catalyze a round? Someone's gotta catalyze it. It doesn't happen on its own unless you're crushing it.

    4. HSHarry Stebbings38:36

       Do you thi- do you think VCs have shown up and made us proud in the harder times, or do you think they've just reinforced the bad image of venture, if you're honest?

    5. JLJason Lemkin38:46

       I think founders have shown the bad side of founders. I think founders became too entitled, and I think founders expected the next round would always come. Founders became, uh, very arrogant toward VCs, used them as fungible, put them on ir- irresponsible schedules, didn't share proper diligence, abused the system, and, and they took advantage of the time. So, that sounds very critical, right? And it is critical, um, but both sides react poorly when the pendulum's on either side, right? When there's no money out there, VCs are pretty crappy. My first startup, it was terrible. I had a 5X participating preferred and a two million pre, and, like, I can't even tell you how bad the terms were in my story. And all the VCs, and all the VCs would collude and they'd all talk and they'd negotiate the deals down together. That's a low point, okay? And a low point for founder behavior was 2021. It was abusive toward VCs. It was abusive. The Hopin story is abusive. "I'll take 140 million out for myself, F you VCs." That's ride or... I know a lot of folks think that's a hero story. I think it's abusive. And so-

    6. HSHarry Stebbings39:48

       Well, well, well, no, I- I'm gonna go-

    7. JLJason Lemkin39:50

       I think-

    8. HSHarry Stebbings39:50

       ... on that one. Uh, no, if you, if you wanna take-

    9. JLJason Lemkin39:52

       I think it's abusive. I think it's abuse.

    10. HSHarry Stebbings39:53

        If you wa- if, if you want-

    11. JLJason Lemkin39:53

        I think it's unethical, and I would not have done it as a founder. I think it's unethical.

    12. HSHarry Stebbings39:57

        If you have a choice to take that deal-

    13. JLJason Lemkin39:59

        No.

    14. HSHarry Stebbings40:00

        ... it is-

    15. JLJason Lemkin40:00

        If you are a founder, Harry, if you're a real founder, if you're a real founder, you have constituencies. You have your employees, you have your customers, and you have your investors, and do you know where real founders put themselves on that list of three?

    16. HSHarry Stebbings40:13

        At-

    17. JLJason Lemkin40:14

        Last.

    18. HSHarry Stebbings40:14

        ... the bottom. Yeah, yeah.

    19. JLJason Lemkin40:15

        Last. And I know, I, I... And that's why what Hopin did was unethical. It damaged the company. That company needs that 120 million. It was ripping people off. You ripped off your investors, you probably ripped off your employees. I don't know how a tender offer happened, right? And it wasn't good for the customers. Anytime I see an employee, a founder put themselves above... Like, by all means, oversubscribed round, whatever. Take, you know, what... Take care of yourself. But when you're above, ab- ab- above those, uh, it... 0% chance it's gonna be a success. Zero. That's why it's wrong.

    20. HSHarry Stebbings40:47

        Okay, let's roll with this. You have-

    21. JLJason Lemkin40:48

        Yeah.

    22. HSHarry Stebbings40:48

        ... uh, incredible revenue scaling.

    23. JLJason Lemkin40:51

        Yes.

    24. HSHarry Stebbings40:51

        The brand of the company is insane.

    25. JLJason Lemkin40:52

        Yes.

    26. HSHarry Stebbings40:52

        Fastest-growing company in Europe, the darling of European tech.

    27. JLJason Lemkin40:56

        Yes.

    28. HSHarry Stebbings40:56

        On the front page of everything. Uh, and he's the sole founder. He's got, whatever, 49, 50% of the company.

    29. JLJason Lemkin41:01

        Yes.

    30. HSHarry Stebbings41:01

        And investors are battering down your door, begging you to take their money.
16. 46:33 – 52:43

    Predicting the SaaS Landscape in 2024

    1. HSHarry Stebbings46:33

       stage markets in 2024, what do you think?

    2. JLJason Lemkin46:36

       I've been doing SaaS since 2005, and this is the first year I'm worried. And I'm not worried the fact that we're trading at 6X, but I'm kinda worried about that 'cause we're in the third year of crummy public multiples. Like, I am worried about public multiples, it's tough for investing. I am worried, just worried that we, m- like, the deceleration, uh, that we saw last year, that public SaaS companies growing at their slowest pace ever, I am worried some of it may be permanent. I am worried that, um, Gartner says there'll be a trillion in enterprise SaaS spending next year. Okay, a trillion, right? You could only spend so much of the US GDP or the global GDP on software. At some point, we are saturated with SaaS and software. At some point, it's not just that we want compound products or fewer vendors or- or this, it's just at some point, literally, software cannot keep growing faster than GDP forever, right? And we've had, we've had a run for 18 years in this, where software spend exceeded everything else, it just absorbed more and more of corporate budgets in- in a quest for efficiency and in a quest to not fall behind. If that doesn't come back, and we are, we have finally reached maturity in SaaS, finally reached maturity in SaaS, we can make money in venture, right? Because eventually a HubSpot may fade or a Salesforce may fade, but it takes a really long time, so it's gonna be r- much harder to make venture, money in venture if we have to wait for ServiceNow to fade away (laughs) .

    3. HSHarry Stebbings48:05

       Doesn't the definition of software spend change, though? When you think about, like, the introduction of AI into so many of our workflows, into what it does for productivity and what that does for GDP, like, software spend as a category itself almost becomes-

    4. JLJason Lemkin48:19

       It may, it may, but we have to, but for that to be true, and- and we, I can, y- y- I think the, for me, in my little bit of world, the contact center is where it's the most true. For- f- for it to be truly true, you have to unlock budgets outside of IT, because IT is only gonna get so much budget.

    5. HSHarry Stebbings48:34

       Mm-hmm.

    6. JLJason Lemkin48:34

       Right? I mean, I asked Aaron Levie when I talked to him, uh, "When you talk with your biggest customers, what's their AI budget?" He's like, "Their AI budget is zero." (laughs) "There's no AI line." Now, it may come out of a different area, it may come out of s- like, uh, and functional groups may have b- budget, right? But the CIO's budget in the enterprise, the IT budget, it- it inflated so much the last couple years and then it deflated last year, right? Where's this extra money gonna come from? And I'm not saying the party's over, Gartner says it's not over, but I'm worried. I'm worried at the, I- I still don't fully, I know why s- some growth slowed this, in 2023, but I feel like it slowed a lot with a really, really, really strong US economy. Like, the- the US economy, yeah, we have some interest rates, blah, blah, blah, ZIRP, DIRP, WRAP, CLERP, but it's a good economy with good companies making lots of money, and we- we hit a train wreck in SaaS growth.So, I'm worried. That's my worry for 2024 is that we've bounced, we've always bounced back these, these, these, downturns, um, uh, but I- I'm a little, uh, a part of me worries we may have seen some saturation in spend for the first time.

    7. HSHarry Stebbings49:41

       Bringing that back to the SaaS early stage market, what does that mean?

    8. JLJason Lemkin49:45

       I don't think I, I, uh, this is why I struggled to give you the great growth investor answer. I don't think it's gonna impact early stage much. I think there will always be wedges. There will always be new tools, new things that take advantage of technology, um, new, uh, th- this has been true since the dawn of software. People will figure out new ways to build neat things at seed, and there will always be 100X opportunities for the next one that comes out of left field, right? That does something we, we didn't know about. We didn't know we needed Riverside. We're on Riverside right now, right? We didn't know. We didn't know podcasting would be big enough, right? But that could be 100X, right? So, those will, the beauty is, the, for, those will c- still exist, um, whether there will be enough folks that can achieve a billion in revenue growing 20% or 30% or more, uh, that's the, that's the bigger issue, right? Will, will there be enough? Because the, the real math in venture, like oh, we can talk about all these exits and stuff, but they're predicated on hitting a billion in revenue with real growth, right? That, that's sort of the terminal state of SaaS, and when I started doing all this, we didn't think it was possible. Now, it's kinda commonplace. Like there's so many p- forget growth has slowed, but there's so many that have crossed a billion, um, but a, you know, a billion can't cross a billion. So, um, but I don't think, I think the vibrancy of seed is here to stay. There's too many folks that made money. There's too many folks that enjoy investing. Um, there are too many LPs that are still gonna search for that alpha, um, and there will, every year there's gonna be 1,000X outcomes and multiple 100X outcomes. And so, that's the, the, you know, the fountain of youth. We're still gon- we're always gonna be searching for the fountain of youth at seed.

    9. HSHarry Stebbings51:25

       (sighs) Okay.

    10. JLJason Lemkin51:26

        It's never gonna end.

    11. HSHarry Stebbings51:27

        If we, if we then move forward-

    12. JLJason Lemkin51:29

        Yeah.

    13. HSHarry Stebbings51:29

        ... SaaS late stage market.

    14. JLJason Lemkin51:30

        I think it's tough. I think it's very, very tough. Um, here's what I think has really happened, Harry, and this is, and I, I think people think that like there's an AI bubble in venture, right? Um, and clearly, to some extent there is, right? But then we just talked about the OpenAI numbers and your jaw drops, right? People sort of just a few weeks ago made fun of, of Memo and putting, you know, whatever, uh, uh, a billion into, um, Anthropic, but if they're doing 200 and something million in one year, it doesn't seem like such a bad deal (laughs) , does it? Uh, so, but my point is that what I think has changed permanently, permanently since 2021, is venture, uh, post-seed, is perpetually gonna be sourcing, searching for decacorns. When I started in, even when you started in this industry, when you started, we were searching for unicorns.

    15. HSHarry Stebbings52:19

        (laughs)

    16. JLJason Lemkin52:20

        We were all searching for unicorns. I- Box IPO did 800 million. HubSpot IPO did 800 million valuation. Um, Shopify IPO did a $750 million valuation, and we were searching for unicorns. We were searching for unicorns, and then when things got good, every unicorn's was a decacorn, right? Uh, uh, in the public markets and in the private markets, right? And I think we have now been wired that way, and as long as there are

17. 52:43 – 1:02:49

    IPO Outlook for 2024

    1. JLJason Lemkin52:43

       a steady stream of Stripes and Databricks and open APIs, there, there will be enough decacorns that venture is permanently decacorn hunters, and that's what I think we're gonna see. And so it will-

    2. HSHarry Stebbings52:54

       Do you think there are, do you think there are enough decacorns though? You mentioned three-

    3. JLJason Lemkin52:57

       I think there's enough To take the bets. I think, I think there are, there will, there will be enough, there, un- there will be enough Stripes and Databricks and open AIs that some growth funds can do 3X net or more, and that will get the LPs to re-up, and that will re-arm the decacorn hunters. I don't think there's gonna be unicorn hunters anymore. I think they're decacorn hunters. And you'll see some folks on 20VC and say, "Oh, we're very conservative, and we're, we're optimized around $818 million outcomes," but I don't think it's true. I think everyone is hunting for decacorns permanently. That has changed in venture. We're more realistic about how many there will be, right? And, and frankly, it's, it's, it's harder to believe that many will be u- decacorns, which makes it hard, but, but I think we are decacorn hunters forever, series A and beyond. I think the industry is permanently changed, and it may be under-discussed that we're decacorn hunters.

    4. HSHarry Stebbings53:47

       Do you think Stripe goes public in '24?

    5. JLJason Lemkin53:50

       I, I don't, I mean, there's some inside information that I don't have, right? Um, I think so. I think 2024 is the year of you might as well go public. I think, listen, because here's the thing, Harry. We will be in the third year of a multiple downturn. So, you, you could be like, "2022, oh my god," you know, multiples fell 75% in 2022. That's not a good year to go public, is it? Multiples plummeted sev- 25%, okay? 2023, weird year, um, but, but, you know, tech- NASDAQ, rockin' year, right? Average public company, up 40%. Top public companies up, HubSpot up 104%, right? Mongo up 112%. Shopify up 128% last year. These are, it's a, it's like feeling good, except the IPOs were, were mediocre. Not that they were great companies. Klaviyo, Arm, uh, Instacart, A+, A+ companies, like but not, uh, but, but just good IPOs because the markets were tough, right? But-

    6. HSHarry Stebbings54:46

       Mm-hmm.

    7. JLJason Lemkin54:46

       But 2024's the third year. If you're a, if you're a Stripe and there's nothing wrong with you, right? Other than the multiple, the, the multiples, you call, you call it a day. You're like, "We're going pub- if we're, if we're going public and we're going public at 3X ARR because of our margins," or whatever, you just call it a day and you just get it done, and, and people stop caring, and it's just ti- it's time to, it's time to, it's time to grow up. It's time to move out of the house. It's time to, it's time to (laughs) get out of (laughs) , get out of (laughs) , get out of the basement and you just do it. So, I think, I think, uh, people will give up on waiting for the markets to change and just do it.

    8. HSHarry Stebbings55:18

       Do you think Databricks will go out too?

    9. JLJason Lemkin55:19

       You know, people talk about that, um, and the only question I have is, um, it, based on what I've seen and the information in others, the, the losses are still significant.So, no matter what everybody says about how exciting the top line growth is, i- it would make sense, logically, to wait a year so that you could gradually taper y- your losses and not be pressured. Because you have... E- every public company is- i- is so efficient today. If I were Da- Databricks is one, based on what I know, I would wait. Everyone's saying they're- they're gonna go. Actually, I hear it from ex-employees and other people they're gonna go public, and people are excited. And maybe they will and th- they can pull it off. But, logically, I might burn- b- burn more cash for a year. Like, I'm- I don't know I wanna be under the- the- the public, uh, the public pressure to get efficient. I'd wait a year if I were Databricks so I can continue to capture share, um, and grow like a weed.

    10. HSHarry Stebbings56:12

        Who else is in the, "Just do it, it's time to grow up"? Who else is in the category of, "Just do it, it's time to grow up"?

    11. JLJason Lemkin56:18

        ServiceTitan may be the first one to go IPO of this group. ServiceTitan's a jaw-droppingly good company.

    12. HSHarry Stebbings56:25

        Right.

    13. JLJason Lemkin56:25

        Jaw- jaw-droppingly good, right?

    14. HSHarry Stebbings56:26

        S- s- s- tell me this, Pam. Why is ServiceTitan such a great company, Jason?

    15. JLJason Lemkin56:29

        Um, ServiceTitan has... Dominates a- a market. D- ServiceTitan's at over 500 million in revenue, okay? It's cashflow positive, as I understand it. It's got 12,000 customers. And it does something which is magical, which is that it has very high NRR at a low ACV, in a tough vertical market. It does tasks for plumbers and air condition maintenance and other things, and it has triple-digit NRR in that market. It is very hard to have triple-digit NRRs in SMB with small deal sizes, right? And, uh, it ended last year at 460 million in revenue, uh, uh, probably. So today, maybe today it's at 600 million in ARR, selling HVAC software and plumber software, growing 40 to 50%, cashflow neutral. I think it'll be the next one to IPO. It- it... Some people think it'll be, it could be in Q1. Um, but that's when... Or it's just time, right? And if it's... Whatever the m- valuations are, it doesn't matter. Whether it's worth, at 600 million ARR, uh, growth rate, if it's worth five billion or six billion instead of 10 that they'd hoped, so what? It's time. It's time. This is a very mature, very r- well-run company, right?

    16. HSHarry Stebbings57:33

        According to data, $9.5 billion.

    17. JLJason Lemkin57:36

        Yeah.

    18. HSHarry Stebbings57:36

        So it's done.

    19. JLJason Lemkin57:37

        So, let's... So, yeah. So, I think that's a great example. Great... Some of the best founders I've ever met, salt of the earth, they did it themselves. But let's assume they're at 600 million ARR, and valuations suck, and they go public and they're worth five billion. That... People would be, uh, throwing their shoes in 2021, but maybe in 24. Like, it's ti- it's fi- it's $5 billion, guys. It's pretty good that we did, kids. It's pretty g- it's pretty good. It's time to go public. It's time maybe to do a little M&A with our stock. It's time to provide some liquidity with employees, right? It's just time to do the things. You know, this company is 11 years old, it's time to IPO, right? And so, I... But if- if the last round was at close to 10 billion, do I think they're worth 10 billion? Um, it's possible they might get a Samsara-like multiple, right? But- but just, if- if we're gonna be a little bit tough on them and just say you're an average, the average multiple would say, "Hey, this is an A+ company," that will price less than the last round. And I think everyone's e- I think everyone's over that.

    20. HSHarry Stebbings58:30

        Yeah.

    21. JLJason Lemkin58:31

        Everyone's over the fact... I had a conversation with one of my LPs about a round that was at a great deal, but was below the last last round. Um, n- no one cared. They just, it- it... I- I- I felt guilty about it. They... Everyone's already internalized this. Everyone's already internalized that, uh, there may be price adjustments to these ultra late-stage rounds in, in 2021, right?

    22. HSHarry Stebbings58:54

        Okay, so moving up from the company-specific, do you stand by your position that the s- H2 2024 is when everyone goes, "Fuck it, we're going out"?

    23. JLJason Lemkin59:03

        Listen, these things are fluid, right? Um, I felt pretty confident about the vibe check when we did it. I- if I had to give an honest answer today, I think it, I say I think it's gonna happen, but it's gonna be shifted six months. So I think it's gonna happen in 2025, 'cause it's getting late. It's already January, right? So if you're gonna go public this year, you- you've already kicked it off, right? And it doesn't mean you filed like a ServiceTitan allegedly has, but you've got the CFO in place, you've managed, you've managed the numbers. And you gotta be looking, you know, uh, 16, 18 quarters ahead to go public. And so, I don't know that folks have come back from the New Year's Eve parties and are- and are- and are all ready to go public in the second half. I may have been optimistic. I- I- I think that the- the- the kind of dud IPOs, du- the great duds, like the- the Instacart, Arm, Klaviyo, which- which in 2021 would've been... your jaw would've dropped. 'Cause these are A+ comp- The fact that they didn't rock it sucked some energy out of everybody.

    24. HSHarry Stebbings1:00:02

        Yeah.

    25. JLJason Lemkin1:00:02

        So, uh, I th- l- logically it has to happen, but it may be, um, it may be shifted six months.

    26. HSHarry Stebbings1:00:09

        I wanna talk about M&A quickly. Uh, obviously, F- Figma didn't happen in the end. How do you see M&A in 2024?

    27. JLJason Lemkin1:00:17

        There's a huge appetite for M&A. Um, and I see it across my portfolio. There is a huge appetite for M&A. And it is natural, because as we talked about before, growth slowed for everyone in 2023, right? And what do you do... And- and people... When growth slowed, people played the first card, which was get more efficient. Pause hiring, focus on the base, raise prices, raise prices, raise prices, raise prices. What's the next thing you can do, Harry? You got two choices. You can build another product and try to get it to market like HubSpot did, and wait 10 years to build HubSpot's CRM into 700 million if you're great founders. But what's the easier thing to do? You gotta buy something.

    28. HSHarry Stebbings1:00:50

        Right.

    29. JLJason Lemkin1:00:50

        You gotta buy something. And, uh, I have seen lots of tire kicking across my portfolio in the last six months. A lot of it. Not just from public companies, but a lot of it from p- ex-public companies that are acquired by PE. They're all looking to bolt stuff on. They're all looking to bolt stuff on north of 20 million in ARR that they can afford, which is the tough part of the conversation, that they can afford that can move the needle at some level, right? What will that translate into? I don't know. Um, I think there will be lots of good M&A opportunities to bolt on in like the 100 to $400 million range next year. People are trying to do those deals. And then I think... You know, The Wall Street Journal said this week that 2023 was a low point for PE investing for like seven years or eight years. It's gotta come back next year, right? If inflation rates come down even a li- I mean, sorry. If the fe- if interest rates come down even a little bit, PE gets much more attractive.... right? It gets much more attractive. And if the IPO markets open even a little bit, it gets much more attractive. PE gets compressed when you can't see exits in three to four years, right? Uh, you gotta at least sell to each other. At least Insight's gotta sell to Vista, or someone's gotta sell to somebody. But I see it picking up. Uh, on the Figma thing, you know, listen, I'm not a total expert, but I have been a VP in a top tech company. And I, and I, um, and I know a lot of folks like Bryan Halligan we talked about said this Figma thing will be like, um... it will create a chill on large M&A. That's not what I see happening. What I s- just think happening is there'll be huge appetite for M&A anyone can afford, but people will buy adjacent plays rather than directly competitive plays at scale. Maybe Adobe can't buy Figma, but maybe Google can. I mean, maybe Google's the wrong example, right? But you will buy, maybe Twilio can still buy a segment, right? Whether that was the best deal for them or not, it was not directly competitive. They tried to get into the CDP phase, right? These adjacent investments will happen. But folks will not be able to buy things... Well, Trump could change this too, but as so- if we stay, if we stay in our current administration, it may

18. 1:02:49 – 1:11:32

    Trump's Influence on the VC Economy

    1. JLJason Lemkin1:02:49

       be hard for Adobe to buy Figma, but somebody else can. Microsoft probably can buy Figma. Someone else can buy them.

    2. HSHarry Stebbings1:02:54

       Would Trump be better for M&A than the current environment?

    3. JLJason Lemkin1:02:57

       Boy, I, I, I, I, I try to stay away from politics. Um, and, um, and I think, uh, you know, VCs... You know what, you know what I learned from the SVB and the Figmas? VCs tr- try to claim they're these big macro folks, but they really care about their own pocketbooks. So is it better, is it better... Is, would- would Trump be better for VCs for M&A? Probably, right? Prob- every VC wants a Figma deal to go through, right? E- e- every, you know, the Microsoft/Activision deal barely went through, right? That was a huge headache. Other people would have quit and given up. Everybody wants this. Um, it's hard to imagine that this is a top priority for the Trump administration, so I, I guess it's a positive. But be careful, and again, I try to say it in politics, be careful what you ask for. There's a lot of unintended consequences. Uh, do we want, I don't, w- will Trump be better for carried interest? Will Trump be better for qualified small business stock? Like, this is something that's under-discussed. Like, who's, who will revoke qualified small business stock in the US? That could be disastrous on many levels. Like, I don't know. I don't know. All I know is Trump is not a friend to California, because he can't get our votes. And so I, I, that part worries me.

    4. HSHarry Stebbings1:04:02

       Hm. One more-

    5. JLJason Lemkin1:04:02

       Trump dramatically raised our taxes in California and New York, he, and to the bet- to the... Everyone talks about how Trump cut taxes. He sure didn't in California and New York. All our taxes went up because we could no longer deduct our state taxes against our federal taxes. My taxes went up, whatever, 15% under Trump.

    6. HSHarry Stebbings1:04:17

       Will the return of SF come back in 2024? AI means SF is again the home of tech. Will that continue?

    7. JLJason Lemkin1:04:25

       First of all, this got too dogmatic, this, this SF versus the rest of the world thing, right? And, um, I mean, there's gonna be, what, four hun- t- taking this back to earlier in the conversation, how many YC companies are there a year, 400, 500?

    8. HSHarry Stebbings1:04:40

       Yeah, so along those lines.

    9. JLJason Lemkin1:04:41

       Okay. Half are gonna stay, and Gary's gonna do this for a decade. That alone will be transforma- transformational to SF by, I don't know, 2028. They're gonna stay. Just like in the old days, Stanford kids stayed in Palo Alto. When I started in tech, it was downtown Palo Alto. It wasn't SF, okay? And why? Well, the kids would just d- go down University. You know, downtown Palo Alto is literally, you can walk to Stanford. It's, and we have... That's where our SaaStr office is now. We gave up our SF office, but we have one in Palo Alto. It is wonderful. You literally walk down... It's so wonderful that the Google campus was built to copy downtown Palo Alto, as was the Facebook campus. They were both built to copy... Well, Google was built to copy Stanford, and Facebook's original campus was built to copy downtown Palo Alto. So that ha- and that's gonna happen at YC, except they're gonna roll into, they're either gonna roll into Hayes Valley or they're gonna roll into Mission Bay, and they're gonna stay. You're gonna st- if, you're gonna stay, and so S- SF will never be what it was, but, um, I, it's... If I were a founder today, it'd be where I was.

    10. HSHarry Stebbings1:05:43

        I know, listen, I love that, and I agree with you on the dogmatism. But I, I still have to ask the question.

    11. JLJason Lemkin1:05:47

        Yeah.

    12. HSHarry Stebbings1:05:47

        Venture funding. Everyone says about the absolute cratering of venture funding, I think in a lot of cases slightly skewed in terms of the data that they present.

    13. JLJason Lemkin1:05:55

        Yeah.

    14. HSHarry Stebbings1:05:55

        Um, will venture funding return in some respects? Will it continue to be reduced? How do you predict venture funding in 2024? Will it be easier or harder for founders to raise?

    15. JLJason Lemkin1:06:06

        VCs will deploy as much capital as the LPs will give them. Within reason, they will deploy it. If they can go back to market every 18 months and find a reasonable number of deals, that's what we learned in 2021. They'll go back to market every 12 months, every 18 months. What they learned the last year is sometimes you gotta go back to market every three years or even four years for some funds, right? But VCs will find a way, b- especially with SBVs and growth funds and opportunity funds. If allowed, they will deploy an in- a- as much capital as the markets will absorb. So the real question is this segment of... And you're, you're the closest one. I should interview you, I'll ask you the question, because there are, there are portions of the, of the LP, uh, uh, there are segments of LPs that are actually not that impacted by the lack of liquidity the last 18 months, okay?

    16. HSHarry Stebbings1:06:53

        Mm-hmm.

    17. JLJason Lemkin1:06:54

        A lot of university endowments have sufficient liquidity. Some don't. Some don't, but some don't care. A lot of family offices don't care. A lot of sovereign wealth funds don't care at all. Like, what are they gonna do with the liquidity? They gotta reinvest it anyway, right? But there is a subset that, that needs that, that, that got paralyzed, especially the folks that are deep into traditional PE, where they're used to getting that cash back and recycling it, and they're under s- and they're... And so it's, it's, it's, there are two- s- it's almost two worlds in the LPs. Folks under stress for capital commitments and under stress for liquidities, and folks that just don't care today.

    18. HSHarry Stebbings1:07:21

        And then I would add one final constituent-

    19. JLJason Lemkin1:07:23

        Yeah.

    20. HSHarry Stebbings1:07:23

        ... which is just net new LPs to the venture eco-

    21. JLJason Lemkin1:07:25

        And net new LPs, yeah.

    22. HSHarry Stebbings1:07:27

        ... wi- which is incredibly significant when I look at, w- like it or not, in terms of China, but Asian LPs more broadly speaking, who've never invested in venture but actually dramatically want to. The amount of family office Asian money is exorbitant and extraordinary. UAE is coming in on force. Uh, Europe has thousands of family offices with the most incredible liquidity reserves.They want tech and they want venture. They're a curtain business. They're a machinery business.

    23. JLJason Lemkin1:07:54

        They are.

    24. HSHarry Stebbings1:07:55

        They know that they've got a child that says technology is where it's at. There is a universe of new LPs that is entering that I see every single day.

    25. JLJason Lemkin1:08:02

        Yeah. No, it's, it's hard. They may be fatiguing a subset of VCs by go- having gone back to market too often. So, I think it's almost a quan- you ask, "Will venture be y-" You, it's almost a very quantitative question. I think if there's just enough pool, VCs will raise the fund and they'll deploy it. Like, it's, it's just, and I just, and I don't think 2024... I actually, it's not gonna be worse, but we're not gonna see the massive liquidity events maybe we'd hoped for for another year. And don't forget, even IPOs, the d- liquidity is very delayed, right? Maybe Figma, Figma was part cash, part stock, but still, if Figma had closed, th- they, they could've distributed the next day, right? An IPO could be 36 months from six months after the, like, it could be four years until LPs get their, their cash back. So I don't know how it's, uh, I don't know that it's gonna be dramatically better in 2024, but I don't, I don't think it's gonna be worse, right? And the other thing that folks don't realize here, you know, you probably have better data than I do, a lot of these huge pools of capital you're talking about, especially international, their annual returns are terrible.

    26. HSHarry Stebbings1:09:00

        No.

    27. JLJason Lemkin1:09:00

        They're not at the Harvard or Yale or Stanford level. They're not, they're not in, buying, like, swaths of, of forests in Scandinavia and weird assets and only investing with the top venture funds. They're returning like four to 5% a year, a lot of these things, uh, less. In sure, you could put it all in NASDAQ, right, which, which has its issues, like, and maybe that's what they should, but venture is, uh, a great alpha to very, very, very mediocre returns. And, and, and, and so that capital will always s- s- want to get a little bit, uh, to, to grease it a little bit, right? They're never gonna put all of it into venture, right? But if they can, uh, get some of it ahead of 3 to 4% a year, it's a b- it, it, it can move the needle a little bit.

    28. HSHarry Stebbings1:09:41

        (inhales) That's also why your multi-billion dollar funds sustain, which is like you're comparing them to 6, 7% net-

    29. JLJason Lemkin1:09:46

        Yeah.

    30. HSHarry Stebbings1:09:46

        ... which they net traditionally, and you're offering them 11, 12% net, which is a 4% bump. Okay. Great. Thanks.

Episode duration: 1:32:52