The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:35:49 · Scott Wilson, Harry Stebbings
[00:35:49] S0: Yeah. I mean, it's typically... It's not just one example. Like, we we had one partner that I... I'm not sure he found a 100 times revenue deal that he was willing to turn down. Like, it just didn't exist. And, for something to trade at a 100 times revenue, it has to be, you know, an exciting company. I get that. But for us, like that's not what we want our capital to be used for. We want discipline around valuation, you know, and you mentioned LeafX L, like, you know, I think he's super pragmatic. He'll obviously, you know, pay up, and he's participated in some of these great companies that are huge winners. But he's also very pragmatic about, you know, when things get too frothy stepping away. [00:36:26] S1: Do you think we should give managers forgiveness patience for deploying funds much faster than they said they would? Scott, me and you are both old enough to know that every manager says three years, and every manager right now is coming back twelve to eighteen months later saying, Scott, I'm so sorry. I'm so sorry, but investing. It's the best time ever. New intelligence intelligence. Should we give them forgiveness?
00:36:26 · Harry Stebbings, Scott Wilson
[00:36:26] S1: Do you think we should give managers forgiveness patience for deploying funds much faster than they said they would? Scott, me and you are both old enough to know that every manager says three years, and every manager right now is coming back twelve to eighteen months later saying, Scott, I'm so sorry. I'm so sorry, but investing. It's the best time ever. New intelligence intelligence. Should we give them forgiveness? [00:36:48] S0: You know, if we think that they're deploying capital at really high returns, like, we have no problem with really fast deployment. And if we think if they're deploying capital at poor returns or poor expected value, then we don't care how fast it's deployed is what I would say. We have a bias for smaller funds. Like we'd much rather have someone who raises, you know, a billion dollar fund when they could raise 4,000,000,000 and, and comes back every eighteen months than, than someone who raises 10,000,000,000 and comes back every three years. We, we just think like the ability to write like a small check-in a venture portfolio and have that be a super meaningful outcome for the whole portfolio, you know, a fund returner is is much easier in a billion dollar or less fund than it is in a $10,000,000,000 fund.
00:36:48 · Scott Wilson, Harry Stebbings
[00:36:48] S0: You know, if we think that they're deploying capital at really high returns, like, we have no problem with really fast deployment. And if we think if they're deploying capital at poor returns or poor expected value, then we don't care how fast it's deployed is what I would say. We have a bias for smaller funds. Like we'd much rather have someone who raises, you know, a billion dollar fund when they could raise 4,000,000,000 and, and comes back every eighteen months than, than someone who raises 10,000,000,000 and comes back every three years. We, we just think like the ability to write like a small check-in a venture portfolio and have that be a super meaningful outcome for the whole portfolio, you know, a fund returner is is much easier in a billion dollar or less fund than it is in a $10,000,000,000 fund. [00:37:33] S1: Do you look at it through the look through perspective? Being if I have a billion dollar fund and I get 10% in every company that I invest in and you say, well, we're a $100,000,000 check of your billion dollar fund, I'll look through. Obviously, I'm just explaining it for everyone listening. You've got this already, is 1% in every underlying company. Is that how you think about it? [00:37:54] S0: That's exactly how we think about it. We hardly ever talk about, like, fund performance. We we only really talk about the underlying exposures in the portfolio. So we aggregate everything up, and we know that we have x dollars of SpaceX or Cerebras or Anthropic in the portfolio, and that's that's how we think about it.
00:37:54 · Scott Wilson, Harry Stebbings
[00:37:54] S0: That's exactly how we think about it. We hardly ever talk about, like, fund performance. We we only really talk about the underlying exposures in the portfolio. So we aggregate everything up, and we know that we have x dollars of SpaceX or Cerebras or Anthropic in the portfolio, and that's that's how we think about it. [00:38:12] S1: Can I ask you, on your, like, Cerebras, how do you think about performance being challenged? And I'm not saying to comment on Cerebras at at all. But when you have a company that is hit by bad tailwinds in the public markets, how do you think about whether the stick and hold or actually a fiduciary duty to just cash your chips in? [00:38:30] S0: Yeah. I mean, Cerebras specifically of... Like, for us, that, that was a really big position at the IPO. And so we took some chips off the table and put some hedges on even pre distribution, but we like Andrew and the team. So we'll continue to hold some of that. And I think, you know, it's, if you look at the current kind of KPIs of the business relative to expectations going out the next four or five years, it's tough to justify the valuation, even at $2,530,000,000,000, wherever it's at today, based on what they've done the last twelve months, you're, you're betting on the, the come, so to speak. So that that company has a lot to prove, but it's clearly a great company, and we have lots of confidence in in Andrew and his team to produce good results over the next decade.
00:38:30 · Scott Wilson, Harry Stebbings
[00:38:30] S0: Yeah. I mean, Cerebras specifically of... Like, for us, that, that was a really big position at the IPO. And so we took some chips off the table and put some hedges on even pre distribution, but we like Andrew and the team. So we'll continue to hold some of that. And I think, you know, it's, if you look at the current kind of KPIs of the business relative to expectations going out the next four or five years, it's tough to justify the valuation, even at $2,530,000,000,000, wherever it's at today, based on what they've done the last twelve months, you're, you're betting on the, the come, so to speak. So that that company has a lot to prove, but it's clearly a great company, and we have lots of confidence in in Andrew and his team to produce good results over the next decade. [00:39:08] S1: Scott, if you could do anything without retribution from any stakeholders, students, board, team, What would you do differently?
00:39:08 · Harry Stebbings, Scott Wilson
[00:39:08] S1: Scott, if you could do anything without retribution from any stakeholders, students, board, team, What would you do differently? [00:39:16] S0: You know, I would I would probably... There's this natural tension between what, like, we're here to support the mission of the university, and that's why we exist. But I also think, like, a 5% payout in certain market environments is, is tough long term, depending on gift flow. So I, I probably smoothed the payout over a longer period of time, but I understand that tension and, and, you know, it's great to grow the endowment and, and be able to see the impact on the institution. So I think that's a natural tension. I I don't think there's really much at WashU that if it makes sense for for the stakeholders and for the team, like, we... We've been able to accomplish everything we wanted to accomplish. [00:39:55] S1: Scott, you've seen many cycles now. You're a pro. Does this have a shakeout, or do we keep going on the meteoric wave that is superintelligence and AI?