Fund Commitments, Co-Invest & Secondaries: The $120B LP Playbook

Speaker A: Sometimes I wonder if the world is going to run out of capital to fund capex for AI right now. We always say, listen, if you come into venture capital as an asset class, if you're an allocator, you can go in when it's hot, you can go in when it's not. You will only really figure out in hindsight, the most important thing if you start committing to venture is make sure that you can commit at a steady pace over a long, long period of time. Because it's a market. You cannot time. There's just no way.

Speaker B: Welcome to Origins, the podcast that dives deep into the business of venture capital, where we learn how the people behind the capital, both GPs and LPs, make decisions. I'm Nick Charles, partner at Asylum Ventures.

Speaker C: And I'm, um, Beezer Clarkson, your LP co host, Managing director at LGT Capital Partners.

Speaker B: New title. Congrats. Um, very exciting. You've officially joined the whole team at Sapphire has officially joined LGT Capital Partners. Very excited to understand what that means, what that means for all your GPs, for the market, for me. Um, and we're going to dig all, dig, uh, into all that on this special episode of Origins.

Speaker C: Yes, thank you. I'm, I'm very excited to talk about all of this with you. And for the, for those of you who haven't heard, my core team at Sapphire Partners, myself, Laura, Nate and others have all joined LGT Capital Partners. It's a huge move. We're incredibly thrilled about it. And today we get to have my new partner on Origins, Thomas Christianson. He's someone I've known and co invested with now for over a decade. He oversees the venture capital business of LGT Capital Partners. And I've always just really admired his approach to the craft of venture, and it's been quite complimentary, his views and his perspective. Although he's so much better spoken and articulate and funny than I am, um, has always been very complimentary to the approach we took at Sapphire Partners. And that was one of the reasons. And we can get into all the reasons we thought this transition would work well and have lots of great synergies for us and for gps. Especially you, Nick.

Speaker B: You introduced me to Thomas maybe five years ago. Um, I've gotten to know him since separately. You always, um, spoke about him very glowingly. So, um, as two folks, I really respect, uh, it's pretty awesome to see you guys come together. Um, and great for me because I get to work with both of you now, which is cool. Uh, it's also a Huge new platform for you guys. Uh, we'll talk about it today, but I think over 110 billion in assets. Big jump up in Aum, uh, for you and the team.

Speaker C: LGT Capital Partners does manage a considerable amount of money in assets. Um, over 110 billion. And Thomas can walk us through all of the numbers, and it is one of the most globally sophisticated, multi asset class investors out there. It's headquartered in Switzerland, has 16 offices globally, including two in the U.S. new York and San Francisco. Um, I will be moving back to San Francisco once I get my son launched to college, which is very exciting. Um, and for the GPS out there, the firm has been deeply committed to venture capital and private equity for decades. And Thomas has been instrumental in building out the venture platform. He's been there, I want to say, for two decades, but we'll let him tell us his story. And our team, the Ex Sapphire Partners team, now has the opportunity to join forces with LGT Capital Partners to meaningfully increase our U.S. product presence and exposure. And just want to give Thomas huge credit because he's. He's got an amazing perspective on the asset class that spans geographies, vintages and fun strategies. And in a way that I. Again, I'm biased, but I think very few people can match. So it's an honor to get to do this alongside him and have him on as our guest.

Speaker B: Awesome. Let's dig into it. Uh, and no better way to do that than bringing your new partner Thomas on, shall we?

Speaker C: Yep, let's do it. Thomas, welcome to Origins. And I have to say, it's a much different kind of welcome than when we last had you on a bit over a year ago, as we are now colleagues, which is excellent. But before we get into all the big LGT Capital Partners and Sapphire Ventures news, I wanted to take a brief moment to give you time to talk about your entry into the LP world and. And how you came to join LGT Capital Partners. And just. Just for me to give you a little bit of, um, I'm going to brag on your behalf that you've built a career that spans some of the most respected names in venture investing, both from the managers you back and your LP base. I guess it's my LP base now. Could you walk us through how you first got into this world and what drew you to LGT Capital Partners?

Speaker A: So, um, quick background on myself. Um, I'm a pan European. I was born in Spain. I grew up in Denmark and France. I studied in Copenhagen and London. And upon graduation in London, I, um, cluelessly embarked on an investment banking career with Lazard. And um, a couple years into this I was looking for a change of scenery. Um, so I was trying to figure out what to do next. I wasn't quite ready to go back to Denmark and I really stumbled into LGT in Switzerland. Um, an ex colleague introduced me to LGT Capital Partners. So I went to meet with a team. It was that the private equity team at the time was eight or nine people. It was a, ah, young, energetic and ambitious team and I think that's really what drew me here. We're owned by the princely family of Liechtenstein.

Speaker B: Um, could you tell us about that family?

Speaker A: Yeah, the family traces its origins back to the 12th century, um, and they settled in what's today known as Liechtenstein in the early 1700s. I think when you trace your roots back that far and you're part responsible for the governing of a country, um, it comes with a somewhat different time horizon, not just looking back, but also for the future. And when you interact with family members it's very clear that the focus is on the long term. They don't think about next year or the following as much as to think about 25 or 50 years out. And that influences our philosophy and our approach to partnerships, both with managers but also with our clients. So trust, transparency and reputation are really high on the agenda. Um, and I think especially in private markets that long term perspective is important because it's an illicit asset class. Trust and transparency and a partnership approach is really key to navigating challenges. And over the 10 plus year of a venture capital or private equity fund, it's almost inevitable that challenges will occur.

Speaker B: I assume there are other folks you manage capital for at this point. Um, given the size of the firm, I think we mentioned later it's about 110 billion in AUM. Curious how those incentives interact with the family that got you started. And does that have an implication for accepting or not accepting certain sources of capital that maybe are aligned or misaligned with that core value?

Speaker A: Yeah, the family has been our sole owner um, since the company was founded in 1998. Um, initially the family was the only client of LGT Capital Partners. But the plan was always to build out investment capabilities and partner with external investors who could co invest with the family. Um, so we started with $400 million uh, from a single investor in 98 and today we manage around $120 billion on behalf of more than 700 institutional clients. The families endowment invests alongside our clients and they invest in a meaningful way. And we think that gives a great alignment of interest. Um, needless to say, given our owner's philosophy on trust, reputation and partnership, that impacts how we think about partnerships, not just on the manager's side, but also on the client side.

Speaker C: So we are going to talk about our big news and we're going to talk also about endowment investing, which I'm so excited for this conversation. I'm just having to hold myself back. But before that, I want to pay tribute to a very awesome flagship white paper that LGT Capital Partners put out after a lot of hard work. And I was hoping you could give us some of the key takeaways. And we're going to link to it in the speaker notes, but thought for our listeners you could kind of give them the highlights to get it going. Before we jump into the rest of

Speaker A: the news, we have an in house asset allocation team which continuously runs scenarios on financial, economic and geopolitical outlooks and environments. This work informs the endowment's asset allocation and it's of course work that we share with clients when evaluating portfolio construction. The paper that just came out uh, talks about the role of venture capital in an institutional portfolio and it builds on three key pillars, um, based on which it's recommending a slight increase in our endowments venture allocation. The first is diversification and it's not the traditional types of diversification. It's more talking about how investors should diversify their exposure across the corporate life cycle so effectively going earlier in company ownership or company life cycle. The second is effectively an innovation hedge. Um, it's not new that incumbents are challenged by new entrants into markets typically driven by technology or some sort of innovation. Um, I think what's new is the speed at which this is happening. And especially in the age of AI, it feels like there is a risk that many incumbents could be displaced quite quickly. And so including venture capital in your portfolio is a way of hedging against this. And the third part of the paper touches on the increased institutionalization of the venture capital asset class. Um, the fundamentals of power law remains the same, um, but we're seeing a viable secondary market maturing and it gives liquidity options. And these liquidity options are a very important tool for an institutional investor investor in managing their exposure. And if you have that tool, you can afford allocating slightly more because you don't always have to, uh, manage to a target absolute over time that you don't really know. It's worth reading the paper, but in broad strokes those are the Key reasons why our asset allocation team has recommended the endowment here to increase its exposure to venture capital.

Speaker C: Well, I'm so happy on a very personal bias basis that they're increasing to venture because. Because this is my bridge to Nick and our big news, because. Take it away, Nick.

Speaker B: Okay. Big news. Um, you've announced this publicly, so we're not, we're not, we're not breaking it here. Um, but I think this is probably the first time you guys are talking about us early on a, on a, on a podcast like this. Um, Beezer, you, Nate, Laura and the rest of the Sapphire Partners team have joined Thomas and the LGT Capital Partners team. Uh, so it's a special moment for you both. Um, exciting to have you both here. Um, so maybe we start with you, Thomas. Um, curious how this came to be. Um, I know there's been other, you know, uh, acquisitions and LP land in the last few years, which we can also talk about. But, um, I'm curious maybe just to start specifically for LGD Capital Partners and Sapphire Ventures and how this, how this deal went down.

Speaker A: Yeah, absolutely. It's huge news for us. Um, since Beezer and her team joined our team, we knew that it was going to be a great fit. But we've had so many compliments from the industry at large. Uh, after we've announced, acknowledging the fantastic fit between our teams, we found something that is best in class, um, highest quality work, amazing portfolio reputation in the market that quite frankly is second to none. And equally important, we found a team whose culture we think is a really, really good match for us. And that's for someone that's family owned like us. That aspect is almost more important, uh, or at least equally important when we take the decision. And I think that's fantastic news for us. And I think that's also reflected in a lot of those comments we got from market participants. Right. It's not just great team, well done. It's also actually that made a ton of sense. And I've been told by many people that it's a complete scoop for LGT Capital Partners, which it is. The joining of our team of Beeser and hers really achieves a couple of different, um, goals. We're very committed to building out our presence and capabilities in the US market as a firm, not just in venture capital. Um, so being able to increase our footprint in the US especially on the west coast, is very important for us. It's a commitment that we have to the market, to our clients there, but also to our GP partners now, um, Specifically for venture, um, as the increased allocation to the endowment, uh, or by the endowment indicates, we believe it's an increasingly important part of our business going forward. And Beezer and her team are among the very best in the VC industry. So having them on board um, really makes us much, much better equipped to offer expanded capabilities both to our clients and also offer deeper engagements and capital partnerships with our gps. So I think it's both building out as a firm and it's going much deeper, uh, as a manager of our clients money and as a partner to our gps.

Speaker B: Yeah, I mean it sounds like maybe the comp in GP Land is like partners that serve on boards together that get to know each other through that board and there's been recent examples of them joining forces and teams and it sounds like maybe something similar happened here. You guys, um, also co investing in a number of firms together.

Speaker A: One thing is that we've served on the same advisory boards and that we've picked the same managers. We've also chosen to pause manager relationships at the same time, which I think says a lot about how we think about things and the similar mindset. Um, so it's easy to invest, it's more difficult to get out and get liquidity, um, and it's also difficult to put a pause on relationships that haven't developed the way we all hoped they would. But the fact that we see or we have seen eye to eye on a lot of those almost says more than the investing together.

Speaker B: Let's zoom out a little bit and um, uh, talk about something very much related which is consolidation, uh, in the industry, um, starting to see hints of it in GP Land. We talked a little bit about this Beezer in our last podcast with David Clark. Um, and I suspect we might see more of it, um, particularly with like the rise of solo GPS and lots and lots of solo GPS and folks, I don't know, combination of loneliness and realizing maybe they can do more together as a team, combining forces

Speaker A: clearly, um,

Speaker B: seeing examples of it, uh, in LP Universe, um, Stepstone and Green Spring another example, um, in the last year or two, um, so curious if you both were to zoom out and look at perhaps Sapphire and LGT Capital Partners and Stepstone and Green Spring. Like are we going to see more of this? What does it mean for gps? Um, so curious to get your. Both your take.

Speaker A: Yeah, I can maybe kick it off if you want. Obviously can't comment on other players in the market and what plans they may or may not have, so don't even want to speculate but uh, I do think the VC industry has, has matured or is maturing and with that faces some structural changes or challenges. It can be generational transition of some of the more well known funds or less well known funds, um, as individuals start taking a bit back, a step back, sorry. It can be a liquidity crunch, um, or um, other things. I think for me what it means is that there's a different need both for investors in the asset class but also for the actors on the ground in the asset class. Right. Um, I think there's going to be some firms that need to figure out how they generate liquidity in markets that are just not that liquid, at least at the moment. And it looks like going forward, even if an IPO window opens up, the hurdle to IPO is probably an order of magnitude higher than what we all thought five or six years ago. So there's a number of companies that will not have IPO as a viable exit option. And I think with that maturity and those changes, I think it being part of a larger platform allows us to partner with GPs and clients in different ways. So for GPs you can be a different type of investor. Right. You can invest in a fund but you can also help them think about how they generate liquidity for other, for other LPs of theirs. And for clients you can invest in a fund with a uh, 10 or as we said before, 15 to 20 year life or you can try and be a little bit more nimble and strategic or tactical about how you get access to a subset of, of types of companies. As the industry matures further, I think that opportunity set is going to increase and that's where we think this larger platform just allows us to be more nimble and uh, be a better or at least a partner with deeper capabilities than before.

Speaker C: Yeah, I want to just double click on that. I don't think it's just because whether we can argue where we are in an AI hype bubble. But you are seeing to your point, Nick. Potentially some big IPOs this year, but before that a whole bunch of interest in secondaries that's been building over the last, what is it, two years. And in watching that evolve and watching the venture managers get more sophisticated or thinking through the options, because back when I started in venture, really your options were get bought, right? M and A. And even then it was more of a pull versus push. People didn't have the big BD platforms and all that going on back in the beginnings or you IPO and you could IPO much earlier in Your what is that? A hundred million, Two hundred million? And banks were taking companies public. And fast forward to today, like it is just really different capital markets for companies and there's a lot more sophistication in the private markets, which means venture managers, and this is just my shout out to them, um, need to think through all of these implications because it's not just for your trillion dollar companies, but there's options all along the way. And I think as the capital markets continue to evolve, you'll see this whether or not people like it being forced into venture. And so it'll look, you see this already happened years ago in private equity. And so I think Ventures is kind of catching up continuation vehicles or strip sales or GP LED curated deals and being at a platform like LGT Capital Partners that has that experience already, I mean frankly I had FOMO before and now I just have, I'm going to have fun because um, I've always been a big venture geek. That has not changed. But in this market I think that is important for an LP to be able to play in these different kind of realms so that we can be the best partner possible to Asylum and to other funds. As you, you know, your new companies might just need fresh capital, right, that sort of typical seed Series A. But as they grow they're going to be thinking of other things and you might be thinking of other things in your past funds because there could be companies that get a second win because they move from being non AI to AI and they want to run for another five, six years, but they're already eight years old. Um, and what does that mean to your old LPs and you're just seeing a lot of those nuances in the market right now. And I just really feel very privileged to be in a position now that as an LP we can have those kind of conversations and really dig in and say what does this mean and how does that work? And I'll also just say I think it makes my brain smarter being able to work with colleagues that even though the breadth of the LGT Capital platforms is pretty crazy, there's private equity, private credit, real assets, to Thomas's point earlier, hedge funds, there's insurance link strategies, there's sovereign debt. I mean whether or not we deploy all of that in venture is not necessarily the point, but the fact that you can ping your colleagues brains and say hey, how are you thinking about scenarios like this and learn faster or ask questions about the macro and how that applies. I think all of that benefits Asylum, which I know is a lot, but that was part of, it's all part of what makes me really excited to be here.

Speaker B: What are the things that I should be thinking about, um, in a broader LGT capital partnership platform that like I should be taking advantage of, whether that's co invest or secondaries or you know, Capex funding? Um, yeah. Curious to get your perspectives, um, for how maybe you would advise GPS to manage through all these different products.

Speaker A: Yeah, I, I think from my perspective, I think your North Star should be, how do I do right by my LPs who are funding me? How do I stay aligned with them? How do I transparently discuss how that alignment may shift over time as I embark on different types of structures? So I think first of all think about your fiduciary duty to your LPs at least if you want to keep being a GP.

Speaker C: Right.

Speaker A: If you want to move into something else that's different. But I find it very, very interesting. We're in a period of time where we were roughly five years ago where there was an abundance of opportunities, co investments abound, um, and people were raising SPVs and co investing heavily into companies that were shooting through the roof from a revenue perspective back then because everything went online, so online went up. And I just think we're in a slightly similar situation where I think as a GP it's very tempting to do all these things. It's very tempting to quote, unquote, leave money on the table for another investor. I think if you really want to do the best for your own business as a VC firm or as a VC manager, then think through what's best for your LPs and what can help you evolve your firm the way that you want it to. And you can't make everyone happy all the time. But I think it's fine to think about, um, syndicating co investment to your LPs. Um, I think it's fine to think about how do I generate liquidity in, in a, in a slightly more um, creative way or how can I sell a strip of my portfolio, do a continuation vehicle. I think all those things are fine and we love engaging with our GPS on those. We do it a lot. I think there's just a danger at a point in time like this that people lose the focus on long term alignment with their LPs. So maybe that's not really the answer you were looking for. But I think there's a lot of shiny objects out there from a capital perspective right now. And if you have long term ambitions as a VC firm. I think that's where you should focus. And then, yeah, come talk to us about ideas that you have. Talk to other of your LPs. We love brainstorming about it. Um, we love sharing our feedback. What we've seen elsewhere, what works, what doesn't, how things price, how do you navigate conflicts of interest, how do you make sure people feel aligned, um, what are the approval mechanisms, et cetera. But keep first things first.

Speaker B: Bisra, you want to change gears?

Speaker C: Yeah. I was going to actually take the thread on the long term perspective that Thomas was talking because I want to make sure we talk about the kind of conversation around endowment investing. And I'm going to give a little bit of context on this for those that don't know. Um, it was the whole concept of endowment model. No disrespect to the Royal Family. And there were hundreds of years of investing and the endowment in the US which maybe potentially didn't know of this. It became popularized by David Swensen at Yale and was considered in many respects the gold standard for institutional investing and was built on a couple key tenets of long term thinking. Access to top tier managers and a heavy allocation to illiquids, which when David started doing this for Yale, was novel. And then many other US Endowments followed suit. And for decades it worked incredibly well. And we can get into, we're not going to get into why that worked. Just take it for assumed numbers. It did. Today's market with their prolonged illiquidity challenges, the which meant fewer or has meant fewer distributions and the significant growth in fund sizes. There is a question on the table that I've been being asked and listening to LPs discuss for at least the last year, which is, is this model still working? It's being very, very sorely stress tested. Is it breaking? Do the core principles still hold? And if the model is broken, what comes next? Um, so, Thomas, I'm so excited you get to answer this question. No, literally, I woke up thinking about this and I thought, oh, insert a four lettered word. Um, this is the perfect time to talk about it because it's a tough question, but I think I'm going to lead the witness. I think you've got a great answer because I think LGT Capital Partners represents a great answer. And again, I'm very excited to be here.

Speaker A: The endowment that we represent has a very elaborate portfolio construction, um, and strategy. And it's, as I said before, constantly being revised and tuned. And there are scenarios that are being developed, uh, and refined on an ongoing basis that inform both strategic and tactical portfolio allocations. I think when it comes to private markets and especially venture, because we've built the endowment with both fund commitments and co investments and secondaries and variations in between for the 25 years plus the endowment portfolio that we manage on behalf of the princely family has got a quite interesting mix of fund commitments, very early stage managers, reasonably small managers that there is exposure to, but they bring a different type of risk profile to the portfolio. And the larger firms that have been around for 20 plus years, but mixed with that is direct investments into companies that we've identified through our managers are really nice value creators, maybe compounders over time that we can double down and invest to uh, as co investments. But we also have the ability to acquire stakes and funds that we really like if the price is right. So it becomes a bit more tactical. And so uh, when you see periods of disruption, there is that opportunity of taking advantage of dislocation. And in private markets, especially because it's such an asymmetric asset class when it comes to information, I think there's a really nice opportunity. What people may be thinking, talk about less, is that at LGT Capital Partners we also sell private markets assets on a regular basis. Right. There's really very active portfolio management here. Um, I think because of the size of the endowment we have the ability, um, and other portfolios, I should say, not just the endowment, but we have the ability to piece together really attractive portfolios for buyers to buy into. Meaning that we can generate what we think are very attractive returns when we sell. Um, and I think maybe that's a plug to a lot of VC managers. You make money on the sell, not on the buy. Um, but. So I think, I'm not sure how different it is to many other endowments, but that ability to place several strings of investment styles and be quite opportunistic about both going in but also going out, um, is at least something that we see adding quite substantial value to our portfolio.

Speaker C: What I find intellectually fascinating is that at one level the endowment model that LGT Capital Partners started and we'll give Yale credit to is very old. I say old, but not in a negative way, but just historic. And yet some of these techniques that you're talking about, Thomas, are newer ways of managing capital given the current market. And it's uh, that pairing of it that I'm going to say that I don't think the endowment model is dead. I think maybe it's being stress tested, but I think there's a Sort of a next generation way of managing this version of it. And that sort of is the having different levers to pull is partially where the magic happens.

Speaker A: I think the advantage we may have over other endowment portfolios is that we have dedicated team for various asset classes. So you effectively have in house specialists that you can leverage not just for understanding what exposure you have, but also for understanding, uh, what's happening on the ground in each subsegment, um, of your portfolio. You can literally as a portfolio management team, you can go to the desk and talk to someone who does nothing but private market secondaries all day long, or you can go to Beezer or myself and talk about venture capital. And we live and breathe with venture capital and do nothing else. And so I think having those resources in house probably makes us a little bit more flexible in terms of how we think about, um, putting together our portfolios. It may give a little bit more confidence, uh, in the performance and outlook of some asset classes in a period of time that may otherwise look challenging, but actually maybe be a great opportunity to invest.

Speaker B: I think also bees are one of the things, you can correct me if I'm wrong, but one of the challenges I think people highlight in the endowment model, or maybe just private investing in general, is if you look at public tech indexes, if you look at the QQQ or whatever, um, over the last 10 or 15 years it's performed extraordinarily well and uh, obviously fully liquid asset. Um, and so what I'm hearing from Thomas, um, you correct me if I'm wrong, but there are perhaps more ways in which you can be not opportunistic, but strategic and clever in the private markets, um, that actually create a different liquidity profile, um, compared to just, you know, investing in 20 funds and seeing how they do 15 or 20 years later. Um, is that maybe the right way to summarize? Thomas?

Speaker A: I think there's investing in different ways and you can quote, unquote, load up on different types of asset, different in different parts of the cycle. Um, so that, that's certainly. Yes. You don't always have to invest in an early stage fund and wait for, for the underlying companies to be mature enough, well, one of the underlying 25 companies to be mature enough to do an IPO 10 years later, only then to wait five years for the IPO window to open up. You today have the opportunity of investing into companies that you're pretty sure some of the ones we acquire on a secondary basis. Now, you know that There's. When the IPO window opens. This is one of the first 10 companies that's going to go out, but you also have the ability as part of a portfolio to say, okay, I buy into these five solidly performing companies. They're profitable, they're not going to go be IPO candidates, but I know that they're really solid companies and there's going to be a large universe of buyers that are willing to pay a solid price for these companies as a strategic M and A, um, over the next two to five years. And what you look for in those situations is effectively companies that can survive on their own, of course, but, but that have several routes to exit. Right. And one of them may not be an ipo. So I think if you structure your acquisitions or portfolios and the secondaries cleverly, you can actually, you can engineer returns or distributions that way, but you can set yourself up to have a portfolio that's much more resistant to IPO windows opening or shutting down.

Speaker B: Yep. I mean, I think a lot of this stuff is also relevant for early stage managers. Um, and we've talked about this a bunch on this podcast, Beezer, but I, um, think even early stage managers now have to be a little more strategic and clever around how they go about this. And um, and I think the late stage private markets are like effectively our new IPO window, um, if approached carefully. Um, so I actually think a lot of these things are probably true for all market participants and not just LPs.

Speaker A: The difficult thing for me is if you're an early stage VC firm and you start going out buying stakes in kind of halfway mature companies, that's tricky. But I hear you on the, I think what you're saying is on the exit side, you need to be aware of where opportunities are and take them when they arise.

Speaker B: 100%. Yeah. And that might be a series C or D growth round. Um, because like you said, there's very little visibility for early stage managers, whether or not that company is ultimately going to be able to go public or when a full, uh, acquisition might happen. And so, um, I think you have to take advantage of those opportunities. Like in the same way there's an IPO window for certain companies. I think there's a growth round window, uh, for early stage managers.

Speaker A: I think a lot of people start VC funds, at least have started VC funds because they thought, I can invest in good companies. Turns out, and we see this again and again, it's actually really difficult and there is a chance that you don't have companies in your portfolio that you know if you sell, if you sell 25% you can return your fund. And you feel like, I think some GPs find themselves in a trap where they say I can't sell any part of this company because it's the one that's going to be the fund return or two or three times over. So they hang onto it because there's nothing else there. And it's scary to sell because it feels like you're foregoing upside. But that's part of good portfolio management, right? It's acknowledging, yeah, I'm going to cap my upside on the fund here a little bit, but it's going to be worth it in the grand scheme of things. And if I do it well, I can convince my LPs to come back to the next fund and then I've got another 20, 30, 40 shots on goal.

Speaker B: Yeah, maybe I'll frame a question. You guys let me know if you think this is interesting or not. But like, so if we were to touch on the market today, here's the things I would be interested in as a gp. Um, particularly that will you know, try to raise funds in the future. Mega funds raising just like extraordinary amounts of capital. So you know what that means in terms of LPs deploying to those funds. You know, are they going to be all out of money in 12 months after these firms raise another 50, $100 billion? Uh, mainly talking through the lens of a, of a, ah, obviously a much smaller venture firm. I'm seeing GPS start to deploy capital much quicker, um, like reminiscent of zirp. So I'm just now starting to see peers, uh, deploying funds in a year or two.

Speaker C: Mhm.

Speaker B: Like that's back. I don't know what, I don't know what it looks like for the bigger funds. Um, and so I think this is a very self serving question but I think there's a lot of smaller firms, maybe more emerging managers thinking and maybe this is true for big firms too, we should be deploying quicker and going and trying to raise our next fund quicker because everyone else is doing it. And um, is the market going to be out of money when we come back in a year or two? Um, so I'm not saying that's actually impacted our strategy at all but um, anecdotally that's what I'm starting to hear and feel from the market. So curious. That was a lot of questions in there. So you guys can take, you know, whichever ones you think most appropriate. But curious, um, what you're seeing and how you maybe are changing or not

Speaker C: changing the strategy to your general sense that we're feeling zerpee Nick. Um, a hundred percent. I feel that we're kind of back in 2020, 2021 from a fast fund deployment, large rounds, people's pro rata getting sucked up. I hope that we have the exit market. Uh, my crystal ball is broken. So no, no forward statements there. But 2020, 21 also, if you look back historically was a. Was a lot of exits were created and that is. We're not seeing that part yet. I mean the secondaries has some and obviously the wiz exit and others that are coming, but that feels a little bit. Not quite the same if I was going to call out things that were texturally different. And uh, that is worrisome because a lot of people that didn't exit in 2020 and 2021 were then sad that they did not exit in retrospect. And a lot of those funds that were deployed in a year, uh, there is still time, but they're not looking great generally speaking. Um, so history can repeat itself and it can rhyme. And so we're what. I'm personally watching some of those same dynamics and not personally encouraging folks to repeat that and to learn. It was only five years ago, it was not that long ago. So it. I'm laughing because it feels really just yesterday in many respects.

Speaker B: Yeah.

Speaker C: Um, so. So this is where. And this is. It feels like a. Just a shameless plug. But I think this comes to what, you know, what we are. What Thomas was saying before, and the breadth of LP platforms, when you have LPs that have capabilities to help you do things that you don't have to pile all your pro rata into investments, keep your eyes open to other opportunities. Um, and then I'm going to say this last bit and then Thomas can make it better. I think fundraising, because you think the GP next to you is going to fundraise and suck all the money out of the ecosystem is a failed strateg strategy. Because LPs will invest in good funds is my hope. And not because you want to pull the dollar before somebody else does. Right. That, that to me just feels like it's one of those tragedies of the commons waiting to happen. That, that just doesn't. I've not seen that historically work, work. If people are out of capital, it's, it's, it's not because they forgot that there could be new people coming back to market or that they're existing GPs weren't going to come back to market. It's usually because of other structural challenges. Now, M make that better, Thomas, because I know you can.

Speaker A: I think. Nick, are LPs going to run out of capital? I don't know. Sometimes I wonder if the world is going to run out of capital to fund, um, capex for AI right now. And I think if I kind of take a little bit of step back, think about how we think about this. We always say, listen, if you come into venture capital as an asset class, if you're an allocator, you can go in when it's hot, you can go in when it's not. You will only really figure out in hindsight the most important thing if you start committing to venture is make a commitment, go in, make sure that you can commit at a steady pace over a long, long period of time. Because it's a market, you cannot time, there's just no way. Um, and I think that also applies to the GP mindset. A little bit like, set yourself a target, go out there, Are you going to be slightly faster? On some occasions, yes, you are. That's totally normal. But also be aware that when everyone's rushing in, I'm trying to think back, when was the last time that everyone was super excited about an investment environment and investment pace went up dramatically and you look back and it was a great idea in hindsight. And that goes for venture or buyouts or public markets. Um, public markets I shouldn't talk about because I know nothing, but I struggle to see it in private markets. I do think you need to take a little bit of a step back sometimes and just think about, hang on, what's going on here? What's my role to play? How do I maximize? And it's super difficult, right, because you've got these incredible companies in front of you that are doing things that you never thought possible a couple of years ago. And how do you choose? And I don't have a good answer for you, but what I think is going to happen is in the next couple of years there's going to be, and I don't know if it's in 3 months or 6 months or 18 months or 36 months. Can't help but at some point capital is not going to run out, but risk appetite is going to decrease unless the capital that has already gone in feels rewarded. If we don't have, uh, a couple of IPOs ahead of us that are going to do phenomenally well, I think capital is going to start thinking, hang on a minute, I've gone all in on this. I'VE gone in at really high valuations. Yeah. It's beginning to stretch my asset allocation. If I don't see a return on the risk that I've taken, maybe I'll just start tapping the brakes. And it doesn't mean the capital disappears, but it means that it takes a pause, because sometimes capital takes a pause. And I think what's going to happen is whether it's one of the big, um, language model companies or someone else is going to go to market and they can raise their 50 billion, not a problem. But maybe it's a flat round or maybe it's a slightly down. Right. And my impression is these companies need the capital. It's not like they're not going to raise or they're going to sit on the sidelines for two years for capital markets to improve if they can't raise $50 billion now at a certain valuation. And what's going to happen is that slight disappointment in the outcome of the invested capital, I think is going to filter through to the entire rest of the asset class. Impact pricing. And so I think we're going to have a dip. At some point in time, I think valuations are going to come down. It does not change my fundamental belief that AI is going to completely change the world and we're going to have massive and fantastic returns from it. I just think you need to prepare yourself as a GP for the fact that there is going to be some kind of dip along the way and you can't time it. So make sure when you look your LPs in the eyes, that you followed your strategy, you've done as well as you could, you've showed some discipline and hopefully along the way you've also invested in some companies that look great.

Speaker B: Thank you guys, so much. Amazing news. Congratulations, uh, on the partnership and, um, really excited to work with you both.

Speaker C: Thank you. And, Thomas, it's so fun to be your new partner. Thank you for having us and thank you for being on.

Speaker A: Thank you for agreeing to join us. Uh, it's fantastic. Really enjoying it. And Nick, thank you so much. Really appreciate it.

Speaker B: Thanks for listening to Origins, the show where we discuss the venture ecosystem through the lens of myself, a gp, and Beezer, an lp.

Speaker C: Be sure to tune in next time for a bonus minisode where Nick and I unpack our thoughts from today's conversation with Thomas and the latest happenings in the market.

Speaker A: Sam.