Mitchell Green, Founder @ Lead Edge Capital: Why Traditional VC is Broken

Mitchell Green 0:00 I think investing in AI infrastructure today is like investing in websites in 1997. The incumbents usually win. It's customer distribution. The idea of a single-person AI company, I think is like comical at best. I think the venture industry was about to be in for a rude awakening, and then AI showed up. People didn't learn a damn thing from '20 and '21. It's like shocking.

Harry Stebbings 0:22 Ready to go? (instrumental music plays) Mitchell, I'm so excited for this. When Nigel Morris messages me and says, "Hey, you've gotta spend time with my friend Mitchell," I'm like, "You know what, Michael? Uh, you know what? Uh, this is gonna be a fun one." So thank you so much for joining me.

Mitchell Green 0:45 Absolutely. Thanks for having me on. Nigel's a legend, so...

Harry Stebbings 0:48 He is a legend. Uh, always makes me feel very lazy though. Uh, so athletic.

Mitchell Green 0:52 He, he, he's also the hardest working man and, uh, you know, I was like, "Oh, how..." You know, I joked to him the first time I met him. I'm like, "Well, how's retirement?" And then he showed me his Outlook calendar, and I'm like, "I think you work more now than you did when you ran Capital One." But... And by the way, never ever go on a bicycle ride with him.

Harry Stebbings 1:07 I would never. Uh, before we dive into LeadEdge-

Mitchell Green 1:10 Sure.

Harry Stebbings 1:10 ... there was Tiger and there was Bessemer before.

Mitchell Green 1:12 Yeah.

Harry Stebbings 1:12 When you think about your takeaways from those experiences that shaped how you operate and run LeadEdge today, what are the one or two that really shape how you think about LeadEdge?

Mitchell Green 1:21 Uh, what I would tell you is my time at Bessemer was very like formative for why... and everything we do here at LeadEdge. So what... A little bit of context. When I joined Bessemer, Bes- this was 2005. Bessemer is this legendary early stage venture fund that is very Shark Tank-esque. And what I mean by that is every year a th- you know, a thousand entrepreneurs would walk in the door, and at the time they had five partners, and it was very like Shark Tank-esque. And they were wondering why, why Insight was calling, finding these $15 million revenue companies growing fast that have never raised money, and they were like personal friends with the guys at Ran-, you know, Jeff and Devin, the g- guys at Insight. And all that Insight was doing was replicating what Summit and TA did, which was hire 22 to 24-year-old knuckleheads, which my now partner Brian and I were, and pound the phones calling companies all day long. And you realize if the company calls you back, the company sucks. It's the CEO you talk to every two days for a month, and, you know, and, and you know how you know what a good company is, over two years talk to 10,000 bad companies. And so when we got there a week into the job, they're like, "Okay, next Monday you're gonna come and present your best companies." And we got there, we're like, "Oh, we found this great company. It's two million in revenue. It's gonna be the next Google." They're like, "No, it's not. This company sucks. Find us companies that meet like 10 million of revenue." And then the next week you'd find a company that meets 12 million of revenue but grows 10% a year, and they're like, "No, no, find us companies that grow fif- " for them it was like 50% a year. And then you find a company but it has, it's 20 million in revenue, grows 40% a year, but you know, has 30% gross margins. And they're like, "No, no, find us businesses with like 70% gross margins." And they had five, and they over like a period of a six-week time or eight-week time, built these like five criteria. And they basically said, "On Mondays when we do our pipeline meetings, we want you to never bring a company that meets less than three criteria. If it meets five, you better already have the meeting set up, the next meeting, and start the pipeline meeting with, 'I spoke to company ABC, it meets X number of criteria. Here's what it does.'" And so it just like was a very rigid framework. In a world where like you can call companies all day long and it's like an unlimited universe, like stay like very rigid. And so, and we took that framework, we expanded it to six, now it's the LeadEdge 8, and that defines everything we do.

Harry Stebbings 3:55 I love that in terms of how it defines everything you do, and I love the framework structure. I had Nabil on from Spark recently, and he said that bluntly, this form of spreadsheet investing respectfully, and I hope you don't mind me calling it spreadsheet investing.

Mitchell Green 4:05 Totally fine.

Harry Stebbings 4:06 Okay. Is, uh, outdated in a world of AI and in the next generation, and that a kind of banker-led approach will not work in the next generation. Is that fair? And how do you think about that? Because I am concerned that that is the case.

Mitchell Green 4:21 Look, we speak to 10,000 companies a year. We have a team of 20 18 to 22-year-olds. So, or sorry, 20 to 22. We haven't gone pre-college yet. So like 20, 22 to 24-year-olds that are speaking to 10,000 companies a year. If I say I need to meet all eight of these criteria, it's about a 1% yield, which is, you know, out of 10,000 companies, 100 meet all eight criteria, and to do five to seven deals a year, that's like too small of a pond to fish in. Like you, you, you wouldn't end up doing anything. So what we find is if you say, "I need to meet five or more of these criteria," it's just objective. Like, you're 23 years old, was the company four million in revenue or 18 million in revenue? You find about 10%. And this is after speaking to probably 70,000 companies over the last decade. It's about a 10% yield you get five or more criteria. We do due diligence. So that gets you 10,000 to 1,000. You do due diligence on 150 to 175 of them. How do you go from 1,000 to 150 to 175? Most aren't looking to do anything, 'cause you're calling them, they're not calling you. And by the way, the good ones don't call you back. The good ones you call every two days for a month. That 150 to 175 leads you to do five to seven deals a year. In terms of the AI response st- and so like we find the companies, 70% of what the stuff we invest in, the guys at Spark have never looked at, they've never heard of. Um, and, and why? Because they, they're investing mainly in the coasts. Less than 10% of our companies are in the Bay Area. Not 'cause we don't like Bay Area entrepre- entrepreneurs. We love Bay Area entrepreneurs. They kinda built some of the biggest companies in the planet Earth. I just think it's very hard to make money at making, you know, at 100 times revenues invest in. And so like, and also if you look at our companies, um, less than 10% are in the Bay Area.... 70% of the time, we're the first institutional investor. Now, AI and, you know, disrupt all this stuff. So when DeepSeek was announced, which I find quite funny that a lot of people that invest in the infrastructure of AI didn't even know about it, uh, 'cause you, it's like... And by the way, I think it's

Mitchell Green 6:25 the, I think investing in AI infrastructure today is like investing in websites in 1997. You and I could have taken $50 million, bought Sun Microsystems servers, and built a website. Today, for £10 a month, we can build a website that's 50 times better than that. Same thing's gonna happen. Prices are gonna plummet. But the stock market actually acted pretty rationally that day. What happened? NVIDIA's stock fell, the software stocks went up. So why, why do I mention that? We're investors in a company in Toronto that we own the business called Gravity, world's most boring company. It makes budget planning software for small local governments. If you are the water district of Atherton, if you are the Palo Alto Police Department, you need to post a budget online. It helps you plan the budget, post it online. It's a nicely, it's a roughly around a $10 million business, grows very nicely, had never raised capital. Before we came in, had never had a salesperson. We came in, uh, brought our new CEO, brought in a CRO, partnered with a guy who had built a $200 million gov tech business. My point is here on the AI stuff, they have, I don't know, 10 software engineers, 12. They can use companies like Cursor, Copilot to help their 10 engineers become like 30 or 40 engineers. And you're gonna see this at Salesforce. You're gonna see this at Workday. The incumbents usually win. You know, if... Since the iPhone came out in 2007, 2000 whatever, 6, whatever it was, there's only been three companies built that did not exist before that were $100 billion companies, ByteDance, Pinduoduo, and Uber. Who won? Facebook, Google, Microsoft, like incumbency wins. The, it's customer distribution. The idea of a single person AI company, I, I think is like comical at

Mitchell Green 8:11 best.

Harry Stebbings 8:11 Which is why... Unpack that, 'cause everyone is saying, "Hey, we're gonna have billion dollar companies with one person."

Mitchell Green 8:16 It's like (laughs) these software companies are not like... As you know, you, you, you run an awesome venture fund. Like a lot of the software stuff isn't that, it's not like that complicated. This is not like rocket science tech that people are solving. It's sales, it's distribution, it's-

Harry Stebbings 8:29 It's GTM, it's regulation-

Mitchell Green 8:30 Yes, it's go to market.

Harry Stebbings 8:31 ... 40, it's difficult.

Mitchell Green 8:32 Exactly, it's that kind of stuff. And, you know, if, if I had a dollar for every time somebody had said to me like, "Oh, Microsoft's just gonna do this," like I would've never invested in any software companies, and nor would anybody else have. But the great thing is, is it's like people ask us, they're like, "Well, you must run out of companies to call." Every, every Monday morning, new companies come in that I, we've never heard of that, that they, you know, this is like software... You know, when, when Josh Kushner said it 10 years ago that software's hitting the world, I was like, oh, I just kind of like, this sounds crazy. But he's right, like it's changing every sector and every industry. And I believe, look, I could be totally wrong, but that, but when you look at like technological trends over the last 50 years, people always overestimate it over the near term, and they always underestimate it in the long term. AI is going to completely revolutionize the world over the next 10 to 20 years. But it's not gonna because we create a new call center software company. There's gonna be some type of company that AI is enabling that nobody else could do something before, and that changes it. And it's gonna be guys like you or Benchmark or Sequoia that find that thing, um, at the very early stage. And my guess is it is not just some infrastructure software company that like the whole w- world knows about right now.

Harry Stebbings 9:47 I completely agree with you. I just wanna take it in turn, 'cause you mentioned Gravity, this company. You said like 10 million ARR.

Mitchell Green 9:52 Yeah.

Harry Stebbings 9:52 I'm just intrigued, 'cause it's a very different world to the one I actually inhabit-

Mitchell Green 9:54 Yeah.

Harry Stebbings 9:54 ... honestly, Mitchell. Like what does that deal look like-

Mitchell Green 9:58 Yeah.

Harry Stebbings 9:58 ... in terms of price?

Mitchell Green 10:00 So we, uh, we are able to buy businesses. So we are able to buy bootstrap companies at, you know... We, I think we bought the business for like $50 million or something like that. We own the company. Like we bought the business for $50 million. And by the way, it grows like 50%, 60% a year. Now, by the way, it will never be an IPO. In a million years, it will never be an IPO. Um, we wanna build a business... So I'll give you an example. We just sold a company, and I don't wanna talk about returns on here at all-

Harry Stebbings 10:32 Yeah.

Mitchell Green 10:32 ... but I'll tell you about like both sides. There was a company called SafeSend that makes, um, it's like a verticalized version of DocuSign for tax returns. Um, there's a bunch of reasons DocuSign is not very good at it. It also is like the tax organizer that people get that like, you know, did you get married this year? Did you have kids? Did you move? And all these sort of things. When we invested, when we bought, we bought about 60% of the company in 2021. My partner, Nima, did the deal, and my partner, Brian. Um, that business we met through cold calling, it was based in Ann Arbor, Michigan. It was a bootstrap business that had never raised capital, had been around for six or seven years, and it was COVID-enabled. And what do I mean by that? Well, it turns out before COVID, a bunch of people like used to literally go to their accountant's office and like sign their tax returns. Sounds totally insane. Um, but after COVID, like you couldn't do... During COVID, you couldn't do that, so it was all electronic. But then it turns out it stayed COVID-enabled. Unlike a virtual events company, like a Hopin, where like people during COVID couldn't go to, couldn't go to events, they went to virtual events. It turns out that people like to go to Vegas and drink beer and get away from their husbands and wives and children. And so like everything went back to Vegas and these events. You'd never have gotten a DocuSign and said, "Oh, I'm sorry, please send me a paper copy."

Harry Stebbings 11:51 (sighs)

Mitchell Green 11:51 It's like the reverse. So this thing was cool. So we invested in that business. It was about 13 of ARR. It was growing about 50%, 60% a year. It was a controlled deal, so we were buying 60% of the company, and we bought 60% for about 90 of equity and 20 of debt. So what is that? I don't know, 130, $140 million valuation. In three and a half years, we...... built the business to about 47 million of revenue and, you know, n- very nicely profitable, and we sold it to Thomson Reuters, um, y- um, you know, for a great return. Um, it was publicly announced, uh, what- what it was. And, um, that was a business that if you had read our investment memo, in- in... the word IPO would not have come up in the thing. We were like, "Listen, we'll grow it from $13-, $14 million to $60, $70, $80 million, and we'll sell it to a mid-market private equity fund because it's got 90+ percent gross dollar retention, or we'll sell it to a strategic." Um, if that deal... so we paid, you know, I don't know, 130, 140 for it. Middle of '21. Insanity, right? Had that deal, been backed by Benchmark, like Vishay or Fent- Peter Fenton, one of those guys, backed at Benchmark, doing a minority deal, based in Silicon Valley, it would've been $500 million.

Harry Stebbings 13:07 Yeah.

Mitchell Green 13:07 And so like, let's go find stuff. We don't have to play the same game. Let's go find the boring stuff that's not gonna be the next... there's 0% chance it's the next Snowflake, it's the next Datadog. Let's go find stuff that we can just build, like, you know, invest when they're $10- to $20 million revenue bus- software businesses and exit 'em when they're $60- to $80 million software businesses. If, like, if I talk to these-

Harry Stebbings 13:27 The immed- the immediate response would be that yours aren't generational defining founders.

Mitchell Green 13:30 100%. Correct.

Harry Stebbings 13:31 Like me, Fenton, Vishay would be like, "No, we have to back founders who reshape categories, like true, true visionary innovators." And here, you're talking about a control deal where you're bringing in a team, which is amazing-

Mitchell Green 13:41 Yeah.

Harry Stebbings 13:41 ... but a very different scenario.

Mitchell Green 13:43 That- that's totally fine. Li- li- like, I- I don't have to, like... we have these eight criteria. Some of them are, like, generational companies. Like, look, we've been b... you know, late last year, we were buying ByteDance. We were paying five times earnings for it. It grows like 25-30% a year. That's probably a generation. I mean, it's already a gigantic company, but like, it's just, do you meet the framework of what we do? We own a business called ExaGrid that was started in 2002. We own about a third of the company. It last raised money 15 years ago. We bought out Lehman Brothers. It's a $165-, $170 million revenue business that competes with HP and Dell in, like, storage devices. It's a 70% gross margin business. It did $26 million of EBITDA last year. We bought it for... we bought our stake at $130 million valuation. Like, great, I'm gonna build it into a $250 million revenue business doing 70 of EBITDA, and I'm gonna sell it for 10 times EBITDA and make four times that money. Like, no, it is not generational game defining, but it is tech investing making really good retu- making, like, you know, good returns.

Harry Stebbings 14:49 So I am really worried because we're seeing the shakeout now. I'm getting old. Uh, you said... I think you said I was 32. I'm 28, Mitchell-

Mitchell Green 14:56 (laughs)

Harry Stebbings 14:56 ... just to clarify that.

Mitchell Green 14:57 No, I meant the guy from Spark.

Harry Stebbings 14:58 Oh, thank God.

Mitchell Green 14:59 (laughs)

Harry Stebbings 14:59 I was like, "Jesus, I'm not

Harry Stebbings 15:01 that..." Uh, but, uh, you know, I'm really worried because we're seeing this generation of SaaS companies now that's raised a lot of money, but actually they're not profitable. Growth is in the mid-teens now yearly. Like this is, you know, 10% to 20% growth, uh, and revenues are $50 to $200 million. They are not big enough for PE.

Mitchell Green 15:17 Living dead.

Harry Stebbings 15:18 Wh- what happens? Like, teach me.

Mitchell Green 15:20 Yeah. Fundamental problem that happened. We saw this, by the way, at Bessemer when we were at Bessemer Coal Company. It was back then. Uh, you would basically e- exit a company through an IPO or a strategic. Those were like the two options on how you could get out of a company. And if the strategic didn't show up and if you got it and it's like $50, $60, $70 million revenue and it stopped growing, you'd be like, "Well then, what the heck do I do?" So... and in 2010, 2008 timeframe, the- mid-market private equity firms like Nautic Partners, GTCR, Charles Bank, they would buy industrial companies, manufacturing companies, services companies. Some bought consumer, some bought healthcare, none bought software. And that was just as like the Vistas, Thomas, uh, and Franciscos were like just starting to start. Fast-forward today, you now have these big software private equity firms that have gotten very big, and you also have mid-market private equity funds that... where, by the way, these portfolios, they still buy industrial companies, manufacturing companies. Their portfolios grow at like GDP plus two, right? So if I bring them a company growing 15% a year, like they think... that- that's like, that's like really fast for them. And now, it's not 100%, but 50%, 60% of these mid-market private equity firms also buy software companies. Like, they have a sleeve to do software. So now if you, like, look at all of our exits, a third of our exits have actually come fr- t- come to private equity. In those companies... by the way, I've got some in our portfolio. Don't worry. We did some r-... we did some real stupid stuff in 2022, 2020 and '21, as everybody else did as well.

Harry Stebbings 16:53 No.

Mitchell Green 16:53 Um, no, no, nobody-

Harry Stebbings 16:54 I didn't. I didn't. I-

Mitchell Green 16:55 Yeah, n- no. Exactly. None. Um, you'll have companies that have $130 million of revenue, that have 18% growth. They don't burn that much money, but they have $130 million of cash. Like, these companies effectively went public. When... in, in 2015, '17, when companies went public, they'd raise $100 to $300 million. Okay, forget the Ubers and Facebooks and stuff like that. But most companies would raise $100 to $300 million. In '20 and '21, they would go raise $100 to $300 million. These companies completed IPOs. You have to get them to r-... I mean, like, we- we've just like drilled in a couple of our companies that ha-... we have this. It's like you have to get to rule of 40 because that's the only way you're getting out. A strategic is not gonna just come and buy you. Your- this company's never gonna go public. You need to get it to rule of 40 to try to either... to sell it to a private equity fund. Like, and by the way, it... I'm sorry the last round was $3 billion. You're $120 million in revenue, growing 18% a year. If we can get it to rule of 40, you might be worth five times revenues. Like, and, and again, you can try to pivot and pivot all you want. There are so many VCs that just like to, like, waste their time on, on company boards. We do not understand it. We're just like, "Listen. Yes, we have a pref, so we would get our 1X, but if you told me today I could take a .7X just to get out of it, I would happily cut you. I would ha-... I would happily do it." There are hundreds of these companies out there.

Mitchell Green 18:20 The problem with the IPO market, the IPO market is actually totally fine.If you look at IPO performance of companies, they've actually done pretty well versus opening day prices. Look at Reddits, look at some these other things. The, the issue is, like, the good companies, the Grafana Labs, the Databricks, like, they have so much money, they have so much cash, they don't... The Stripes, they don't need to go public. And then you have this whole other c- sector companies that can't go public.

Harry Stebbings 18:41 I'm gonna make a contrarian statement. I do not think in five years the majority of companies that could go public will go public. Uh, I, I think being public will be a unfortunate consequence of scale.

Mitchell Green 18:53 And that's really bad for the venture capital industry and LPs.

Harry Stebbings 18:57 If we don't have a very developed or mature secondaries market.

Mitchell Green 19:01 Correct. That is, like, very, um, in the... Y- do you think guys like Don Valentin, or Mike Moritz, or this John Doerr, they would be, like, putting guns to these founders' heads today and being like, "You need to go public. Don't be afraid of the 27-year-old HBA, uh, at Harvard Business School analyst. You'll be fine." Um, we actually think it makes companies better, uh, like, I get, I get both sides of the trade.

Harry Stebbings 19:23 How, how, how does it, how does it make them better? You know, John, uh, John Colson said the other day, "Listen, if you are a public company, or if you are a CEO, and you think that having an analyst at Goldman saying, 'Oh, you need to improve your margins,' is gonna increase the discipline within your company, then you clearly do not have a great company."

Mitchell Green 19:39 Look, there's, there's two sides of it. I, um... Look, nobody says you, by the way, have to be a public company. Chanel, Tetra Pak, uh, you know, Amway, there are c- big private company, Koch Industries, you do not have to be a public company. But I do think if you take venture capital money from people, you should be very clear on... Look, I think the Stripe guy, I don't know him, but, like, the Stripe guys, I think very early on, were saying like, "We don't wanna be a public company. So, like, if you invest in us, just know that we very well might not be public." I think if you're very open and honest with your investors, I think that's totally fine. Um, where I do think being... Look, there are two different ways. I mean, obviously, the quarterly guide, the quarterly cadence of public companies is a little bit nonsen- nonsensical. Um, however, I think if you go ask a lot of, like, Marc B- Marc Benioff or, like, you know, the Google guys, "Did being a public company make them more disciplined? Did it, like, m- make them, like, prioritize one thing over another thing?" They probably would say, like, "But it was a necessary evil. They had investors that wanted liquidity that they needed, th- they needed to, to get out." Um, we, we... Look, I do think, I do think, like, a company like Zoom went public because they're, you know, it's a very profitable business growing fast. They went public because pri- public companies they compete with were constantly like, "Well, Zoom, it's a tiny business. Like, why do you want..." You know, like, they use it as a negative where you can be like, "Okay, go look at our balance sheet." Um, but, like, I do think the quarterly cadence is a little bit ridiculous. But there are a lot, some companies also just don't care a, care as much about it, and they, their stocks are gonna be more volatile. And, like, uh, we have no problem with companies that go public and wanna have dual class listed stock. I've got one in TransferWise over here.

Harry Stebbings 21:19 Do you think that private market investors, venture investors are advantageously positioned because of asymmetric information and historical information to manage the book once it goes public? In other words, is Roelof and the Evergreen Fund the right structure or do you think it should be handed over to LPs and they are as well positioned?

Mitchell Green 21:39 So, I believe it depels- depends what you tell your LPs your mandate is. I believe most private market investors are very good company pickers, but they're not... But, like, good company and good investment are two very fundamentally different things because of valuation and when you're a public company you can know on if... If you are a early stage investor, when your company goes public, you should get off the board and sell the company. Uh, 'cause I suspect that's what you've told most of your investors that you do. You spend all your time picking small companies, grow them into big companies and they go public. Just get off and call it a day. Look, we are relentless in our focus of trying to make, like, two to five X in three to seven years. And when we do it, just, like, move on to the next company. Now, again, our business is not try... Like, the early stage venture business is a lot of, like, trying to get 100 baggers and, but you're gonna have a bunch of zeros as a result. That's just not our business. And, like, we just feel like if you can cut the downside scenarios of the zeros, you can generate, like, really good returns. Like, look, people have always credited us with, like, very high, like, DPIs and it's just a relentless focus on selling. Like, I know this, when I sell, I'll always either sell too early or too late. I've never, like, I've never... Have I regretted selling too early? Yes. I've never regret, like, too late. Like, I, I just think pigs get

Mitchell Green 23:04 slaughtered at the end of the day.

Harry Stebbings 23:05 I'm so enjoying this. So, relentless focus on selling. What have been your lessons from a relentless focus on selling and what does that really mean?

Mitchell Green 23:12 Relent- So, our fo... We have a disposition committee at LeadEdge, and we meet like, uh-

Harry Stebbings 23:16 What is a disposition comm-

Mitchell Green 23:18 We look at the portfolio and we say like, "Hey, how is the company doing?" By the way, there's... What, what's an investment committee? Investment committee is you, you anal- you sit and, you know, talk about companies that you wanna invest in. You, like, analyze, "Should I invest in this company?" Well, a disposition committee is the exact same thing, just in reverse. "I'm already an investor in this company. How should we think about getting out of the company?" Oh, there's secondary. Can we find secondary? Uh, is there an early investor that might wanna buy more of our stake? Is there a crossover hedge fund that would wanna buy our stake? Why might we wanna sell? 'Cause the company, we think the market size could be too small, we've lost confid- we've lost confidence in the management team. There could be a whole list of reasons. But it's like, we think there's a lot of really good funds that are really good at investing. We think there's a lot of people that are not very good at selling. Um, by the way, I might blame LPs for this just as much as GPs. Like, the LPs have to, like, hold the GPs accountable. They... One of my longtime LPs refers to some p- like, some VCs as pigs at the trough. It's like, "Well, I, I ate the food. Uh, and I, I, like, spent all the money, now give me more mon- give me more money to spend again." And, like, they couldn't give you the third or fourth time if you haven't given a lot of the money back from the first or second time. There's just a lot of, like, com- I think a lot of people in this industry are very complacent. All of us as GPs need to do a better job getting money back to LPs and figuring out how to do it.

Harry Stebbings 24:40 So, I...You said there about disposition committee-

Mitchell Green 24:43 Yeah.

Harry Stebbings 24:44 ... uh, and then I wanna talk about, like, venture's place in a money manager's book because-

Mitchell Green 24:47 Yeah.

Harry Stebbings 24:47 ... it's gonna be too interesting. Um, you said there about disposition committee, w- I'm often told that (scoffs) companies are bought, they're not sold. Do you agree? And how do you reflect on that "bought, not sold" as a sentiment?

Mitchell Green 24:59 You have t- Well, in order to get... Look, I, I've sold li- I've had lots of returns generated by selling the companies, by putting them up for an auction and selling the companies. Um, it is a... There are a lot of things a lot of companies don't do that they probably should do. You, it's very hard to get bought if your compet- if your strategics don't know who you are. So, uh, we encourage all of our founders to get to know the biggest strategics in the space, get to know the private equity funds that, you know, could eventually buy you. Like, you know, by the way, you know, if you think you're gonna do 50 million in revenues this year, up from 30, tell them you're gonna do 40, and then beat the number. Uh, and it's just building relationships and partnerships with people.

Harry Stebbings 25:40 Y- we mentioned there about, kind of, duration. You said, like, two to seven X in three to five years?

Mitchell Green 25:44 We're trying to make two to five Xs in three to seven years, which basically blends to a 20% net IRR curve.

Harry Stebbings 25:50 Okay, totally makes sense. The thing that I hear there is duration. So I'm a money manager at a big endowment pension fund, and I'm going, "Huh. Okay. With that duration, if we compare that to now a 15-year, what it will be duration for an early-stage venture fund-

Mitchell Green 26:05 Yes. (laughs)

Harry Stebbings 26:05 ... I can compound my money with you three times over, almost-

Mitchell Green 26:09 Yeah.

Harry Stebbings 26:10 ... huh? And get that same blended, say, three-

Mitchell Green 26:13 Yeah.

Harry Stebbings 26:13 ... three X.

Mitchell Green 26:14 Yeah.

Harry Stebbings 26:15 Or I can go to a early-stage venture fund, which is now probably outsized in terms of just actual size of f- uh, fund, and maybe get a three X. Mitchell, I've seen the data. There is not many three X funds.

Mitchell Green 26:27 Oh, by the way-

Harry Stebbings 26:28 It's hard to do.

Mitchell Green 26:28 By the way, we m- Oh, totally agree with you, by the way. We met some en- we met some endowments, like, a couple years ago that said, "Oh, you know, your lead edge, your fund returns aren't good enough. All your funds aren't three X net funds. I only invest in three X net funds." And we turned to them, we, we left the meeting and we said to ourselves, "Should we go hire that guy immediately?" Like, "Should we hire him to run our money?" Because, like, we wanna w- please tell me where all these, like, three X net funds are all run. It's a complete fallacy.

Harry Stebbings 26:53 And so my, but my point is, if I can compound my money with you three times over and get that, say, three X blended, versus a hopeful three X in a venture fund over a 15-year period, and this is my point, the duration is so long, how does venture earn its place in a large-

Mitchell Green 27:08 I think it's, I think it's very hard. I think there's too many venture funds. I think what I, my advice to guys and gals that go start venture funds and start early-stage venture funds, um, and, and do you ever interviewed or do you know Fabrice Grinda-

Harry Stebbings 27:21 Yeah, of course.

Mitchell Green 27:21 ... from Zamora in?

Harry Stebbings 27:22 I've interviewed him twice.

Mitchell Green 27:22 Yeah.

Harry Stebbings 27:22 I really like him.

Mitchell Green 27:23 So, so Fabrice has been an LP of ours for 15 years. He's a very good friend. Those guys have figured out the game. It's like, invest in the seed or A and sell a bunch in the B or C. That is a fantastic game to play. And you can make a ton of money doing it, and you generate DPI back to your investors. You still get to ride your winners. And, like, you see, you're provi- you're providing both. Like, the 15-year duration thing is, is totally true, and, like, it should scare more... It, it's actually shocking that m- like, that the number of venture funds over the last, like, five or seven years has actually increased, given that the exits are getting longer, not shorter. What, what I believe, like, emerging managers and people starting venture funds need to do is take advantage of the secondary win- of the secondary markets, and the fact that these growth funds have gotten so big, or the crossover hedge funds that wanna get in, or the public funds that wanna get into private investing, and start selling off stakes. Do the seed, do the A, and sell some in the B or C. Even if you, you're not selling the whole position, just like start to return

Mitchell Green 28:24 money back to people.

Harry Stebbings 28:25 I get you-

Mitchell Green 28:25 Yeah.

Harry Stebbings 28:25 ... but then I also think, oh, oh, oh, because I just had a GP on from Emergence-

Mitchell Green 28:30 Yeah.

Harry Stebbings 28:31 ... and he basically outlined the different fund returns they had, had they sold or not sold positions, and bluntly, they sold their Salesforce position at IPO, and had they not, they would have made another, I'm butchering it, but 20 to 30 billion-

Mitchell Green 28:47 Yeah.

Harry Stebbings 28:47 ... in gains. That's, Bessemer sold their Shopify position at IPO, lost billions. My point being that, with your mention of Fabrice-

Mitchell Green 28:56 Yeah.

Harry Stebbings 28:56 ... and selling the BC, sure, but actually, if venture's a power law game-

Mitchell Green 29:01 That's true. Yeah, yeah. So like, I take it... But by the way, you gotta stay in business, and so I think the faster a venture fund can get to a w- if you could get a venture fund that it could get to a one X faster than other funds, that fund could probably grow assets quite a bit. And I mean, I'm also talking towards emerging managers as well, who, like, need to stay in business and, you know, need to raise funds two, three, four, and you know, are not people like Bessemer that have been in business 80 years. Um, and by the way, for every Shopify, go ask them about, you know, 1999 and 2000, or like, how many billions of dollars were lo- were lost in 20- 2021 by not distributing positions.

Harry Stebbings 29:37 You said about stupid stuff in '21, '22. We did all, obviously.

Mitchell Green 29:41 Everybody did.

Harry Stebbings 29:42 What was your most stupid, and what do you learn from it?

Mitchell Green 29:46 Our stupidest ev- our, our stupidest mistakes were just, like, overpaying for a couple companies, assuming the exit multiple was going to be, like, higher than it actually is. Like, you know, and look, I credit my partner, Nime, you know, who's been with me since the beginning, with really in like 2018 or '19, we really started to shift our, our business away from Silicon Valley-based companies and needing to say every company needed to IPO. It was go find these Gravities, go find this SafeSend, go find, you know-

Harry Stebbings 30:17 What caused that? 'Cause I go through your Fund Ones, dude, and it's like your Alibabas, your Spotifys, your Ubers, fantastic companies-

Mitchell Green 30:23 Yeah.

Harry Stebbings 30:23 ... but all venture.

Mitchell Green 30:24 Yeah, yeah, yeah. What caused it?

Harry Stebbings 30:26 Huh.

Mitchell Green 30:26 Uh, it was caused by the fact that we looked around and said there's no possible way that every one of these companies can grow to be as big as they are. Like y- just the, the law of compounding when you're investing over a billion or two billion dollars of revenue, or sorry, a billion or two billion of valuation, it's just, like, harder. It's just like the law, the law of large numbers. And we also just looked and we're like, "Who's got money?"... mid-market private equity funds, and there's hundreds of them. And we were like, none of these guys used to buy software companies. They're now starting to buy software companies. So now we have like a fertile ground. And if you think about all these mid-market private equity funds, their portfolios grow 7% a year, 6% a year, top line revenue growth. Industrial companies, manufacturing companies. Now they have sleeves to buy software companies, but wait a second, for us, we'll go buy a company that's 40, with, you know, $30 million of revenue, $10, $20 million of revenue, growing 40% a year. Let's grow it, let's, you know, two to two and a half, three X the revenues, and then it'll be growing like 15% a year. That's like fast for the... And we can, we can run an auction. We can sell the business, and we'll get 20 people that bid for it.

Harry Stebbings 31:31 So, so this is my point. So actually, those companies growing mid-teens-

Mitchell Green 31:34 Yeah.

Harry Stebbings 31:34 ... with $50 to $100 million in revenue, there is an asset for them.

Mitchell Green 31:38 There is. They just need to pivot the business and realize they're not building the next Datadogs and Snowflakes, and they need to get them to rule of 40. And the most important thing getting the rule of 40 is high gross margins. If you have high gross margins and you have 90+ percent gross dollar retention, it's shame... I mean, you can let the private equity firm, you can try to sell it when you're losing money, break even. Or what some of these growth equity firms and venture funds should do is do it themselves. Like it's not that complicated. Like, it's like, look, you have high retention rates. You know, if you have low retention, like good luck. Um, you know, if you have 70, 75, 80% gross retention, it's much harder. But if you have a 90, 95% gross dollar retention business, yeah, like make the hard decisions, you know, and get the thing to profitable. Turn it into rule of 40.

Harry Stebbings 32:22 So you said, hey, one of the mistakes was we paid up for things a little bit too much. How do you determine between a stretch on price and a mistake that we stretched too far?

Mitchell Green 32:31 We build a five-year model. The model is wrong. We try to put a reasonable exit multiple on it, and then just i- and it-

Harry Stebbings 32:39 Is that valuable to do? And what I mean by that, respectfully, is like exit multiples vary so much over different durations. If we look back at 2021, '22, the multiple would have been so much higher versus today, so much lower. I don't know what's gonna get you.

Mitchell Green 32:51 I think you need to use like some reasonable, I think for software comp- Again, revenue multiples for software companies are just shorthand for EBITDA. Like it's not... At the end of the day, I think you should assume if you b- if I- if you build a software company and you're in it, you know, and it's growing, you should assume an exit of it's growing 15% to 25%, 15% to 30% a year, and that should trade somewhere between four to seven times revenues. Like yes, like we, so we tend to like, I think our bands that we tend to assume most exits at are like four to eight times revenues. Like maybe sometimes ten times at the absolute highest if it's like growing 30, 40% a year. By the way, I credit the guys at ICONIC like a huge amount because of... Look, they were underwriting deals in '15, '16, '17. I think it like, they- they thought they'd exit stuff 10 to 12 times revenues and they, they, so they bought the best assets and, you know, maybe paid 20% higher to get access to the best assets. And then multiples went to like 20 to 30 times. The best way, by the way, to 4X your money is 2X your revenue and 2X your multiple. By the way, the reverse happens too. So, you know, that's what's happening to all the stuff in 2021 vintage funds, like multiples got cut in half, uh, for people. And so like, you know, if you 2X your revenues and half your multiple, that's called a 1X.

Harry Stebbings 34:17 What is the stupid stuff that we are doing today that not many people are talking about? We mentioned 21 stupid-

Mitchell Green 34:25 Uh, paying 100 times revenues for companies. You know what we like to ask ourselves when we look at businesses? If I invest today and I grow it for 18 months, and I assume like it's still growing fast, am I like kind of in the money or do I need to grow for four or five years until I even get in the money? Like if you, if you're growing... And like I think in Toast, for instance, it was like when we invested in, I think it was in '07, no '16, '15, '16 time-ish, '17 timeframe, it was like 25 of revenue growing 250% a year. Like what would that... That would be a billion-dollar plus exit. That would be a billion, billion and a half dollar multiple today, valuation today. We paid 20 times revenues. It was like $500 million valuation. Like that's pretty expensive. When we think about it, we're like, okay, in a year from now, we're in it probably 10, we're in it at like 10 times. Okay, like for that growth rate, that's like seems pretty reasonable. Like I think I encourage people to ask like, "Okay, if I pay this price today, in, in 12 months, am I in it still at like 80 times revenues or 50 times revenues?" The prices being paid are totally insane. I also think, uh, not enough investors... I've had numerous entrepreneurs tell me, "Oh, I don't look at gross dollar retention. NET's the only thing that matters." And it's just like, "Oh, really?" Okay. Um, that's like, I think more investors need to focus on like gross dollar retention.

Harry Stebbings 35:46 Why so?

Mitchell Green 35:47 Okay. If you've got a business that ends at the end of 2024 at $10 million of revenue, and you say, I have, you know, and I've got, you know, 90%, and I've got 50, and I've, and I've got 200% gross dollar retention. So like, okay, my, my 10 became 20 all through existing customers, but you only have 50% gross dollar retention. You actually lost half your customers. And you had, yes, you had a few that really liked it, but that means a huge amount are like experimental. Now the pro- When you're a really small company, mo- a difference between 90% gross dollar retention and 50% isn't that much, because there's not that much of the pond to fill up or the bucket to fill up. But when you get to like 100, 200, 300 million of revenue, like that's, it results in, it's like a huge, it's a huge hole in the bottom of the bucket, which just then leads to the, you know, sales and marketing efficiency is just awful and your burn rates are much, are higher. Not enough people... And like we look at a lot of these AI software comp- tons of these AI software companies, and like the gross dollar retention rates are just like really, really low. I- it's actually like shocking.

Harry Stebbings 36:52 Pretty much all of them are.

Mitchell Green 36:54 There you go.

Harry Stebbings 36:54 Yeah. (laughs)

Mitchell Green 36:55 All the, all the, uh, uh, uh, not every one of them. Like-

Harry Stebbings 36:58 Not, not every one of them.

Mitchell Green 36:58 ... um-

Harry Stebbings 36:58 Lovable's got 85%, which is pretty good.

Mitchell Green 37:01 Yeah.

Harry Stebbings 37:01 Better than ChatGPT.

Mitchell Green 37:02 But, but again, it's not, it's not 90 grow... By the way, we have a business in our portfolio. By the way, it will not change the world. It makes cardiac monitoring software. It like... It is a very small market.

Harry Stebbings 37:13 (sighs)

Mitchell Green 37:13 It has 99% gross dollar retention. Th- like, it just means that you can run the business very capital efficiently o- over time because you don't have to keep spending money on more and more sales and marketing.

Harry Stebbings 37:24 How do you think about that kind of capital efficiency and future dilution element when investing? You know, as we said earlier, your Uber and your Alibabas, these are incredibly cash consumptive businesses, and now you found businesses which are incredibly cash-efficient, lean machines.

Mitchell Green 37:41 Yeah. So Alibaba was very cash-efficient actually. When we invested, it was a billion dollars of profit. Actually, there may be less shares of Alibaba. I credit Josiah and the team at Alibaba as actually, like, done... Like, the amount of stock-based comp dilution for a lot of public companies is totally crazy. Most people, including ourselves, over the last 15 years, massively underestimated the amount of stock-based comp dilution and c- you know, dilution that we all took. Um, you know, Uber was, Uber's was, was totally insane. Um, we tend to, you know, over the last few years, we've dramatically increased the amount of, like, dilu... We assume, you know, 20, 30% dilution. And if you're investing earlier, it could be a lot more than that.

Harry Stebbings 38:22 Mm-hmm.

Mitchell Green 38:23 Um, we have this, like, what we call cap efficiency. It's like, you know, Warren Buffett would laugh at us because it sounds kind of stupid, but it works. Are your revenues today greater than your historical cash burn, cumulatively? Not raised. If you've raised 80 but only burned 20 and you have a $40 million revenue business, like, that's a great, that's a great business. Um, but we're looking for, like, a one-to-one ratio or better. We just think it speaks to, uh, so many just quality, qualities of the business. Like, we were lucky to be investors in Benchlane. We're still, we're still investors. Um, which, you know, was a... When we invested, B- Benchmark, like, did the early rounds. Thrive was an early investor. When we in-... You know, it was like 13 of ARR, growing, you know, well north of 100% a year.

Harry Stebbings 39:12 That must have been expensive.

Mitchell Green 39:14 It was, I think we p-... Yeah, it was expensive. It was like, I wanna say in the low threes. It was expensive. Now however, the company had only burned like $10 million. It had burned very little capital, and why? Because it had, like, amazing gross dollar retention rates. And, like, and the CEO was just like, he thought a lot about, like... You know, it w- I know when it got to 20 million, it had not burned 20 to get there. Um, it, it, it just, it, they just valued the value of a dollar. You now have a lot of entrepreneurs that just like like to light money on fire. By the way, I'm not saying some... Some of them will build amazing businesses. By the way, we have definitely missed businesses that were not capital-efficient. It's just like, it wasn't for us.

Harry Stebbings 39:51 What business most sticks out to you with that in mind?

Mitchell Green 39:53 That we missed?

Harry Stebbings 39:54 Yeah.

Mitchell Green 39:54 Snowflake, like massive. I mean, when we looked at Snowflake, it had, like, horrible gross margins. Like, but again, it was a... We looked at it at $500 million, and, like, we were completely wrong, like, just, like, 100% wrong.

Harry Stebbings 40:05 How many businesses actually, though, have that perfect profile that fits yours? When you look at, as we said, your Ubers, your, uh, DoorDashes. DoorDash is, um, larger.

Mitchell Green 40:14 We looked at it, we looked at it in, in the past.

Harry Stebbings 40:16 Yeah.

Mitchell Green 40:16 So like, uh, it's fine. Again, we're gonna miss stuff. It's, it's fine, but again, we have a framework. Well, a thousand c-... 100 out of 10,000 companies will meet all eight criteria. Um, now a lot of those hundreds, the valuations would be totally insane, if you can even get in them or if they even wanna take money. Pff, o- out of 10,000 companies, 10% will meet five or more criteria.

Harry Stebbings 40:37 Now with respect, we ha- live in such an interesting asset class because it is one where the supply chooses the demand. In other words, the company chooses the source of capital-

Mitchell Green 40:46 Mm-hmm.

Harry Stebbings 40:46 ... in a lot of cases. And my question to you then is, okay, we find one that meets all the criteria. They then have to choose you. If they meet all the criteria, they probably have a lot of options. With absolute respect, Mitchell, you're not a romantic around company creation in the way that a lot of Silicon Valley VCs are or the way other investors are. Do founders resonate with the kind of financial...

Mitchell Green 41:09 Founders want... So our pitch is very simple, and it's the reason that, you know, a huge number of our founders have con- have invested in our funds post-exit. Um-

Harry Stebbings 41:22 The founder of Duo, like, uh, responded and then DM'd me after I tweeted about having you on, being like, "Amazing, amazing. Now I'm an LP, it's even more amazing." It was cool to see.

Mitchell Green 41:33 So it's like, what do we do? Why is that? So when we started LeadEdge, my partner Nimi and I, because Brian hadn't even joined yet, sat around and we're like, "Why is it we gotta take our two knuckleheads money?"

Harry Stebbings 41:45 Mm-hmm.

Mitchell Green 41:45 Like, why are they gonna take our money? And we were like, "Well, if we were the global head of HR of... If I had been the global head of HR at Pepsi, and Nimi, you had been the global head of HR at Microsoft or Dell, pick a company, we could probably cold call HR software companies to be like, 'Hey, let us invest in your business, and we'll introduce you to a bunch of, like, global HR execs.'" And that'd be, like, pretty, probably pretty believable, right? Well, we're like, "We don't have that." We had never, you know, been the global head of HR of anything or the, you know, we had never done anything except, like, cold calling analysts. So we thought like, "Well, how are we gonna get in the companies?" And, and we thought, "Let's make our competitive advantage be our LPs. So let's raise money." So like, you know, let's raise money from world class execs and entrepreneurs. And so, like, if you look on our website, 80, 90% of our LPs get permission to be listed on our website, and these are people who run and have built some of the world's largest companies. These are people like the former CEO at Charles Schwab, the former, you know, the former CEO of Kimberly-Clark, the former CEO of Colgate-Palmolive. And we go to companies and say the following: "If you invest with us, we'll give you access to our LPs who have built, run, and advised some of the world's largest companies. So A, you are a software company that sells into the pharma-bio space, you sell R&D software."Well, hey, would you wanna meet the former CEO of Pfizer? Would you wanna meet the former CEO of Biogen? And we, by the way, we introduce them during our diligence process. They act as our own version of McKinsey. That helps, that, that's how we get into deals, and that's why keep all of us.

Harry Stebbings 43:13 Great. Sounds great. Respectfully, that is a model though now that's used by a lot.

Mitchell Green 43:18 Yeah.

Harry Stebbings 43:19 You know, we... I, I have, um, I don't know, 65 billion dollar founders in our funds, uh, that... less kinda traditional company-

Mitchell Green 43:27 Yeah.

Harry Stebbings 43:27 ... much more software-led founders. But, like... and I use that as a weapon, so to speak, to win. I would say founders are like, "Yeah, that's great." But by the way, Index have that too, and s- definitely Sequoia do, and all the great firms have this kind of armory or kind of weaponry of great, great entrepreneurs who invested with them. To what extent is that differentiating?

Mitchell Green 43:49 A lot of ours aren't entrepreneurs. They're executives at, like, plain, boring vanilla software companies. Or sorry, non-software companies. Um, we just constant leverage them. We make, you know... We can track introductions. We track every intro, um, a- a- everybody says they help, very few people do. I think there's a reason that, like, you know, 80 plus portfolio company exec- former, former and current portfolio company execs who we've backed are investors in our funds. So, like, I- I- I don't know, everybody says they help, some people probably do more than others, we just do what we say we're gonna do. It's just not that hard.

Harry Stebbings 44:24 Dude, I love it, you, you said about tracking intros, that you had a very viral, um, tweet, and I can't remember who did it, I think it was, um, Pit Dessy, Shill Monas, who kind of tweeted your, like, criteria around how companies do reporting and then-

Mitchell Green 44:36 Yeah, hierarchy of bullshit.

Harry Stebbings 44:38 Yeah, and the-

Mitchell Green 44:38 How CEOs lie to us.

Harry Stebbings 44:39 Yeah, but I- we'll go into how CEOs lie to us, but one of the ones where when funds, like, you know, are fudging numbers, they track intros.

Mitchell Green 44:45 What... so, like, we are, um... We believe... So, like, we can give... There's a reason that Doug Song, who sold his company for two and a half billion dollars put money with his fund, 'cause we drove tons of intros. There's a reason that VCs is some of the biggest venture funds on the planet are longtime investors with us. They've seen us in action do it. Uh, I- I don't know why more funds that, like, say they have these incredible networks don't help people more. Like, I have no idea why. Like, even... I- I have a feeling that a lot of funds-

Harry Stebbings 45:17 Scale?

Mitchell Green 45:18 ... scale, and also a lot of people are just like... a lot... so a lot of our LPs are execs who are plus or minus five years away from retirement, 10 years, you know, they've been retired for the last five years, or they're about to retire in the next five to 10 years, and they wanna help. A l- like, a huge amount of our LPs are not from Silicon Valley. And so we find them a company and we get them involved early on in the process. I mean, it's how we, it's how we do diligence. And so if, like, you are a payments company, like, we invested in TransferWise over here, we very early on in the... before we invested, said, like, "Listen, would you wanna talk to the former CFO of PayPal? Would you wanna talk to, you know, the former president of Visa?" And any good entrepreneur is gonna be like, "Yeah, that sounds like interesting people." And then we call them and ask them, "Hey, what'd you think?"

Harry Stebbings 46:04 How do you manage that from an infrastructure perspective? 'Cause that sounds amazing, but it's difficult to-

Mitchell Green 46:08 It's a lot of work.

Harry Stebbings 46:09 Yeah, it's difficult to coordinate.

Mitchell Green 46:10 Uh, so look, every intro we make... I wish I could tell you that it's automatically logged, you know, every... be- we BCC an assistant, and it, it gets logged in Salesforce. It's a highly customized version of Salesforce that, you know, we've built and spent millions of dollars on customizing over the last, you know, 15 years.

Harry Stebbings 46:26 Do you have, like, heads of network and network managers and community managers?

Mitchell Green 46:29 We do not. Um, what we have is, uh, every person that... if you've worked at Lead Edge... if you work at Lead Edge, like, every person on the investment team has access to all the LPs. And by the way, to be clear, if you're an associate who's worked here for two years, and... or a year and a half, and you're going to Seattle for a wedding, and you say, "Hey, I wanna stay on Monday." We'll be like, "Wonderful, you should meet, like, these four LPs. We'll pay for your plane ticket." Like, we encourage everybody that works at the firm to get to know our LPs, spend time with them, educate them on what's going on in the portfolio. Versus if I was, like, a vice president at... I'll pick on Index, but I could pick any firm on the planet. If I was a vice president at Index and I was flying to Seattle to meet a company, I would go meet the company, I'd go meet maybe another prospect company, and then I'd fly home. I wouldn't be spending, you know, six hours meeting four other individuals and, like, eh, who are LPs in our... who are LPs in Index. It's just n- it's not their model. It's... Like, these funds are primarily backed by the largest endowments and pension funds in the world. And our model is like, we're gonna be 95% backed by individuals, and we're gonna treat those individuals like gold. And so we're gonna communicate with them, and yeah.

Harry Stebbings 47:39 Quite a lot of VCs today say that founders are our customers. LPs are not our customers.

Mitchell Green 47:44 Well, um, I- I- I would, I would tell you that we have two customers, founders, but more importantly LPs. Because if you do not have LPs, you do not have a business.

Harry Stebbings 47:58 I 100% agree. I think- I think it's- I think it's really arrogant to suggest they are not your customer. I, I think there's two customers, as you said-

Mitchell Green 48:05 Yeah.

Harry Stebbings 48:05 ... founders and LPs, but I'm astonished by this unwillingness to recognize them as customers that we have to provide a great product for.

Mitchell Green 48:12 So, like, we run our business trying to figure out how do we have 97%... how do we keep up 97% gross dollar retention, not net, gross, with LPs? So, like, if you think that, what do you do? So we communicate with them, we do lots of events with them, we do quarterly calls, we walk people through the portfolio, we tell people how things are doing. "Look, some companies are gonna be doing well one quarter, some companies are gonna be doing bad one quarter." But again, when you grow 30% a quarter on average, like, some are gonna be doing well, some are gonna be doing bad. But just, like, the lack of transparency in this industry to LPs is shocking.

Harry Stebbings 48:48 To what extent do you think your re-up rate is determined by your engagement, community, uh, communication versus performance?

Mitchell Green 48:56 It's both. By the way, without good performance you can have none of it, but I can tell you that people w- here's the thing though-People want the nice guy, the good guy, the person who communicates to win. So like if, if you have a bad vintage or two bad vintage funds, they're more likely, I think, to stay with you.

Harry Stebbings 49:15 100%. And that line's not dots again. Um, you said there they like, you know, they won't come back without the performance. Wrong.

Mitchell Green 49:23 They do come- By the way-

Harry Stebbings 49:24 They, they do. We've seen-

Mitchell Green 49:25 By the way, by the way, there are, there are... I'm not gonna like talk about. There is a very well-known, very large private equity fund that would tip, historically would raise their... It's not in software. Would raise their funds and literally be like, "The LP is, you have three weeks to get your docs in. Take it or leave it. These are the terms. We're not changing anything." They then had a bad fund vintage. They've been in the market for three and a half years. The fund they just closed is like a fraction the size of their fund before. And they... I asked an LP, "What's the problem?" He's like, "You know exactly the problem is. They're jerks." But it, it's like... It's, it just... Your LPs, like, they give you the money.

Harry Stebbings 49:58 (sighs)

Mitchell Green 49:58 Like without you... They're paying you. Like it's... I don't know.

Harry Stebbings 50:01 I, I get you, but we've seen a lot of fund per- like returns or performance numbers, uh, (laughs) leak in recent months. Um, I'm not gonna name the funds because I don't want to-

Mitchell Green 50:11 Yeah.

Harry Stebbings 50:11 ... bloody pick them out. And their, their numbers have been poor, to be blunt. Um, mid-teens IRRs at best-

Mitchell Green 50:19 At best.

Harry Stebbings 50:20 ... uh, for early stage funds. And they have scaled AUM and had a excess supply of LP cash. Is performance even relevant?

Mitchell Green 50:30 Uh, that's why LPs are to blame too, uh, for a lot of this. Like we, we don't-

Harry Stebbings 50:36 I have many, I have many LPs come in this office-

Mitchell Green 50:38 Yeah.

Harry Stebbings 50:38 ... and say, "Hey, Harry, I have 500 million a year. Where do I go?" And I say, "Well, we go to these tier ones, but you can only get 20 in each."

Mitchell Green 50:46 Yeah.

Harry Stebbings 50:46 And so there's 100 and then they have 400 left and they go, "So see, I've got to put 75 in X multi-stage fund."

Mitchell Green 50:53 Yeah.

Harry Stebbings 50:53 And they'll say, "I just have to, it's my budget."

Mitchell Green 50:55 So what I would be... Then like the smartest ones I find are actually like, "Listen, if the, if the opportunity is not there, let's go figure out where else to put it." Like it's not like I have to put a billion dollars in venture every year. Maybe I, maybe a billion dollars in venture is too big. Like I should, I should be doing smaller. I think... Look, I, I think like there's a guy, um, Eric C. Bush at Mercer who runs research there, who took a bet on us very early on. Before Fund Three, people would like laugh at... Actually our first institutional investor in Fund Two was University of Virginia and like we literally started the meeting with like, "You're not going to invest with us. Like why would you invest with us knuckleheads?" Like you know, "We don't have a brand. We have nothing." And a lot of the investment consultants really, uh, are very brand name focused. It's like again, you, you don't get fired hiring... You don't get fired hiring IBM, hiring McKinsey. I credit this guy Eric C. Bush, who has like taken a flyer on us very early and he's done it with a bunch of other young managers. And he's, he's... It's just all about the people. Like and he, and he like digs into, "Okay, I'm in your Fund Three, why'd you exit these things in Fund One? Like how'd you think about it? How do you think about returns? How do you think about treating LPs?" Talked to a bunch of like, you know, uh, talks to a bunch of like portfolio companies. Like how do you actually add value? We tell LPs, prospect LPs, "By the way, everybody tells you they help companies. Wonderful. Let me go introduce you to 10 companies in our portfolio, call up as many people as you want and ask them if we add value."

Harry Stebbings 52:27 Do you know what I actually just do? I just put screenshots in, in decks of like introductions, two amazing people between them and you see the responses.

Mitchell Green 52:34 Yeah.

Harry Stebbings 52:34 Like tangible value-

Mitchell Green 52:35 Yeah, yeah. For sure.

Harry Stebbings 52:35 ... is like great, easy, totally get that. But respectfully, when you look at someone like Andreessen, they have proven that brand is more important than performance at scale.

Mitchell Green 52:45 Well, let's see over the next 20 years. Let's see over the next decade what happens. Um, but you're right. By the way, you're far richer than I am. So uh-

Harry Stebbings 52:51 Does that, does that make you change your perspective on the importance of brand or you just go, "Fuck that, we stay in our lane and we do that"?

Mitchell Green 52:56 We stay in our lane. So I have a huge amount of respect. There's this amazing, um-

Harry Stebbings 53:00 Is your e- Sorry, I mean this so nicely. Is your ego a little bit hurt because your performance is here-

Mitchell Green 53:06 Nope.

Harry Stebbings 53:06 ... but people don't-

Mitchell Green 53:07 Don't g- Uh, no. But here's... I respect Affirm, probably one of the best returning funds in like the tech investment s- There's a couple of them. One of them is, uh, Spectrum Equity. Incredible investors. They've kept $2 to $2.5 billion funds forever. By the way, Benchmark, funds are smaller. Now Benchmark has had like... What's incredible about Benchmark is it's like you had Gen 1, Gen 2, now you have Gen 3 and they still continue to put up really good numbers. They've, they've kept it small. Josh Kopelman at First Round has continued to stay f- small. Mike and Anne at Floodgate have continued to st- to stay small. But like sp- Like I'd... The firm that I think has generated the best returns in the tech investing world over the last 30, 40 years is... And it's become more a buyout fund, but they used to do tons of minority, is TA Associates. Um, and if you look, it's gotten gigantic, uh, huge funds. But the DPIs that they put up are just like incredible. But Spectrum is-

Harry Stebbings 54:03 What do you think they do that makes them so good?

Mitchell Green 54:05 They have a countless... They have a count... They're relentless in thinking about how to get liquidity to LPs. So a lot of stuff they do in the buyout world now is, like they'll do minority sales. They'll invest in a company, two years later, you know, sell 30% of the company to somebody else, get their bait back. So they're sitting on already a 1X. Like they're just, they're just like relentless focus on liquidity. Um, I think some... Look, some of these multi, not even multi-strap fund, like multi-, you know, these giant platform funds, the Andreessens, uh, of the world, there's just so many people at these firms. I have no interest in having like hundreds of employees. Like we have 80-

Harry Stebbings 54:43 But do you think-

Mitchell Green 54:43 ... employees and that's plenty.

Harry Stebbings 54:44 Do you think venture... Doug Leone said on the show to me that we've moved from a boutique high margin, uh, community to a commoditized low margin industry.

Mitchell Green 54:54 100% agree with him.

Harry Stebbings 54:55 Do you think that is irreversible?

Mitchell Green 54:57 (sighs)

Harry Stebbings 54:58 Is the platformization now venture, it is matured to this asset class?

Mitchell Green 55:03 Is it reversible?

Harry Stebbings 55:04 'Cause the hard thing also for me is, the cost of capital is so different. So I lost a deal recently to one of these large master funds.

Mitchell Green 55:09 Yeah.

Harry Stebbings 55:09 Uh, I did three on 15, handshake with the founder. It was pre-product, pre-revenue-

Mitchell Green 55:13 Yeah.

Harry Stebbings 55:14 ... pre-everything, but an amazing founder. And he called me up the next day and he said, "I would never walk out on a handshake, but I got offered eight on 100, and it's uncapped."

Mitchell Green 55:24 Yeah, um, look, these bad returns will do it, uh, over time, but it's gonna take a long time. Like, ba- I, I think the venture industry was about to be in for a rude awakening, and then AI showed up. It's a, it-

Harry Stebbings 55:38 I always say AI was the OxyContin that we needed. (laughs)

Mitchell Green 55:41 Yes, I think that's a, for a lot of these venture funds, I think that's true. Again, I've talked to a lot of, like, legends in this indus- like, uh, w- I love to talk to people that have been in this industry longer than I've been alive, uh, or that, that w- or invest in, like, were adults in, like, the '90s, uh, or the '80s. This, what's going on in AI looks very similar to the internet bubble, or like, you know, and it's like people didn't learn a damn thing from '20 and '21. It's, like, shocking. Uh, and I don't... And, look, I just-

Harry Stebbings 56:11 Specifi-

Mitchell Green 56:11 ... well, like let's not even talk crypto 'cause that's like a whole nother world, but-

Harry Stebbings 56:13 ... specifically, what should we have learned? Entry price matters.

Mitchell Green 56:16 A lot.

Harry Stebbings 56:17 Don't over-capitalize companies.

Mitchell Green 56:18 Bingo. Yeah. Entry price matters, don't over-capitalize companies. Like, the amount of stock dilution really, really matters. F- you know, like, if you run a fund where you need IPOs, you better invest in founders that wanna IPO their companies, uh, or have a good plan how you're gonna get a lot of secondary out of it. Um, it's, it's entry price matters. Entry price matters a ton. These companies are not all Snowflake and Facebooks. Like, they're not. Mo- the vast majority of companies, like, I put on one hand the amount of people that are capable of backing companies like Googles and Facebooks of the world, and doing it more than once. Like, it's, it's a really, really, really small group of people. It sure as heck isn't me. Um, it's like the Doug Leonis of the world, and there just aren't many of them.

Harry Stebbings 57:01 I love Doug. (laughs)

Mitchell Green 57:03 No, it's just, like-

Harry Stebbings 57:04 (laughs)

Mitchell Green 57:04 Yeah, like, we need more Doug Leonis and Don Valentines and, like, you know, and people that are just like v- and LPs that are, like, very direct and outspoken. People like Peter Dolan at McKenna, he used to be at Harvard and, like-

Harry Stebbings 57:17 If you were to... We have, I mean we have hundreds of thousands of listeners and, and several thousand LPs.

Mitchell Green 57:22 Yeah.

Harry Stebbings 57:23 If you were to advise them something on investing managers today, it can be anything, what would you say?

Mitchell Green 57:28 I believe a great question that people don't ask that they should ask any manager who is arou- who's been around 10 plus years, "Hey, in September of '21, September 30th of '21, how much unlocked stock did you have in your portfo- And let's say September, that was like the high point of the insanity in the last, you know, tech run-up. "How much unlocked public stock did you have in your portfolio?" And the next question is, "Why didn't you distribute it to your LPs?" And by the way, a lot of funds can distribute stock too, and, like, you could have kept the stock. So, like, why didn't you hold? Some people will be like, "Well, I was on the board." Well, shouldn't you... I mean, like, isn't your goal just to return, like, returns to LPs? Isn't that, like, the whole job of the business? But I don't know.

Harry Stebbings 58:12 That would be a shocking amount of people that have a lot of unlocked that did not return.

Mitchell Green 58:15 That did not, did not return money. Um, look, it's... I also think, like, LPs should spend more time talking to companies of portfolios that failed. Like, actually talk to the ones that didn't go well, or like were the 1Xs, to find out what is the person really like to work with. Like, the ones that work really well, that's, those are the easy ones. But it's like what actually, like, d- tell me the stuff that didn't work and, like, how did you... How was the f- how was the partner on the deal? Like, how did they respond? How did they deal with adversary? How did they, like, deal with you? Like, hey, th- those are the things I like to focus on.

Harry Stebbings 58:54 You said, "Hey, if I get the chance to take a 0.7X back on an underperformer, (snaps fingers) fuck it, I'll take it all day long."

Mitchell Green 58:59 All day long.

Harry Stebbings 58:59 All day long. How do you feel about the transactional nature of where time is spent? Your Fred Wilsons of the world, who is an incredible investor-

Mitchell Green 59:07 Incredible.

Harry Stebbings 59:08 ... incredible h-

Mitchell Green 59:08 He'd be in the t- he'd be in that five, yeah.

Harry Stebbings 59:09 I, I, of course, completely agree, but he always says, like, reputations are made in the bad companies. And then, you also have the realization that I have a limited amount of time, and I have to manage a portfolio and invest in new companies. Is it possible to bluntly cut your losers elegantly to concentrate on your winners?

Mitchell Green 59:27 It's a lot easier for me to do it than it is for Fred, because he was there when it was a st- it was nothing, and I, I came in as it was a bigger company. And so... But again, there I think are some VCs that are, like, world-class VCs that cut their losers, and I think there's some of... Or, like, cut, like, there are, there are firms that are known-

Harry Stebbings 59:47 (laughs)

Mitchell Green 59:47 There are firms that are known to, if y- if you're a CEO and you don't perform, you probably won't be the CEO. But, like, I think if you're just the founder coming in, you should just be... Well, I have, like, I have no problem with it. I tell all my employees, "If I'm not the right person to run Lead Edge, like, throw me out." Like, that's fine. Or, "Put me on the side, you, you come and run the business."

Harry Stebbings 1:00:04 You mentioned ByteDance earlier.

Mitchell Green 1:00:05 Yeah.

Harry Stebbings 1:00:06 We had the head of privates from Baillie Gifford actually in yesterday-

Mitchell Green 1:00:08 Oh, cool.

Harry Stebbings 1:00:09 ... who are big in-

Mitchell Green 1:00:10 Yeah.

Harry Stebbings 1:00:10 ... um, ByteDance. Um, there is a lot of public concern in the US or excitement need- whichever side you sit on, that TikTok will be shut down, um, or kind of divested. Um, you've said before you're not worried about that.

Mitchell Green 1:00:23 So, when we underwrote ByteDance, we assumed the US business is worth zero. Uh, ByteDance North America is a, you know, single-digit percentage of revenue. Um, we assumed it would be shut down. And it's not profitable in the United States. Then, we saw actually what happened when they shut it down, for a day, and both sides of the aisle came running up with their, you know, bags saying, "Oh, please, please keep it open. Please keep it open. Please keep it open." I, I, we just want something to happen. Either shut the thing down for good or spin it off or do something. I suspect it's not done by April 5th or whatever the date is. They'll probably push it out. Again, I'm not saying... I, I just don't know. Um, I think there's four or five people in the world that know, know what's gonna happen. Um, and, well, time will tell. But again, it's, like, just the uncertainty. I do think this though, that the Chinese government actually really likes ByteDance. Um, it's a truly global business.Alibaba is not a truly global business. Uh, Tencent is not really a truly glo- truly global business. Nike is a truly global business. Microsoft, John Deere are global businesses. What I mean by that is, you can go into, I don't know, 140 countries around the world and buy Nike shoes, but go into 100 countries around the world and buy a John Deere tractor. China's always wanted to build a truly global business. This is that first truly global business. Like, if- if you, if you think they're just gonna, like, let other... You know, I- I think, like, they're very proud of what they've built, and it's a huge business. I think they're going to be one of the foremost AI companies on- on the planet, uh, over the next decade.

Harry Stebbings 1:01:56 What makes you say they'll be one of the most foremost AI companies?

Mitchell Green 1:01:58 I mean, they just... The amount of tech. I mean, there's a reason when... The amount of AI they have already embedded in the product, uh, I mean, in India, when they were kicked out several years ago, nobody's really been able to build a competitor in India. I mean, Facebook's trying. You know, by the way, you know who hates ByteDance, right? Mark Zuckerberg. And by the way, so would I. To be clear, I would be, if I was running Snapchat or Instagram or Facebook, I would be all over, like, politicians in- in- in- in Washington being like, "Oh, this is horrible. This is all propaganda. This is like, you gotta get these guys outta here." It's the biggest threat to these companies. Um, it's- it's absolutely incredible what these g- what these, the Chinese have built. The Chinese are like... I mean, like if you look at all these stats, like number of PhDs and science spend and all these things, like it is a, it is an incredible country that is like, they're not worried about what happens next quarter or next year. They think in 50-year blocks.

Harry Stebbings 1:02:53 Do you think we as the West underestimate China's ability in AI?

Mitchell Green 1:02:56 100%. I just have seen how hard people in China work at some of these tech companies.

Harry Stebbings 1:03:04 I agree with you, and as a result, I get concerned. Do you get concerned by their ability to infiltrate our societies and provide amazing products, but th-

Mitchell Green 1:03:17 I think both countries should learn to get along. China and US collaborating together more is better for the global world than less. There's lots of things, like, both countries can do together to make both countries a better place.

Harry Stebbings 1:03:30 Peter at Baillie Gifford taught me actually the strength of the core ByteDance business in China. I know it's a global business, as you said-

Mitchell Green 1:03:36 Yeah.

Harry Stebbings 1:03:36 ... but, but the core business in China, monster.

Mitchell Green 1:03:38 Monster. And by the way, it's a huge e-commerce business there too.

Harry Stebbings 1:03:41 Unbelievable.

Mitchell Green 1:03:42 Yes.

Harry Stebbings 1:03:42 But we, we were thinking like, "Oh, TikTok's shutting down in the US, it's over. It's terrible." And not really at all, actually.

Mitchell Green 1:03:46 Yeah, exactly.

Harry Stebbings 1:03:47 My question to you though is, if it is more domestic focused, I just don't understand where liquidity comes from. It is not gonna list in the US, clearly.

Mitchell Green 1:03:56 Hong Kong.

Harry Stebbings 1:03:57 Hong Kong?

Mitchell Green 1:03:57 Hong Kong, for sure. Like, by the way, Tencent's listed in Hong Kong. It's gigantic. Uh, Hong Kong, 100%.

Harry Stebbings 1:04:02 And that's feasible? I'm naive here.

Mitchell Green 1:04:03 Oh, 100%. Yeah, yeah, but look, I mean, Tencent's a huge company. Um, you can list, you know, like there's giant Asian businesses listed on the Hong Kong Stock Exchange. It's very liquid. Um, you could, you could have a trillion dollar, like... By the way, I, I, I don't know what Facebook stock is, uh, market cap was yesterday, but I think it's like a $1.5 to $1.7 trillion company. This is the same size business, in terms of earnings. Grows faster. I mean, like Alibaba and Tencent don't really grow that fa- I mean, they're like 5, 7, 8% growers. What do they trade at? 13, 15 times earnings. Like, you do the math, like this- this is a very, very big company. I like to... We like to buy stuff when no one else likes to buy things. Like, when the world hates something, it, um... One of my long-time LPs-

Harry Stebbings 1:04:49 Does that not go against your statement, though, of, uh, the best founders are not the ones calling you back?

Mitchell Green 1:04:54 That's fair. Um, that- that is a fair statement. I just think that if you... Not always, right? Like, but, you know.

Harry Stebbings 1:05:01 'Cause I struggle with that statement too, 'cause I have so many great entrepreneurs in here, from the founders of UiPath-

Mitchell Green 1:05:06 Yeah.

Harry Stebbings 1:05:06 ... and the founder of Klaviyo, and like go on and on and on. Tobi at Shopify, he just gives me data. Have like 50 VCs were like, "Nope, nope, nope, nope, nope, nope, nope." And actually, it is the opposite. They were calling, they were calling.

Mitchell Green 1:05:19 Yeah. Look, for every, for every Tobi at Shopify, there's 100,000 founders that are like, um... They're, they're not gonna make it. Um, but look, it's incredible what he, what he built. Um-

Harry Stebbings 1:05:30 Yeah. Can I ask one, final one before we do a quick fire? What's your favorite deal? You've done many deals. What's your like, "That's my favorite"? And- and what did you learn from that?

Mitchell Green 1:05:42 I mean, Duo was a really interesting... I mean, it depends on like... My favorite deal is buying like LPs out of a 20-year-old fund and buying something like at four times earning. I mean, finding something like at four times earnings, um, you know, like-

Harry Stebbings 1:05:56 You buy fund positions?

Mitchell Green 1:05:57 100%. So like this-

Harry Stebbings 1:05:59 Wait, you do strip sales of companies or-

Mitchell Green 1:06:00 Yeah, yeah. So let, let me, let me explain.

Harry Stebbings 1:06:01 Oh.

Mitchell Green 1:06:01 So, um, the company I'm gonna get to is this company called Workhuman, that's where we're gonna go with it. Um, there's this, there's a table in front of us, right?

Harry Stebbings 1:06:08 Yeah.

Mitchell Green 1:06:08 Let's say this table is a company. If I buy 10% of this table or 60% of this table, it's the same table, right?

Harry Stebbings 1:06:15 Mm-hmm.

Mitchell Green 1:06:16 If you own the table, but the chair you're sitting on... And if you're the fund and you own the table, and the chair you're sitting on owns half your f- owns half your fund, and I buy the chair, I just bought 25% of the table. So like, we just view it as like buying it through a wrapper. So we, we describe investing in companies is we have these like very specific criteria, then we take this completely flexible approach. We'll buy 10% of your... We'll- we'll go through the front door. It's, we'll think of like, like a house. You're walking down the street, you see a three-criteria house, walk by it. See a four-criteria house, walk by it. Get to a six-criteria house, knock on the front door. You can go in the front door and you can buy, you can lead around in a minority deal. You can go in the front door and buy the entire business. Well, let's say like they don't wanna raise capital. You can go in the side door and buy out like an early investor or an early employee in the form of secondary. Again, it's still the same house. But let's say that doesn't work. Let's say like you can't buy secondary, so for a whole host of reasons. Could be roofers, it could be there's no cellars, whatever. Well, let's go through the basement window with a pickax and let's find a derivative. Let's fund somebody's co-investment vehicle. Let's find some 20-year-old fund where 90% of the NAV is in like one company. Um, so this, so this example, um-This company, Workhuman, is an awesome business up in Boston. It's been around 20-plus years. It's insanely profitable. And n- no, not, not, not, not, well, it doesn't grow 50% a year. It's a giant, stable business. I'm gonna totally get dates wrong, but like, it came out of like a two... We met the company. There was nothing to do. There was no like, um, the company didn't need primary capital. It was super profitable. There was no secondary to buy. So, we found an old fund that was 17 years old, and we tendered and we went to the part... fund- founders and said, "Look, uh, the fund, you... it must have like a bunch of LPs that want out. You've been in it 16 years, right?" I mean, we bought it at like, the position at like, five times earnings, and we've gotten 90% of our money back through dividends in the company. And you're like, "Well, how'd you do that?" The LPs were in the fund for like, 15 years. They just, like, wanted out. So, and, and-

Harry Stebbings 1:08:27 There are these unique opportunities I find in business where it's this arbitrage on timing.

Mitchell Green 1:08:32 Correct.

Harry Stebbings 1:08:33 And that is the most special time ever, when you have a manager who desperately needs liquidity to get a fundraise. And they know that it is inopportune to sell, but they need to to get that next fund.

Mitchell Green 1:08:44 Correct.

Harry Stebbings 1:08:44 And for you, your duration is different.

Mitchell Green 1:08:46 Correct. And so we were like, "I- in, in a world where LPs and GPs are looking for liquidity, fishing in the pond of old funds, like 20-year-old funds," people are like, "Well, what's your discount to NAV?" Like, NAV's irrelevant. What's fair market value? If like, NAV is really cheap, I'll give you... I'll, I'll bu- pay you 100% over NAV. But I can't do that, because then the LP would think, "Oh, you know more than I do," so I'll pay a discount to NAV still. Um-

Harry Stebbings 1:09:16 T- do you worry that everyone is doing that now?

Mitchell Green 1:09:18 I, I... It shocks me that more people don't do this. There's not that many people doing it.

Harry Stebbings 1:09:22 Oh.

Mitchell Green 1:09:22 Um, the secondary funds come with-

Harry Stebbings 1:09:24 'Cause they do gauge like, gross price down on price.

Mitchell Green 1:09:26 They do, yeah. Yeah, a lot of, a lot of people are going after the multi-asset stuff, so you'll buy, you know, an LP that's selling 30 positions in 30 old funds, and there's 200 underlying companies or 500 underlying companies in it. We're looking for the stuff where there's like one underlying company in like, it's an old fund, 90% of NAV is in one company. And like, we just write off the other stuff, basically, and just like, look at it, and-

Harry Stebbings 1:09:50 Got you. So, you buy the basket, discard the 10% that you don't want.

Mitchell Green 1:09:53 Correct. Exactly.

Harry Stebbings 1:09:54 Yeah. Got you.

Mitchell Green 1:09:55 Um-

Harry Stebbings 1:09:55 Have you ever been surprised on the 10%?

Mitchell Green 1:09:57 Yes. We got back 50% of our money on a 10% in this fund in Workhuman. Yes. It was, uh, it was some like, chips company, that literally were like, the cash balance on the balance sheet is like almost as big as their valuation for the entire company. Like, this doesn't make much sense. Like, "I don't know. I don't know if this thing does." Whatever. Maybe, maybe there'll be... we'll get something back. Yeah, we got 50% of our money back.

Harry Stebbings 1:10:19 Wow. I love

Harry Stebbings 1:10:20 that.

Mitchell Green 1:10:20 So, yeah.

Harry Stebbings 1:10:20 Uh, listen, I wanna do a quick-fire.

Mitchell Green 1:10:22 Sure.

Harry Stebbings 1:10:22 I've so enjoyed this conversation. Uh, okay. So let's start with... Where are we? What do you believe that most around you disbelieve?

Mitchell Green 1:10:31 Uh, I beli- uh, are we talk... Uh, I believe that like, DPI is the most important thing, and marks are com- completely for suckers.

Harry Stebbings 1:10:38 You can buy and hold one public stock for 10 years.

Mitchell Green 1:10:41 Microsoft.

Harry Stebbings 1:10:42 Why?

Mitchell Green 1:10:43 Damn it, the pricing pressure. The pricing power they have is just absolutely incredible.

Harry Stebbings 1:10:47 You don't worry that there's no upside left given how richly priced they are?

Mitchell Green 1:10:50 It is, it, it... Look, it is expensive, but like, it's just an incredible business with, with amazing price power. I think they have an inc- So like, you asked me who I thought was the best CEO I saw on that list. I think Satya, Satya is a absolutely incredible CEO. You know, it's... Look, it's a giant business. There are companies in like, a downturn, if we could get a 30% drawdown, like, I would buy Snowflake or buy, uh, Datadog and put it in... you know, put it in a drawer and let, let those compound for 10-plus years. Um, maybe Amazon, you could put in that bucket too. Just a lot of them are fairly rich stock.

Harry Stebbings 1:11:20 What's the hierarchy of BS that companies report?

Mitchell Green 1:11:23 Oh, uh, like favorite place to work. Uh, if like, on the second page of your like, presentation, if you're like, "Oh, you know, we're the greatest place to work, um, oh, you know, in this region." But it... A lot of it comes down to like, they'll be like, "Oh, my revenues are this." You look at the chart, you start doing all the analysis, and you're like, "Actually, that was your total contract value." Uh, that's a, that's a pretty good one, too.

Harry Stebbings 1:11:46 (laughs)

Mitchell Green 1:11:46 Like, there's a lot of ways to fudge gross profit numbers, uh, and through COGS and all that kind of stuff.

Harry Stebbings 1:11:50 What have you changed your mind on in the last 12 months?

Mitchell Green 1:11:53 I was probably