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E141: State of Series A's, VC dry powder, IPO window opens + more with Bill Gurley & Brad Gerstner

(0:00) Bestie intros: Friedberg's bad haircut (1:17) Welcome BG^2! Biography recommendations and film talk (22:27) VC market update: State of Series A's (33:43) Dry powder misconceptions, marking incentives (48:57) IPO window starting to open, IPO down rounds, incentives to go public (1:03:17) Cyclical venture cycles, managing distributions, benchmarking VC performance vs public market (1:22:26) Tragic Maui wildfires, extreme temperatures (1:26:11) Macro picture: inflation cools, deflation risk? Follow the besties: https://twitter.com/chamath https://linktr.ee/calacanis https://twitter.com/DavidSacks https://twitter.com/friedberg https://twitter.com/altcap https://twitter.com/bgurley Follow the pod: https://twitter.com/theallinpod https://linktr.ee/allinpodcast Intro Music Credit: https://rb.gy/tppkzl https://twitter.com/yung_spielburg Intro Video Credit: https://twitter.com/TheZachEffect Referenced in the show: https://youtu.be/xmYekD6-PZ8 https://www.amazon.com/Setting-Table-Transforming-Hospitality-Business/dp/0060742755 https://www.amazon.com/Steve-Jobs-Walter-Isaacson/dp/147770146X https://www.amazon.com/Elon-Musk-Spanish-Walter-Isaacson/dp/B0CBTHK86N https://www.amazon.com/Good-Great-Some-Companies-Others/dp/0066620996 https://www.amazon.com/Man-Arena-Selected-Writings-Roosevelt/dp/0765306700 https://www.amazon.com/Shoe-Dog-Memoir-Creator-Nike/dp/1501135910 https://www.amazon.com/Alexander-Hamilton-Ron-Chernow/dp/1594200092 https://www.amazon.com/Something-Autobiography-Vintage-Akira-Kurosawa/dp/B0C3D5NDJX https://www.amazon.com/Born-Standing-Up-Comics-Martin/dp/B017QUU3EO https://www.amazon.com/Writing-Memoir-Craft-Stephen-King/dp/1439193630 https://www.amazon.com/Autobiography-Malcolm-told-Alex-Haley/dp/0345379756 https://www.linkedin.com/posts/peterjameswalker_cartadata-seriesa-valuations-activity-7092542118803488768-vOcY https://www.theinformation.com/articles/venture-firms-still-writing-small-checks-despite-271-billion-in-dry-powder https://twitter.com/bgurley/status/1688605654188224512 https://finance.yahoo.com/chart/SN https://www.google.com/finance/quote/CAVA:NYSE https://finance.yahoo.com/quote/SRFM https://twitter.com/altcap/status/1686086247029055489 https://www.wsj.com/articles/university-endowments-mint-billions-in-golden-era-of-venture-capital-11632907802 https://www.youtube.com/watch?v=Hhy7JUinlu0 https://twitter.com/gokulr/status/1680006171149869056 https://www.statista.com/statistics/277501/venture-capital-amount-invested-in-the-united-states-since-1995 https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category-line-chart.htm https://www.bloomberg.com/news/newsletters/2023-08-10/disinflation-wave-the-bloomberg-open-americas-edition https://www.nytimes.com/2023/08/09/business/china-economy-inflation.html https://twitter.com/KobeissiLetter/status/1689010884062904320 #allin #tech #news

David FriedberghostChamath PalihapitiyahostJason CalacanishostBill GurleyguestBrad Gerstnerguest
Aug 11, 20231h 35mWatch on YouTube ↗

EVERY SPOKEN WORD

  1. 0:001:17

    Bestie intros: Friedberg's bad haircut

    1. DF

      I'm recording, yeah. How's my hair, Nick? Do I look ridiculous? I shoulda wore a hat.

    2. CP

      (laughs)

    3. DF

      Oh, my God. I went to the (beep) teaching salon in (beep) for a haircut a few days ago.

    4. CP

      The teaching salon?

    5. DF

      Ten dollars.

    6. CP

      You got ten dollars worth of value.

    7. JC

      (laughs)

    8. DF

      Dude, my neck was literally bleeding. The guy cut my neck, like six places.

    9. JC

      (laughs)

    10. CP

      (laughs)

    11. DF

      It's diagonal on the back. 2021.

    12. JC

      (laughs)

    13. CP

      (laughs) Oh, get off me.

    14. DF

      A- a- and he was stoned the whole time. I walk in, he's like, "What do you want?" I'm like, "I booked this thing." He's like, "Shit. Okay, sit down."

    15. CP

      He spit out my coffee. (laughs)

    16. JC

      (laughs)

    17. DF

      I thought, I thought I was, like, in a barber shop candid camera thing.

    18. CP

      Why would you possibly do that?

    19. JC

      (laughs)

    20. DF

      There was nothing available. I told my wife, I'm like, "Get me any hair appointment, anything. I just gotta get my hair cut. It was so long." And then she's like, "Oh, I got you an appointment at the (beep) teaching school." Oh, I'm like, "That's high-end. All the hair salon stylists go there. Must be awesome."

    21. JC

      (laughs)

    22. DF

      This guy fucking butchered me.

    23. CP

      Guy's worth over 100 million, he got a ten-dollar haircut.

    24. DF

      Fucking ten dollars. And then he's like, "What would you like to tip?"

    25. CP

      (laughs)

    26. JC

      (laughs)

    27. DF

      I'm like, "Here's a tip, here's a tip."

    28. CP

      "Here's a tip, get a new career." (laughs)

    29. DF

      You shouldn't be a fucking barber. Yeah, yeah.

    30. JC

      (laughs)

  2. 1:1722:27

    Welcome BG^2! Biography recommendations and film talk

    1. NA

      in.

    2. JC

      All right, everybody. Welcome back to the All In podcast, episode 141. Chamath Palihapitiya has gone missing somewhere in the Mediterranean. We've sent some search crews out. We got some beacons. We're trying to find him, but he is not here today. There will be no conspicuous consumption or discussion of truffle season or wine. But instead we went to the BG squared, if you got to come to All In Summit 2022. One of the highlights of the event was having two BGs, Brad Gerstner and Bill Gurley on the pod. So we thought for All Star Summer, we would bring in some all stars here. Welcome back to the pod, fifth bestie, Brad Gerstner and Bill Gurley. How are you, sir?

    3. BG

      I'm doing great. Thanks for having me on.

    4. JC

      Bill, you, you don't do a lot of press. You don't do a lot of pods. And, uh, I know you're on a lot of boards, but you're not part of Benchmark's next fund. So people are wondering, are you retiring? What are you up to? I know you're still got all these boards you're on, but w- what's Bill Gurley up to these days?

    5. BG

      Yeah, appreciate that. Um, I, as you mentioned, I'm on nine benchmark boards still, so I'm working with those and, and doing the classic work that I've been doing my whole career. Second thing is I've, I've started, I'd done a handful of angel deals, about 1/100th the, um, the frequency of J-CAL here, but, but a few.

    6. JC

      (laughs)

    7. BG

      So dipping my, dipping my toe in the water. And then third, I've been working hard on a, on a book. I've got a co-writer, we've been doing a ton of research. We've got a proposal ready to go and an agent. We're gonna go out to publisher soon.

    8. JC

      Oh, well, you should just do Harper Business. I'll put you in touch with Hollis.

    9. BG

      Okay.

    10. JC

      That's the, the winning publisher. That's the best business publisher in the world. And, uh ...

    11. BG

      Perfect.

    12. JC

      Y- No, no. Harper, HarperCollins Business is number one.

    13. CP

      World's greatest publisher. (laughs)

    14. JC

      World's greatest publisher. Um, and, uh, you don't need-

    15. DS

      Bill, can you tell us what the, what the thesis is?

    16. BG

      Yeah, it's a- it's, it's a further development of a, of a speech I gave at University of Texas Business School about, um, how to chase and succeed in your dream job.

    17. DS

      Oh, nice.

    18. JC

      Oh, so like career advice. Letter to a younger Gurley?

    19. BG

      Yeah.

    20. JC

      Is that what this is? A letter to a younger Bill Gurley?

    21. BG

      Yeah, I didn't wanna do like, "Oh, here's my, you know, thoughts on venture capital." That didn't feel right. This is something I'm more passionate about and I... Something I, I hope will be impactful to a lot of people. I've already gotten quite a bit of feedback from people that have been moved by the, the, the shorter version on the, uh, on the presentation.

    22. JC

      When you, when you look-

    23. BG

      It's all good.

    24. JC

      ... back on your career, unpack it for a minute, um, what, what do you think the things you got right were or the things, you know, you might change in terms of your career and, and being happy and finding your passion in life?

    25. BG

      Yeah, I do feel super fortunate that I was able to do, you know, my, my dream job for over two decades. And I love innovation, I love betting and gambling. And I love the combination of being able to think through markets and disruptions and, and to be able to place bets and all those things are super exciting. Things I got right. Um, studying history, which is something I talk a lot about and we'll be talking about in the, in the book, like knowing who the, the patriarchs were of your industry and knowing what they thought I think is super powerful in any endeavor. And then networking, you know, just like crazy, which I think is actually easier today. So those are a couple of the themes that, that we developed.

    26. JC

      Networking and studying hi- history, specifically you and I have had many conversations about biographies. Uh, we both share a passion for those. Top biographies, not of business people, but that had an impact on you and then I'll go around the horn. Top biographies that had an impact on you, preferably ones that aren't business, but if it is business, I guess it's okay.

    27. BG

      One that, that actually led to me developing this theme was, was learning more about Danny Meyer's journey, who is the renowned restaurant owner in New York City and the founder of Shake Shack. But he had a career where he was in sales, he was about to go to law school and his, hi- I think his uncle told him, "What are you doing? You know you wanna be a, a restaurant owner." And he stopped that day, took a job at 10K a month or 10K a year. He took like a-

    28. JC

      Wow.

    29. BG

      ... 90% pay cut and started studying and that gets into the history part, but he just started studying and obviously the rest is history-

    30. JC

      Yeah.

  3. 22:2733:43

    VC market update: State of Series A's

    1. JC

      VC market update, Carta has released a Series A funding map covering the first half of 2023, but the data is what's interesting. They covered, and Carta basically manages cap tables and, and stuff like that for folks. Original company was E-Shares, I think. This is a funding map, which just shows like, how much money was raised, nothing really too consequential in there, but what's really interesting is the data on Series A rounds. Series A rounds are typically the f- rounds when a Benchmark, a Sequoia, a Craft come in and, you know, join the board and put in a, a significant check. Before that, you have angels and seed investors, and after that you have growth funds. But the Series A is considered like, a seminal moment in the history of startup. Median round is now seven million raised. That's down 26% year over year, and this is all data from the first half of the year. So first half of 2023 versus 2022, which was a really crummy year. We're down from the crummy year 26% on the dollars raised, seven million. And the pre-money valuation, 40 million down 17%, so last year it was 11 million raised on 48. I don't have the 2021 data here, but it would be even more. So just right off the bat, reactions, I'll start with you, Bill Gurley, to what we're seeing in the Series A space. Is it a return to normalcy? I mean, the Series A's back in the, you know, Uber days and Airbnb days were, what, five, 10 million bucks on a 30 million? So this is return to normalcy?

    2. BG

      Yeah, I don't, I don't think you've gone quite back to that line, right? And so I think there's still a significant amount of competition at that level.

    3. JC

      Mm-hmm.

    4. BG

      And, um, I, the fact that it's off a little bit is, is noteworthy, but it's not like, off 50%, right? I think that market remains competitive.I think there's a number of great people out there investing at that level. And I, and of course, the AI deals, like one thing that might be interesting is if you pull the AI deals out, I bet those numbers-

    5. JC

      Mm.

    6. BG

      ... would, would be more akin to what they were two or three years ago, because those are being done at 200.

    7. JC

      Is the reason you went to angel investing or C investing, let's call it, because it's so crowded and competitive at the Series A level, and what C investing is now is what Series A investing was for the 20 years of your career?

    8. BG

      No. (laughs) I- I didn't-

    9. JC

      Okay.

    10. BG

      I think if I were practicing institutionally, I would, I would stay at the Series A level and take board seats and try and get as much ownership as possible, which has, uh, been the benchmark strategy. I, I, um, this is more of a hobby thing for me.

    11. JC

      Got it.

    12. BG

      And I don't want board seats anymore. (laughs)

    13. JC

      But it's super, super crowded at Series A still to this day, yeah?

    14. BG

      I said it was competitive. I don't know that it's super crowded. I think a lot of people realize that if you can get 2.5 or 3% management fee investing $300 million at a pop, that's an easier lifestyle than actually taking board seats and doing work. And so I think a lot of money and activity got pulled into the late-stage market. Nearly every firm started doing that. And, and once the, once the center of gravity goes there in a firm, you know, and you're investing 200 million a clip, can you imagine the Monday meetings? Like, who's paying attention to the person that's putting 5 million out at a time? Like, it'd be hard for that to-

    15. JC

      It's like going to playing high-stakes cards, and then you get invited to a, you're playing, you know, 200, 400, 100, 200.

    16. BG

      Exactly. It's exactly like that. Yeah, I mean-

    17. JC

      And you go to five, 10 game, it's like-

    18. BG

      Except they're the team. And who's paying attention to the person playing in the little game? And so I actually think the number of people that practice at that level has actually gone down.

    19. JC

      Huh.

    20. BG

      But that doesn't mean... You know, the business since I got in only got more competitive. And so there's still enough. And, and, and, and the other thing is the founders have learned how to play the, uh... However, if there's 10 people doing it, they know how to play them off of one another. They're very skilled-

    21. JC

      Yeah.

    22. BG

      ... at it.

    23. JC

      Yeah. (laughs) That's a, that's a weird thing that happened is like the playbook because of podcasts, because of blog posts, I mean, just-

    24. BG

      Absolutely.

    25. JC

      ... how to, how to run a company and then, you know, how to, you know, negotiate with VCs is, it's all been unpacked. Sacks, what are you seeing? Uh, you're a Series A investor. You compete with the Sequoias, the Benchmarks, uh, heads up for these Series As. What are you seeing in the Series A? And what do you take from this data being down 26% year over year? Which probably actually means probably 50% down from the peak. Uh, what are your thoughts?

    26. BG

      Well, yeah, the, the venture capital market peaked in Q4 of 2021 in terms of both valuations and the amount of money that was being deployed. And it kept going down throughout all of 2022. And I think it bottomed out in Q1 of 2023, basically in the last several months. And I think now the pace of deployment has sort of stabilized, and it's kind of stabilized at a pre-pandemic level. So, you know, maybe a 2019 level. Now, I think that probably masks some big differences by round. So like you're saying, Series A rounds are more competitive. There's relatively more action there. I think the late-stage rounds, Brad can speak to this, the capital there has dried up, I think considerably more.

    27. JC

      Hm.

    28. BG

      And those rounds are much harder to get. And the reason I think is because that when you have more operating history, then it's harder to raise a round based on narrative. Whereas when you're at a very early stage, you can basically just raise money based on a dream and a story.

    29. JC

      Yeah. The way I frame it to people is when I'm... And part of this is my fault, because I'm training people in our accelerators and pre-accelerators. I tell them, "You're either selling promise or performance." And, you know, once you start having customers and numbers and retention, you know, someone like Sacks is gonna be like, "Give me the data," and they're gonna look at churn and say, "Yeah, this business has too much churn. It's a leaky bucket, whatever." But when you're selling promise-

    30. BG

      Right.

  4. 33:4348:57

    Dry powder misconceptions, marking incentives

    1. DF

    2. JC

      Okay. So the other big issue here is a lot of money was raised by VCs, uh, you know, commonly known as dry powder in the industry, but there are some misconceptions about this dry powder. People are saying, "Oh my god, all this money's gonna come flowing into the ecosystem, kumbaya, it's gonna be the roaring '20s again." However, uh, Bill, you did a little tweet storm. What people don't realize is when we refer to dry powder at VC firms, the VCs do not have that $250 billion or whatever it is, quarter trillion dollars sitting in their bank accounts. That money is sitting in another person's bank account, LPs, Harvard's endowment, CalPERS, sovereign wealth funds, et cetera. It has not been drawn down by the VCs yet. So, Bill, why is this an important fact for people to understand and what are the dynamics that LPs are dealing with?

    3. BG

      Yeah, and th- and there's a ton of dynamics between the GPs at the venture capitalist and the LPs at those endowments that Brad, Brad started to hit on one of those, which is the marks aren't in the right place. And, and so, so the thing you just explained is critical, Jason, which is you don't actually have the money. There's no, there's no venture firm sitting around with, you know, all of the money that they've got committed to their fund in a bank account that's just ticking-

    4. JC

      Why not? Why does that not actually occur? 'Cause people would say, "Oh, you raised a billion from these folks. They gave you the billion," right? "Why do you not take it down?"

    5. BG

      Which one of, one of, one, one of the, the brilliant realities of the way that a LP agreement works with a venture fund is they're not on the IRR clock until they actually pull the money down. So they-

    6. JC

      Explain what that means, yeah.

    7. BG

      They charge fees based on the total committed amount, but they don't actually draw the money down and get gauged on the performance of their investment until they need it. And so a classic venture firm will do five, six drawdowns over a 10-year period of a fund. And so they don't ha- they literally don't have the money. A couple of other things worth noting. So, and some of that I didn't put in the tweet, but the marks aren't right. And ev- everyone kind of quietly knows that the marks aren't right, but there's actually no incentive to get the marks right. Here, here's what it looks-

    8. JC

      Explain what a mark is to folks.

    9. BG

      So private companies have a valuation that's assessed either by the GP (laughs) themselves in most cases, which gets a bit of a conflict of interest. Sometimes by your auditor, E&Y or whoever's auditing your venture fund. But of course, the techniques they have for assessing valuation are extremely crude 'cause they're not market-based. They're just, you know-

    10. JC

      They're not public companies.

    11. BG

      Yeah.

    12. JC

      Yeah.

    13. BG

      So there's, there's actually not a way to know. They have extremely complicated cap tables. The other thing is m- many LPs...... are actually bonused on the paper mark. And this is something that-

    14. JC

      Ooh.

    15. BG

      ... a lot of people don't realize. And so they don't have an incentive to dial around to the GPs and say, "Get your marks right," because it's actually (laughs) gonna reflect poorly on them if they were to roll those up.

    16. JC

      So the both of them are, bo- both of the LP and the GP are in a dance there. "Hey, we know that Stripe is not worth 100 billion right now, it's worth 50 billion. But if you mark it down, I don't get my bonus. I'm the person who's giving you money for your next fund. And so when we're assessing, 'Hey, how much are we going to give you for your next fund?' we're going to look at the performance of previous funds as an indicator-"

    17. BG

      The only thing I push back on what you just said-

    18. JC

      Yeah.

    19. BG

      ... I agree with what you just said, except ther- th- no one has the explicit conversation.

    20. JC

      No. It's just-

    21. BG

      It's, it's an emergent, it's an emergent (laughs) behavior-

    22. JC

      It's emergent. See-

    23. BG

      ... of the dynamic system. Yeah.

    24. JC

      Show me an incentive, I'll show you an outcome kind of situation.

    25. BG

      But there's no, I've never heard of an LP like, browbeating GPs to get their marks right. Like, especially on the downside. Never heard of that-

    26. JC

      And can-

    27. BG

      ... ever.

    28. JC

      Those marks can be done by an audit, like you said, they could be done by a round of financing. And then there's-

    29. BG

      And sometimes you have this-

    30. JC

      ... a secondary market, weird secondary market, uh, where-

  5. 48:571:03:17

    IPO window starting to open, IPO down rounds, incentives to go public

    1. JC

      Our entire business, of course, is based on exits. The highest form of exit, I guess, is an IPO. An overpriced acquisition would be the second, and a, uh, secondary market for shares as a distant third. Though it looks like the IPO window might be cracking open a bit and, uh, some people are being forced the guns to the head. Arm, owned by SoftBank, Masayoshi-san, looking to raise $10 billion at a 50, 60, $70 billion valuation, could be the largest IPO of the year. Instacart, looking at a $12 billion, uh, valuation. Reddit kind of went dark. They had a couple of problems with their community, but they were in line. Stripe obviously in line. Klaviyo's got a $5 billion valuation. And then we saw a couple of, uh, what I'll say are nontraditional companies going public, something called SharkNinja I saw (laughs) in public. We had a little conversation about this, Brad. Kirshner, they have a market cap of $4.3 billion. They had a pop of 40%. Cava, a Greek food chain, Oupa, they went public and have a market cap of $5 billion. Surfair, a company I'd passed on investing in but was intrigued by, they do Pilates, uh, shuttles between places on the West Coast here, little short runs, they did a direct listing in July, market cap of $85 million, didn't go well. Bill Gurley, is, uh, the IPO window opening or are people kind of on the ledge who have no choice but to jump and hope for the best?

    2. BG

      One thing we didn't probably spend enough time on in the last topic, which I'll just hit on briefly, is the-

    3. JC

      Sure.

    4. BG

      ... complexity of those unicorns. So Brad mentioned... I, I saw a deck that said there were more, um, private unicorns than public tech companies over a billion dollars-

    5. JC

      (laughs)

    6. BG

      ... at one point in time, um, which is shocking.

    7. JC

      That's hilarious.

    8. BG

      But th- those, because those companies grew up in the tw- 99, 22, 21 timeframe where you could raise money at excessive valuation, their cap charts are very complex and rigid. They have different liq preferences at different places and, and, and they've got board members who all have different marks and are all very worried about whether this thing-

    9. JC

      Mm-hmm.

    10. BG

      ... can get to a certain place or not. And so it's very difficult to come in and do another private round in those situations. You might have to, you, you might have to put the return in a guaranteed pick dividend, uh, IPO, or some complex derivative, and a lot of people, and I think Brad would agree with this, a lot of people just say, they opt out and say, "No, this is too hard. I'm not gonna go in there and negotiate with five different constituencies on how to do..." It's, you can't just do a simple investment because of that.

    11. JC

      Okay. So it's gotten too complex, which then if the buyers of those shares do not want to be involved in that crazy, okay, is Stripe worth, we'll just pick Stripe as an example, 50 billion or 100 billion and the last investors are at 100. YC in a two million structure go public.

    12. BG

      Yeah, Stripe may be a bad example just because-

    13. JC

      Yeah.

    14. BG

      ... their total liq pref stack may still be a fraction of their market cap for-

    15. JC

      Huh. Got it.

    16. BG

      A lot of these unicorns, the liq pref stack can be very close to their market cap or their, today's valuation, and that's what creates-

    17. JC

      Got it.

    18. BG

      ... real structural problems.

    19. JC

      So you have a billion... You, you got a billion dollars in investment in the company and liquidation, money that has to come out to pay those investors, but the company's only worth two billion or a billion. And now it's, yeah.

    20. BG

      And when you... When you get to that place, sometimes going public is just the easiest way to clean it all up and-

    21. JC

      Because everybody converts to common and we just, the company starts trading and reality is reality. It's kind of like taking the medicine.

    22. BG

      Yeah. And, and I think that happened, o- one good example was Square at one point had done a derivative financing on top that was somewhat problematic, and they just felt like they had to get out.

    23. JC

      Hmm.

    24. BG

      And they did, and it cleaned up the cap chart. And one thing I've been waiting on, we'll see if it happens, but because of hyper competition in investing in '99, 2000, 20, 2021, there was a term removed from most term sheets that gave investors the right to protect their liq pref on an IPO. That's gone in most of these cases.

    25. JC

      Got it.

    26. BG

      So you could convert liq pref under, which for a founder or an early stage angel investor would be a huge win.

    27. JC

      Got it.

    28. BG

      Whereas if you sold a company in M&A, the liq pref would play. Does that make sense?

    29. JC

      Got it. Yes. So the last investor comes in, they're getting a multiple of their money back, except in an IPO.

    30. BG

      Right. And I suspect-

  6. 1:03:171:22:26

    Cyclical venture cycles, managing distributions, benchmarking VC performance vs public market

    1. JC

    2. BG

      Well, one thing I-

    3. JC

      ... you know, salads to, to feel good again in this industry.

    4. BG

      One thing I would, like, in wri- in retrospect that I think is super interesting about the venture capital cycle, one, I think it's inherently cyclical, and it's always gonna be that way unless we fundamentally change the structure of the industry, 'cause it just invites competition, and there's no barriers to entry. But I went and talked to some LPs that have been in the business for a very long period of time, and a vast majority of the reason venture outperforms other asset classes has to do with these tiny windows when you have a super crowded market. And if you don't, if you aren't around for that part, you know, if you strip those years out of-

    5. JC

      Yes.

    6. BG

      ... a 40-year assessment, it's actually not that interesting an asset class, which-

    7. JC

      Hmm.

    8. BG

      ... highlights the need for venture funds to get liquidity at the peak. Yes, right when we are at the peak is when people get the most brazen, the most confident, and they start talking about how we're gonna hold forever. And so-

    9. JC

      Yeah.

    10. BG

      ... you had venture firms with the biggest positions they've ever had in their entire life go over the waterfall and, and basically evaporate what could have been return.

    11. JC

      Yeah, I mean, diamond, diamond hands can come back and bite you, and you've said famously, you can't... What was the, the line you had? You can't beat IRR? Or you can't-

    12. BG

      Yeah.

    13. JC

      Yeah.

    14. BG

      I don't think I said it, but it's been said. (laughs)

    15. BG

      (laughs)

    16. JC

      Yeah. Yeah, yeah. Since we're on our movie bender here, for those of you who haven't seen Margin Call, just one of the great scenes ever.

    17. DF

      This is the best scene... The whole scene, by the way, is like the best scene I think of modern finance films, so...

    18. JC

      Look at this murderous raffle.

    19. NA

      Who are we selling this to?

    20. BG

      Same people we've been selling it to for the last two years and whoever else will buy it.

    21. NA

      But John, if you do this, you will kill the market for years. It's over. And you're selling something that you know has no value.

    22. BG

      We are selling to willing buyers at the current fair market price so that we may survive.

    23. DF

      (laughs)

    24. JC

      (laughs)

    25. BG

      (laughs)

    26. JC

      Oh, man. You can rationalize a lot on Wall Street, man. But-

    27. BG

      Yeah, but-

    28. JC

      You, to the point of-

    29. BG

      ... there's been a lot... But what, what Bill is saying is that the opposite took place, which is VCs drank the Kool-Aid and didn't sell when th- we were at the peak of the market.

    30. BG

      They also got caught up in a competition of trying to, to, uh, appeal to the founder community as saying, "Hey, we're in it forever. We're gonna hold forever. We're your best friend forever."

Episode duration: 1:35:59

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