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All right, David. Good Huawei episode. Yeah. I think. Man, that was like, I mean, it was a very different episode for us. Yeah. Whenever we embark on the research process and then the recording process for an acquired episode, there's always the element of the unknown, you know, where like, we think this is an interesting story, but we don't really know what the story or the conclusions are until we do the research. Yeah.
Yeah. Like in Pinterest, like we were afraid that there was no story there. We were like, everything was just like nice the whole time. And then like, you sort of have to get in there to find the themes. Yeah. In this one, we were pretty sure there was a story there, but I feel like we ended on a bit of a downer, but that's what it is. Well, do you want to do an LP show? Let's do an LP show. Listeners were kind of winging it here. We hope.
We hope you will bear with us. I actually think this is going to be cool because when we first started out on the LP show, we thought we were just going to have a lot of this sort of casual conversation. We've ended up
for better or for worse, making it much more sort of instructional structured content. That's great for creating a lot of evergreen stuff. This episode may end up being evergreen too, but the goal is to make this one a little bit more fluid and a little bit more like when David and I actually get together for drinks and BS about VC and tech stuff. Of the topics that I texted David that we decided to talk about today, it's how the capital landscape has shifted, including everything from the Vision Fund to
to Series A moving later to valuation increases to seed funds emerging. I don't know exactly how we're going to end up titling this episode. You know it and we don't at this point. That is the conversation jumping off point for us right now. A good focusing point for this, we'll link to this in the show notes, the venture capital firm Wing did a really amazing piece of work that
they published last year in 2018. And then they updated it recently this year about the state of early stage venture capital, specifically seed and series a and the thesis that they put forward. They're not the first ones to say this, but they have just an incredible, like really great amount of data to back it up is that in the VC financing market today, seed is the new series a and
and Series A is the new Series B. And there's all sorts of really interesting reasons for that and implications of what that means. So we're going to jam on that for a little bit. Yeah. And I think we all sort of intuitively know this. Or at least those of us who are like active participants in the market. Sure. But it's interesting to sort of think about why, sort of both macroeconomically and also like
how that manifests in year over year. How does a market shift when people say, oh, well, market right now for a seed deal is raising $2 million on about, I don't know, $5 to $8 pre-money. It's like, okay,
okay, but who the heck set that? And how does that move when it moves? Because it's not like there's a ticker for this stuff that you can go look at the stock price of what a seed deal should be. And so it's interesting to sort of start thinking about the factors of what nudges this stuff.
What's really interesting and to run through, I actually don't have the data right in front of me, but some of the findings... That's the best way to do an episode. In this piece. Yeah. No data. But I've been looking at it enough that I think I can remember what it is off the top of my head. The way early stage venture financings used to work is you raised a...
seed amount of capital, often from angels or maybe there were institutional investors who invested, but it was a couple hundred thousand dollars. And that was the first amount of money you raised. And then you raised a series A that was from an institutional venture capital firm, but it was three to five million dollars.
And you use that, you had maybe built a first version of the product on that seed money that you raised. But then you use that, that A to really build like the first version of the company around the product. And then you would raise a series B and that was about scaling that. What's happened now, series A's are the third round on average, the third round.
sequential round of institutional financing that a company raises. Either be it the pre-seed, seed, and then A, or maybe the seed one, seed two, and then A, or a seed, seed extension, and A, or maybe a seed pre-A, and then an A. The names are ridiculous, but... Whatever you want to call it, but it's really, you know, it's the same emperor in new clothes. The first round of financing that companies are raising is...
between call it 750,000 up to, you know, a million and a half or in some cases, you know, rare cases even larger than that. But then most companies are raising that same, you know, three to $5 million, what would have been a series A, but it is now a pre-series A round that's getting raised and
And then the Series A is happening and the Series A is a $15 to $20 million round. And that's a post-product market fit round. Like that is, it's working and now it's fuel for the fire. If rewind 10 years ago, that's exactly what the Series A was.
Series B was. Yeah. So really interesting to think about like, okay, this is and the wing piece does a exhaustive job of demonstrating that this is the game on the field. How did this become the game on the field is really interesting.
I haven't read the piece. I haven't looked at any data on this, but my gut feeling is it happened around the same time that super angels started really becoming a thing where you had sort of the Ron Conways of the 2010 era, 2009, 2010 era that were investing and leading so many seed deals that
it made sense for them to actually go raise institutional capital. And so then you had SV Angel and you actually had these institutional seed firms for the first time that were investing other people's money, not just their own, in the seed round and could write larger checks. For sure, that's a piece of it. What's interesting, though, is like...
Wing does this a little bit, but as I've been thinking about it too, if you zoom out, I think there's four layers to what's happening here. One is starting from bottom to top. One is that the professionalization and the institutionalization of seed as an asset class. And again, seed used to be those very small rounds.
But as SB Angel happened, you know, and then, and Floodgate and Baseline and some of those real early institutional seed rounds, first round. And then now, you know, we're probably on the second or third generation now that Wave is part of and PSL is part of. You have so much more capital in terms of number of firms and also generation.
under management that those firms have. I mean, you guys are an $80 million fund, right? We're a $55 million fund. That's a lot of capital relative to rounds that a few years ago were a couple hundred thousand dollars. That's driving up the size of seed rounds.
Okay, so that's what's going on at seed, both driving up and there's enough capital to do multiple rounds and companies at that stage before getting to an A. Then you have what's going on at the series A level. So if you look at the firms that traditionally were the early stage venture firms, the series A firms, and you just look at their fund sizes, their fund sizes and their
their firm sizes and their firm composition of who is working at these firms, it's changed significantly in the last 10 years. Your typical early stage venture fund when I got into the industry in 2010 at Madrona was a $250 million, you know, series A fund. Now your typical early stage fund is, you know, anywhere from 500 million, even on the relatively small land up to a billion dollars.
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So we've now named a couple of factors here. One is the rise of institutional seed. Another is series A getting larger. And a lot of this you can attribute to Andreessen Horowitz because you also mentioned the people working at those firms. So it's not just five partners and a handful of associates. It's a full services firm that has a big platform. And there's people at
five, six, seven different levels of seniority on the investment team. It's like really blown out the concept of what could it mean to have an investment firm. People will probably disagree with me on a lot of causation and correlation here. It's less important to focus on what spurred what, but more important to focus on the fact that this was all sort of a perfect storm.
So you sort of have Andreessen Horowitz pioneering this new model. Other people then want to jump on that same train, and they're also getting out-competed by Andreessen Horowitz being able to be much less price-sensitive in deals than other people are because they have this huge fund. They can write bigger checks. That sort of pushes the check size up. Then there's this third factor that is...
of course, much more recent, but the Vision Fund and also the public equities investor that come down. I was going to put that at the third layer of capital. Yeah, yeah, yeah. Well, that's, sorry, maybe I took us there early, but like that's the third thing is like on top of this change in seed, change in series A, you then have like this massive rush of, you know, huge $10 billion plus capital
Well, and that's created a whole new asset class, really. A few more words on what's going on at the Series A layer.
Yes, everything he says is true. And really, yes, Andreessen did, when they started in 2009, pioneered a lot of this. They had a larger fund. They're willing to put more dollars to work, invested higher valuations than traditional early stage venture firms were. That changed the game on the field. But there've been a couple of interesting things that have happened in the subsequent years that I think have really solidified this aspect of Series A, which is that...
other firms independently and in response they started adding more people and the people that they added on the investing side broadly looked a lot more like growth investors so some firms like you know
Sequoia, like Excel, explicitly raised separate funds within the firm that were growth funds. And then they staffed those funds with investors who came from traditional growth investing backgrounds. Now, that's a very different way of looking at companies and looking at the world than early stage investing. In early stage investing, the question is, do you believe that this team that shows promise and this product that shows promise can be built into something larger?
growth investing, you're looking at data, you're looking at metrics, you're saying, what is going on here? And what is the value of what is currently going on? Not what could it be in the future so much. And so what was interesting is that as that DNA came into
traditional series a early stage venture it's gotten institutionalized there and it's bled over into their early quote unquote early stage activities and so you think it's the skill set and bias of the partners that have been added to those firms that then have created bigger checks yeah
Exactly. Part of it, it's a self-reinforcing prophecy. Part of it was the additional capital, but then with the additional capital, you needed a skillset to deploy that capital. That's now become institutionalized and self-reinforcing. And so the net result is when you go out as a company to try and raise a series A these days, you're going to get grilled on all sorts of metrics and retention and conversion and acquisition and all of these things, which are super important to know about how you manage your business. But
In the true early stages of a company, there's no way that you could actually know these things. It's much more about promise. But now promise isn't enough. You need to demonstrate that you have world-class, you know, conversion and retention in your products. Yep. Yeah, it's interesting. I think you and I had this discussion recently.
Where what I was asserting was your traditional Series A fund is going to get squeezed in the middle. Where on the early, early stuff, you're going to get pure seed funds like Wave, even though you hadn't come up with it yet. But like pure seed funds, studios, accelerators that would already select for the absolute best early stage companies that would sort of like do the work that early stage funds used to do in their sort of like seed bets. Right.
and their smallest checks with the highest beta bets, basically, with smaller checks there. And then on the higher side, they were just going to get absolutely destroyed by all of these big growth funds coming in and being willing to sort of invest where they hadn't invested before. And I think already Fidelity and people like that, these sort of larger public people had started to come down. And so my original assertion was like,
VC is in trouble and that that VC as we know it you know these firms are they are going to get out competed at the top by way bigger capital and they're going to add less value at the bottom at these earlier stages but in fact what's happened is like the big money that's coming in is.
series B and later, and series A has had no problem turning into we are everything in between and also raising really big funds. The way that it sort of worked itself out was by being able to stay private longer, there's actually just a lot more room in this sort of like stage stack that has expanded to include what used to be public companies so that these series A firms actually have a lot of room to navigate in the middle without getting squeezed. I agree 100%.
Instead of the squeezing, a new layer got added to the stack and everybody bumped up the stack. So the seed funds that people, both individuals who start them and work there like you, like me, people who really love doing true early stage company building work. Getting in the shit, you know.
Get in the shit, but I would broadly categorize it as making investment decisions and then doing the work of building companies agnostic of data where you are...
identifying potential in an idea in a team and then you are helping build and realize that potential and yeah like there may be data you look at the data like that's interesting but that's not the primary motivation of your decision series a has become data is the primary decision factor and it used to be that that was the end of the venture landscape after that you became a public company and
What happened was stay private longer. Exactly as you said, Ben, you now graduate from making decisions based on data to this whole realm of what used to be when a company would go public. But now that is when you raise your series, you know, D plus.
plus from uh kotu from fidelity from tiro from you know what have you at a multi-hundred million to billion dollar plus valuation and yes indeed most often and most uh best characterized by softbank i'm looking up something i'm trying to remember where i saw it there is a graph of the amount of
money in venture as an asset class at all. And what it feels like to me is there's way, way, way more money going into private companies. And a lot of that is at that top of the stack where that used to just be where people wouldn't, those companies should be public. But it also feels like even in the early stage, there's way, way, way more, more, more venture capital dollars broadly going into companies. I think I remember, and I got to, I'm going to
after I finished saying this, trying to find this graph, it's higher than it's been in the last decade, but it's nowhere near, like LP capital contributed to venture capital funds is nowhere near the levels that it was in 98, 99. Oh, interesting. I was super interested to see that data. To me, this is the transition to the fourth layer of what I think is going on here, which is, you know, so we talked about what has become the three layers of the venture capital stack, right?
broadly the seed, quote unquote, true early stage investing or company phase. Then you have the mid stage, which is series A, series B, maybe, quote unquote. Then you have the soft bank stage at the top, the state private longer stage. The fourth layer is...
Where's the money come from? The LP capital. What is going on with the money flows? If you think back to 10 years ago, private technology company investing was a small esoteric corner of the finance world. VC's venture capital capital
be it early stage or go stage venture capital was like, we were like the, you know, odd ducks out there, out in California or Seattle, out on the West Coast. The majority of finance was investing in, you know, established public companies. It was, you know, hedge funds. It was private equity. It was Berkshire Hathaway. Fast forward to today and the relative portion of, you
the financial ecosystem that is tied up in technology and private technology companies is so much greater than it was 10 years ago. And that's just all like the whooshing sound you hear is, or maybe the inflating sound you hear is, is all of these dollars flowing out of, you know,
other corners of finance and into technology company investing. Is there a macroeconomic reason that they're flowing out of other asset class? Like, is there something going on with the bond markets that we should talk about or like interest rates or like, does that feel like it's orthogonal and the real thing driving it is
there's way more technology innovation because way more people have access to the internet and way more people have a personal computer. So of course there should be way more money funding that stuff. Or is it like, actually they were fleeing other asset classes for macroeconomic reasons? I mean, clearly it is both. Yeah.
In the 10 years following the recession, there were no returns to be had in the bond market. And certainly in government treasuries, the real interest rate in most economies has been zero to maybe negative over the last 10 years.
So if you want returns, you have to go to equities. And if you want high returns, you have to go to high risk equities and you go to early stage technology investing. The other part of what you said, Ben, is absolutely true too. Like the available market opportunity and market capitalization creation opportunity for the internet and technology companies is just like orders of magnitude larger than it used to be. So I'm wrong, by the way.
We are actually past the dot-com. We just passed it last year. So if you look at the amount of venture capital investment in like the run-up to 2000, it was like 25-ish billion in 98, rose to 65-ish billion in 99, and then was at like 120 billion in 2000, and then of course crashed down below 50 billion in 2001. We've been slowly building up year over year over year, and last year for the first time,
we hit 130 billion in 2018, first year of surpassing the dot-com. It's kind of interesting to like, in this world where people say things like too much money chasing too few deals, it's interesting to actually try and hold that chart in your head. Yeah, yeah, totally. Now, I mean, the question is like, certainly by objectification,
objective measure there, you could say we have too much money. The question is, is there too few deals? And that's the question of like, well, you know, how much has the market opportunity for entrepreneurial tech companies grown over
over the last 10 years. It's actually kind of funny. Like you can kind of look at this graph and we should put it in the show notes as, as the Gartner hype cycle where like everyone's like, Oh my God, like internet based technology companies are the fricking cat's pajamas. So we should all rush to invest in it. You get $120 billion invested in companies when it was wildly premature. And like the internet wasn't pervasive. Personal computing wasn't pervasive as, as it is on mobile phones today immediately crashes. Like it, it looks,
Exactly like a hype cycle curve where like instead of rushing into Bitcoin and VR LPs rushed into VC and then it actually took another 20 years to really grow into supporting the amount of hype or actually committed capital that it deserved. And that's assuming that each one of these years the amount of like net new innovation was in a supply demand match with the amount of capital available. Yeah.
Yeah. Question for you, Ben. As participants, more than participants, founders of firms that are building and investing in technology companies, how bullish are we on where we are in the cycle? The way that we're spending our time and money, I think we've made our... Very bullish. I think
The internet being on, there's like 2 billion smartphones that have been shipped. Half the world has access to the internet now. I think we're in this era where the platforms, at least for the next five plus years, have been laid in terms of...
Yeah.
And to me, that's a thesis for why, you know, there's trillions of dollars to be realized in the technology sector right now. I mean, it's really that software is eating the world framework. And what I've moved away from, at least for the moment, is believing that we're about to enter the fourth wave. And that's something. I mean, I remember walking into your office at Madrona and seeing you with a VR headset on. I'm like, oh, maybe David's like a VR. Yeah. But like it wasn't VR, at least we thought it was going to be. It wasn't.
crypto at least when some people thought it was going to be it like hasn't been all these things and like recently i've been settling into like okay what if it's still a decade out like it is there still enough innovation for software to go eat every industry uh to justify all the money rushing in fourth wave being a decade out of some new of some new oh yeah and sorry i should say pc the internet mobile fourth being the question mark i have
certain that it's going to be an AirPods-like experience with a augmented viewing experience that is either embedded in glasses if they can finally make them nice enough or a contact lens. And it's going to be this sort of like
like if it's invisible, I mean, I don't need, this is a weird time to just like take this dive, but maybe we do another episode on that. I don't think that's coming anytime in the next few years. What you're saying is like, maybe that doesn't matter. Yeah. And is there, is there enough by just going in and taking advantage of all this infrastructure that's been laid in the way that Amazon took advantage of all the infrastructure that was laid in delivery, you know, and, and, uh, with sort of UPS as the platform. I think so. Like,
it makes sense to me that, that now that everyone has access to a Thumbnail,
phones and the internet and and everybody has like a relatively consistent expectation for what the user experience should be like we have hundreds of millions of new people in a professional class that expect all of their industries to leverage all that infrastructure that they're used to using in consumer experiences so yeah I mean that's one of the reasons we've been churning out so many b2b companies recently is I feel pretty strongly about about leveraging what's in everyone's hands
I definitely also agree. My reasons for agreeing are I see it every day, like as a participant in the ecosystem here and through acquired, right? Like, I mean, shoot, you and I started acquired. Like, who were we? You know, we started this podcast. We were nobodies. But it's true. We were. And we started this podcast. We now have tens of thousands of people around the entire world that subscribe and listen to our podcasts, you know, every time they get released. We have...
soon to be thousands of you, you know, wonderful LPs, you know, thank you that are subscribing to listen to even more paying money to us, you know, which is great and very, very much appreciative. But also even beyond the fact that you're paying money to us, like,
envisioned and helped create this company, Glow, that you built within PSL, which is a whole technology company oriented around creating a platform to serve this new market that's been created solely by the internet. I mean, it's crazy. You're sitting in Seattle. I'm sitting in San Francisco. We're talking into like...
sticks with foam paddings on the end of it. Keep in mind, these sticks with foam paddings, you're talking about a lot of old technology right now. Seriously. But these ideas that we're talking about are being beamed into the ears of thousands of people around the world, probably wirelessly. That's pretty amazing. And this whole thing you're describing, the actual newest technology
breakthrough thing is a wide availability of LTE such that people can stream this and have no concern about it while they're on the go. I think. Well, but there's also innovation on the back end too, right? Like if you think about like what is a technology that is core to enabling Glow? It's Stripe. Yeah, there's new sort of layers of infrastructure. Yeah.
So without that platform and layer of infrastructure that enabled internet businesses to be able to be built at Stripe, we've been able to build, you've been able to build a internet platform business in Glow that enables content creators like ourselves and podcasters to create businesses and markets around that. Like, that's pretty awesome. Yeah.
So, you know, I see that. I see our most recent investment here at Wave is a technology company that is a technology-enabled brokerage of scrap metal recycling. Like, it's crazy. I mean, scrap metals is a, call it $200 to $300 billion global highly connected industry that was untouched by technology until...
when Quota Pro, this company, was started. Literally untouched. And...
QuotaPro is already one of the largest brokers of scrap metal trading in the entire world. Like, that gives me a lot of optimism. Yeah, it's exciting. As I think about, like, the... This is great, Andreessen Horowitz's presentation by Benedict Evans last year, I think probably at their annual meeting. But one of the things he talks about is the internet wave that we're just coming out of is...
moving information around. Like it's largely all digital experiences. And that was the easy stuff. And now we have to do the hard stuff, which is moving all the physical things around, which are actually a way bigger piece of GDP. And so like, if you think about technology eating more of GDP, that's,
the pie remaining is still way bigger, assuming that it's addressable by technology and software. And so things like logistics platforms and payment platforms and think about like Flex, the Seattle-based company that like gives you flexible warehouse, it's like the Airbnb of warehouse space. Like there's all these sort of like
infrastructure things that need to be built to link the physical world to the digital world so that you can softwareize a lot of these businesses and go and address more of that GDP without having to come up with the next mobile or the next internet. And I do think we're going to be treading for a bit before that comes. But that's what gives me so much optimism, like you were saying, in this
in this quote unquote interim period where we see Flex in Seattle, we see Convoy in Seattle, we see Flexport in San Francisco, we see QuotaPro, the company I was just talking about that we invested in here in San Francisco. I see it with my own eyes that technology can penetrate these markets that five years ago would have been inconceivable that it could.
So that's all my bull side, which is by far, you know, tipping the scale. I'm far more a bull than a bear. The bear side is that, you know, and I've also seen this too, and I'm sure you have too, Ben, is that the farther we get into the cycle and as the stack of venture capital increases...
you get companies that somehow manage to continue to traverse the stack and raise more and more capital, but are not actually real companies. Or they are real companies. They're not real businesses. Right. There may be something real about them, but they're not businesses. They're not long-term companies. They're not companies that will ever be...
viable investments via DCF model. I've noticed again, you know, it's natural the deeper we get into the cycle, and I'm sure you have too, that there are just more of those companies. I wouldn't say it's a majority of companies in Silicon Valley, but it's a much higher percentage than there are of those types of companies, like when you start at the beginning of a cycle. Yeah, it's like, do we need to hit some tipping point where there's
enough of those that go bust that that creates the pullback or is, you know, the question that everyone's asking is what's the change in this startup bear market going to look like and when's it going to happen? Are we going to flatten? Are we going to fall off a cliff? Are we going to, are we all wrong? And actually there's just so much innovation here that like it actually just can keep going. That's the actual real world manifestation of companies like that
being created in the first place and then continuing to be funded and lots of dollars flowing into them. That's what pumps up risk in the system. And as risk pumps up at a certain point, it will pump up past an equilibrium that
those companies will start to fail. And then all of the LP capital that has flooded into the system will start to pull back and people will worry. Once Bill Gurley has a great quote that like, risk is like boiling a frog. You risk seeking behavior starts growing incrementally, rising slowly. But then once risk aversion sets in,
it sets in immediately and it sets in hard. And everybody feels the same thing at the same time. Yep, exactly. So that's, I worry about that. I don't worry about like the fundamentals of, is there a lot more market cap of technology enabled businesses to be created? Zero worries about that. I worry about where we are in the risk cycle. And then of course you get into that interesting discussion of like, well, okay, when everyone gets spooked all at once,
presuming you have the means to continue to keep investing through it, either as an operator who is going to self-fund a company or as an investor that's going to put more GP money in the fund or an angel investor who's going to start writing more checks out of their own pocket. That's an amazing time to be investing through it if what you're saying is true. You believe that the fundamentals are strong of the supply-demand match was...
in pretty good shape. It's now at a place where there's way more innovation than capital available. So it's a great time to be investor. It's like if you have the means and the vehicles set up to do that, what an amazing time to be able to be putting money into the system when there's way too much risk avoidance happening out there. Yeah, yeah.
Well, that's why pretty much any great investor over time, whether that's, you know, Warren Buffett or Howard Marks or, you know, the folks at Benchmark or the folks at Sequoia, they say, you know, when a recession hits, when a bust happens in the cycle, like that is the time to get greedy. Yeah.
because that's when the opportunities happen. And we see it on the show, right? Like all these generation of companies that we've been covering last season and then coming into this season and IPOs unacquired, they were all started coming out of the last recession. Yeah, I think the number of times that we've referenced somebody had a life-changing event that happened in 2008 and then decided to start a company.
I think it was Pinterest. It was, uh, who was the investment banker that in 2008 lost their job? it was Lyft. Yeah. Lyft. Yeah, yeah, yeah. Uh, John Zimmer left. He didn't lose his job, but he left like right before Lehman went under. He was, oh, that's right. He was smart. All right. What haven't we covered in this?
I think the last piece to cover after all of our pontificating is what does this mean? We've been talking about this from our thoughts on the investor standpoint. What does this mean if you are a company founder or if you're an employee at a company? What should be on your mind on where we are in the cycle?
Well, one thing is be excited about the fact that in the earliest stages, the common stock that you're getting in these companies is, you know, on paper worth a lot more than it would have been a decade ago. It's not actually like you can't buy dinner with equity, but... Well, that's what I was going to say is the flip side of that is...
you know, you need to be prepared if you're going to come participate in this industry with the way things stand right now. And I don't see this changing in the foreseeable future. You are going to have to wait a long time for liquidity. You should not expect that while your paper worth may go up very quickly as a company you founded or you were working at raises successive money and increases in valuation, you're not going to be able to feed your family on that, you know, on that equity for quite a while.
Yeah, it's funny. I was just reading that Scott Cooper book, The Secrets of Sand Hill Road, and he makes a point that I'd never thought about before, but the four-year vest that is so common in startups came because the average time in the dot-com boom between founding a company and IPO-ing was four years. Oh, man. What a good point. That's one of those things that's just like a light bulb. I never thought about why is it four years? I never thought about that either. Yeah. Wow. Yeah.
And even I mean, you even look at like like a public company vests like Amazon and Microsoft are like four years, I think, as an artifact of sort of that era. At this point, as a startup, you can't like say, well, you know, you look at these companies, it tends to take eight to 15 years to to IPO to get them out the door. So that's what we're going to do for vesting. You you'd have a really hard time retaining an employee contract.
or winning when someone else is offering them a four-year vest in comparable equity. And so what ends up happening is we have this like treadmill cycle of re-ups where you constantly are creating bigger option pools, constantly diluting everyone, constantly re-upping the people that are staying. And so it's like...
if we were all just honest about, hey, this is actually going to be a 10-year journey, let's have everyone vest over 10 years, we wouldn't need to keep creating so many new shares all the time. But the precedent is set that it's a four, maybe five-year vest, and you're probably going to have to go do new grants over time. The further we get into the cycle, and as I was saying, the more...
flow into opportunities that don't necessarily deserve those dollars, the scarce resource in the system becomes judgment and really forcing yourself to have good judgment and
And that really means not making decisions about where you're going to work or what strategic decisions you're going to make at your company if you're a founder based on what common wisdom around you feels like the right decision to make. But what do you really believe? Do you really believe that there is upside in what you're doing? If so, you should dedicate yourself to doing it. If you don't really believe that there's upside in what you're doing, you should not do it and you should get out of it.
Yeah, what it means to be in this sort of late cycle environment as an employee is that you should evaluate the intrinsic value of the company as if you were an investor. And of course, not everyone has these like deep investor skill sets, but like you kind of don't need it to do what you should be doing, I think, as an employee joining these companies. You sort of look at like, what's the value actually provided to customers? How much
revenue are we actually generating what is the gross margin on what the revenue that we're able to generate here and like you can ask those in even less finance-y terms it's like of the money that we make like how much do we really get to keep like are we providing enough that we're able to mark up our services or whatever the you know the ingredients to the product that we're making are there's lots of good ways to sort of like squint at something and be like huh
Well, what's to stop someone else from just coming and undercutting us and just asking those sorts of questions rather than reading TechCrunch, seeing that someone just raised a bunch of money, hearing it's a new hotness, seeing it all over Twitter, and then just making your decision based on that. Yep. Yep. 100%. All right, dude, this has been a freaking marathon. Not this LP episode, but with Huawei.
LPs, what we normally do is we rarely do two episodes at the same time. And actually, for a little behind-the-scenes look, the reason that we can't do that for the main show is we can't keep enough information in our heads at once. Like, when you hear a regular episode come out, there's...
There's like a six-hour window where we can do that episode where we actually know enough information, but before we've started forgetting it and like to line up two back-to-back, which we've tried to do before is just like a colossal failure. So it's a good thing we can have this much more conversational LP show as our second. That's good though. I feel like to the topic of this LP show, doing Acquired is like, it's such a great way to keep
my judgment honed and sharp, you know, like, uh, it's worth every minute that we put into it. I noticed myself asking very similar questions in like, uh, as we're working on creating companies now and I'm like forced to make a deck to then go and justify it to my partners of why we should start this business. Like I can sort of
premeditate what the holes are going to be because of like when I look at the playbook or when I look at you know places where these companies were vulnerable or places where the the their edge got competed out over time like it actually it actually materially helps in being an investor
That was the number one, you know, the number one motivation for us in starting this podcast and deciding to continue doing it is like, hey, it forces us to get synthetic reps, you know? Yeah. Have we? Oh, I like that. Synthetic reps. That should be a tagline for something. I don't know if we've ever shared on the show.
certainly not the main show, maybe worth sharing what our sort of like priorities are and our non-priority with LPs. Because this is interesting. This is something David and I came up with like six months. So we do this like every six months we have the Acquired Summit. And it's happened over Skype a few times since David fled south. But ideally it happens over drinks. And we sort of like go back. We of course look at like the goals for the year and like our content calendar and stuff. But we'll... Which has become much more material than it used to be, which was...
you know, the day before saying, what company should we do today? We check our goals. Like the biggest thing is that we check our goals and make sure that we both feel good about why we're doing the show and that nothing's changed. And amazingly, of these like four things in this order, none of them have changed in the four years. And so the first is our own education. Like first and foremost, learn to be better at creating and investing in companies. The second is growth.
grow our own networks. So by getting to spend time with the great guests that we have on the show, build that connectivity far below one and two is reputation as our third, which is exactly what the fruits of four years of labor are sort of paying off with now is there's so many more times that I get email from like amazing people that I want to meet with who already know of us because of the show. Like I could, I couldn't have imagined that four years ago. And it turns out
hundreds and hundreds of hours of research and learning to be a better storyteller and diving into some of this stuff. Like it's been really great for that. And a complete and total non-goal is make money because we like so fundamentally believe that if we, of course we generate revenue from the show. If we can pour that all back into growth, then,
then we can sort of like realize the turbo charges goals one through three. Yeah. Yeah. Through our day jobs over a very long time. And so that's sort of how we think about why we do the show on goal to, you know, of, of growing our network. Part of that is the guests we have on the show. A big part of that is you guys too. Like, I mean, the people like all of you who we've gotten to meet through doing this, like the slack has been so awesome. It's been incredible. Yeah.
Riley and Sarah and I here at Wave were preparing for our, we do offsites twice a year. We were preparing for our summer offsite. You know, one of the key things we think about is sourcing strategy and channels. And I was thinking about it, preparing for that. And I was like, you know,
Just about every interesting company that I have seen at Wave over the past year that I've invested in or haven't, but interesting ones, has come directly or indirectly through Acquired, which is amazing. So, you know, thank you guys. Like, it's just been so rewarding personally and professionally to get to know you all. Yeah, that's pretty cool. All right. I'm calling it. All right. Bedtime. LPs, thank you. See you later. We'll talk to you soon.