0:00
Barry, thank you so much for joining us here on Giant Ideas. >> Great to be here.
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>> Um for everyone's context, Barry has been a a long-time mentor of mine and um I'm very grateful to all the advice he's given me along the way in building Giant.
0:12
Barry, what is going on in the venture market?
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I mean, it seems like every week there's a new record, a new billion-dollar seed round, whether it's Infable Labs here in the UK or it's, you know, two billion at ten billion-dollar post money for Thinking Machines.
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Every, you know, uh week we hear of a company raising at yet another higher valuation, sometimes three months after the last round at multi-billions of uptick. What is going on?
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Is this Is this the new normal?
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Is this a moment in time? Is this a bubble?
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It's very hard to understand what's going on in some ways and whether this is just a bubble or a very rational thing that's happening at the moment.
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What do What's your take?
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>> Yeah, I mean, and and it can be both, by the way. >> Yeah, of course.
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>> You know, I mean, you I think you have to go back to I don't know, 2000, 2005 and look at venture.
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Venture was a 15 10 to 15 billion-dollar business.
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That means that venture capital firms were investing 10 to 15 billion dollars total.
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>> Half the size of Anthropic's last funding round to give people context. >> in the world. >> Yeah.
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>> Um and I don't know what the latest numbers are, but I think we're probably somewhere 30 to 40 times that size now.
1:30
And it may be even greater than if you start to include some of these late later rounds in SpaceX and OpenAI and Anthropic and some of the others.
1:40
Um And and that's really the what you have to recognize is that because companies have stayed private longer, so much market value has shifted from the public markets to the private markets that it has in fact attracted a lot of public market investors to the private markets and in fact there's a lot of private market investors who act like public market investors.
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And so when you talk about venture, venture it is, you know, we use venture as one word to capture everything. It's not.
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We can't really do that anymore because you know, traditional venture capital still being done, but it's being done by a very small portion of the venture capital market.
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That is investing early and building and growing you know, and developing companies.
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There's a whole part of venture capital industry, and it's probably 80% or more that is really looks more like a public market investor. All right?
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Because so much capital is now come into our market, um companies can afford instead of going to an IPO, they can afford to stay private longer.
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And in fact, you know, they can keep doing these rounds and secondaries so that you know, employees get liquidity and and investors get liquidity and why go public? Yeah. Right?
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And be under that scrutiny.
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So and I think that's going to continue.
3:03
Now you're seeing, you know, you're going to see trillion-dollar IPOs.
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I remember when a billion-dollar IPO was a really big thing.
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I think eBay was one of the first ones that I remember. Yeah.
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You know, now we're doing a trillion-dollar IPO. That's a thousand times. So it's crazy.
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So that's one trend, um you know, that we're seeing.
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And again, I think we have to bifurcate the way how we talk about venture from here on out.
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Number two, because we have this 80% of the market that is so much capital has been attracted to and these companies are staying private longer and and these rounds are so large that um that venture capital companies, venture-backed companies can now solve big problems traditionally solved by large corporate behemoths and industrials.
3:53
And so you're seeing, you know, and you're seeing it.
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Now, a large language models is one of those problems, right?
3:59
SpaceX was one of those, you know, big problems.
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Energy, nuclear, one of those big problems.
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Quantum, another big problem.
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Um, you know, defense and how it's evolving, another big problem.
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Um, you know, health care and and drug discovery.
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All these things now, um, which were traditionally solved by these big companies are now being solved by new companies.
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And they're getting, you know, they're getting the capital to do it.
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And that's amazing because now all of a sudden we have AI at our at our at our hands and we have companies that move fast and innovate fast, um, that can attract the kind of capital to allow them to solve these huge massive problems.
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And that's exciting in in my view.
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And that's I think why we're seeing people get so excited about these companies and are willing to throw a lot of money at them.
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And of course their valuations go up and up and up and up.
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And and and in a lot of cases, too, they go up because the revenue's growing so fast.
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And in some cases it's just the promise of solving a really large problem, like nuclear, right?
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>> So, so yeah, that makes a ton of sense to me.
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So that we shouldn't talk about the whole private technology market as venture. It's it's different.
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There's venture which is kind of more the early scale side of things.
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And then there's these crossover funds which are probably more similar to what public market equity investors used to be.
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That makes a ton of sense to me.
5:21
Similarly, I really like the take that because these venture firms have gotten so big, they can now finance entrepreneurship to take on these big industrial problems in a way that I guess you weren't really doing back in the '90s where you were trying to find an eBay which was super capital efficient and could kind of get network effects and scale.
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I've never I've never heard that take before.
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So do you think that's that's a big part of it they're sitting there today saying, "Hey, we can finance a different kind of entrepreneurship?"
5:47
>> And I've been arguing this with a lot of people on on just how venture has changed.
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You know, we've certainly gone from um building portfolios through diversification to building portfolios through concentration. >> Yes. >> Right?
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Because we have the haves and have-nots.
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There's a Mag 7 in the public market, and there's probably a Mag 10 in the private market. >> Yes. >> Right?
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And everyone wants to be in those companies.
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Um you know, but yeah, you know, we're we're throwing we're we're doing these companies We're funding these companies also with our peers.
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It's not like, you know, we're you know, Lightspeed's going in and doing it by themselves, you know?
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There's there's a bunch of us doing it together so we can all bring our collective capital and solve these big problems, and um it's exciting.
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I I do think that, you know, when you look at a firm like us, and I think for a lot of our peers, we really are two different firms.
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We're We're one that's traditional venture, and one that looks more like a public market investor.
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And we, you know, we go through, you know, the analysis like a public market investor.
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Um we don't probably run the algorithms like they do, but we're using a lot of AI and using Claude and getting smart, and um it's a whole different business, and you know, we have to remind ourselves that um we think of ourselves as not a venture capital firm, even though we do venture capital.
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It's one of our products, but we we think of ourselves as financial services, right?
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And in fact, as the market goes global and companies stay private longer, a lot of people want access to these companies, and we provide access.
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>> I I tell I want to take the billion-dollar seed round and just double-click on that because I have to be honest, my thinking there has changed.
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I think a year ago I thought it was a a sign of a bubble, and now I kind of starting to think that it's a very rational uh thing to do if you are seeing companies go to a trillion dollars on the time frame that Anthropic has.
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What What do you What do you think?
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Like, does it make Does it make sense to do billion-dollar seed rounds?
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Is this Is this kind of a way to generate true >> Well, I think yeah, it has it has sort of become the new normal Um you know for research labs and for for a bunch of different categories.
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Um, and I think [clears throat] in some cases you'll look smart and in some cases you won't.
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You'll lose your money and you know, we can't apply the same model to everything.
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You know, these companies are going after different markets.
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Some markets are way more exciting than others.
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Um, and so you know, we're we're doing this um, and we'll find out.
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You know, the nice thing about venture capital I've said this over and over and over is that you can only lose one time your money.
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You know, now if you're writing a you know, a billion-dollar check that's a lot of money.
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>> that's a decent amount of money, yeah.
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>> You have to be careful but you can obviously make 10, 20, 50, 100, you know, 2,000 times your money.
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People are realizing that the whole world is changing um, with you know, with AI and all these markets are being disrupted and we can solve problems that we've never really solved before.
8:41
You know, we start to talk about space and you know, people are really excited about SpaceX and there's a number of companies behind that that are building the infrastructure for us to go into space and solve problems, right?
8:53
And not just build data centers, that's one.
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You know, energy um, you know, minerals, um, drug discovery, um, there's all sorts of things you can do in space a lot more efficient than you can do here. >> Yeah.
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>> So, um, you know, what's and who knows how big these markets are going to be and disruptive.
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>> Yeah, we actually interviewed um, Baiju the founder co-founder of Robinhood who's building the Cowboy Corporation and building data centers in space.
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We had him on the podcast a couple weeks ago and it's pretty fascinating to hear his view on the physics and the cost curves and how he thinks that's a pretty natural place for us to end up building data centers in solar in space.
9:30
Um, you've you know, been through a bunch of cycles Barry so how you know, you saw the the dot com boom, um, you saw the 2000 wave with social media.
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How does this one differ or in feeling or in, I guess, practice to the last ones and what's similar?
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>> Yeah, they're all different.
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Um, you know, dot com, I think we we all ascribed a lot of market value to companies that were, you know, building viewership and eyeballs and, you know, all that kind of stuff without really looking at the overall revenue growth and profitability.
10:07
Um, but you could argue someone like Amazon wasn't profitable for a long, long time and they became a, you know, pretty good company.
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Um, but I think a lot of those companies, you know, when the, you know, when the music stopped, we all said, "Oh, wow, they're not as good a companies as we thought."
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And a lot of them didn't make it.
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Um, you know, with this AI boom, I think it's a little bit different because, um, there is real revenue behind these companies and and and revenue growth that we've never seen before, ever in any in the history of mankind.
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Um, and so you have to take notice and I think that's because, you know, AI is obviously disrupting everything.
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Um, and the market, the available market for a lot of these AI products is not just replacing existing product markets, it's also, you know, replacing in some cases existing labor markets and everyone's afraid AI is going to take jobs and it probably will take jobs and we're going to have to figure out what to do about that and how to create more jobs, you know, with new companies.
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But, um, >> Yeah, the addressable markets of these companies isn't just software and >> These addressable markets are incredibly and and as you build out new new markets, I mean, think about drug discovery.
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If you can do factor drug discovery in space and um, and and get drugs out faster and more effectively and I mean the market's almost endless for that, right?
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We want people to live I guess we want people to live as long as they can these days, so.
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These are by the way very giant ideas.
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>> These are very giant ideas.
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>> if giant VC going after some of these ideas.
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>> We definitely are Barry.
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Um we definitely we already have some I would say in the portfolio and um you know, Open AI announced this day that it's going to file for to go public.
12:00
SpaceX is just just uh published its prospectus.
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Anthropic is likely going to go public later this year.
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Lightspeed's going to be a big big winner in that IPO.
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Could you give our listeners maybe just a bit of insight into how you guys thought about that investment when it first uh you know, when you first decided to to to invest.
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I'm sure it wasn't as straightforward as easy as it might seem in hindsight when it's gone from 30 to 40 billion in revenue uh you know, earlier this year.
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I mean, at that point in time when you guys invested Open AI was the kind of clear frontrunner.
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So, be love love to get just a little bit of color.
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>> Our first the first money we put in I think in Anthropic was at 16 billion.
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>> Which is huge price for the time.
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>> Looking back seems like that's a that's a big valuation for any company.
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Some of our companies never get they go public and they never get to 16 billion, so um but you know, they had a relationship with Amazon and they were you know, seeing some revenue potential coming from Amazon and we sort of looked at that and said, "Okay, one they're sort of going after the enterprise, two they got at least a a base customer in Amazon that's a pretty good customer. That's interesting.
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You know, let's see what happens."
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And of course then they quickly after that they raised 60 at 60 billion and we really happy up in that round.
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We put a lot of money and a lot of our LPs in that.
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Um and that was a harder round to raise because revenue was just getting started and a little bit later than that they raised it 170 billion.
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It's funny because that round, I think, was you know, um there was a lot of demand for that round, much more demand than at 60, and it was just, I don't know, three or four months later.
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months later. So, um you know, when you think about Anthropic, and I don't really want to compare OpenAI and Anthropic because they're very different companies, but I think Anthropic, um wisely chose to go towards the enterprise, where there's a lot of
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dollars, and you know, create products that, you know, are impactful for the enterprise from day one, that that give them efficiencies and and, you know, Claude code and Cohere and and some of the other products they have have, you know, been real successful. So,
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So, you know, I think we're we're seeing a lot of really great companies that are going to come out and go public, and um I'm excited to see the market reaction to it. >> Yeah, absolutely.
14:20
What do you think the lesson there with Anthropic is that, you know, we can't quite comprehend how big things are going to get, or momentum is just so extreme in this power law world that things get bigger than than ever.
14:30
So, they threw out the rulebook on previous valuations.
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>> Yeah, I mean, I think, you know, you look at it, and you sort of look at it in the lens that you're, you know, when you look at the 16 billion-dollar round, you look at it through a lens that um you you've been using, and you're like, "Oh, this is a high valuation, and may- maybe they can get this kind of revenue momentum, and maybe they can, you know, three to five x their revenue, or whatever."
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And then you realize this is a whole different ballgame, that, you know, they can 10x plus their revenue, and the enterprise is huge, and, you know, like I say, in venture, uh we we make bets.
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Sometimes we look smart, and sometimes we don't.
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You know, and there was a lot of early investors in Anthropic that, you know, will look very smart with the bets they made.
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And OpenAI, for that matter. And SpaceX, for sure. >> All of them. All of them.
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It'll be a They'll be great case studies.
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You know, can >> But it's exciting, right? It's exciting.
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And look, we need some liquidity in our market.
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Our LPs need some liquidity.
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Our GPs need some liquidity.
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And it's good for the market.
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>> Well, I think that's coming.
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We got We got a a tsunami of liquidity potentially coming our way over the next 6 months if these three IPOs take place.
15:44
Um one thing I have candidly been struggling with a bit myself, Barry, I would love your take on is just we've almost moved into this era of I would say like total consensus that AI is the most transformative technology.
15:55
And I think, frankly, cuz you just can't argue with the impact it's having and the numbers we're seeing.
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Um that physical AI is probably the next big theme.
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And it's almost like the whole market has converged on that belief.
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And I guess venture is always kind of been a bit about the non-consensus and right investment, particularly at the early stage.
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But perhaps we're in an era where the smartest thing is to be consensus.
16:15
I heard Elad Gafni say that on a podcast recently, and it kind of resonated quite a bit with me.
16:21
Um and we've also got this era at the moment of just like total kingmaking, right?
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We've got firms like Lightspeed, Andreessen, uh you know, uh Thrive.
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They are essentially kingmakers.
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They anoint a company with capital, and they can almost brute-force it into success.
16:31
So, if you aren't one of those kingmaking five, how do you think you should invest or deploy in a time like this where there is, I guess, yeah, just maximum consensus, but it might actually be the smartest thing to do might be to be consensus.
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>> I mean, these rounds are these large financing rounds when companies get going um include a lot of investors, right?
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And much much different than they We used to do venture, right?
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This is like public market investing.
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So, a lot of people are riding these things.
17:05
Yeah, I mean, I don't know.
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I mean, you know, consensus I don't think you make money in venture when you're investing with the herd.
17:11
Yeah, I think you have to be early.
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And so, you know, um you got to be early in these companies and you got to be able to, you know, move with conviction fast and be and not be afraid to lose your money in these companies. So, that's one thing.
17:28
Um but, you know, AI is changing everything. We know that.
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It's a huge market opportunity.
17:35
I do think physical AI with robotics is going to be in the next leg and we'll see a lot of really interesting use cases and companies come out of that.
17:46
Um and I do think there's a hardware component that will even enhance how we think about AI.
17:51
When you talk about things like quantum computing and other ways to accelerate, you know, um the hardware infrastructure below AI.
18:02
Um it it creates even more potential.
18:06
Um so, and I think about AI is now intelligence intelligence um is being commoditized. Yes. You know, somewhat.
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Now, people will [clears throat] always say, "Well, there's always got to be a human doing this or that or Well, in some cases, yes, some cases not, but um the nice thing is intelligence is now at our fingertips. >> Yes. >> Right? Everybody's fingertips.
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And so, what can you do with that?
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I think going forward, um you know, people um that know how to use the intelligence, but also have all the intangible kick characteristics um of, you know, that we look for in entrepreneurs and investors, you know, drive, persistence, teamwork, um resourcefulness, um you know, interpersonal skills, communication skills, um self-starter, you know, go down the list.
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All these intangibles, EQ, right?
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All these intangibles are going to differen- differentiate people in the future because they, you know, intelligence is is at their fingertips.
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>> Yeah, you you and I were we're about that uh a months ago, right?
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That for kids growing up these days, it's probably going to be EQ that's the real differentiator cuz intelligence is abundant.
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Um Reid Hoffman also had a great He came on the show and he had a great uh view on it.
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He was like, "The internet made uh connectivity abundant.
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It kind of imbued the world with connectivity and AI is going to make intelligence abundant.
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It's the whole world is going to be imbued with intelligence of everything from our phones to our cups to our you know, beds.
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There's just intelligence everywhere."
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And I thought that was kind of an interesting um metaphor.
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>> You've hired a bunch of great investors, Barry.
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You've been a great investor yourself.
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You know, you were involved with Snapchat, a bunch of other fantastic companies.
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What do you think makes uh a great investor?
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What are the timeless qualities of a great venture investor across across cycles?
19:55
>> Yeah, I mean, I've worked with a lot of people who are really good investors, certainly better investors than I am.
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Um um and you know, I think the common thread is um their their just their instincts about a vision and a direction and a market are really good and they're not afraid to take early risk and move with conviction.
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Um you know, and that's really that early-stage venture stuff, but >> Yes.
20:25
And how how articulate are they on that vision?
20:27
They sort of just shrug their shoulders and say, "Hey, I got a feeling."
20:30
Or can they really articulate it to you and and function? >> it. Yeah.
20:34
I mean, you can articulate it.
20:36
I mean, here are the scenarios where this becomes a really big thing, right?
20:41
And there's several scenarios.
20:43
Um whereas you know, um it's it's funny because sometimes you can think about And you have And you have to be able to remove yourself as a consumer from this analysis, right?
20:54
Because sometimes you think about, you know, as an old person I think about consumer apps and I'm like, "Why would I Why would you do that?"
21:01
you know, but I'm not the target market.
21:03
So, in some of these companies you just have to you have to sort of remove yourself from that and just say, "Hey, if this this works, you know, if if take pick an example.
21:13
If we can truly do drug discovery in space and improve, you know, process times and efficiency and lower cost, that's that's a massive opportunity, >> Right. >> right?
21:25
And there's going to be a winner.
21:26
If it's feasible, there's going to be a winner.
21:28
So, let's take the technical risk.
21:29
Let's back some a company and let's see if they can pull it off because we know if they can pull it off, it's massive.
21:36
>> And and there's always a bit of kind of two schools of thought for the early venture like, you know, some people are very market focused and I would say over the past 10 years it seems like there's been a big swing towards let's be 100% founder focused.
21:46
The founder is what matters.
21:47
In your experience watching people, the best and best at Lightspeed, they blend both, they tend towards one or the other? What What do you think?
21:55
>> Yeah, I think it's a combination of >> Combination.
21:58
>> of great people and great and great market opportunities.
22:00
It's It's hard if you don't have one or the other.
22:02
Um a lot of people center on product, too.
22:05
Um when they're evaluating companies.
22:08
The thing with product is the product evolves quite a bit over time.
22:13
So, it's really hard to make an assessment.
22:16
Um either you can be a leader or not, you know, and you have the technical team to build, but you're going to evolve the product.
22:21
But good people in good markets find a way.
22:24
And now we're seeing some exceptional people in AI and robotics and space um and exceptional markets.
22:32
So, um those are some companies to watch.
22:38
>> Yeah, I always thought like a fun parallel is, you know, when I was a student of history back in the day, they had the kind of great man theory of history and then they have kind of the great forces of history theory.
22:46
And I think actually the reality is it's both, right?
22:50
Like, you know, Napoleon was Napoleon cuz of who he was, but there was also a bunch of things going on in Europe which allowed him to to be the emperor.
22:56
And I think it's the same with founders and and markets, right?
22:58
You need a great founder.
22:59
That is the consistent thing in the business.
23:02
But there's also always some kind of broader structural big tailwinds that that drive the founder along to build the big business, I think.
23:10
>> Yeah, and I think founders are getting younger.
23:12
I'm not sure the data shows that yet, but it feels like at least in the Silicon Valley that founders are getting younger and younger and younger because they're they know the technology better.
23:20
The technology cycles are so fast that you know, you have to come out of college knowing this stuff, having used it.
23:27
If you didn't use it in college, if you were a CS major and a coder, you know, you're sort of behind if you haven't you learned how to use AI.
23:35
>> Oh, I'm I I had a 17-year-old come on Zoom the other day and pitch me Baron.
23:39
It made me feel a bit old, I'm not going to lie. >> [laughter] >> Yeah.
23:43
>> But you but you but you you bought Evan when you bought Evan right when he was like 21 or something like that?
23:47
He can't have been much older than that.
23:50
>> He was he was a senior in college. Yeah.
23:54
Um So yeah, I mean, we're going to see a lot of those and we'll see entrepreneurs get younger and younger and hopefully we'll see entrepreneurs all over the world.
24:02
I mean, this is this is the opportunity really is that you know, all the innovation shouldn't be just in the Silicon Valley.
24:08
We need it to be everywhere.
24:11
>> I love one thing you always said to me, Baron.
24:13
>> It brings economic wealth to people, right? And regions.
24:17
>> It is the great It is the great uh wealth creator entrepreneurship.
24:19
One thing you always said to me which really I've um I've loved is that you know, with great change comes great opportunity, right?
24:25
Uh uh for venture firms and from for entrepreneurs, for everyone.
24:28
And I think that's so true and we are at a period of like maximum change, right?
24:31
So it's um it's a wide-open field.
24:37
>> Yeah, and we are in a a period where the the the cycles have gotten faster, change is happening, change is more disruptive than it's ever been.
24:46
And and [clears throat] and I think a lot of people are like, "Wow, I'm going to be glad when this is over." Um I got news for you.
24:50
I'm not sure it's ever going to get slower.
24:55
>> No, doesn't seem that way.
24:55
technology cycles are going to get, you know, longer and I'm not sure the change is going to be less disruptive over time.
25:00
I think it's just going to be more disruptive.
25:06
So, we got to get used to it.
25:06
It's sort of the new normal. Great as an investor.
25:11
>> That is an interesting point.
25:11
I know I I think people are going to have to come up with new ways to manage this kind of psychology of the pace of change cuz it is a new a new normal.
25:19
Um but listen, you've you've built one of the biggest venture firms, Barry, you and your co-founders uh took you, you know, 20 20 or so years, but you guys have established yourselves as, you know, one of the top venture firms, certainly one of the largest.
25:32
What are your lessons on that journey?
25:35
It's been up and down, right?
25:37
There's been as always it's been an entrepreneurial >> Um yeah, we're celebrat- we're celebrating our 21st >> 21st, okay.
25:44
>> anniversary this year. I think this this month.
25:47
I never never thought it would get as big.
25:51
You know, we our first fund was 475 million. Um and that felt big.
25:59
Um but we never thought we'd get to where we are.
26:02
Um and I think, you know, people ask would I do it again now knowing what I know and sometimes I say, "No, I don't think I would cuz it's it's a long hard journey."
26:13
People think it's, you know, it's easy and it's just, you know, there are hurdles all along the way and roadblocks and it's a lot it's a 24 by 7 grind.
26:21
Um having said that, I'm glad I did it and it was an incredible journey.
26:26
I worked with incredible people, my my co-founders and and the team at Lightspeed and um wouldn't trade it for anything.
26:36
You know, for us, we took the idea of following, you know, sort of we knew that that in in for us to gain market share and to establish ourselves as a serious brand in venture, we had to be early to things.
26:53
Um because you just can't be with the herd and establish yourself.
26:54
So, we we tried to get early to you know, certain investment sectors, certainly to India and China and and all other places.
27:04
We're not in China anymore.
27:04
But, you know, Israel, Europe, um other places.
27:10
And then, of course, just understanding that companies are staying private longer.
27:14
So, how do you take advantage of that and getting access to these iconic companies that are being built.
27:20
And so, you know, we sort of followed the opportunity.
27:22
As venture grew from, you know, 15 billion, which I said in 2005, to whatever it is now, 400 billion now, we've sort of grown with it by following the opportunity.
27:31
You know, going to where the puck is and going early. Um and it's worked.
27:36
And along the way, we've gotten into some good companies and we've generated liquidity for our LPs and that keeps them happy and loyal and um you know, we've been fortunate to to to ride sort of the the growth in the industry.
27:50
And I think there'll be more growth ahead for companies, you know, for us and companies like Giant. >> Yes, absolutely.
27:55
You've been um you guys are really entrepreneurial, I think, from the outside.
27:58
You kind of as you said, you went to the where the puck was going.
28:00
You you pursued opportunities. You didn't stay static.
28:02
But, I just want to come back to your comment on, you know, the ups and downs of the journey.
28:06
What what was Can you paint a picture like what was the hardest thing?
28:09
What was the moment you were like, this is just I don't know if I want to do this.
28:14
I'm chewing I'm chewing the proverbial glass.
28:17
>> Yeah, and I don't think I ever said I don't want to do this because um I just have I don't I don't have a quit gene.
28:23
Um and so, >> [snorts] >> you know, for better or worse, I just was going to churn through.
28:29
And and same with my co-founders.
28:32
So, you know, we had a chip on our shoulder a bit and we wanted we were going to succeed no matter what.
28:37
Um but, you know, getting through a lot of those hard times, I would say 2000 and um 12, um >> Mhm.
28:49
>> we the financial, you know, market had had crumbled in 2009, the great financial crisis, and uh people were pulling back from venture, and you know, there was all this literature on, well, big venture funds don't perform, and all this stuff,
29:05
and and so we found ourselves in a position where even though our first two funds were really good funds, um you know, at three 4x funds, um and they were taking shape still, but they looked like they had some good companies in them. We had
29:18
We had a tough time fundraising.
29:22
You know, in 2012, and so, you know, we went from an $800 million fund down to a $625 million fund.
29:31
Um even though we felt like things were going really well, we were building a great team, and you know, we're hitting on all cylinders.
29:39
Um and that was that was really frustrating for me.
29:41
It's like, wait a minute, don't you see that we're we're doing all these great things, and we're, you know, we're building these great portfolios, and we've established ourselves in the enterprise space, especially early-stage enterprise.
29:53
You guys should be, you know, supporting us.
29:55
Come on, we want to make you money, and we had some LPs that didn't, you know, didn't like didn't like the fact that we were a bigger fund, and um and didn't didn't re-up with us, and so we raised 625, and you know, that fund, and you know, I think that that put another chip on our shoulder, like, we're going to prove you guys wrong who didn't come into this fund.
30:16
And that fund I think is a six or seven X fund now.
30:18
So, >> You told me that the hardest the hardest funds to raise are often the ones that do best, right?
30:25
>> Hardest funds to raise are often the ones that do best.
30:27
That's because when everyone's afraid to put money in venture, is the time to put it money in venture.
30:32
So, anyway, but we got through that, and you know, I I sometimes take it personally when an LP doesn't doesn't re-up with us, because I feel like we're we're, you know we're trying to put a great product out there and but anyway there's lots of other things you always have to deal with all the human things and there's a lot of management of firm management stuff you know how how that goes but >> Yeah.
30:53
>> Um so >> And you have a pretty interesting take on on like where like this four stable states in venture you were you were kind enough to share that um that piece that you wrote with with me so maybe give all listeners a bit of insight to that what you think the >> Which one?
31:08
>> The four you kind of said there's four stable states in venture like the big mega cap where you kind of see everything >> Um >> Yeah.
31:14
>> Kind of yeah maybe maybe just paint that overview >> Yeah I'll let me boil that down a little bit further I think I feel like there's there's two areas of venture that are defensible Um and that is the the early stage proprietary deal flow Um that's defensible and if you have deals that you're seeing that are high quality deals and you're seeing them early
31:37
before other people and you're getting in and you're building great portfolios that's pretty defensible Um so the yeah and then the the second you know area that's defensible is just scale and that is the scale of you know of capital that we have and our peers have Um because it allows you to come in you know if you miss something come in on
32:00
the next round and and so you're not you know you're building a great portfolio and and plus you can do a lot of these new companies um you know they're raising such large amounts of capital they're only available to a small amount of firms right and so uh and and when these companies get left off they sort of know the list of firms to go to and you can't just build scale
32:21
in venture it takes to it's too long right there's a J curve for everyone you hire so you know it took us 15 years really to get to the size that we're at Um so you you just you can't do it overnight so that is defensible so is early stage the stuff in the middle I think is less defensible, and we'll see how that shakes out >> Mhm. um over time. um over time.
32:41
>> It's quite a few firms, right, that would fall in that middle bucket, particularly in San Francisco, Silicon Valley. >> Yeah. >> Yeah. >> That's right.
32:49
>> Would you be an investor again if you were starting out your career today, you were coming out of university?
32:52
Would you go be a vent- a VC? >> Yeah. For sure.
32:57
Um I I think the first thing I'd do is I go get some operating experience, go work for a startup, so at least know how things work.
33:03
So, when you you talk to CEOs or you sit on a board or whatever, that you have some context.
33:10
I think that's important.
33:10
A lot of people just want to go straight into venture.
33:14
I totally advise against that.
33:14
But, yeah, I think being a an investor right now is really exciting. >> Yeah.
33:21
Well, thank you so much, Barry.
33:22
>> You're you're lucky to be right in the thick of it.
33:25
>> We we're we're enjoying every day of it, but uh >> And, you know, on behalf of your LPs, don't mess it up.
33:31
>> [laughter] >> We ask this question of every guest that comes on the show.
33:35
If you could describe kind of three snapshots or three photos of your life that have really um impacted you and defined your life, what what would those be?
33:43
So, what would be the three moments for you?
33:47
>> Well, that's that's a hard question to answer.
33:51
I think um the first moment the first snapshot is probably me as a baby and uh being held by my mom. >> baby. >> Yeah, a ginger baby.
34:02
Why didn't I probably have red hair yet, but um you know, 2 weeks old, 3 weeks old, um and the reason why is my mom was just so instrumental in in my life.
34:18
Um more more than my dad.
34:18
Um my mom didn't work, but she had gone to Stanford.
34:22
She had worked at the Pacific Stock Exchange.
34:26
You know, one of the few women to do it.
34:29
She knew a lot about stocks and would introduce me to stocks and and and was the one who sort of drove me to you know, you should think about business school and you should think about this and was always a huge supporter.
34:43
And um and I grew up in Sunnyvale and went to public schools and I didn't really know I didn't know what I could do at the time and she was in the person who instilled a lot of confidence in me that I could go try these things and I try to succeed.
34:57
So you know, a lot of times when I think about you know, what's like Lightspeed's become I sort of wonder if you know, my mom's up there smiling somewhere hopefully and that she's proud of what I've done.
35:11
So that's that's one one picture.
35:15
Um you know, I think I'm on the other pictures is you know, me holding my kids um you know, when they were born and um you know, you can talk all about the stuff you do at work but for me family is is the most important thing and relationship I have with my kids.
35:38
Um you know, is is amazing and um you know, they're now out of college and in the working world and they still like to hang around me and all that kind of stuff and I'm watching them grow as individuals and and professionals and humans and um you know, that that's that's life, right?
35:58
Um the third one and and um and I guess the third one would be um you know, picture of me and my wife when we got married and you know, the person you're going to spend the rest of your life with.
36:12
So you know, these are it's funny these are all pictures that are all pictures of people you love in my life that matter and none of it relates to business or venture or any of that stuff because I'm certainly proud of all the stuff we've done in venture, but um I think for me the family, you know, my relationships with my parents and my kids and my wife are the most important thing to have.
36:39
You know, if I had a fourth choice, it'd probably be a picture of my high school buddies, you know, water polo picture of us >> [laughter] >> because um we're you know, we were so close then and we're still close now.
36:52
I feel like some of my best some of my best, you know, friends are still the guys that I hung out with in high school and and we're all still the same people.
37:00
When we get together, we still act like we did in high school and I love that. So, I'll add a fourth. >> That's awesome.
37:06
And maybe that's probably why you seem like such a happy guy, Barry, because you got some great relationships and you focused on that through it all.
37:13
Um now I'm going to ask a question which some people get uncomfortable with.
37:15
Mostly Americans love answering it, but some Americans less so.
37:18
Um the Brits always get a little awkward or typically do, but what has What is it about Barry Alldrin that um has made you so successful? And you can't be modest. Yeah.
37:32
Um it's a hard question for me to answer.
37:35
I'm probably more like a Brit um >> [laughter] >> because I, you know, I definitely suffer imposter syndrome.
37:43
Wonder sometimes a lot why I'm where I'm at.
37:47
Um And usually attribute it to other factors, not factors that I have that I bring in.
37:52
But I think if I'm trying to you know, drill into that question and be precise with it.
38:01
Um you know, I I think there's a couple things that I do well and um and certainly surrounded myself with very good people that were complimentary to my skill sets and my co-founders, you know, bring other skills that I think were amazing.
38:19
And together, you know, we were very complimentary, but for me, I think I brought um I'm I think I'm pretty good at decisions. Right?
38:27
At making decisions um quickly and getting to the, you know, sort of 85/15 of a decision and making it um and you know, and our business is all about making decisions. >> Yeah.
38:43
>> So, I feel like I'm good at making decisions.
38:46
Uh number two um I think I'm creative and innovative.
38:52
So, when there's a problem um or a financial issue or something I can usually figure out some some ways to solve for it that are good work for both parties that are pretty innovative and haven't been done before.
39:06
And so, I I feel like um that creativity that I can bring to the table um is important.
39:17
Um and then number three, um I I feel like I'm I'm I'm pretty good around people.
39:24
I mean, I you know, I have good good EQ.
39:27
I really care about the relationships that I that I forge both with our team you know, getting to know everyone on our team, everyone at Lightspeed um and having that personal relationship, getting to know the CEOs I work with, getting to know the investors that I work with and trying to have um you know, authentic relationships >> Mhm.
39:53
>> in life [clears throat] and um and being a trustworthy person so they know how I'm going to operate, that I'm going to operate to a set of values.
40:00
Um and I'm predictable that way.
40:00
And I think people like that and feel comfort in that. >> Yeah.
40:07
>> You know, venture is a game where you, you know, it's a repeating game, right?
40:10
It's not one instance and so you the you know, your your reputation that you create out there and how how you work with people matters because it impacts kind of opportunities you get after that.
40:22
So, I feel like I've done a not always, um, but I think generally I've done a good job with my people relationships.
40:30
>> And four, I'd add you you always respond to every email in sub 30 minutes in my experience, which is a I think another critical life skill. >> to be responsive.
40:38
I feel like, you know, you you should respond the way that you want others to respond to you in terms of timeliness.
40:45
And you know, my time is not worth any more than anybody else's time.
40:48
So, >> sometimes I think judgment and decision-making is so under discussed, particularly like in life in general, but definitely for children.
40:57
Like if there was not one skill I would love my my children to have, it is good judgment and good decision-making because almost everything else in your life flows from that and compounds.
41:06
And it's not something we really talk about a lot.
41:10
We focus so much on these other skills, particularly in school, but like actually that's just um it's yeah, it's so important, I think.
41:18
>> Yeah, it's you know, I wouldn't say I wouldn't say that I had great judgment sometimes as a kid or >> Yeah, but it grew over time, I guess. >> that.
41:25
Um, >> [laughter] >> but over time, I feel I feel like in terms of decisions, when when I when I know a decision's approaching, I can sort of sort of know a lot of times I I think I know where it needs to go to settle, right, to to be the decision and where it where something needs to go to.
41:43
And um and sometimes I need to give other people time to get there also.
41:46
And if I push too hard, um, they won't get there.
41:52
So, like I'll give them some some time to get to to where I'm already at, but I feel like I can see where decisions need to go before others do.
42:00
>> What are some of the most painful, um, lessons on the misses, Barry?
42:04
>> The nice thing about venture capital is you can only lose your money one time.
42:10
Right, but but you can make it 10, 20, 50 2,000 times.
42:17
And that's those are the companies that that make the fund perform.
42:19
And so you don't want to miss out on one of those companies for whatever reason.
42:26
In the past, one of the reasons has been price.
42:27
You know, I I saw us pass on Yelp at 70 pre because we we wanted to do it at 60 pre.
42:37
Um I I watched us pass on Splunk because we wanted to do it at 90 pre, not 110 pre.
42:45
And you then you look at, you know, the opportunity missed there.
42:47
Um and I will tell you that I don't think it makes sense to miss a deal based on price.
42:54
I think you should be I think you should be price have price discipline, but you should not miss a deal um on price.
43:05
Um and I think that's I think by the way, that's something that we're seeing in a lot in the market today is why these prices get paid so high is people don't want to miss a deal.
43:13
They don't care if it's a billion pre for a seed.
43:17
It's more important to have the right portfolio.
43:19
And and what I mean by that is to to have the right handful of companies in a fund that are going to make that fund a a great fund um to be in those five companies than it is to say, well, we we're disciplined on price. Who cares? You can't take that. LP's can't spend that. >> Yeah.
43:38
Well, might as just be in the right companies and the sin of omission is much greater than the sin of commission in in venture. >> It really is.
43:45
And I think we're seeing now and I guess some people might call that FOMO, um but we're seeing a lot of FOMO in the markets these days.
43:52
And um I think it's healthy to a point, but you know, the music will stop at some point and you know, some companies will make it and some will not.
44:01
On decisions about whether to invest or not, um you know, I just feel like I'm I'm I'm good at at sort of weighing the risk-return profile and in venture, you know, we're paid to take risks.
44:15
We have to remind ourselves that a lot.
44:17
Like, okay, you can lose all your money, but who cares?
44:22
You know, what if we get a 20 x here?
44:22
Do we really want to give up that opportunity?
44:26
>> I remember the um you said the most painful ones that you regret the most are passing cuz of price.
44:32
>> You should never pass because of price.
44:34
>> Never pass because of price.
44:35
What would you tell um if you if you could go back and tell 22 Barry 22-year-old Barry as he was as he was graduating from university, give him some advice on the journey.
44:42
What would what would it be?
44:46
>> I mean, it's the same of the advice that people gave me.
44:48
I mean, work hard, have values, work with good people, um don't give up.
44:56
I mean, care about people, um give something back in life because we're all fortunate to be where we are.
45:05
Um you know, live live a good life.
45:06
And no matter whether you become a VC or not, I never thought I was going to be a VC.
45:13
You know, I and I went to business school and I didn't even take the VC class cuz I thought, I'm never going to do that.
45:18
[laughter] You know, here I am 35 and I'm a VC.
45:20
So, you know, and I've been doing it for almost 30 years now.
45:23
So, um I think whatever you do in life, you want to find something you're passionate about, you you know, all that kind of stuff. The business side.
45:34
But, on the personal side, I you know, I I truly believe life is about the experiences that you have with your family and friends.
45:41
And so, um I'm not one to necessarily collect a lot of things, even though I have some things, but I do like to collect experiences with my family and friends.
45:50
And I think that is that is and creating those memories I think is what what makes life so great.
45:56
>> Well, I want to end with a little story of of a Barry cuz I I approached Barry cold in LA after seeing him speak on uh on Snapchat in the in the kind of wake of the IPO.
46:05
And no one was uh more supportable or gracious in just kind of me opening doors for me into the venture world, particularly in San Francisco.
46:16
And uh you know, Barry really just did that cuz he believes so much in paying it forward and I guess saw something in me.
46:21
So, I've never said that so publicly, Barry, but I want to thank you for that cuz it really did change my life. >> It's been a pleasure.
46:28
I mean, I mean, you know, I always want to help a brother.
46:31
And I like that you were starting a venture firm, you know, at at UCLA at the time, a small fund.
46:38
Um but then the fact that you've gone on to start Giant is just tremendous, man. I love what you've done.
46:42
So, happy to help as much as I can.
46:46
>> Thanks so much, Barry, for joining us. It's been great. >> Thanks for having me.