Roger Ehrenberg: Why VC Returns Will Get Worse & Why LP Incentive Structures are so Broken | E1117

(instrumental music) I'm not in pure tech anymore. But if I was, I would literally be spending almost no time in pure AI. Venture is never gonna be commoditized. Maybe mid and late stage, we'll feel more like institutional asset management, but I think incubation, pre-seed, and seed will always occupy a different place.

How much longer does venture have on the two and 20 model before there becomes real pressure on fee structures?

It's gonna be just like hedge funds. You know, look at Sequoia. And the best firms charge premium fees and will be able to get it because on an after-fee basis, they still outperform.

You have many absolute bangers. How did you think about whether to distribute versus whether to hold and sustain?

That is one of the hardest questions I have dealt with.

Roger, I am so excited for this. You just said, you know, the magic happens in the conversation. It does. Thank you so much for joining me today.

Thanks, Harry. As usual, I am thrilled to be here with you.

Now, I was listening to you on Eric's show the other day, and you've said before about essentially seeing these seismic shifts in landscapes every kind of 17 years, which I thought was kind of mysterious why it was every 17 years. But if we go back to the first seismic shift that you saw when you went from banking to venture, what was that seismic shift that you saw that others didn't?

I felt like there was almost a, a euphoria on the street back in those days. You know, I had been running derivatives desks at Citi and Deutsche, and then my last tour of duty on the street was as the CEO of DB Advisors, which was this multi-billion dollar trading platform. Money was coming really easily, but also with that, knives were never sharper in terms of, you know, the politics, whether it's inside hedge funds or at the top of Wall Street, because the pie is big and people in those cultures want as much of the pie as they possibly can. And I just found that culture corrosive, and I also felt like this fell too easy in a way. The markets were up into the right, money was being minted really across the street, debt and equity markets in addition to trading, that, just sense that things feel a little too good, and I personally had felt like my learning curve had stopped and I couldn't really imagine another traditional job on the street that was exciting and would enable me to grow. That's really what precipitated my spending the next five years really digging into the seed stage technology world, and then it was really during that period that I crystallized my hypothesis that, uh, very early, very concentrated, that kind of big data infrastructure theme was something that ultimately was gonna be a background.