How I Invest with David Weisburd
00:34:31 · David Weisburd
[00:34:31] S0: The one thing that I disagree with probably 90% of smart investors is a Peter Thiel question. What do you disagree with that that smart people agree with in your industry? And that's this, to me, absurd idea that you don't really know whether you're a great venture capitalist for ten years. So here's the logic. Well, companies take fourteen years to exit from pre seed to IPO. So when you're ten years in, you haven't even gotten your first exit. And it's this very alluring narrative that people say, there's some usefulness to it, and that you don't wanna be arrogant. You wanna be tracking. You wanna make sure, you know, just because a company has gotten momentum and gotten marked up doesn't mean that's a good company. There's there's some lessons there, but it's absurd because on the path of that pre seed company becoming an IPO company, there's other milestones. Not just funding rounds, seed a b c d e f g, but also revenue, 1,000,000, 10,000,000, 100,000,000, 200,000,000. Also secondaries, company tenders, all these other liquidity events. I think more so today, there's this underrated meme by Marc Andreessen, which is... Today, there's this underrated meme by Marc Andreessen, which is there are no more diamonds in the rough, only diamonds, which explains these $100,000,000 pre seed evaluations, these billion dollar seed rounds is the consensus is coming earlier. So what's second order effect of that? If you know that now who the best companies are, you could more quickly as a firm determine whether you're gonna have a good portfolio and whether or not you're likely to be one of the top firms moving forward.
00:36:10 · Jerry Ye, David Weisburd
[00:36:10] S1: I think, at least in terms of being able to identify companies earlier, that still hasn't changed. Right? A lot of this stuff has, you know, honestly just become table stakes as well. Right? Like, me working on talent data back in 2013 is now something you can get off the shelf from a lot of vendors as well. Right? So the the alpha there in terms of identifying signals is diminished a bit. There's still a lot of interesting data sets that you could, you know, figure out what's happening sooner. But there's just a lot more that you can continuously measure as well. Right? Like, as as you said, funding data, looking at tender offers, right, etcetera. But that also presents, like, other opportunities for exits as well. Right? So it's selling secondary shares. It's selling into a continuation vehicle or or whatnot. So it is kinda more in terms of portfolio management, right, where the bet that you made for ten years generally still applies, but there's just more options in terms of how you can exit that position as well if things turn south. Right? [00:37:16] S0: I wanna go back to this concept of firms learning and firms actually growing. For probably up till about five years ago, venture capital was seen as this cottage industry where it's just the partners, and the venture capital firms didn't even have enterprise value. GP stakes famously, very few have happened in the venture space for that reason. There wasn't seem to have terminal value for venture firms. Do you think in an age of AI that might be changing?
00:37:16 · David Weisburd, Jerry Ye
[00:37:16] S0: I wanna go back to this concept of firms learning and firms actually growing. For probably up till about five years ago, venture capital was seen as this cottage industry where it's just the partners, and the venture capital firms didn't even have enterprise value. GP stakes famously, very few have happened in the venture space for that reason. There wasn't seem to have terminal value for venture firms. Do you think in an age of AI that might be changing? [00:37:48] S1: We've already seen that happen a lot. Right? So, yeah, there's a number of firms focused specifically for GP stakes in in the venture industry. And especially now, we're just structurally with, you know, companies staying private much longer. There's just a lot more capital, you know, allocated to this sector and the space, and it's just stuck there otherwise, and GP stakes let you kind of tap into that. Right? So there are definitely more options, like, for growing a firm as well. Right? And the ability to to exit positions or share that upside with other investors too. [00:38:27] S0: How do you look at the value in the venture capital firm between the the house, the data, and the venture capital firm, and this learning organism like a company versus the individual general partners? How do you quantify those today?
00:38:27 · David Weisburd, Jerry Ye
[00:38:27] S0: How do you look at the value in the venture capital firm between the the house, the data, and the venture capital firm, and this learning organism like a company versus the individual general partners? How do you quantify those today? [00:38:40] S1: At the end of the day, right, venture capital, unlike, know, a hedge fund where you could just make a trade immediately, it's a interpersonal relationship business. It is about access. So the data side is helpful for, you know, identifying, you know, opportunities or whatnot, but getting onto the cap table is the most important part. Right? And I think that's why you see a lot of firms focused on what I call it more of a token budget versus a data budget, because you're essentially working on ways of making your existing investor base more efficient. Right? Being able to check-in on the founders that you're tracking. Right? Say congratulations on a new baby, etcetera. That helps in terms of building relationships with the founders, and that's what matters, right, at the end of the day, is getting the founders to actually sign that term sheet. [00:39:31] S0: Do you see that play out in junior staff in terms of it's becoming much more top heavy at venture capital firms with these star GPs with with AI and not as much room for associates and analysts?
00:39:31 · David Weisburd, Jerry Ye
[00:39:31] S0: Do you see that play out in junior staff in terms of it's becoming much more top heavy at venture capital firms with these star GPs with with AI and not as much room for associates and analysts? [00:39:43] S1: We're seeing that across all industries. Right? So the partners at a legal firm, they're hiring significantly less associates. You're marketing. Right? You're seeing the same thing. So, yeah, I I think there's gonna be a lot more efficiency gains for the top GPs. There's gonna be a lot more marketing budget that is going toward, you know, like, campaigning for GPs and getting their names out. [00:40:11] S0: Talk to me about value add as well. You've you've quantified this going back to 2013. What does that even mean? How do you go about quantifying something like value add?
00:40:20 · Jerry Ye
[00:40:20] S1: There's NPS scores obviously here, which is helpful. So I think a lot of venture funds started targeting this from a talent perspective. Right? The value add being, the team being super important, so let me help you identify how to grow, like, engineers to grow your team, like finding the right product guy when you need it. And one thing that we realized is sometimes this value add is important and sometimes it's actually pretty significant in terms of hiring the right person. But the founders may or may not actually remember who to attribute that hire from. Right? I've actually heard cases where they thanked another fund for this hire, and you're like, wait a minute, we're the ones that made that introduction. So it's... There's a question in terms of feeling like how much a value add that actually is. But there's other areas of this that are interesting, especially on the consumer side, where there's just a lot more data points, right, like being able to figure out what market share looks like trending over time. Right? So the the early days, I think, oh, five, we actually did a lot of consulting for companies. And you could apply this to other things, you know, like food delivery companies, like in this geography, is it actually trending or not? How many of your customers actually churned? Right? Like, this one that canceled on your service, are they showing up on another one? Right? So there's a lot of value from that as well. I think the other part is is also just like figuring out where from the other venture ecosystem, you could fill out the round as well. Right? Like, what other venture funds are not conflicted out that are investing in the sector and making the right introductions to that as well.