Larry Aschebrook, Founder & MP @GSquared: How We Lost Money on Uber and Made Millions on Lyft

Larry Aschebrook 0:00 (upbeat music) I mean, we made ridiculous sums of money for LPs in that period. We were the s- largest shareholder of Coursera, $800 million back to LPs on Coursera. We made a ton of money on Lyft and we lost money on Uber.

Harry Stebbings 0:12 What?

Larry Aschebrook 0:13 40% of my third fund went into Spotify. I went back to our LPs and said, "Listen. We fucked up. We need to pivot. We need another 300 million bucks because I need to protect this thing." The next three years were some of the worst of my life.

Harry Stebbings 0:27 Ready to go? Larry, dude, we walked around the park and I heard your incredible story. And to be fully transparent, I didn't know the incredible story before, which is why at the end I was like, "Dude, we have to do a show together." So thank you so much for doing this with me.

Larry Aschebrook 0:54 Well, thank... That's, that's humbling, you know. It's, it's sometimes difficult to open up and tell the story. But, uh, I enjoyed our walk.

Harry Stebbings 1:02 Listen, it's the short shorts and the great lakes that make you feel comfortable to open up. I completely understand.

Harry Stebbings 1:07 But I wanna start on the entry. Dialing for dollars is kind of how I was thinking about this. How did you start your way into venture and what was that entry point?

Larry Aschebrook 1:18 Yeah. For me, it was, it wasn't really, "Hey, I wanna be a venture capitalist and manage, you know, billions of dollars." It... For me, it was, you know, I come from nothing. Um, I was a fundraiser for academic institutions for their endowments. I was good at that. And everybody I raised money from, most of people, not everyone, most people made it investing in private companies, it would be at PE funds or venture funds, or running their own operating businesses, it didn't matter what it was, from, you know, Windows to financial management to, to PE, they created real wealth for their families. And I was like, "They're not that much different than me. I work hard. I'm smart enough. Um, maybe I can do it." So I went back to business school late in life and our business today was my thesis, and I started buying... You know, the smartphone became something that was running our lives in 2010. And I just started saying, "This is super interesting. Why don't I buy shares?" And, oh, yeah, I follow Twitter. I like Twitter. Uh, you know? What about, um, early Uber? What about early Spotify? And I just started buying shares from my classmates-

Harry Stebbings 2:24 Okay.

Larry Aschebrook 2:24 ... with my own money.

Harry Stebbings 2:25 That, that sounds great, but these companies are not public at the time.

Larry Aschebrook 2:27 No.

Harry Stebbings 2:28 And so, so how does one do that then? How did you approach it?

Larry Aschebrook 2:30 Well, I guess it's not knowing what you don't know is... And ignorance is bliss is kind of the same thing. I didn't realize that it was something you shouldn't or couldn't do. I just asked people. "How about w- You have shares. Can I buy some of your shares?" "Well, I never really thought about selling them 'cause I really can't sell them." "How would you buy them?" And still to this day, 15 years later, there's a form that I created at the Carey School of Business at Arizona State, one-page form that then we sent to the company to buy stock. And it still floats around. I got, I got it back from a broker not that long ago and it's, like, literally the form I created in 2010.

Harry Stebbings 3:09 (laughs)

Larry Aschebrook 3:09 One page. And it's binding though. That's scary. It's binding (laughs) .

Harry Stebbings 3:17 So, so, so-

Larry Aschebrook 3:17 Which has bitten me in the ass a few times.

Harry Stebbings 3:19 So we're at business school-

Larry Aschebrook 3:20 Yeah.

Harry Stebbings 3:20 ... and we're like, "You know what? I see the mobile revolution. I'm buying Uber, I'm buying Twitter, I'm buying Spotify." What happens then? And also, how much are you buying at the time?

Larry Aschebrook 3:29 Yeah. So small... You know, I, I, I wanted to make a change. I was working in college athletics. That was changing as it's become today. You know, this whole thing pa- players should get paid, and coaches' salaries, and pretty soon the inmates were running the asylum, so to speak. And I was like, "This isn't my passion. This is not where I came from. I, I wanna make a change." As a former athlete, like, "Hey, maybe I can use my brain, not my brawn." And I just, I cashed in my retirement, I went through a divorce, um, got remarried, had nothing. I had no money and I just had paid the tax on my retirement and started buying these shares. And I think-

Harry Stebbings 4:06 This is literally your last money?

Larry Aschebrook 4:08 This... Yeah. Well, half of nothing's nothing. My wife came to our marriage with $50,000. Um, I'd went through a pretty tough financial situation. Um, rightfully so, my former wife kinda took what I had, um, uh, raising my three young kids at the time. And my wife and I today, we started a journey together. And she backed me with the 50 grand and my small amount of retirement, I just started buying Twitter shares and Alibaba stock from Jack Ma's family office. And, and then holy shit, it

Larry Aschebrook 4:41 worked.

Harry Stebbings 4:41 Can I ask, when you review those today, which was the single best investment on a multiple basis?

Larry Aschebrook 4:47 Oh. The early ones. I mean, Twitter and Alibaba were pretty good. Um, those were, those were when I realized there's something here. Like, making a little bit of money in your whole life, working 10 years in a profession, thinking you've kinda made it coming from... I grew up in a orange trailer in Myton, Utah.

Harry Stebbings 5:09 (laughs)

Larry Aschebrook 5:09 You know? (laughs) Having, like, 100 grand in your bank account one random Tuesday felt pretty good.

Harry Stebbings 5:15 (laughs)

Larry Aschebrook 5:16 (laughs) And I said, "Th- this is something interesting." And, um, I remember the first... You know, I tried then, I was like... I got some advice. Um, "You should raise some third-party capital." And that's when I really understood the power of OPM, other people's money. And, um, I went around to all those alums who basically, I think, gave me some money because they were tired of me asking, that I worked at five different large academic institutions.

Harry Stebbings 5:41 And so just so I get it right-

Larry Aschebrook 5:42 Yeah.

Harry Stebbings 5:42 ... what was the thesis?

Larry Aschebrook 5:43 For me, it was very simple. For the... If there's fewer institutions to help companies go public, coming off the financial crisis, funds started deploying large sums of money, so then the byproduct would be companies would stay private longer.

Harry Stebbings 5:56 Mm-hmm.

Larry Aschebrook 5:56 The average age from inception to IPO was, like, three years leading up to 2010. From 2010 to 2018 it got to, like, seven or eight years. Today, our average portfolio company's 15 years old. So there was, to me, something that was clear there, which was there's an opportunity to buy shares from these people who have no liquidity-... and they're, you should be able to make more of a return than... and also, companies wouldn't return my phone call, frankly.

Harry Stebbings 6:22 (laughs)

Larry Aschebrook 6:22 'Cause I had like, no money, and, "Hey, Twitter," you know? "Hey, Dorsey. My name's Larry Ashbrook. I'm a," you know, "a retread athlete that wants to become a venture capitalist. Can I invest in Twitter?"

Harry Stebbings 6:36 (laughs) Sure.

Larry Aschebrook 6:37 "And by the way, my fund size is, uh, I don't have a fund. I just have like, 200 grand to my name. I'd like to buy, you know, $10,000 worth of Twitter stock." That, that conversation obviously wouldn't go anywhere. So, um... yeah.

Harry Stebbings 6:48 And so, you have this moment in time when you're like, "Hey-

Larry Aschebrook 6:51 (laughs)

Harry Stebbings 6:51 ... we're seeing this establishment of private markets. We're seeing a lot more capital flow in." And so you go out and fundraise for the first vehicle. How big was the vehicle?

Larry Aschebrook 6:59 (laughs) Uh, three years, $35 million dollars deployed along the way.

Harry Stebbings 7:04 Wait, wait, pause. It was three years to fundraise?

Larry Aschebrook 7:06 Yeah, three years. Uh, 2010 to 2013.

Harry Stebbings 7:11 Wow.

Larry Aschebrook 7:11 34 million or 35 million, and deployed the money as I raised it.

Harry Stebbings 7:17 So you did multiple closes?

Larry Aschebrook 7:18 Oh yeah, multiple. Man.

Harry Stebbings 7:19 What was the first close?

Larry Aschebrook 7:20 Like, I don't even know how many, uh, couple million bucks? (laughs)

Harry Stebbings 7:23 What do you advise founders on closings? I know it sounds strange, but like, uh, you got different advice. Close as soon as possible, 50%-

Larry Aschebrook 7:30 Yeah.

Harry Stebbings 7:31 ... one close?

Larry Aschebrook 7:32 Founders for, for companies or founders for new managers?

Harry Stebbings 7:34 New managers.

Larry Aschebrook 7:36 Yeah, I think... Uh, well, first of all, if I, if I knew then what I know today, I'm not sure I would start the journey, 'cause I, I don't think I f-... I didn't know how hard it would be. I just wanted to ha- do something different with my life and try to create value for my family, and try to, try to set my children up for a different future than I had. I was lucky. I grew up, my siblings grew up in the same house as me. We don't have the same life today. I got out of the squalor because I could run and throw and catch. My siblings didn't have that benefit. I didn't want my children to... who knows what their outcome would be. So, that whole genesis of it for me was to try to create something, and seeing opportunity and capitalize on it. So with my mentality still to this day, raising billion, two billion dollar funds is, the money's there, you close. Start deploying it. Build a portfolio. Show some improvement in NAV. It is inertia that makes it easier. I don't have the benefit even today, with the returns that we've had and the DPI we've had, to say, "Hey, I'm raising a new fund," and have two billion show up in two months. I just, I don't, we don't have the benefit of that. Um, uh, and I'm okay with that because I think the way we're forced to raise money makes us better. Now, 2021, it was very different. You, we both sat at our houses. I wa-... sat at my farm, you sat in your underwear probably and raised, I don't know, (laughs) in three months, you, I don't know what you raised.

Harry Stebbings 9:11 150 million dollars.

Larry Aschebrook 9:12 150 million bucks. We raised a billion four and then turned down another 700 million, um, in very short period of time. And companies, by the way, also raised a ton of money. You know?

Harry Stebbings 9:23 When-

Larry Aschebrook 9:24 In insane, insane, insane mon- numbers.

Harry Stebbings 9:26 We're gonna get there, but I-

Larry Aschebrook 9:27 Yeah.

Harry Stebbings 9:27 ... wanna tell the story before we move into-

Larry Aschebrook 9:29 Yeah.

Harry Stebbings 9:29 ... like that.

Larry Aschebrook 9:29 Okay.

Harry Stebbings 9:29 It's just such an amazing story. And so when we look back at that, okay, so three years, 35 million-

Larry Aschebrook 9:33 Yeah.

Harry Stebbings 9:33 ... awesome. What was the first big mover in that portfolio?

Larry Aschebrook 9:37 Yeah.

Harry Stebbings 9:37 When was the real momentum?

Larry Aschebrook 9:39 The v- real momentum happened in 2014, and that's when I really felt the power of what I was trying to do, when Alibaba goes public.

Harry Stebbings 9:48 Mm-hmm.

Larry Aschebrook 9:49 Um...

Harry Stebbings 9:49 And you had that in the fund?

Larry Aschebrook 9:50 I had, yes. I bought f-... bought shares from Jack Ma's family office. Um, and, and wow, what a, what a creator of shareholder value, Jack Ma.

Harry Stebbings 10:00 I'm sorry, dude, how do you get in touch with Jack Ma's family office to buy shares-

Larry Aschebrook 10:04 Yeah. (laughs)

Harry Stebbings 10:04 ... from them? (laughs) Like-

Larry Aschebrook 10:06 I mean, that's the story of my life. It's like, you know, it's, it's, it's a bit of, bit of luck. You, you meet i-... alum that I knew, knew somebody, that knew somebody and, you know, kinda introduced me to... Uh, gentleman's name was Barry Purcell, who was running, um, some of Jack Ma's money in Virginia of all places, I believe. And he said, "Hey, we have some shares to sell." I'm like, "Okay." Hired a group in India to do some DD (laughs) 'cause I had like two people-

Harry Stebbings 10:38 (laughs)

Larry Aschebrook 10:40 ... (laughs) and wrote me an investment committee-

Harry Stebbings 10:42 Are you serious? (laughs)

Larry Aschebrook 10:42 Oh yeah, my early investment committee memos in the early vintages were outsourced to, you know, a, a group of really smart, um, analysts in India that you could pay a fraction of what you could pay talent in the US. And I didn't have any money to invest in talent.

Harry Stebbings 10:54 And that today is what Sam Altman does with Deep Research. (laughs)

Larry Aschebrook 10:59 (laughs)

Harry Stebbings 10:59 Okay, so we've got-

Larry Aschebrook 10:59 So yeah, Alibaba was the, for me-

Harry Stebbings 11:02 And so e-

Larry Aschebrook 11:02 ... was, there's a business here. It was grinding, grinding, grinding. That was the first one that was material for me, is 2014 Alibaba.

Harry Stebbings 11:11 And are you putting size into these? Like, you-

Larry Aschebrook 11:13 Yeah, so from the beginning, again, when you, you don't know what you don't know. (laughs) So, I didn't like the idea... and my personality is kinda you go big or go home. And so, I don't, I didn't like the idea of trying to manage a lot of these positions, 'cause I didn't really know how. So my idea was, I wanna have, I wanted to put a little bit of money in, understand the businesses, and then pick a few and put all my money in. Today, we call it land and expand. We have all this bullshit that we say-

Harry Stebbings 11:42 (laughs)

Larry Aschebrook 11:42 ... that our marketing, you know, our marketing team, our ou-... our team is second to none. They're amazing.

Harry Stebbings 11:46 We've a very reserves-heavy model, but we're diversified on entry. (laughs)

Larry Aschebrook 11:49 (laughs) See? It sounds like that, but really, for me it was-

Harry Stebbings 11:52 (laughs)

Larry Aschebrook 11:53 ... oh, fewer companies 'cause ultimately, how do I get liquidity if I have 50 companies? I don't... it's my money. I don't have much. I've got a few people who trusted me. I wanna get their money in and out as quick as I can. Because as you're trying to raise that fund, and you know what it's like, what do... people want track record, they want pedigree, they want, um, are you, you know, what's your TVPI gonna be? What's your MOIC gonna be? I had people who were running their own businesses give me a little bit of money and say, "I want the money back quick."... I want optionality to it. So, from the early days, it was, "How can I build a, a, a strategy that I can actually make a good living at to have velocity of the capital come back in optionality?" And today, our business has become that. And the early generation of it was, start off with little checks because I didn't have much money. As I raised more money, the challenge of raising the first vintages, the benefit of that, was you didn't have a lot to deploy. So, I'm deploying it as I have it, so inherently, I'm doing this land and expand without even knowing it. Then you look back at the returns and you say, "Holy shit, it works." Start off with a couple small checks, and then all of a sudden, you keep getting the data. And I'm sending it, yes, to my, my, my awesome group in India to give me the data back.

Harry Stebbings 13:06 Thank you,

Narrator 13:06 Yeah. (laughs)

Larry Aschebrook 13:07 I'm sending it over there. Hey, it's amazing. You work 24/7. Time zones. But anyway, what comes back is, "Hey, these five companies are better." And so then what I did, is I put a lot of concentration in. And still to this day, which some people are not comfortable with, 80, hopefully 90% of our risk are in 10 companies.

Harry Stebbings 13:24 So, so when we go back to that-

Larry Aschebrook 13:25 Yeah.

Harry Stebbings 13:25 ... first 35, that's how many companies, sort of, give or take?

Larry Aschebrook 13:29 Like, seven.

Harry Stebbings 13:30 Seven companies.

Larry Aschebrook 13:31 But most of it is Alibaba. (laughs) This is funny. Alibaba. This is just dumb luck, come on. I'm not that smart. Alibaba, uh, Spotify, um, Palantir, um, and Twitter.

Harry Stebbings 13:44 Okay. (laughs)

Larry Aschebrook 13:44 (laughs)

Harry Stebbings 13:47 No, you're not that smart.

Larry Aschebrook 13:48 I'm not that smart. (laughs) I'm not, I'm not that smart.

Harry Stebbings 13:50 You're either the best fucking picker ever, or you... But, but actually, you can't get that lucky, and so you have to actually be 'Cause y- if you just did one, I would've-

Larry Aschebrook 13:58 But what do all those have in common, right? It's the, it's the, it ... And, and now you look back and say, "Well, how do you do that?" Right? And there were some dogs in there, flam- some clean tech shit that Kleiner Perkins sold me that was just a flaming bag of turds on your front porch.

Harry Stebbings 14:10 (laughs)

Larry Aschebrook 14:11 Like, "Look at this guy. He's super, he, he, he's energetic. Let's, let's give him some garbage." You know, and that's what the old line C, Silicon Valley firms did in the beginning. "Oh, yeah. We'll let you in this syndicate, sure. Oh, well, how much are you putting in?" "Oh, we're putting in very little, but our LPs are co-investing a lot."

Harry Stebbings 14:30 (laughs)

Larry Aschebrook 14:30 (laughs) That's an alarm bell, now that you know it's ringing as loud as like, a four alarm fire.

Harry Stebbings 14:36 When, when Doug Leone calls you and goes, "I've got something just for you."

Larry Aschebrook 14:39 Just for you, yes.

Harry Stebbings 14:39 You're like-

Larry Aschebrook 14:40 You're gonna love it. You're gonna love it.

Harry Stebbings 14:41 (laughs)

Larry Aschebrook 14:41 It's really gonna help your, your first time manager. I really want you to succeed. No-

Harry Stebbings 14:45 So, what do those four have in common then, to you, when you look back on them and reflect?

Larry Aschebrook 14:49 Um, those, the timing of that period. No liquidity, large private valuations, um, really differentiated unchallenged business models. None of, no, no one was doing anything like them. And there was ... The liquidity window was just, was still early from the financial crisis 'Cause, you look at the number of IPOs from 2010 to '14, there wasn't many.

Harry Stebbings 15:16 Was the-

Larry Aschebrook 15:16 Yeah.

Harry Stebbings 15:17 ... pricing premium applied to them? And what I mean by that is, if you think about that applied to today-

Larry Aschebrook 15:21 Yeah.

Harry Stebbings 15:21 ... your, your SpaceXs of the world, or your, you know, open-

Larry Aschebrook 15:23 Yeah, which we had in our third vintage.

Harry Stebbings 15:26 We can get to that.

Larry Aschebrook 15:27 Yeah. Yeah.

Harry Stebbings 15:27 But like, there's a pricing premium on it, where you're paying an exorbitant price for that defensibility and for that moat.

Larry Aschebrook 15:33 Yeah. Today, probably. Um, then there's no options for liquidity. The, it wasn't that, it was, you actually could get really good value. And I think one of the interesting things about this cycle we've been in the last 15 years is, you know, now we look back at the funds and dissect them and say, "What kind of value did you get as being a secondary direct buyer?" In early vintages, we got like, 35 cents on the dollar by being a secondary direct buyer over primary buyers, because there was no other secondary buyers. So, I kinda, because, there are a lot of reasons ... Sure, okay, give myself a little credit. Hard work, drive, run through a wall regardless of how thick it is and just keep hitting it until it falls. That's my mentality, which is good and bad.

Harry Stebbings 16:17 You're really leaving the brawn, not brain department, aren't you? (laughs)

Larry Aschebrook 16:20 Yeah. Right? I'm trying, I'm trying.

Harry Stebbings 16:22 I'm just running through some mountains. (laughs)

Larry Aschebrook 16:22 Running through a wall. It's there, but I'm gonna break it. No, but it's ... I think that early vintages, up until 2020, all of those vintages, you were getting a lot of value by being a secondary direct buyer. Now, that's a key differentiator. What I wanted was, and still to this day, what I want, is I wanna touch and feel the founders, the companies, the data. I was r- amazed by what I started, the op, the, the, the paradigm that opened for me mentally was something that I'd never tapped into my entire life, was, this was really interesting, what these companies are doing.

Harry Stebbings 17:00 Do you think your business model still applies today when you are so detached from the data and the founder at the level that you're going in now to a lot of these secondary businesses?

Larry Aschebrook 17:10 So, that is the, that's the misconception of what we do. And I love it, because it actually is when a good LP, the light bulb goes off, they realize that it's the opposite of that. We get primary level data. We touch and feel the founders. Because actually, the value of the discount is back, and they value the work that you do today, because there's still a massive need of liquidity, but they want a trusted partner. And that's, that's part of the journey to how we got here today, is by doing something different.

Harry Stebbings 17:46 But sorry, the value of the discount is back? Are you kidding me?

Larry Aschebrook 17:49 No, it's amazing.

Harry Stebbings 17:50 No, no, no. But for the premium assets-

Larry Aschebrook 17:52 Yeah.

Harry Stebbings 17:52 ... you're coming in at cost. No?

Larry Aschebrook 17:55 Not always, no. I mean, it's ... The, the market on direct secondary buying is really fragmented. You have the people ... So, first of all, in the US, you have to be regulated a bit of a different way than most fund managers to do it in quantity.

Harry Stebbings 18:12 Which is RIA.

Larry Aschebrook 18:13 Yeah. A fully registered, kind of like a hedge fund.

Harry Stebbings 18:16 Okay.

Larry Aschebrook 18:16 So, you're seeing a lot of people opt into that.

Harry Stebbings 18:18 Yeah.

Larry Aschebrook 18:18 Why? Because they wanna pair primaries and secondaries together.... um, and they wanna do some one-off secondaries big checks. (clears throat) One of the things from the early vintages that teased out, that we still do today, it was the frequency of transactions and touchpoints of really microtransactions, sub- $2 million, let's say, today, on a $2 billion fund, give you a lot of interim data that you would not normally get in that touchpoint as a primary investor. It starts to provide you that Trojan horse moment to know when to triple down on a whiz, which we did in our 2022 vintage fund, and have the outcome that we're gonna have. Those founders are amazing, but to make 3X in 18 months is because of what they created. But the opportunity to do that is because you offer something different than others, and that's to the people... You asked me a question earlier, if you're gonna start raising a fund today, what would you do? Yeah, raising money, don't take no for an answer, open every door, all those things, deploy as you go, but also create a firm that's different. The world doesn't need just another early stage seed manager, growth manager, crossover fund. There's so many.

Harry Stebbings 19:34 Dude, I agree. I... Completely, that's why we have media companies-

Larry Aschebrook 19:36 That's right.

Harry Stebbings 19:36 ... attached, and it's very, very different. Why-

Larry Aschebrook 19:38 It's you differentiate your business-

Harry Stebbings 19:39 (laughs)

Larry Aschebrook 19:39 ... by sitting here and doing this and in the know on how many awesome people do you get to talk to, to find, and to get the references to the next great thing. You have figured out a niche. Most don't. Most say, "Oh, you know, I worked at XYZ old logo firm for 10 years, and I know how to operate. I'm gonna start a VC firm, and I'm gonna go to 10 LPs that were in that old one that I got to know and give me some money."

Harry Stebbings 20:06 And they fund them.

Larry Aschebrook 20:07 And they fund them.

Harry Stebbings 20:08 I mean, they really do.

Larry Aschebrook 20:08 They, they really fund them.

Harry Stebbings 20:09 I was with an LP like right before this, and like, "We love the spin-outs."

Larry Aschebrook 20:12 Yeah.

Harry Stebbings 20:12 "You spin out of Excel or-"

Larry Aschebrook 20:13 Right.

Harry Stebbings 20:14 "... you name your big firm, and we fund you."

Larry Aschebrook 20:15 Great. And that also provides the ecosystem for us to operate in.

Harry Stebbings 20:18 Totally

Harry Stebbings 20:19 get that. I, I wanna-

Larry Aschebrook 20:20 Yeah.

Harry Stebbings 20:20 ... go back to the four names you mentioned, you mentions. How do-

Larry Aschebrook 20:23 (laughs)

Harry Stebbings 20:23 ... you get Spotify? What's-

Larry Aschebrook 20:24 Oh, my-

Harry Stebbings 20:25 ... the story there?

Larry Aschebrook 20:27 (sighs) Uh, uh-

Harry Stebbings 20:27 I, I love Daniel. He's one of my oldest-

Larry Aschebrook 20:29 Yeah.

Harry Stebbings 20:29 ... friends.

Larry Aschebrook 20:29 I love him.

Harry Stebbings 20:30 Shaq- Shak as well. They all special.

Larry Aschebrook 20:31 Mm-hmm.

Harry Stebbings 20:31 How'd you get a Spotify in 2014?

Larry Aschebrook 20:34 Yeah, so, so one of the first employees I hired, um, young guy outta Berkeley, he's now my, uh, co-PM, Spencer MacLeod. You gotta meet this guy. He is, he's a, he's, he's a living caricature of what Silicon Valley is. He was working as an analyst with me. Um, uh, this is like 2014. Um, I think he's like 22 years old at the time. And, um, I was telling him this story about how my, my mind exploded when I was in college, and I could download Metallica on Napster. And he's like, "You know you've heard of Spotify, right?" And I'm like, "Yeah." He's like, "Well, maybe we should buy some shares in Spotify." And it literally, that's kinda how it started, and we started searching around. And we found a celebrity that was going through a, uh, unfortunate change-of-life scenario and a divorce, and he had like $4 million of stock. And we had a, you know, $300 million fund at this point. I'm like, "Yeah, let's buy it." Well, Spotify had this interesting process of, of, of how they approve shareholders. It was kinda onerous and difficult. And my mentality was, "Hey, well, they're not responding, so let's go see them." So literally-

Harry Stebbings 21:44 (laughs)

Larry Aschebrook 21:44 ... Spencer and I flew without an appointment to Stockholm. Um, my wife came. Uh, we spent a week there in the terrible nor- m... Like November. Um, we had a new baby, and we were staying in a, in a Airbnb that we rented, um, which became a great investment for us later on. But anyway, we started going to get a meeting. And finally, this young lawyer, Peter Grandelius, I think took pity on us in the waiting room and took a meeting, and we pitched, I, I think, to... I look back on all the pitches I ever gave a company on how we could add value with a small fund and a lot of co-investment. You know, Spotify's what it's become, but they're like, "Yeah, we could use the help." Very humble, very nice people. They introduced us to a gentleman named Johan Berghquist, who's, who was at the end, I think, the treasurer, and then went on to Bolt, where we also became an investor in the EU ride-hailing business. And before we left the meeting, they were like, "Do you think you could buy $150 million worth of stock?" And I said, "Sure." And I didn't have the money because we were in the process of raising the v- the fund, and I think we had like close to $125 million. (laughs)

Harry Stebbings 22:53 No, uh, have you, have you done the diligence?

Larry Aschebrook 22:55 (laughs)

Harry Stebbings 22:57 Have you done the diligence?

Larry Aschebrook 22:58 Yeah, by this time we did s... We did due diligence. We'd written a memo, and you know-

Harry Stebbings 23:02 But there's diligence and there's diligence. There's diligence like for $20 million check-

Larry Aschebrook 23:05 This is mosaic-

Harry Stebbings 23:06 ... and there's diligence.

Larry Aschebrook 23:06 ... theory. So most of the early stuff had to be mosaic theory because companies... Until really Spotify. So the early wins are, you know, gathering data, trying through public sources, but it's not really available. You're trying to gather, um, uh, through contacts and putting as many feelers out, and then sending all this information to what became our own research team to develop a thesis around it. Um, and then the Trojan horse became the check to get the info. So in that land-and-expand strategy that we run, as it's developed often, that first check is, is kind of the Trojan horse, 'cause you wanna... You like it, you've done some mosaic theory work, you think it works, but you don't really know, you go in. So we go in, they give us, they give us a whole deep dive on the business, and it's amazing. It's like nothing I ever could imagine, right? It's nothing I've seen before.

Harry Stebbings 24:01 Wh- why so?

Larry Aschebrook 24:02 (inhales) (sighs) Why so?

Harry Stebbings 24:04 What was it about it that was, made it so different?

Larry Aschebrook 24:06 20... At that time, the penetration of the usership in, in S... in Sweden was like 25% of the population used it.

Harry Stebbings 24:16 (gasps)

Larry Aschebrook 24:16 I mean, that's amazing. 25% of the population used the product, and you're like, "It's already cool because you're using it," and of course Apple Music and I think the Beats and-... T- you know, Tidal and all these, you know, SoundCloud, all these competitors. But what they divulged to us in that one-on-one personal meeting, after saying no to us for six straight days, um, was the fact that the record labels were also investors. That, to me, was like, "Okay, this is like Napster on steroids." And it worked. And obviously, they went on to create amazing shareholder value. It's one of the best businesses we ever invested in. And we had $150 million to go find.

Harry Stebbings 25:01 So, what do you do then?

Larry Aschebrook 25:02 (laughs)

Harry Stebbings 25:02 They're like, "Hey, you got $150 million. Are you shitting yourself internally?"

Larry Aschebrook 25:06 Um, yeah, yeah, um-

Harry Stebbings 25:08 Because is it 150 million or none?

Larry Aschebrook 25:11 Yeah, so the way that the transfer process worked on that business is pretty interesting. It actually gave you time. So, you sign the documents today, and it took, like, 60 days to clear. So, we had, like, let's say, 25 million ready to go. Awesome. Concentrated position on a $300 million fund. We're gonna start, let's do it. We had four million they said yes to. "We'll take another 25." (breathes deeply) So, we went out and (sighs) went on a world tour with our thesis, Spencer and I. I mean, different countries, uh-

Harry Stebbings 25:40 How long did you have?

Larry Aschebrook 25:41 We had 60 days.

Harry Stebbings 25:42 You had 60 days to raise 125.

Larry Aschebrook 25:44 And we got to day 59, and we had sent 141 million to, to, uh, one of the earliest investors, very predominant Norwegian fund. We'll leave their name out of it. Awesome founder of that fund who is an iconic s- like, pop star, or, uh, sorry, metal, heavy metal star in, in music in his own right. Very serious guy, very hard guy. And we have $141 million we've sent him, and the ROFR ends. And if we don't send him the $9 million, the deal blows up. And I don't have $9 million to my name. So, I borrow it from him. (laughs)

Harry Stebbings 26:26 You borrow it from him?

Larry Aschebrook 26:27 I borrow the nine million bucks from him.

Harry Stebbings 26:29 What, you call him up and say, "I'm so sorry, I don't-"

Larry Aschebrook 26:31 "I don't have the nine million, but if you lend it to me, I'll close, and I'll pay you back."

Harry Stebbings 26:36 And he's like, "Sure, I'll lend you the nine million dollars."

Larry Aschebrook 26:38 Well, it wasn't exactly that pleasant, Harry, but it worked. And, um, God bless my wife, she's like, "Do you love this business?" I'm like, "It's the most amazing business I've ever seen." She's like, "Well, how do you, how do we figure out how to own the nine million?" And we figured it out, and that nine turned into a very different number. And that was the life-changing event for me. Spotify buying into our business model, we then went on to become a top 10 global shareholder of Spotify. We went as far as to putting up signs in their break room, "We'll buy your shares." Buying all these odd lot transactions along the way and built a huge position. And it ended up being, like, a billion-dollar outcome to our LPs.

Harry Stebbings 27:19 Wow.

Larry Aschebrook 27:20 40% of my third fund went into Spotify.

Harry Stebbings 27:23 Whoa. How much was that of the third fund?

Larry Aschebrook 27:26 Well, third fund-

Harry Stebbings 27:27 So, it-

Larry Aschebrook 27:27 ... was 380 million.

Harry Stebbings 27:29 So, it was-

Larry Aschebrook 27:30 It was a lot of money.

Harry Stebbings 27:31 Wow.

Larry Aschebrook 27:32 Very concentrated risk.

Harry Stebbings 27:33 What price is it going in? Just kind of give or take. Like-

Larry Aschebrook 27:36 Yeah, so, (sighs) um, it, in many ways, uh, we, we did it at the time in which it was perfect because you had Adele announce she was leaving the platform. You had Apple Music really taking m- market share. Um, and you, you had Taylor Swift saying, "I want my library off." And, and Daniel Ek came out, and I think one of the smartest things he's ever done, and he agreed with the artists. He said, "I have your back. I understand why you pulled from our product. You're not the issue." And the record labels had an option to buy more shares, and they executed the option to buy more shares. So, to me, that was like, there's this aha moment where we can triple down. Nobody else knows this information. You buy from all the people who are scared to death, and you do the counterintuitive thing, and you, you, you take the bet. And we did, and it worked, and we bought at, like, a 50% discount to the current financing round. And we just kept buying it there for the next two years.

Harry Stebbings 28:41 So, after the 150, you kept buying?

Larry Aschebrook 28:43 We, yeah, we kept buying. So, we, we, we pooled a bunch of money together. Some of it, we were able to put into our fund. Others, we had very prominent, very, very prominent logos come into our SPVs to buy the stock because we had, we'd locked in the access. And to me, that became... So, you have this journey. You start, you're just hustling. You get to F- $35 million. The second fund was 36 million raised in a year. (laughs) Um, very-

Harry Stebbings 29:06 And a million increase.

Larry Aschebrook 29:07 (laughs) Yeah, one million increase, yes.

Harry Stebbings 29:09 Okay, wow. (laughs)

Larry Aschebrook 29:09 Yes, fewer investors, thank God. And then you get to a, a $380 million pool of capital, um, and in that, you take a lot of concentration in, in Spotify. But on top of the concentration we had, we did another 700 million in co-invest.

Harry Stebbings 29:24 In Spotify?

Larry Aschebrook 29:24 In Spotify.

Harry Stebbings 29:26 700 million?

Larry Aschebrook 29:27 Mm-hmm. Yeah. I know.

Harry Stebbings 29:30 You've got balls.

Larry Aschebrook 29:31 But that fund also... By, by the way, that fund also had, um, Lyft, Uber.

Harry Stebbings 29:36 Oof.

Larry Aschebrook 29:37 Um, s- um, uh, SpaceX, um, Instacart, um, Impossible Foods. Um, uh, the list goes on and on, of companies, because of Spotify's acceptance of our model. It was-

Harry Stebbings 29:50 It opened up the door.

Larry Aschebrook 29:51 It opened the door. And Johan Bergquist and Peter Grandelius, they're, they're two people that have made probably the most direct impact to my life because they trusted that we could do it, and they put their names on the line to the, to Daniel Ek that we could actually achieve it. And then we went in f- and somehow, you know, Spencer and I... Spencer, poor guy, got shingles. He literally got shingles. (laughs)

Harry Stebbings 30:17 (laughs)

Larry Aschebrook 30:18 He was, like, 23 years, four years old, got shingles. You never hear it.

Harry Stebbings 30:21 I just find it so funny 'cause Daniel's, like, the guy who I just send rude memes to most mornings. (laughs)

Larry Aschebrook 30:28 (laughs) I mean, it's, it's an amazing business. It's, it's truly amazing.

Harry Stebbings 30:31 He, no, no, he is absolutely incredible.

Harry Stebbings 30:33 When you go through those names-

Larry Aschebrook 30:34 Yeah.

Harry Stebbings 30:35 ... what about Uber? How does that come?

Larry Aschebrook 30:37 Yeah, Uber comes...You know, we-- often in our thesis, we'll back two businesses trying to attack the same thing. Lyft and that fund became the value play. Um, we sold it, um, and it-

Harry Stebbings 30:52 Did you make money?

Larry Aschebrook 30:53 We made a ton of money on Lyft, and we lost money on Uber.

Harry Stebbings 30:56 What?

Larry Aschebrook 30:56 Yeah.

Harry Stebbings 30:57 Well, how does that work?

Larry Aschebrook 31:00 I think, (sighs) uh, it, when Uber chose to go public, I think, um, it was a tough time. Um, today Uber's valued off of gross profit, which is, I think, a good, a good metric for them, um, and, and a massive business. And I don't think when it went public, it was rewarded properly. In our business model, we don't hold ev- rarely do we hold post-public. Oftentimes, we sell before they're public. And as it went public at the price it did, on a converted basis, um, we were underwater. We lost, uh, I think we made, uh, we, we, we lost like 20 cents on the dollar. In Lyft we made like a 3X.

Harry Stebbings 31:39 So, how much did you lose on Uber?

Larry Aschebrook 31:41 I don't know, $50 million bucks, probably.

Harry Stebbings 31:44 And you made a 3X on Lyft?

Larry Aschebrook 31:45 Yeah.

Harry Stebbings 31:46 (laughs)

Larry Aschebrook 31:47 Yeah.

Harry Stebbings 31:47 Because you sold before the IPO.

Larry Aschebrook 31:48 We sold most of it before the IPO, and, uh, you know, we won't talk about the names-

Harry Stebbings 31:53 Yeah.

Larry Aschebrook 31:53 ... that buy, but you'd be surprised of the, uh, it's kind of, I think one of the issues with Silicon Valley, one of the benefits of being in Chicago is we isolate ourselves a bit from the herd mentality. And it's like sometimes it's like sheep. They just jump one on after another, and they buy more stock in things that you see that you should sell, and it just takes one brand name to jump onboard and 10 others jump onboard. And we just kept selling our Lyft stock to oth- to others, um, and, you know, I get why they did it. It was a value play compared to Uber, and it went on to work for them, but we made our multiple and went home and distributed the cash.

Harry Stebbings 32:32 Do you think it's very clear when rationality leaves the room?

Larry Aschebrook 32:37 Yeah, that's something I've spent a lot of time in the last few years trying to figure out-

Harry Stebbings 32:41 Yeah.

Larry Aschebrook 32:41 ... because 2021, all rationality left the room, 2020, 2021, and, and us, like everyone else, just kept deploying capital.

Harry Stebbings 32:49 But it left the room in public markets too. The multiples were off the charts.

Larry Aschebrook 32:53 Yeah.

Harry Stebbings 32:53 The excess of profit.

Larry Aschebrook 32:54 No, everybody left the room. I think, you know, you wanna-

Harry Stebbings 32:56 And they're told to play the game on the field, as Bill Gurley says.

Larry Aschebrook 32:59 Yeah. You, you, yeah, I think, um, a few things about that period that, that is the rationality leaving the room, that you wanna protect yourself, I think guardrails are important. A good friend of mine, and I know you had him on this show, I'm a huge fan of what they've done, Mitchell Green, you know, I th- the best things in life are, are copied, um, in, in some ways. Um, you know, he has his Lead Edge 8, we have our G-Squared 8. Sorry Mitch, we kind of borrowed it from ya. (laughs)

Harry Stebbings 33:25 (laughs) Is it the same?

Larry Aschebrook 33:26 It's not the same. Um, they're similar 'cause we have a similar style, um, and, uh, they're, they're similar, but I think, uh, we had to really adjust ours after 2021 because I think it, it had holes in it that were exacerbated.

Harry Stebbings 33:42 What were the holes, and how did you address them?

Larry Aschebrook 33:44 Too much qualitative. Too much my gut, my feel. Too much, um, who else is in the room? Too much, yeah, just the soft stuff that venture capitalists and growth managers like to pride themselves about, and our strategy has to be about the numbers. It, it, it has to be just cut and dry, cutthroat. Does it work financially or not? Because at our stage, unlike yours, which it doesn't, you know, from your seat, it, in a lot of ways I envy your seat because if you pay 50 pre or 100 pre, if it's a good business, you're still gonna make a 5X. Uh, 10 pre, 50 pre, does it really matter for you? Maybe. For me? Is it $3 billion or $2.5 billion? You walk that forward, I can't make my 2.5X net in a five-year period if I miss that. Now, I get an okay return, but I'm not rehired.

Harry Stebbings 34:40 Does your mindset change around that when you see the elasticity of outcome sizes that we have today? I completely agree with you in a normal world-

Larry Aschebrook 34:47 Yeah.

Harry Stebbings 34:47 ... over the last five years.

Larry Aschebrook 34:48 Yeah.

Harry Stebbings 34:48 But when you have companies that are hitting a trillion, a trillion five, two trillion, uh, dude, who gives a shit if it's $10 or $15 billion?

Larry Aschebrook 34:55 Yeah, I think that that's... in a shorter thesis, you're able to play that game. And that's, and that's one of the benefits to our thesis, is, is yes, as long as you don't get caught at the end of that cycle, which happened in 2021. So, our earlier vintages were selling into it. Like, it was happy days, right?

Harry Stebbings 35:14 Did you just offload-

Larry Aschebrook 35:15 Oh, just massive amounts. I mean, we made, uh, ridiculous sums of money for LPs in that period, which set our business up to be able to survive a bad vintage. And we're working our tails off, our asses off, on our 2020 vintage, but it's hard. That venture's hard.

Harry Stebbings 35:29 When you're shipping a ton of money back-

Larry Aschebrook 35:32 Yeah.

Harry Stebbings 35:32 ... are LPs happy?

Larry Aschebrook 35:34 Yeah, I think LPs are happy. Um, it's also their expectation. And so looking for a pat on the back because you did your job is something I talk to our team a lot about. Yeah, it's a big win, but hey, we also lost $400 million of their money over here. Like, yeah, we made them money, but we... look at these losses. Like, wh- how, how can we lose that kind of money? And, and I think keeping our team focused on that and reducing the amount of mistakes, because in a short fund life, liquidity is already hard. It's really hard as a fund manager, as you know.

Harry Stebbings 36:17 You're a five-to-seven-year fund life, aren't you?

Larry Aschebrook 36:20 Yeah, with some levers, we can get it a bit longer, but, um, you know, for the first time, we've had to pull one of those levers, and it, it, it really guts me that I have to do that.

Harry Stebbings 36:30 Is that a mistake on your behalf? Or is that a changing landscape that is inevitable?

Larry Aschebrook 36:33 Yeah, I think it's... (sighs) You know, you are what you become, so to speak, and-... yeah, are there businesses that I would love to take a 10-year horizon on 'cause I think they're, you know, amazing companies? Yes, 100%. But that's not what our LPs have hired us to do. They've hired us s- specifically for this North Star DPI statistic that I've pitched them on and our team have pitched them on and for 15 straight years, across seven vintages.

Harry Stebbings 37:03 Do you not think they, they hire you to make the most money for them? And you can go back to them and say, "Listen, the job of a manager is to change to moving markets, and I believe that-"

Larry Aschebrook 37:12 Yeah.

Harry Stebbings 37:12 ... "Actually we will make more money for you with a longer hold period because of X, Y, and Z reason."

Larry Aschebrook 37:19 Yeah, I think that-

Harry Stebbings 37:19 And you now have the data... I'm so sorry to interrupt you.

Larry Aschebrook 37:21 Yeah. No, go for it.

Harry Stebbings 37:22 You have the data to go look at Palantir. Look at Spotify-

Larry Aschebrook 37:24 Oh my God. Why... So Larry, I just-

Harry Stebbings 37:26 ... Look at SpaceX.

Larry Aschebrook 37:27 I, I, even if I would have held Palantir for three more years. (laughs) I mean, who knew they would go on to build this juggernaut?

Harry Stebbings 37:34 How much more money would you have made if you held it?

Larry Aschebrook 37:36 Oh, God. I, you listen, Harry. We would be having this podcast in my bubble in outer space. (laughs)

Harry Stebbings 37:41 But is it like two X more or like-

Larry Aschebrook 37:43 Oh my God, no. It's like, I had an LP, long time LP, first vintage, been back every time. I was talking to him the other day about the, the difficulties of our 2020 vintages and the lessons learned and, and you know, how more energized today than ever before and how, you know, we're gonna make it, make it up in spades. And he said to me, "You know what, Larry? You get a free pass on that one." You made me s- 'cause I distributed the shares to s- to, to, to, to some of our early funds. We distributed shares. We no longer do that. We just send cash. And he's like, "I held that Palantir stock, and I've been investing in every one of your vintages from the proceeds of my first 50 grand I gave you." (laughs) He, he... So it just gives you a perspective. I sold it at like, I think we made a three X on it and sold it at like $9 a share. Yeah.

Harry Stebbings 38:39 What's it now?

Larry Aschebrook 38:40 Oh, I don't know. I, I try not to look at it 'cause it's one of those things is, is you're like, you know, you don't wanna inflict the self-inflicted wound of the pain, but I think it's... I don't know, it's 80, 90 bucks a share or something.

Harry Stebbings 38:51 But my question to you is have your guard rails not now become a constraint, a negative constraint?

Larry Aschebrook 38:57 Yeah, look, I think if, if m- the answer to that is we're doing what we're hired to do, and that is to generate the velocity of the capital for our subset of LPs. It's not for everybody. Our LPs are looking for an ability to play the fastest growing most dynamic technology companies in the world, and they wanna get in and out with optionality of their capital to give more to firms like yours, in every a five-year period. So if they back to back funds of ours, they make a Forex cash on cash return in 10 years. But they have the optionality of it, and if you have confidence in the mousetrap you've built, Forex in 10 years cash on cash return is pretty hard to beat.

Harry Stebbings 39:40 That's phenomenal. Oh my God.

Larry Aschebrook 39:41 Right.

Harry Stebbings 39:41 D- Dude, we all toun- it's like-

Larry Aschebrook 39:42 I mean, it's not-

Harry Stebbings 39:42 ... we all tun these big numbers.

Larry Aschebrook 39:44 Yeah.

Harry Stebbings 39:44 Look at the real numbers. I've seen them, you've seen them. They're very different in reality.

Larry Aschebrook 39:47 Yeah. I mean, when your North Star is a DPI figure, there's no hiding.

Harry Stebbings 39:51 Listen, let's go to the 2020. You said there about, "Hey, you get a hall pass." I look back on, on mine. I, I, you know, I said to you after our wa- i- it's really special to actually have the conversations that we do, and I really meant it.

Larry Aschebrook 40:04 Yeah.

Harry Stebbings 40:06 The candidness is important. When you look back now, what do you think your sins were?

Larry Aschebrook 40:13 (sighs) I, and I've talked a lot about this openly to our LPs because, um, I take pride in going around the world, uh, we have 60 countries and six continents of LPs. I- it was smart, in my opinion, when I started the firm. It was fun. Uh, it's, it's difficult now. The main mistake we made was believing our own bullshit. Was believing that we were... 'Cause coming up to that point, we had some of the best returns in our industry. Like, we were raising money. It d- we just t- put the flag out there. It was hard. We go around, raise money. Co-investment, raise money. Life changed dramatically for my partners, myself, our team. Just to chip back, you know, uh, 2018 vintage fund, by 2020 we had the DPI to almost one. Oh yeah, Airbnb goes public, make a three X. Coursera goes public, make a three X. Sell our SpaceX stock privately, you know, make a, make a big return. Impossible Foods make this huge return.

Harry Stebbings 41:14 Impossible Foods made a return?

Larry Aschebrook 41:15 Oh yeah, we made a killing.

Harry Stebbings 41:17 How did you make money on Impossible?

Larry Aschebrook 41:18 Because the, the sh- the herd mentality. I mean, I think that, that it, it's, it's all product of the time you're operating in. You go back to that period, Impossible Foods was a big deal. People made a ton of money on that, Beyond Meat, and what was the other one, that egg comp- in, um...

Harry Stebbings 41:33 One of my best friends made-

Larry Aschebrook 41:34 Yeah.

Harry Stebbings 41:34 ... like $10 million on a Beyond Meat SPV.

Larry Aschebrook 41:36 See?

Harry Stebbings 41:36 And I'm like, "$10 million-"

Larry Aschebrook 41:37 See?

Harry Stebbings 41:38 "... like the market cap of the company today."

Larry Aschebrook 41:40 Yeah, no. It's again, that's the... I look at the big wins that the, where the market cap goes in a bad way is, look, we made... We were the s- largest shareholder of Coursera through our strategy. We owned 16% of Coursera when it went public.

Harry Stebbings 41:53 What did they give public here?

Larry Aschebrook 41:54 Holy shit. They're trading... We sold the stock at 36 bucks a share, and it's at $8.

Harry Stebbings 41:59 (exhales)

Larry Aschebrook 42:01 $800 million back to LPs on Coursera. $800 million back to LPs on Coursera. So, so that's part of the strategy where you get the concentration, and the law of large numbers actually works, and it's easier to manage a fund in liquidity. But getting into 2020, the mistakes we made, so you had all these exits. Toast was our largest position in that fund. It's trading at 76 bucks a share. Mitchell Green and I did Toast together. Man, we were... It's like you're popping champagnes around the office. You're like, "This is... We're so smart."

Harry Stebbings 42:31 (laughs)

Larry Aschebrook 42:31 "We're the fucking smartest people in the room."

Harry Stebbings 42:34 (laughs)

Larry Aschebrook 42:34 You know? And then I'm on a ski lift in Montana, and I'm looking at, unfortunately, and I'll admit it out loud, Yahoo! Finance.

Harry Stebbings 42:44 (laughs) It was before perplexity. (laughs)

Larry Aschebrook 42:47 (laughs) It was before polite- perplexity. And I'm like, "Wait a second, you got... Toast is 76 bucks a share? What the hell? Wait a second, how is it at $76 a share?" It's a great business, but 76 bucks a share? I mean, whoa, at the time. Now, Toast is an amazing company, right? Cha- revolutionized ind- uh, th- the restaurant space. And by the way, saved, saved tens of, of, of, I don't know, hundreds, tens, thousands, hundreds of thousands of jobs in the US because of the way they pivoted during COVID to help restaurateurs. An amazing business, great founders. Um, all that being said, it wasn't worth, as a public company, that price. So, to me, that was kind of the canary in the coal mine, and I started freaking out because we just deployed $900 million between, you know, beginning of COVID and (laughs) 2021. To your point, jumping on board with all these primaries and secondaries, "Oh, we're super smart. We can do some pr- primaries too."

Harry Stebbings 43:52 So, what was the realization when you saw Toast? To sell?

Larry Aschebrook 43:54 So that, that Toast was, "I have a problem in this vintage. We've overpaid for all of it. All of it, we've overpaid." Go to the team, and a lot of them aren't with us anymore, because we had to, we, we, we really w- went through a, a kind of identity crisis and said, "Listen, I had went through a period where I wanted to believe that our firm was, you know, more than just the t- co-PMs and Spencer and myself, and that we could, we could do a traditional model." Because we don't do that. We deploy the capital between the two of us. We have, uh, a research team that support us. It's more like a hedge fund. It's quick decisions. But at that period of time, we're like, "Hey, we've made all this money. We're growing our business. LPs are coming aboard with big checks. They want to chase MOIK. They want to chase TVPI, right?" We have to have a thesis that's a bit longer. Seven years, not five. So, let's divide the capital up amongst a bunch of people. Let's build the traditional fund model because we're so smart. And you know what? We're still conservative, so we're gonna pay 12 times last 12 months to enterprise value on SaaS. Public markets are trading at 25. Pat yourself on the back, guys. We're super smart. Oh, the floor can't be lower than 10. That's a historic multiple. Wake up in 2025, the multiple is four. So, when that happened, when, when a really awesome business, which we made a ton of money, eh, eh, on, by s- selling it at the right time, and harvesting, and they-

Harry Stebbings 45:29 In Toast?

Larry Aschebrook 45:30 In Toast.

Harry Stebbings 45:30 Mm-hmm.

Larry Aschebrook 45:30 And they, they've went on to create a tremendous amount of shareholder value as a public company, don't get me wrong. But when it's trading at this crazy multiple, I went back to our LPs and said, "Listen, we made, we, we, we fucked up. We need to pivot, and we need to, we need another 300 million bucks because I need to protect this thing." And so we went in, and we did structured equity deal after structured equity deal. As that market's falling, and the house is on fire, we're running in the front door with cash, and we're going and doing minimum IRR deals. We're partnering with the super savvy investors and the Light Speeds and the Dragoneers and the DSTs of the world, and we're doing deals that nobody knows about, Third Point, Coatue, and we're putting all kinds of structure in, where these founders believed their own bullshit, and they said, "I'll take the high price to- top line, but I'll embed structure in the equity." And so that vintage, of all of our vintages, has 70% primary-

Harry Stebbings 46:28 Whoa.

Larry Aschebrook 46:29 ... with s- and 40% of that has structure.

Harry Stebbings 46:34 For people that don't know, what does that mean?

Larry Aschebrook 46:35 It means you embed IRR hurdles in multiples in the paper. So, regardless if you say the business is worth 8 billion on paper, the company has to generate you a 25% IRR or a two and a half X, whichever is greater. So, every day, the return is ticking, and you walk it out, f- now, five years, the entire pref stack is totally fucked because we... The last money in has this ratchet that's just eating up all the value, and that pivot and, and, and the willingness, I think our team, not just me, the willingness for, uh, for Spencer and I to get together and say, "What, what were we thinking? We have to try to save this thing." Our LPs trusted us with a billion, at that point, billion five,

Larry Aschebrook 47:19 yeah.

Harry Stebbings 47:19 But, but you're going, like, on the offensive with cash in the door when everyone's running out.

Larry Aschebrook 47:22 Yeah.

Harry Stebbings 47:23 In terms of the actual saving, what are you doing with the overly inflated asset prices that you have?

Larry Aschebrook 47:28 S- selling.

Harry Stebbings 47:29 You're selling at a loss?

Larry Aschebrook 47:30 Cutting losses. Selling. Taking a different perspective on multiples and saying, "Okay, you know, you, you have to get the price to 10X," so you're going back in in assets you overpaid, and you're using the secondary market as the market's falling to lower cost basis. So, we did a lot of primaries, yes, because we, we didn't like the secondary multiple because it traded at a premium during that period. So, if you paid 25X in a public company to enterprise value the last 12 months of VRR in a SaaS company, privately, they traded at 50.

Harry Stebbings 48:05 And so you're like, "Shit, the secondary market is overly inflated."

Larry Aschebrook 48:08 The secondary market doesn't work. My business model is broken.

Harry Stebbings 48:10 And so you go to primary.

Larry Aschebrook 48:11 You go to primary. You go earlier. You do a bunch of small cap-

Harry Stebbings 48:14 Was that a mistake?

Larry Aschebrook 48:14 Hindsight, the mistake I made was not having... besides thinking we're smarter than we are, um, is, structurally in our business, not having the levers to pull. 'Cause leading up to then, it was like whatever we did worked, and you could get in and out in five years and make a 2X net. You're a hero. You just keep raising money, and it keeps getting bigger, and your amount, your wealth generation keeps getting bigger. So, we're unstoppable. We're, you know, Tiger Woods in, in 2001.You start to create this persona that everything works. And, and pivoting, it was a lot of soul-searching. We had a, a, a large meeting in-

Harry Stebbings 48:58 Was it difficult for you as a leader?

Larry Aschebrook 49:00 I was... Yes, it was difficult because I couldn't believe that I talked myself into it. I c- you know, I had a Silicon Valley, uh, uh, coach. (laughs) Here you've got a, me, a person that grew up in a trailer in Mighty, Utah, athlete, and I have to have a coach to tell me how great I am? I bought into the whole hook, line, and sinker bullshit of the entire problem, in my opinion, of Silicon Valley. And so did our firm.

Harry Stebbings 49:27 What is that problem?

Larry Aschebrook 49:30 I think losing focus of what you're hired to do and paying more attention to, um, the lifestyle that comes along with being a money manager, and the circles that you roll in, and about the deals that you're doing and the money that you're managing, versus at the end of the day, the actual value you're creating for your people who have trusted you with their capital, and making a difference for your underlying companies. That's what's important. Not going to a dinner party and saying, "I just invested in Wiz or Anthropic or OpenAI or Airbnb." That's the culture, in my opinion, that, in Silicon Valley, and it's people deploying the capital that don't have the responsibility to sit in front of the LPs to explain the problems. It's a herd mentality that rushes in. And LPs follow, by the way. LPs follow, at the wrong time. It's very easy to raise money in a crazy market, like you and I both did, and many other managers did, when it's the wrong time. And it's very hard. Our 2022 vintage we raised, very difficult to raise.

Harry Stebbings 50:38 How big was that fund?

Larry Aschebrook 50:39 Billion two.

Harry Stebbings 50:40 Billion two. Was that the first billion fund?

Larry Aschebrook 50:42 No, 2020 was a billion four.

Harry Stebbings 50:44 (exhales) So, you went down in fund size?

Larry Aschebrook 50:49 Well, the 2020 vintage is, we

Larry Aschebrook 50:51 topped that up. Remember, it was, I was saying, we went back and said, "Hey, we've made all these mistakes. We have to protect. We need more money." And it went from a billion two to a billion five.

Harry Stebbings 51:00 And the protection there was 'cause pay-to-play was coming in?

Larry Aschebrook 51:03 It was because we saw that we had overpaid on the first, first tranche of capital. So, I wanted more to combat that with secondaries and also structure.

Harry Stebbings 51:12 So, you hadn't lost faith in the underlying assets?

Larry Aschebrook 51:14 No. Some of them have went on to c- m- monumental failures, um, that have been well-written about. Um, but most are really fundamentally good underlying companies.

Harry Stebbings 51:25 So, when you review-

Larry Aschebrook 51:26 Yeah.

Harry Stebbings 51:26 ... that period of 2020, what do you wish that you had done? Or if you could replay the tape-

Larry Aschebrook 51:31 Yeah.

Harry Stebbings 51:31 ... go back to the first half or quarter or whatever you-

Larry Aschebrook 51:33 Yeah.

Harry Stebbings 51:33 ... Americans like to call your timings in sports games-

Larry Aschebrook 51:37 Innings, innings.

Harry Stebbings 51:38 Innings. Yeah, that's cricket, my friend.

Larry Aschebrook 51:39 No, no, that's baseball.

Harry Stebbings 51:40 Oh, right, sorry. Uh-

Larry Aschebrook 51:42 That's okay. Both, I guess.

Harry Stebbings 51:43 Both, there we go.

Larry Aschebrook 51:43 Yeah.

Harry Stebbings 51:44 We're both, um, what would you have done now if you could replay that tape?

Larry Aschebrook 51:48 Um, if I, yeah, if I could go and talk to my, myself then-

Harry Stebbings 51:52 Like, I would say-

Larry Aschebrook 51:53 Yeah.

Harry Stebbings 51:53 ... sit on my hands. You did not need to be part-

Larry Aschebrook 51:55 Yeah.

Harry Stebbings 51:55 ... of that ridiculous 700 million price round for a 10 millionaire SaaS company.

Larry Aschebrook 51:59 Yeah. Yeah, I think that that's the, that's the easy answer is wait. Um, I think if I could do it all over again, I would keep the control tighter to Spencer and myself on deployment. Um, in that way, as we went forward, the only excuse we could have is that he and I made the decisions. And we could, w- we wouldn't have any excuses. It would be clear that we made the mistakes, versus, "Hey, we tried to do the Silicon Valley mentality and hand out the capital and build teams underneath." And, you know, it's, yeah, it's the G-Squared logos that we invested in, but the attribution actually goes to X, Y, and Z.

Harry Stebbings 52:46 You don't like attribution?

Larry Aschebrook 52:47 No.

Harry Stebbings 52:48 Why don't you like-

Larry Aschebrook 52:48 I think it-

Harry Stebbings 52:49 ... attribution?

Larry Aschebrook 52:49 I think that it, it, it causes unintended consequences.

Harry Stebbings 52:53 And in what way? 'Cause it's a very common...

Larry Aschebrook 52:56 Yeah, it's 'cause people wanna, people want to pat themselves on the back for the wins and deflate the losses, or, uh, deflect the losses, excuse me. I think if you wanna build a firm that stands the test of time, the logo makes the investment. It withstands any transition period in any leadership role in the firm because the logo made it, not the individual. And that's what I'm, that's what we're trying to build at G-Squared, is when I look out 20 years from now and say, "Where do I want it to be?" I want, you know, hopefully some grandkids to think about the logo that was built and say, "My grandpop built that," and it's still there, and it's like the Jim Simons' 40% annualized IRR for 20 years.

Harry Stebbings 53:44 It is what I always say. I always say that about my grandchildren. I don't have children yet, so it's really quite a step. Um-

Larry Aschebrook 53:49 Yeah.

Harry Stebbings 53:50 ... but can you t- I, you know-

Larry Aschebrook 53:52 Yeah.

Harry Stebbings 53:53 ... we mentioned lessons. On a company basis, or if you look back at one of yours that was a big loss, what was your subsequent lesson from that?

Larry Aschebrook 54:01 Well, we've had a lot. In that concentrated equity portfolio, you're gonna have some monumental misses, hundreds of millions of dollars you're gonna light on fire, if you have the fortitude to stick to it. So, we've got a lot of those lessons to draw upon.

Harry Stebbings 54:14 What was the one that most stands out?

Larry Aschebrook 54:16 That's most painful?

Harry Stebbings 54:17 Yeah.

Larry Aschebrook 54:18 Um, there's a couple. I would think, uh, one is, is Theranos, and the other is 23andMe.

Harry Stebbings 54:27 How did Theranos happen?

Larry Aschebrook 54:29 So, Theranos, um, secondary, we actually, the, the, the, the, the big loss there was for, for me personally, um, because we did it, we, we signed up to do a secondary, um, at a really good price, and met with management. Something didn't feel right, don't know what it is. Can't say that I was like, "Oh, it's a great, gigantic fraud." I didn't know what it was. Just some-

Harry Stebbings 54:54 Did you meet with Elizabeth?

Larry Aschebrook 54:55 No.... the, um, the, the, the kind of C-suite without her. Um, and something just didn't feel right. Uh, so, you know, we went back and we had a... that form I told you about-

Harry Stebbings 55:09 (laughs)

Larry Aschebrook 55:10 ... binding to transact.

Harry Stebbings 55:12 Oh, no.

Larry Aschebrook 55:13 One page (laughs) , one page simple, companies love it. It's easy. Things that change on it, name, shares, company, dollar amount, binding transaction. Um, so I ripped it up and I got, uh, sued to finish the transaction, and I agreed to settle where I would pay a fraction of the transaction cost, but I did it personally, so our LPs didn't have to go in. Um, and I think that, what that taught me was, was before we sign that paper, we better be certain, because it cost me a few million dollars at a time where I didn't have a lot of money. And I did it so that our LPs didn't take the loss, because th- that was one of those spider sense moments where it's like, to your s- you're saying the risks were tangential to what the data. This was, you know... (laughs) and my wife would say if she were sitting here, she told me that it couldn't work 'cause she's an epidemiologist and they collect, you know, sa- blood and saliva and you can't, you can't get that much data from a pr... whatever. She was the one saying-

Harry Stebbings 56:19 I feel the magic. (laughs)

Larry Aschebrook 56:21 (laughs) She's like-

Harry Stebbings 56:22 She goes sick.

Larry Aschebrook 56:23 Yeah. She's, she's like, "That, that doesn't work." Um, anyway, uh, long story short, uh, the spider sense came up, um, going through negotiations to get outta the contract and then s- you know, some of the material started to come out and we just like, "Hey, we're not doing it." Um, and then actually, I don't think it was formally sued. It was threatened to be sued, and I agreed to settle it outta court and gave them a couple million dollars to go away. And obviously it went on to be, you know, one of the more i- you know, notable frauds of, of the time. Um, but that was painful for me. That was bad process and bad outcome. Sometimes you can have bad process and good outcome, sure. But what that taught me was that you just need to have a good process, and if the outcome is bad, okay, that's fine, which is 23andMe, which we'll get to. This was bad process going in, this was jumping, trying to jump on board, play the, the, the, the elasticity in pricing and follow the herd.

Harry Stebbings 57:23 Respectfully, the herd there was not professional.

Larry Aschebrook 57:26 No, it wasn't. It-

Harry Stebbings 57:27 Did that not worry you?

Larry Aschebrook 57:29 To me, I was chasing the, the, the, the discount that was available and the thought that if it just traded at what the last round was, I made a lot of money. So that's... on the secondary side, that's what you're chasing, right? You wanna get that disc value of the discount, and that... you could get it in bulk, and I should have seen, I should have seen a lot of warning signs. That was a tough one to do due diligence on. I would say that added a lot of our checkboxes that we now have to make sure that we don't make those mistakes again, and we really, uh, we really averted a massive issue in our business by doing that. Massive.

Harry Stebbings 58:08 What was the check size gonna be?

Larry Aschebrook 58:10 The, the, the agreement was to buy about $50 million of stock over like four months 'cause, you know, um, 'cause I, 'cause I'm still raising the fund. Um, anyway, we got out of that-

Harry Stebbings 58:22 In a way, that's one of the biggest wins. I know, I know personally-

Larry Aschebrook 58:25 Yeah, I could... yeah. (laughs)

Harry Stebbings 58:26 ... personally it sucks.

Larry Aschebrook 58:26 (laughs) I mean, personally-

Harry Stebbings 58:27 And personally it sucks, I agree.

Larry Aschebrook 58:29 Yeah.

Harry Stebbings 58:29 But actually for the damage that it would've done to the brand-

Larry Aschebrook 58:31 Oh, it was catastrophic-

Harry Stebbings 58:32 Yeah.

Larry Aschebrook 58:33 ... to o- to us.

Harry Stebbings 58:33 Yeah.

Larry Aschebrook 58:34 You know, if it would have happened.

Harry Stebbings 58:35 And so actually mega win.

Larry Aschebrook 58:36 Yeah.

Harry Stebbings 58:36 Couple of takeaways, though. One, always listen to your wife if she's around and-

Larry Aschebrook 58:40 (laughs)

Harry Stebbings 58:40 Uh...

Larry Aschebrook 58:41 Well, hopefully she doesn't listen to this, although I'm sure she will.

Harry Stebbings 58:44 Oh, she will.

Larry Aschebrook 58:44 But don't, don't say that out loud-

Harry Stebbings 58:45 She will.

Larry Aschebrook 58:45 ... 'cause she'll say, "See, Harry's right."

Harry Stebbings 58:47 She will, trust me, and the clips go viral. Um...

Larry Aschebrook 58:50 Yeah.

Harry Stebbings 58:50 And two is when you feel icky in your gut, and I want the-

Larry Aschebrook 58:52 You got the spider sense.

Harry Stebbings 58:53 ... dude, I've had this, and I'm not gonna name the company-

Larry Aschebrook 58:55 Yeah.

Harry Stebbings 58:55 ... 'cause it's still going. We, we did a $5 million investment and I called up the lead investor, um, who's a very, very pedigree firm.

Larry Aschebrook 59:04 Yeah.

Harry Stebbings 59:04 I just don't... this is off.

Larry Aschebrook 59:06 Yeah. But you still did it.

Harry Stebbings 59:07 I did. Now I don't fucking do it.

Larry Aschebrook 59:10 Yeah.

Harry Stebbings 59:10 I'll pull out of everything. If I feel the ick, I feel

Harry Stebbings 59:13 the ick.

Larry Aschebrook 59:13 Yeah, you go through this phase as building a business where you feel like you have some allegiances to some of the people that helped you get there, right? So you have other investors-

Harry Stebbings 59:21 And you're too far in.

Larry Aschebrook 59:21 ... and you're too far in to say no, and you know you shouldn't do it, and, and, you know, it's not what el... we're humans.

Harry Stebbings 59:29 Oh, yeah, now I'm like, "Fuck you." It's a 10-year relationship.

Larry Aschebrook 59:30 Yeah, no, now you're like, "What..."

Harry Stebbings 59:31 Too far in is, is, uh...

Larry Aschebrook 59:33 First mistake on, uh, uh, on you, second mistake on me, right?

Harry Stebbings 59:36 Yeah, yeah. That I totally agree with.

Larry Aschebrook 59:38 And, and the, the one that's probably from a financial perspective the largest that hurt, um, there's two really, uh, is 23andMe and Getir. Yeah. 23andMe not selling, that was my mistake.

Harry Stebbings 59:54 What, when did you come in?

Larry Aschebrook 59:56 First investment in 23andMe in I think 20 s- 2016, '17.

Harry Stebbings 1:00:02 Okay.

Larry Aschebrook 1:00:03 Um, really bought into the business model on the consumer side. Um, loved it, really enjoyed interaction with Anne, really bought into what she was trying to build and she really embraced our model to be helpful. Um, and I, I, I was really, you know, taken aback by, by what she was doing and believed in it, and we built a large position in our 2018 vintage fund. I think it was the second-largest position in that fund. Um, like co-investment we had, maybe had 50 million in and, and LP capital maybe 30 or 40 million in, and it... and, uh, during the SPAC craze, you know, pair up with Sir Richard Branson. Like, what an iconic pair, right? You got Anne Wojcicki who's, who's a fantastic founder in my opinion, uh, to, to, to... not maybe a great public CEO but awesome founder and-... visionary of what she wanted to build, and, and the ability to go do it, amazing. Richard Branson on top of it, awesome. Let's go. Put gasoline on it. Trade's at 10, goes up, we can start selling at seven, which would have meant about a 2X. I think I sold the last share at 70 cents.

Harry Stebbings 1:01:22 (gasps)

Larry Aschebrook 1:01:23 So, so that's chasing multiple. That's me chasing multiple. And that's a problem in our strategy. And you need guardrails in that to protect from Larry chasing multiple. Yeah.

Harry Stebbings 1:01:35 Which is what a layered approach to selling.

Larry Aschebrook 1:01:38 Yes. Dollar cost average out, just like you dollar cost average in, and just start getting liquidity when you can privately-

Harry Stebbings 1:01:44 (sighs)

Larry Aschebrook 1:01:44 ... and continuing it through when they list. Liquidity's hard.

Harry Stebbings 1:01:48 How big was your position?

Larry Aschebrook 1:01:50 In total, probably 100 million bucks. (sighs)

Harry Stebbings 1:01:52 100 million bucks. And you said you could do a 2X?

Larry Aschebrook 1:01:55 Yeah, and instead, lost $70 million. (exhales)

Harry Stebbings 1:02:02 The LP's cool about that?

Larry Aschebrook 1:02:03 No, the pool of the capital is awesome.

Harry Stebbings 1:02:05 Yeah.

Larry Aschebrook 1:02:06 Eh, it's just, you know-

Harry Stebbings 1:02:07 What was the number one position in that fund?

Larry Aschebrook 1:02:09 Toast.

Harry Stebbings 1:02:10 (laughs)

Larry Aschebrook 1:02:11 Yeah, Toast, awesome business. It's like a 3X net, and started in 2018. During COVID, Mitchell and I talking about it, Mitchell Green and I saying this, "People don't get it, let's buy a bunch of secondary."

Harry Stebbings 1:02:23 ... taser.

Larry Aschebrook 1:02:23 Yeah. You know, awesome.

Harry Stebbings 1:02:24 Aman is now here.

Larry Aschebrook 1:02:24 Also, A- Asana too. We teamed up, Mitch and I teamed up on Asana, you know, it was fantastic. Yeah.

Harry Stebbings 1:02:32 (sighs)

Larry Aschebrook 1:02:32 We were just... It was just like you're conquering the world, you and your buddy buying stock. People, people running out the front door 'cause their house is on fire during COVID, and us running in with capital.

Larry Aschebrook 1:02:42 It was fun.

Harry Stebbings 1:02:43 What about Getir?

Larry Aschebrook 1:02:44 Getir, Getir is, is one emotionally for me that's really hard. Um, when I think about that good process, you know, good outcome.

Harry Stebbings 1:02:53 You had good process?

Larry Aschebrook 1:02:54 We had good process on the first money, Gorillas, the investment in Gorillas, we had good process. Um, we had made a lot of money in kind of the food revolution. We were in Instacart, we were in Postmates, we were in Meituan.

Harry Stebbings 1:03:06 And just to be clear, sorry-

Larry Aschebrook 1:03:07 Yeah.

Harry Stebbings 1:03:07 ... 'cause people will hear these names. You made money in Postmates?

Larry Aschebrook 1:03:10 Oh, we made a, uh, that's a Sp- that's a Founders Fund special, man. We did a lot of work with Founders Fund early, fantastic group of investors there. Um, I mean, I think Peter Thiel's got more money than God now, but, um, uh, yeah, they were the largest investor in, in Postmates. Sebastian Lehmann, awesome guy, spoke at our 2018 LP day. Um, yeah, we made a 3X on Postmates.

Harry Stebbings 1:03:35 In how long?

Larry Aschebrook 1:03:37 18 months.

Harry Stebbings 1:03:38 Whoa.

Larry Aschebrook 1:03:39 It was amazing. And Spencer MacLeod, who was my co-PM, he led that deal. And he was like, "This, you gotta meet this founder. He loves what we're doing. He wants to help all his employees. Let's do it." And I was like, "Yeah, the data looks good, man. Let's go."

Harry Stebbings 1:03:53 And you made money on Instacart?

Larry Aschebrook 1:03:55 Yeah, we made a lot of money in Instacart. We sold Instacart privately during COVID.

Harry Stebbings 1:03:59 You're one of the guys who sold at like the 25?

Larry Aschebrook 1:04:02 Oh, yeah. I was like, "Come on, Sequoia."

Harry Stebbings 1:04:05 And the price, because Sequoia bought?

Larry Aschebrook 1:04:07 Yeah, but Sequoia'll make money in the long run on that. They also bought along the way. I mean, Sequoia's business model is fantastic. We do a lot of, uh, we have a lot of investments in common. Their partners are, uh, y- awesome. There's few evergreen structures I'd ever invest in, theirs is one.

Harry Stebbings 1:04:20 I agree with that.

Larry Aschebrook 1:04:21 Yeah.

Harry Stebbings 1:04:21 So, why did you sell at 25 then? You just thought it was-

Larry Aschebrook 1:04:24 Okay, funny story.

Harry Stebbings 1:04:26 Yeah.

Larry Aschebrook 1:04:26 Um, (laughs) and, uh, personally, you know, you have experiences with companies, and very frustrating experience with Instacart during COVID, where, you know, it went from Whole Foods only pickers and grocery shoppers, which was an amazing service, right? To then having your Uber driver shop for your groceries. (laughs) And try to get a ripe avocado in COVID from your Uber driver.

Harry Stebbings 1:04:53 (laughs)

Larry Aschebrook 1:04:53 It's not a great experience. (laughs) And I remember a point, I'm hunkered down at my farm, the world's falling apart, you know? Um, and, uh, it's just like, I can't get... The order just can't... It's just not right. And they don't take it back. You just keep getting stuff delivered. And I was like, "It's time. I just gotta get out." (laughs)

Harry Stebbings 1:05:15 I'm sorry, wait a minute.

Larry Aschebrook 1:05:17 (laughs)

Harry Stebbings 1:05:17 So the fact that your Uber driver can't get you a fucking ripe avocado, you're like, "You know what? I'm out."

Larry Aschebrook 1:05:21 I mean, I'm not the only one here. Come on.

Harry Stebbings 1:05:23 "I'm out. You know what? We're gonna sell at 25."

Larry Aschebrook 1:05:25 (sighs)

Harry Stebbings 1:05:26 And you do like a 3X on it?

Larry Aschebrook 1:05:27 Yeah, but also for us, the decision to sell becomes somewhat easy, because we're also solving for something that's different than others. And, and we're solving for this velocity of capital. It's not... Part of keeping in the middle of our, to use a sports analogy, fairway, is don't chase the MOIC. We make a 2X net in a five-year period, cash return, not shares. We stopped distributing shares because LPs blame you if they hold it.

Harry Stebbings 1:05:58 Don't founders just see you as a bit of a tourist? No offense, though.

Larry Aschebrook 1:06:01 Yeah.

Harry Stebbings 1:06:01 If it's like, if you want that short compression, you're not exactly a long holder, you're not a long believer in the company.

Larry Aschebrook 1:06:06 No, we're pro- we're at, we're at point-in-time problem solver. We're like the s- we're like the st- the janitor that's cleaning up the mess. They have an employee that leaves, that they're out there in the market making noise, they don't want them to take their shares, we get the phone call. You've got a fund that wants to show their LPs that there's value in the extension they're giving them, we get the phone call to buy a little bit of their position. You don't buy 100% of somebody's position typically in a f- in a company unless they're on year 15 of their fund and have no extensions, because if it's a large position in their, in their, in, in their holdings, in their nav, and you buy it all, you kind of scratch your head like, "Well, why are they selling it to me?"

Harry Stebbings 1:06:43 Yeah, but dude, I've had this before. I've got a great company, and I want to buy some, and I-

Larry Aschebrook 1:06:46 Yeah.

Harry Stebbings 1:06:47 ... chatted with you. And then ROFRs happen.

Larry Aschebrook 1:06:49 Yeah.

Harry Stebbings 1:06:50 How do you get around a ROFR?

Larry Aschebrook 1:06:51 (inhales) You know, that's relationships and, and companies buying into the... In our business model, the companies and your peers have to see value in what you can bring to the company. Because what we're after is large concentrated positions. We're not...... indexing secondaries, buying with no information, playing the arbitrage and pricing, and putting 200 secondary positions in a fund. That's not what we do. We're gonna have 10 companies make up 90% of our risk, and we're gonna become very large shareholders of those companies by doing our business model. And so, it requires your peers to say, "Okay, they do something unique. They are gonna provide value to us by consolidating the cap table. They're gonna help us with employee structured tenders, shareholder tenders. Uh, we have an employee or a former share- or a current shareholder that, that w- needs to leave, they're gonna buy it." And it's, it's really the barbell of the small microtransactions that nobody cares about-

Harry Stebbings 1:07:50 Mm.

Larry Aschebrook 1:07:51 ... that w- some of our companies we've built through 50 transactions to get to $75 million. And some we've done four to get to 200. It's just a... And you, you have to sell that you're, going back to raising money as a new manager, be different. Be different. Because different-

Harry Stebbings 1:08:10 Oh, it's a pain in the ass to do 50 transactions to get to 75 million.

Larry Aschebrook 1:08:12 It is. It is. The, the, the muscle memory of that-

Harry Stebbings 1:08:15 Yeah, I get that.

Larry Aschebrook 1:08:15 ... is not replicable for others. (clears throat) In the back office, you have to have the investment to not just pay yourself and to hire big teams to run it. Requires the ability for you to know that the actual outcome is the benefit of the carry, not the management fee.

Harry Stebbings 1:08:30 No, I, I-

Larry Aschebrook 1:08:31 Yeah.

Harry Stebbings 1:08:31 ... totally get you there.

Larry Aschebrook 1:08:32 Yeah.

Harry Stebbings 1:08:32 Going back to Getir.

Larry Aschebrook 1:08:33 Yeah. Mm. That one took years off my life. Um, good process. Look, I think-

Harry Stebbings 1:08:41 How did you come to it?

Larry Aschebrook 1:08:43 So, we made those investments and made a lot of money for LPs. And, uh, uh, getting in- introduced to Getir by one of our, uh, excuse me, to Gorillas. We have an office in Zurich. Uh, we have a, a team about 10 in Europe. We've been here since 2017. Um, say, "Hey, you got to meet this company in Berlin," when I'm there visiting. We had a bunch of portfolio companies in Berlin at the time. Met the founders and the business was growing like a weed. And-

Harry Stebbings 1:09:08 This is when it was in Turkey only?

Larry Aschebrook 1:09:10 No, this was Gorillas in Berlin.

Harry Stebbings 1:09:12 Oh, this was Gorillas in Berlin.

Larry Aschebrook 1:09:12 So, we were acquired... Gorillas was acquired by Getir.

Harry Stebbings 1:09:15 Yeah. That wasn't a good deal it, was it?

Larry Aschebrook 1:09:18 So, for a group of shareholders who we were a part of helping structure alongside of, uh, five others, it actually was a good deal. We actually got, um, good value for our money. Uh-

Harry Stebbings 1:09:26 You get cash out of it?

Larry Aschebrook 1:09:27 Uh, we did get a little bit of cash. We got most of the preferred value in the transaction. So, four or five shareholders of Gorillas r- received, of all of their shareholders, received the majority of the preferred equity that we received from Getir. So, we're in a good place then. Fine. Getir valued at 10 billion.

Harry Stebbings 1:09:48 Yeah.

Larry Aschebrook 1:09:50 The next three years were some of the, you know, worst of my life.

Harry Stebbings 1:09:54 Why?

Larry Aschebrook 1:09:54 Uh, just the, the seeing that we needed to then try to protect that money with more money, and then get involved at the board, and do the heavy lift of restructuring, and battles with the founders. And we'll leave a lot of it out 'cause it's still ongoing, but-

Harry Stebbings 1:10:11 Mm.

Larry Aschebrook 1:10:11 ... I think it's, it was just, it was really hard and my will- the mistake I made was the second tranche of the capital.

Harry Stebbings 1:10:21 How big was the first, how big was the second?

Larry Aschebrook 1:10:22 The total first was, I th- was like 50 million bucks in total between secondary, primary. Kind of, we got that plus some in value of Getir. And then the next check was 100 million bucks.

Harry Stebbings 1:10:33 (inhales deeply)

Larry Aschebrook 1:10:34 To restructure that equity, to pull it forward.

Harry Stebbings 1:10:37 (exhales deeply)

Larry Aschebrook 1:10:37 So, you got 200 million risk total. A lot of LPs in it with co-invest. Of course, everybody during that period signed up for, you just put it out there and-

Harry Stebbings 1:10:46 Dude, the co-invest craze was fucking nuts.

Larry Aschebrook 1:10:49 It was nuts in 2021. And, and, and created a lot of unintended consequences, um, that we can chat about, but... And different from our normal co-investment model, which we went back to from that period. But anyway, the long story short was, I think the ma- major mistake I made there was, was not willing to just walk away.

Harry Stebbings 1:11:07 After the first check?

Larry Aschebrook 1:11:08 After the first check. My, it's a (laughs) ... The fight that when you grow up in, like, severe poverty, you're fighting with your siblings for everything. You're fighting at school, you're fighting for food-

Harry Stebbings 1:11:21 Fighting the world.

Larry Aschebrook 1:11:21 You're fighting, you're fighting, you're fighting. And, and as you grow into business, that doesn't leave you. It subsides a little bit. But the pe- people, there's many people in our industry that have backgrounds like mine. And you don't stop fighting. And it's, it becomes-

Harry Stebbings 1:11:40 Is it a blessing or a curse?

Larry Aschebrook 1:11:42 It starts to become a curse if you can't manage it. Because in that scenario, my thought that I could fight and will the outcome, little old G squared amongst giants. Like, it wo- it was like you were, you were a dead man walking without knowing it. You were just, you were already dead and you just kept fighting. And, and making sure that we don't make those mistakes again are important. Um, and that's where guardrails, um, other people with voices in your firm-

Harry Stebbings 1:12:16 Was it obvious-

Larry Aschebrook 1:12:17 Yeah.

Harry Stebbings 1:12:17 ... that it was going wrong? Like, it seemed like just an enormous amount of cash going into a business-

Larry Aschebrook 1:12:22 Yeah.

Harry Stebbings 1:12:22 ... before it was ready and premature scaling and just unit economics that didn't work.

Larry Aschebrook 1:12:26 Yeah.

Harry Stebbings 1:12:26 It seemed very obvious to me, respectfully.

Larry Aschebrook 1:12:29 Yeah. Hindsight, it's easy to say it's obvious. Um, I'm sure to many looking at me and watching from afar, it was obvious. For me-

Harry Stebbings 1:12:38 You still hold it though, no? It's still like a Turkey business.

Larry Aschebrook 1:12:39 Yeah, we st- we still, we still hold it. It's now a, a, a business focused in Turkey and, you know, lots of great people in the business working. Um, and I'm still on the board, uh, so I'll be careful of some of the things I say, but it-

Harry Stebbings 1:12:51 'Cause it's a major, major part of Turkey.

Larry Aschebrook 1:12:54 Oh yeah, it's... By the way-

Harry Stebbings 1:12:55 That was the biggest mistake for me of the business.

Larry Aschebrook 1:12:57 Yeah.

Harry Stebbings 1:12:57 It should have just continued deeper penetration in Turkey.

Larry Aschebrook 1:12:59 Yeah. Well, yes, and I think, you know, investors would say, um...... one thing, founders would say another on how it became a global kind of strategy. I think the mistake the company made there was it left Turkey-

Harry Stebbings 1:13:13 Mm-hmm.

Larry Aschebrook 1:13:13 ... um, and didn't focus maybe on other markets that were, were, were similar to Turkey from an employment cost perspective. Um, but look, it's, today, it's still operating in Turkey. It's a big business. You got a lot of sophisticated people from, um, Mubadala in there working with the business. You've got, you've got people inside the business that want to win. You've got 10,000 plus employees that are working hard every day, trying to create values for their family. For me as an investor, I lost a lot of money. Um, why I'm still involved is because those people that are commuting, in some cases three hours a day, to work in Turkey, you know, they deserve a good outcome. And that's the piece of our investing, as a secondary investor, you often, often don't get that granular involved with, and we do it with a handful of companies. Unfortunately, typically when they have issues that you're trying to save, um, but yeah, it, it was a very hard journey, um-

Harry Stebbings 1:14:05 How much money do you think you lost there?

Larry Aschebrook 1:14:09 Well, there's kind of the, the, the numbers you can, you can quantify, and then there's probably the dollars that you lost from a fundraising perspective for your next vintages, um, from LPs. M-

Harry Stebbings 1:14:20 Because you lose that co-investment.

Larry Aschebrook 1:14:21 Yeah, because you, 'cause-

Harry Stebbings 1:14:22 When you lose co-invest dollars-

Larry Aschebrook 1:14:24 Yeah.

Harry Stebbings 1:14:24 ... do you lose them as the next round LP?

Larry Aschebrook 1:14:25 Depends on how you structure your co-investments. Um, in that case, from that fund, my guess is those decisions we made cost our partnership probably a half a billion dollars of capital, between capital actually lost and investors that you can't bring back. Yeah. It, it was, it was a monumental miss on our part. Now-

Harry Stebbings 1:14:49 I have lost money before in co-invest, and the only lesson that I've learned actually on that is, use it as a chance to build trust, and in crisis-

Larry Aschebrook 1:14:58 Yeah.

Harry Stebbings 1:14:58 ... communicate more than you ever have done before.

Larry Aschebrook 1:15:01 Yeah, and try to overcommunicate. I think a lot of LPs, um, because of that, um, have come back, and now they're-

Harry Stebbings 1:15:08 Does it make you question-

Larry Aschebrook 1:15:09 Yeah.

Harry Stebbings 1:15:09 ... your co-invest strategy? Because the thing that I don't like with co-invest is often LPs, they, they're almost not aware that-

Larry Aschebrook 1:15:17 Yeah.

Harry Stebbings 1:15:17 ... it's a single shot. Um, water?

Larry Aschebrook 1:15:20 Yeah, please. Thank you.

Harry Stebbings 1:15:21 They're not aware that it's a single shot. And what I mean by that is, you know, you have a portfolio in a direct-

Larry Aschebrook 1:15:26 Yeah.

Harry Stebbings 1:15:26 ... in a venture fund, fine, you have a get it, fine, we've got to toast as well.

Larry Aschebrook 1:15:30 Yeah.

Harry Stebbings 1:15:31 But it's like they're almost shocked that, "Oh shit, I didn't realize that's done."

Larry Aschebrook 1:15:36 Yeah, I think that it's... So, so kind of going through our co-investment process, in the early vintages, let's say vintage one through four, in some cases we were four times co-investment to fund investment, because we-

Harry Stebbings 1:15:47 Four times co-invest?

Larry Aschebrook 1:15:47 Yeah, but here's why. Because the k- type of companies that we were interested in investing in, we weren't large enough to make a difference. So if you want to run our business model, you need capital, a lot of capital.

Harry Stebbings 1:15:59 Just to get in the door?

Larry Aschebrook 1:16:00 Just to be able to solve the problems that they have.

Harry Stebbings 1:16:02 Mm-hmm.

Larry Aschebrook 1:16:02 To your point of being relevant, to the ROFR, if you, if all you can do is onesies and twosies (laughs) and you can't write $100 million check when they need you to do it on the secondary, they go find somebody else. And when they turn that faucet on of shares, when they, when they buy into your strategy, when Daniel Luck says, "Hey, you guys are interesting to us. Oh, by the way, here's $150 million worth of stock." If I say no, and it's at a good price, and he picks up the phone and calls somebody else, it's gone. You're not getting that opportunity back. So with our strategy, you have to have scale. So is the co-investment, in the early days, was a significant part of our strategy. Over time, it's more normalized. Today, it's about, you know, I don't know, on a billion five, it'll be 700 million. It's still a lot. Um, the mistake we made in 2021 vintage, or 2020 vintage, is we didn't just do co-investments around our core positions. We had LPs coming to us saying, "Hey, I built my fortune in," let's say, "wellness. I like health tech companies. You've got one down here in the land. I want to buy stock directly." And we felt at the time, hindsight being 20/20, it was wrong, we felt at the time that we were enabling our business model to help them achieve what they wanted by being an LP of ours.

Harry Stebbings 1:17:29 Okay, but let me just-

Larry Aschebrook 1:17:30 Yeah.

Harry Stebbings 1:17:30 ... push back on you.

Larry Aschebrook 1:17:31 Yeah.

Harry Stebbings 1:17:31 We're partners now.

Larry Aschebrook 1:17:32 Yeah.

Harry Stebbings 1:17:32 Okay? I say they have directly requested that asset.

Larry Aschebrook 1:17:36 Yeah.

Harry Stebbings 1:17:36 I share with them my concerns-

Larry Aschebrook 1:17:38 Yeah.

Harry Stebbings 1:17:38 ... and how we believe the company's doing.

Larry Aschebrook 1:17:40 Yeah.

Harry Stebbings 1:17:40 And if I do that transparently and offer them access, am I not providing them a service that they're asking for?

Larry Aschebrook 1:17:45 Yeah, until it doesn't work, and then they blame you.

Harry Stebbings 1:17:49 So you should block them from doing it?

Larry Aschebrook 1:17:51 (laughs) I wouldn't... So the way we run it today is the way I think people should run their... Only in conviction, when your funds are investing alongside of it, that's when you do the co-investment. You don't do it the way we did it in 2020. You do it the way we did it today. Our 2022 vintage fund, that was a billion two in size, the co-investments we ran are our top 10 positions. You got, uh, a couple LLMs, you know, the, the high flyers. You have, um, companies like Fanatics, Wiz, um, Databricks, um, uh, Turo, the Airbnb of cars, um, like Monzo, companies like that, where there's... You've already decided those are your core positions, and then they make a bespoke portfolio of additional exposure to them in equal weighted size.

Harry Stebbings 1:18:37 Why are you in Monzo?

Larry Aschebrook 1:18:39 Value play to, to Revolut and TS is fantastic.

Harry Stebbings 1:18:42 I think, I think Revolut is the generation-

Larry Aschebrook 1:18:44 We were in Revolut in our 2018 vintage fund. I agree with you. Amazing business.

Harry Stebbings 1:18:48 Did you hold it?

Larry Aschebrook 1:18:49 Um, yeah. I mean, I -- some of the stuff we can't really talk about holding it or not in, in the live positions. But-

Harry Stebbings 1:18:55 'Cause for me, sort of, like you don't need to.

Larry Aschebrook 1:18:57 Yeah.

Harry Stebbings 1:18:57 I just look at it