10.

So we're gonna be talking more about VC stuff, cause them.

I have a lot of friends who say that ultimately you want to end up being a VC investor.

Totally.

Is that how we say VC investors?

A venture capitalist?

Mr.

VC?

Their reasoning is that they don't really want to do the work of building things, But they want to advise people, you know, think about what would be a good product and then bet on.

Oh, my God.

I guess I would tell them.

Don't do it.

Okay?

Because then you'll end up being remember earlier in the episode.

We're talking about their investors who lied and they make up their own minds.

And then there are people who just check, check, check, check the box and then on Lee wanted, you know, invest when it's absolutely a sure thing.

Right?

But I guess even Okay, let's just say they do want it like they do want to need.

They still want to leave, right?

I don't know if I'm reeling their messages directly for me.

It sounds like they don't really want to do the work they want to do that Purely intellectual.

Yeah, which is VC.

There's so much work, though.

That's why I was thinking You can't tell me about your day to day work.

Yeah, totally.

I mean, VC done right is literally like your schedule is like, you know, 9 a.m. to 6 p.m. R.

Honestly, I have kids now, so, you know, if I didn't I probably do be doing, like, literally, like 7 a.m. till, like, 2 a.m. You know, just things all day, right?

But now that I do have two young Children after, actually cut it back too, like, well, get the office at nine.

I have to leave by five and pick up my four year old right on dove course.

I can get a few hours in the evening, but I better sleep because, you know, my five month was gonna cry all night, and so honestly, this job done right?

Well, actually fill any amount of space that you give it, And so it is a lot of work to do it right, because every other day someone lost their best customer.

They lost their director of engineering.

Uh, you know, someone Somewhere in my portfolio, people getting punched in the face.

And, you know, on that day when maybe the company's gonna die, I have to pick up the phone.

I can't just be like decline, right?

So what do you have to do like if a company dies?

It's not like you have something you have a say on.

What?

Yeah, they have to do.

So what do you do to prevent that?

Yeah, a lot of it is.

How do we find a better person?

Like, if we're if its personnel like, how do we recruit?

How do we hire get me on the phone with this person?

If it's losing a customer like let's find other customers, let's make a spreadsheet of 100 other people who could fill in that hole unless, you know, well, actually come through all nine partners at initialized their whole networks.

And then we'll we actually built software for this to basically get customers and hire people for our companies.

And so all of these things are a lot of work, like we kind of run it like a startup itself, actually had no idea that feces were such help.

Well, we do it this way.

There are a few other people who do it like that, and reason Horowitz is known to have, you know, probably more than 100 people who work as an operating company on behalf of their founders.

It's really cool.

Yeah, we have nine.

So we're just getting started.

Okay, so you call these operators are operating partners, but you know, every single one of our operative partners also can do their own deals and bring in cos they're not expected to, but, you know, we want them to learn how to do the business.

So what kind of people would be would become good veces honestly, great founders or sort of the best?

Because those are the people who can actually help.

Like when something happens, it's just not, you know, totally new.

You know, I don't have toe call in a favor from my network.

It's like, Oh, when I when I had that problem, here's what I did.

Um, and that's just more useful when you're trying to avoid them with land mines.

And so the best version of that is actually start a company, and even if it doesn't work out, you'll have learned so much.

The next best thing, honestly, is joined a fast growing company, as its, you know, sort of in hyper growth.

Here's a really useful rule of thumb for your viewers.

You can basically about if you wanted to evaluate any start up the way of VC does just figure out what the growth rate iss Um, and this might be revenue.

It might be users.

It depends on what the company is, but, uh, basically for seed to Siri's A.

If they're growing the reacts a year, Um, that's pretty good like that.

Sort of like a solid B.

Anything for X and above that's like a like a five is like a plus.

It's like five x a year really, really hard to sustain.

And then anything growing around two X like in C plus See like, you know, And this is sort of a measure of why start ups are so hard, like literally start ups or growth.

And if you've ever tried to grow something like bye to even two weeks a year, that's really hard.

But that's sort of how people can evaluate as a non VC.

You just figure out how fast that thing is growing, and that'll actually tell you whether your startup is living or dying.

They're like sharks.

Basically, they have to keep growing.

Otherwise we'll die.

They have to keep moving.

Otherwise we'll die.

Yeah, so for engineers and PM's currently yeah, um, if they want to go into the sea than the best thing they should do is join startup or even start their own start up so that they can build empathy totally.

Startups that they will invest in, right?

Absolutely.

And then it's about that story like, you know, what did you do for that company?

You know, a lot of people jump over to V.

C because they're the person who they were.

The growth PM for something that grew from like a 1,000,000 uses to 100 million users.

And that's the kind of experience that is almost impossible to get.

And those are the people who are deeply sought after in the world for their advice on so beautiful.

That's why joining a fast growing startup, sometimes even better than starting your own because it's really hard to start your own.

So imagine if they have all the skills.

Hey, how does that work in terms of the money because I don't really understand how the VC world works.

So do you usually try to join a VC firm and then pay your steak so that you could be a managing partner or operating partner?

How does it work?

How do you even join one?

Yeah, absolutely.

Um, I think they're kind of a few different paths.

The 1st 1 would be, You know, work is an operator.

Maybe early in your career find some sort of win, like I was the person who scaled like this.

10 X.

You know, this fast growing company andan early in people's career, they could join is an associate at a venture capital firm.

And usually you have to find your way to network in to meet the person.

A lot of it is just purely trust, right?

If people think you're smart and scrappy and hungry, um, and you know, they've met you like sometimes they're just gonna hire you like the next time they have an associate, the next level of sort of principles.

I mean, these are people who sort of start as veces um and then get promoted once, and those people who start taking more investing responsibility associates tend to do mainly sourcing.

So you know, sometimes going to events or, you know, going into excel spreadsheets or writing software to basically go come through the Internet and figure out what's happening.

What are companies that could be good opportunities and then they'll work with, you know, the general partner or, you know, basically the investing partner to bring that to the whole team.

And so you know, the associate role is not that glamorous, but it's kind of like starting out in any business.

It starts out as you kind of have to do, like the scut work and then, as you go associate principal.

Sometimes there's a managing director rule, and then, you know, making partner is kind of what it sounds like.

It's a really big deal, because on Lee, then do you really get a significant part of sort of the winnings from a given fund?

We call that Kerry in the business, so only after you return the whole fund, um, the partners tend to get 20 to 30% of anything after you returned the money to your limited partners.

Nice limited partners of the people who give you money to invest.

Got it.

Okay.

So, for example, for initialized capital.

You and Alexis, you guys air founding partners, all right?

And then you guys probably put in your own money at first.

That's right.

And then you guys have a bunch of, I guess, associates that maybe become principal and then maybe a partner.

We just have partners, just have partners.

Okay, so they have partners.

So they put a stake in Do they have to, like, pay an amount to be in it?

Or like, investor old money?

Oh, I mean, we're basically investing on behalf of some of the biggest endowments and institutions in the world.

Universities, You know, when you watch PBS and you hear about, you know, X foundation and why foundation?

They're large pools of capital that air billions of dollars that are basically run often to support some sort of non profit or some sort of university, some sort of big goal.

Those air pools of capital that have to grow in order to actually support the mission.

So, you know, Harvard or Stanford or any university that has an endowment, they actually can't spend the money that they have.

When you hear about Harvard having $38 billion they can't just take a dollar out of that and down it and just, you know, give someone a scholarship.

They actually have to go and give that to other investors and those private equity, your hedge funds or, you know, Fidelity.

There's so many ways to invest in venture capital eyes crazy because it's only, you know, something like 1% or, you know, all of venture capital is only $100 billion a year, whereas the total amount of money and going in through the financial system is easily in the trillions.

And so everything that we talked about with venture capital, it's basically this tiny mote of dust on this vast ocean of finance.

And there's more capital in the world than people know what to do.

If this point, which is like, mind boggling for me, like if you told the 15 year old me that there's more money in the world than anyone knows what to do with, I wouldn't believe you because we didn't have money and, you know, and so that's one of the core problems in society today.

It's like, how did these giant pools of capital actually put it towards?

You know, businesses that employ people that actually useful for society.

So that's why I venture capital is probably one of the most important businesses.

And I'm you know, I'm glad people want to do it.

But the best venture capitalists are probably people who also started their own too, So they can actually help.

That makes a lot of sense.

Okay, tell me a little bit of the timeline for initialized capital.

Like how much money you've raised.

And now, like how much you've grown and stuff like that just to give some numbers?

Yeah, totally.

We started off with a small $7 million fund about seven years ago.

And, uh, now we have over $500 million under management.

Nice.

Our newest fund is $225 million.

So we will write checks of a $1,000,000 to $5 million in exchange for about 15% of companies on DSO will lead and we'll do the whole round.

And you know, if we if we write a really big check will sit on the board on That was very different.

Like weird a true institutional venture capital firm before now.

But before we actually started, kind of like angels, like we were writing $50,000 checks, $25,000 checks.

And even then I was like, That's a crazy amount of money.

But we were writing them into companies as the first check on those companies became $1,000,000,000 companies.

And so that kept happening.

And we realized well, instead of sending 20 or 30 emails toe all everyone else saying, Hey, this is a good company, you should invest in it.

We just write one check, the founder is done and then we get back to work.

And that was sort of the evolution of us from going tiny checks and helping other people to helping other investors to Well, we'll just do the whole thing.

So what were some of your biggest wins, personally, that you have rewarded yourself financially the most.

I mean, honestly, I've just been super lucky, like, yeah, for me, Stanford was pretty crazy because the people you got to meet you wantto Waterloo.

Like the people you get to sit next to people who were gonna go on and do all kinds of insane stuff.

And when I was there, I had no idea.

Okay, so I guess when I met was, like, what was your best exit and how much did you make up?

Yeah.

So I've actually never talked about this, but we did sell postures for $20 million.

Nice harmony.

Co founders to co founders.

Okay, Okay.

And did you have initial investors?

Yes, we did.

I won't tell you how much I actually made.

Um, but I can tell you how a za v c I try and figure out how much people made from a given exit.

So obviously you have the acquisition price.

And then again, going back to cap table, you can kind of guess most cofounders air probably close to equal, but not always.

But assuming that it makes the math easier if everyone's equal on Ben, basically count the number of funding rounds they've done.