Earnest Sweat 00:03
Welcome to Swimming with Alligators, the VC podcast from the LP perspective, with your hosts Alexa Binns and Ernest. You ready? Let’s dive in. Alexa, it’s great that it’s our 100th episode. Can you believe it? This is 100 swimming with alligators episodes, that’s 10 DDQs and 90 allocators, 90 allocators. es.

Alexa Binns 00:47
Truly, they like, I think the early on the question was, doesn’t every allocator do the same thing? And every episode I would say is truly unique.

Earnest Sweat 01:01
It really is, and everybody and everyone has their different flavors, because there have been episodes where I was like, that is going to be a killer episode, and other people are like, he says that all the time, I was like, okay, and then there’s been others where I’ve, I’ve said, okay, that was good, but not my cup of tea, and it’s been very popular. So, yeah, truly, we want to thank everybody who’s been listening. It’s been amazing, the learnings, the community that we’ve been able to build of emerging managers, allocators, and everything in between. And then our events that we’ve had as well, it’s been cool for folks who know when we wish when they’re stuck just with us. It’s a DDQ episode, and so playing on kind of the tasks that a lot of emerging managers and fund managers have to do, answer a ton of questions, and so we poke fun of that a little bit, where we discuss different topics, debate different concepts, and then answer questions that our guests, as well as audience, and sometimes just us that we have that we want to ask each other. So, for those who want to reach us, email us at contact at Swing With allocators.com Submit your questions, we’ll give you a shout out, and we appreciate it. So cool with that, we can jump into DDQ,

Alexa Binns 02:33
starting with the first D discussion. These are things that we’ve been hearing from LPs, fellow VCs, and want to share with the audience, because they weren’t necessarily on the record. The first thing I would love to discuss. Interesting thing I’ve been hearing from multiple angles, that looking quickly at somebody’s deck, shallow high net worth kind of emerging manager investor was saying, oh, everyone has deals as the main markup for their like fund one or angel track record, etc. So it was super interesting to start to like think about what is the thing that’s differentiating for you, and if it is, if your story is so similar to somebody else’s, because this is a game of hits, and so you’re all going to share a lot of the same hits, and this came through in something another LP was telling me that the spin outs have the same issue, that initially they were taking tons of meetings from spin outs, and then they started to realize it was all the same logos, because everybody’s claiming on their track record the same big hit, so the takeaway here is you got to be specific about the fact that you sourced it and you led the deal, and it’s got to link back to whatever the strategy is that you’re then pursuing, so like, yes, you’re going to have your slide with all of your hits, big letters sourced, big letters led, because that’s something not everybody can claim, and otherwise those same logos are showing up in everybody’s decks.

Earnest Sweat 04:17
That’s a good point. It actually makes me think of when last mile, last mile kind of technology, or kind of everything was becoming bb, Uber B to B, or X for Uber, whatever, we, I would always see these decks with the same logos of customers, and it quickly made me start to kind of like dilute certain logos if they were always on there, and then others that rarely showed up that were from large corporates or partnerships, I was like, oh, this is actually something I can. Dig into, and so with this question of differentiation, thinking about the logos that you have on there, and I think it goes one, I think your piece about source or lead is important, but making sure you actually have the relationships for the back channel, so people be like, who you know, they’re not like, who was that? Yeah, but we never spoke to them. I think it’s really important to be very transparent about those wins and saying kind of like exactly what you did for the company, even if you didn’t source it, making sure you describe how you helped the company, and it actually makes me think. I’d be curious what you think of this too, Alexa. With when we first came into the business, sourcing was like, you sourced it, this person sourced it, this person, you know, and then it was like it, but what, what was never really brought up was like, did you lead in the negotiations to actually win, and then how much allocation did you win, and how much did you help those other aspects that I think are more important now that sourcing is like, how hard is it to source a great consensus company today? So you have to be able to differentiate what is going to come from the other things that you do.

Earnest Sweat 06:38
What, when it comes to decks, is it just quick follow up? Is there anything else you think that people think is providing differentiation, but isn’t

Alexa Binns 06:54
What consistently we’ve heard is like the strategy there, most people are going to accidentally spend too much time on your strategy, where you’re planning on putting the capital, and why, and not enough time on your own differentiation. As the,

Earnest Sweat 07:16
yeah, haven’t heard many LPs say this, but I would say successful GPS have definitely told me that when building a firm, the people and like how you all mesh and like each other and respect each other and can push each other matters way more than like the strategy, because out of that, if you’re really like aligned and like that strategy should come and be very congruent and support who you all are as an investing core, so yeah, I think that’s that’s that really that’s very obvious, and I thought about it, I knew the kind of like similar logos problem when it comes to talking to founders, but it’s just proof that as we’ve done this over 100 episodes, the jobs and the diligence that’s being done on founders can really be applied to fund managers and firms as well. So that’s great.

Earnest Sweat 09:47
My discussion topic is kind of, kind of like a light connected string to what you were speaking when, when, when talking about you. Kind of wins or common wins since our last DDQ. The news of Anthropic trying to stop all SPVs was very interesting to me, and it made me think, is this an Anthropic, you know, when were they founded? Like 20, it was fairly recent, right? As a company, I don’t know. Well, let’s see how good my memory is. I would like to say, like 2019 or 21 something like that.

Alexa Binns 10:37
Ding, ding, ding, 21 Huh,

Earnest Sweat 10:39
That’s great. It’s on camera too, so it’s awesome, and so this doesn’t – this fully doesn’t apply to them, but it made me think of, like, are we starting to see the stay private as long as possible, like start to crack, right? And you know, Anthropic doesn’t fully fit in this, because it’s only almost five years old, but the, if, if another company in past eras had this much revenue, they would have probably been public two years ago, three years ago, and so it just made me think of, like, are we finally reaching a point where the private markets are starting to create their own markets in the way they can, and then we’re going to see probably a lot of issues that come up from that, and as one l1 LP told me, is like, we’ll probably see the most lawsuits ever millionaires made in lawsuits ever coming out of the SpaceX IPO, because some people don’t know if they actually own it or not. So, if we finally hit a point where it’s like, okay, if you hit a certain threshold of revenue or a certain maturity of like age as a private company was what was stopping you, stop trying to time the market.

Alexa Binns 12:11
my understanding of it is basically like there was so much capital available in the private markets that you don’t need to go public, you can avoid the headache, and Open AI, Anthropic, etc. are only, or only going through it, because they’ve basically like run out of private capital. It’s, it’s like they’ve hit their max, obviously. That, that’s totally antithetical to this, like massive demand for secondaries in these companies, so I feel that is the case for Open AI, that they really do feel like they’re like, well, the last, the last great, like pot of money is the public markets, but you know what does motivate you to finally go public? Apart from that, I don’t know. It does seem like a giant headache,

Earnest Sweat 13:17
like I said. I feel like it feels like it’s a giant headache now, even as like a super late stage private company, too, and we’ll see how the plane lands on a lot of these companies when it comes to like post IPO, but it’d be interesting to see kind of, you know, are there lessons learned from that from other companies that essentially were planning to go public before these companies, and now feel like they have to wait, so something to kind of look out on, and I know as an industry we’ve spoken about how these companies are getting longer and longer in the tooth, and like what is the role of venture capital like? Yeah, what is the role of venture capital for instituting like, or being kind of the head of the innovation economy in a certain nation and world? And is it for companies to stay private forever, or are there real benefits to companies becoming public or not?

Alexa Binns 14:22
Yeah, in the case of those three names, what are SpaceX, Anthropic, OpenAI? It seems like it’s mostly just because if your competition is doing it, you’ve got to participate too, or else you’re one around behind. It’s just like required to continue to go head to head, otherwise you’re at a huge disadvantage. If you’re

Earnest Sweat 14:46
no, no, no. I, my pondering is, I agree with you, but I’m likeis there any point where people stop using that logic for everything? And I’m fine if, like, if they do it, then we have to do it, but it. And I’m fine if both parties end up at the same place for different reasons, but it seems like so much is associated with, like, well, if they do it, then we have

Alexa Binns 15:10
to do it. Yeah, I did have an interesting conversation with a friend whose portfolio company was acquired by OpenAI, and the subtext was, “Thank goodness we got cash and not stock.

Earnest Sweat 15:22
Well, you heard it here. That’s an.. that’s a man.. we get.. I get, but also I think you just messed up our opportunity to get acquired by Open AI. Thanks, Alexa.

Alexa Binns 15:32
There, there are a lot of podcasts getting acquired by.. should anybody be interested? Do you want to go to contact at SwimmingWib alligators.com

Earnest Sweat 15:42
Yeah, we will. For them, we’re capitalists, so for the right negotiations, we will be..

Alexa Binns 15:51
we’ll just burn your competition. We’ll just make it an entire show about how bad your tech

Earnest Sweat 15:57
is. Yeah, how bad the competition is. And we’ll be state TV for you again. Contact us with allocators.com

Alexa Binns 16:07
I’ve got another discussion topic I would love to bring up here. Hear your point of view. Something I am starting to hear from many Nisi friends, and a few LPs is, oh yeah, we’ve been doing consumer, and it’s with an interesting air of defense in their voice. Like, what do you mean we’re thinking of doing more in consumerism? We’ve always done it.

Alexa Binns 16:46
So I’m curious, have you also been hearing more, let’s say classically enterprise VCs starting to broaden their aperture to also look at, I think, in a smart way. Consumer, right now,

Earnest Sweat 17:10
I have heard less VCs talk about going into consumer and more founders lately speaking about building and consumer and seeing that’s where the real opportunity is, and I don’t want to forget your point, because I’m going to come back to it, but for founders, what I’ve heard recently is there’s a real question of like, how do you actually build a moat in today’s time, and that’s going to be one of my conversations we have in the debate section, but I think a lot of people are thinking about, as far as founders, of like, all right, if, if there’s, if any SaaS tool can be built, any kind of, like, UX can be built, you can’t depend on a technological moat to push off competition. It’s really going to come down to all the squishy things, and not so squishy, but distribution and brand, and that has brought people a lot to back to consumer, and even some on hardware consumer, like that being a little bit of a technological barrier for a little bit, and so that’s that’s interesting to your VC point. I am not going to step on another question I have, but I just feel that there are a lot of wayward lost venture firms with a lot of capital, and so they’re just searching and don’t have a real clue of what they want to invest in, and so they want to keep the top of the funnel broad and pull back, kind of like what they’ve been doing in the past, maybe like generations ago. So I think that’s a little bit of that.

Earnest Sweat 20:45
I think also the piece that’s happening with, you know, engineers, founders, whoever, being able to build so quickly is that even if you are building a B2B solution or you’re analyzing and diligence in B2B opportunities, you need to be more of an anthropologic kind of investor, where you have those consumer, that consumer investor mindset, and how you’re identifying who can, who has the best opportunity to win, because, like I said before, moats are dissolving really fast. So, who actually has distribution? Who has trust? Because it seems like to me the only moat that you can get to, and consumers been doing this play for a while, is how do you get the trust fast enough with your customers to then

Speaker 1 21:40
uh To

Earnest Sweat 21:42
have them give you their data, because that’s what’s going to be powerful, and beat LLMs and other folks when you have that proprietary data.

Alexa Binns 21:55
Yeah, no, I think that’s a good case for Google, frankly. When I think about, like, where people have already just sort of come to terms with, like, all of their personal data, and for whatever reason, I feel like Google is taking this more seriously, my personal data than some of the other LLMs,

Earnest Sweat 22:25
yeah, and we haven’t even seen the, the, the cost of, you know, all of us using these LLMs yet, and you know, part of us, like, I’ll say for myself, is just kind of understand, I’m like, well, that when that leak happens, yeah, it’s a part of it, cost of admission, emissions, anyway. I have one last quick one for us, and it kind of gets to the point of VCs being reactive a little bit, but I was speaking to an LP a couple of weeks ago, and they said on their tour of San Francisco and New York firms, everybody led or spoke early about their AI strategy, and you know, some speaking about kind of, you know, how they’re using it to improve their workflows, how they’re using it to see more companies, and or I’ve even heard others, not from this LP, but from others teaching their LPs how to use

Speaker 1 23:34
it,

Earnest Sweat 23:35
and the question that this LP had was like, why , is it is what you’re using AI in the tool for actually helping what you’re good at, and have an expertise at, and what you’re is it congruent? I always go back to kind of like that point that Jay made a couple, like 10 or so episodes ago, maybe it’s more than that, but is the use of the tool congruent with how you work in kind of building on your lead, or are you just doing it because everybody else is doing it, and it’s truly just a table stake. And so I was curious, if you’ve heard similar, or just even personally, what’s your philosophy on, like, what is the right AI strategy, AI stack for an individual?

Alexa Binns 24:27
It’s interesting. I did take one emerging manager pitch this week, where he, I think, rightly was like, I mean, stable table stakes. Yes, I’m using AI to help, like, iron out workflows, anything that was like rote work that seems like everybody’s doing that. It’s a solo GP, and that’s great to hear, because it’s great. I’m glad you’re, you’ve got more free time. And then did bother to point out some of the things that he’s building to improve his own areas of differentiation.

Speaker 1 25:00
Education,

Alexa Binns 25:01
so that was pretty cool.

Earnest Sweat 25:03
Yeah,as this LP told me, as like, hey, I am a fund to fund that focuses on venture and private equity. If I’ve picked you for a certain expertise, I want you to, like, you know, ideally follow on that, and if your use of this tool is to broaden, like now you’re seeing 1000 companies a week, is that really the best use of the tool, and you is that building like on your friends or the emerging manager that you saw the pitch, is it actually building on your differentiation, and that’s the approach I’ve taken, for even like my personal use of AI. It’s like, you know, really, you know, forget my weaknesses, right? Like, I, I’m self-aware, I know what those are, but early days of these tools, how can I do a better job of thinking in systems, viewing and plotting things in workflows, and then prioritizing those workflows that actually build upon whatever my superpower already is, and incorporating AI in that manner, and that’s just a level of intention that, like, again, back to our differentiation prompt earlier, if you don’t take, if you don’t take the extra layer to think what is differentiated might not seem like it’s differentiated at all, but I think those are the small kind of like intentions and activities that you can do to really build a lead in what you’re really good at all right now to the next D debate, and this is when Alexa and I bring up topics, fun little games to really stir up different concepts and opposing views that are happening within the world of venture capital, so I’ll start us off with one, and the first one I want to start off was actually stealing your favorite game, which is start bench cut, but I’m going to add a little bit more, so there’s start bench cut trade or suspend,

Alexa Binns 28:02
ah Oh, straight,

Earnest Sweat 28:03
you don’t even know which one. All right, so the prompt is, and this is because you know it feels like it’s just been a steady leak of 30 and 40 something venture capitalists not working at their firms anymore, and my question to you is, for a group, when I was starting this industry, I was like, they don’t have many transferable skills, I don’t believe that anymore, there’s a ton of transferable skills if you’re a venture capitalist, but my question is, like, what is the best spot for 30 somethings, 40 somethings venture capitalists today, and so the options I’m going to give you are large firm GP at large firm GP at small firm managing partner, and starting your own firm four is a VC, a VC partnerships person, so anything around BD or something like that, and then last is founder, so

Alexa Binns 29:13
I think the only real flex is to go founder,

Earnest Sweat 29:19
so is that going to be of your start bench cut trade suspension, and you can make the deficient definitions for any of those.

Alexa Binns 29:27
I think, like the most

Alexa Binns 29:30
The awesome move you can make is to start, I’d say, to become a founder. I think that shows the absolute most confidence, because you are down to do a whole new role, you’re putting all your eggs in a single basket, it’s like one idea, and so that’s like the biggest bet. If a friend comes around and they’re like, now I’m a founder, and this is the thing I want to put my time and money into. Is the highest conviction option, I think that shows the most belief in themselves and the thing they’re building. I would be very curious to hear from you, though, what you think all these transferable skills areEarnest Sweat 32:23
Wait, wait, before we get into that. No, I need to know the others quickly. I want to know who you’re suspending, who, what do you trade, what would you cut, and what would you bench on those other roles?

Alexa Binns 32:34
Okay, there’s so many.

Alexa Binns 32:47
I want to know all these people, so I give them all. I put them all in. You’re telling me the point of the only thing that’s left of my skill set is my network, and so yes to everything I want. I want to be a GP at a big firm. Yes, multi-stage. Take my, take my winners. Let’s pump some cash in there. I want an early stage friend who is going to send me some deal flow. Yes, please, yes, please. I like the diversity. I even really appreciate the friend who is now running partnerships at some cloud provider, because I need all those GPUs. So, please,

Earnest Sweat 33:30
I get that email

Alexa Binns 33:32
for sake. I think some of these lives are going to be better than others.

Earnest Sweat 33:38
Yeah, that’s what I wanted to answer, but it’s okay. We can, if you think Alexa copped out of that question, please email us at contact at Swimming With allocators.com All right, what was the topic you want to speak about?

Alexa Binns 33:54
Something we hear from so many allocators on the show, and I haven’t called them out yet. I just want to do it here. They’re all following a barbell approach.

Earnest Sweat 34:06
Yeah,

Alexa Binns 34:08
When you hear the same thing from 20 people in a row, what does that make you think?

Earnest Sweat 34:18
I don’t knock them. I think it’s like conventional wisdom, right? I think where we’re in to clarify, barbell approach, you mean like very early, very new small pre seed seed funds and the big names, right, multi stage funds, right?

Alexa Binns 34:37
Precisely, yeah,

Earnest Sweat 34:38
yeah, you know, at first I would say, if you asked me this question, probably three DDQs ago, I probably would have been, oh, I’m frustrated, I think, like, why is nobody seeing that there’s an opportunity, but there is a conventional wisdom on why, and I think it’s similar to, I’m probably repeating myself, but at. Think it’s similar to the SaaS apocalypse, right, and the feeling of, like, oh, why would you invest in a mid-stage growth SaaS company today, and I think if you’re applying the same kind of, like, vanilla SaaS product or a company that you were the last 10 years, yeah, there’s no reason to, but if you do have something differentiated, you do, you have been able to manufacture more kind of momentum to consensus, I think there is a place for you in a huge opportunity, and I feel the same way about having more series A and more growth focused funds. I think that discipline will be appreciated, and it might not happen for a while until returns show up, but I do think that there’s an open opportunity in the market because we have a lot of great companies that are are growing that have the resilience, but the graduation rates are just like going down and down, so that’s that’s what I hear from when I hear it is conventional wisdom, but I think conventional wisdom is supposed to be broken by exceptions.

Alexa Binns 36:25
Yeah, I think it’s, it’s based on good data, like, you know, you have much higher multiples if you’re investing super early, but it’s, as I have been digging into this a little bit, and I think it is basically like SAS data, so it’s a strategy based on outcomes from the past decade.

Earnest Sweat 36:53
Yeah,

Alexa Binns 36:55
and you might be like things are moving so fast that I wonder if we need to adjust how we like the level of commitment we have to that historical data. One example, consumer has so many more flame outs before you get to series A or series B, and then after that, Forerunner pulled a ton of this data, like consistently way better results. So, if you’ve got a barbell approach and you’re only investing in sub $50 million funds or sub 100 million dollar funds, consumers gonna look like the the drain on your your LP portfolio,

Earnest Sweat 37:46
yeah.

Alexa Binns 37:47
And I think, like, hardware used to be really expensive, so it wasn’t in there. Like, there’s all this stuff that the barbell approach, I think, in it, like, is a reflection of the past, and I’m wondering, how much we need to adjust it for this new era, where companies don’t even have to raise money to get started, like they’re also going to be huge companies that, like, flame out with a single update from some of these LLMs, so I’m just wondering if history is not going to repeat itself.

Earnest Sweat 38:25
Yes, there’s definitely a lag, and that’s a great astute point that you just made, of, you know, your allocators might be operating on stale or old data that made a lot of sense, and it’s your responsibility as a, as a fund manager to help them see kind of like why they’re getting in at the right time for your opportunity and why it needs to exist, but if you’re not coming with a believable or even kind of definite and confident reason to exist. Conventional wisdom says no. Yeah, to that point, I, you know, my last discussion, sorry, debate question was, do you, it was really around a number of conversations I’ve been having with GPS at different firms and hearing their where they are and their different strategies, whether it’s like what I brought up earlier, AI, they’re using how their hiring practices are changing, where there’s a lot of firms that said, “Hey, we hired this way, everybody does this, everybody comes from. This background that now feels that that’s really stale and really fits only with the old era, so people who never.. it was always, it was always like, know that hey, if you don’t get hired by this point, you’re not coming into this.. this firm, I’m hearing like reputable firms and some non-reputable firms throwing that out of the window and looking

Speaker 1 40:30
at it

Earnest Sweat 40:30
and looking for people who are more entrepreneurial, who know things that they don’t know, and also who can sell and are good with LPs, and so this is a fascinating moment now, where I think my question is, I think LPS need to do for their re-ups and the new net new relationships, but maybe it’s more re-ups need to diligence harder on where firms are going, and even their operations, and where they see themselves going. I think they need to ask tough questions on not just like, oh, who do you think are the stars? It’s like, how do you think about addressing other opportunities, how do you? What’s your strategy towards competition, and a lot of firms who have, like, 800 million and up fund size 800 does say probably the 2 billion. A surprising number of those are doing seed deals and feel like that’s the only place they can compete.

Alexa Binns 41:40
Yeah,

Earnest Sweat 41:41
so, yeah, my take is I think LPs for re-ups need to dig into our strategy. What are firm strategies, and how is that congruent or building upon even if there’s adapting? How is it building upon what they’re already good at?

Alexa Binns 41:58
I 100% get that there is a talent crunch like the fights, the internal fights you’re seeing among all top AI talent. I think is then like reflected back in venture, where those are the mafias that you want to be backing, those are the incredible deals that are like raising hundreds of millions off of an idea. So, if you don’t have a person who’s in that network, you have to find, you got to get access to one, and so I think that that’s where they’re filling in a little bit, understandably, so there’s like truly a limited number of people who have deep AI expertise, and alternatively, you see that somebody like Bob Iger has just joined a fund, and you’re like, I mean, how much is that going to move the needle, right? Like, so when you are thinking about, like, where you’re adding people at the top of your fund who’s giving you legitimacy, I think it’s going to be super like technical deep mind.

Earnest Sweat 43:16
Yeah, yeah, something to think about. All right, next we’ll move on to questions. All right. All right, we’re back, and this is kind of one of the favorite parts of the DDQs, is answering questionsI’ll let you go first, Alexa. What’s the question that you wanted to ask?

Alexa Binns 43:57
Is it worth building anything for my fund in terms of AI operations and workflows, or is this product going to be delivered for all emerging managers?

Earnest Sweat 44:10
Oh, the old build versus buy.

Alexa Binns 44:15
This was one that was brought up at a luncheon of 20 investors on Tuesday, and it was sort of like, which things do I bother to create, and which things do I just wait.

Earnest Sweat 44:29
I would say don’t create an LLM, that would probably cost a lot of money, but I would say that you, I am on the side now that, as an investor, you should be tinkering with stuff, and so the, and it’s actually even tinkering with things now has actually shifted my view on kind of like what types of. Tools you should buy. I was always on, like the holy grail is a CRM like that works in very customized CRM. Now I think if you have all the unstructured data and the right workflows of agents, it can surface that same information without you even having some interface, right? And so I would say that people should be constantly tinkering with what are the most important workflows that they have, having set dates on, like, all right, I’m trying it for a month or two months or six weeks, and then evaluating, maybe taking an hour every six weeks, two hours every six weeks of saying, all right, what worked, what actually helped me, what was a deter, and actually added more work, and then what have I heard from other people and use cases that they’re doing, and more importantly, tools that they’re using, because I think one of the biggest problems this is across industries, not just our kind of, you know, early user, early adopter bubble, but I’ve heard from a lot of friends, educated friends, who said, no, I don’t want to use that, because I tried to use one of these LLMs, and it didn’t work.

Earnest Sweat 47:07
My question is a question from Ernesto Sweet. Don’t know who that guy is, but the first question he sent us was with all the change. Has anything in your approach to diligence changed?

Alexa Binns 47:33
Yeah, I think the like I do referrals faster, I do them earlier, and trying to sort of like look back at why it’s not like I have conviction, and then I’m checking that they’re not a psycho,

Alexa Binns 48:01
like I think I learned, and I don’t know that this is, this may just be from experience, but I’m like, oh, you’re taking a lot of pitches in Zoom, just like, don’t get down a rabbit hole, don’t do references at the end, just like start to feel it out early, just like shoot off like one message and start to do references like as soon as you can to try to kill a deal faster, or whatever it may be.

Earnest Sweat 48:29
I think for me it’s like really thinking about how durable of a business model does this person perceive, right? If you, if you’re still thinking in the old SaaS era, you’re like, oh, my tech is great, and I have some momentum in these pilots, or even contracts, and that’s not enough anymore. So I’m really looking for and asking questions around, does this person really understand how they get more trust and distribution towards their customer base, and then can they build a mode around that, and what’s the business model around that, and then also what’s their ability to manufacture momentum, because manufactured momentum leads to consensus, at least a little bit right, because every investor should be thinking about even if I really like this, can they raise the next round after me?

Alexa Binns 49:29
No, it’s wild that, like, pattern recognition as a VC, we don’t have the patterns right now, like a lot of the, a lot of the reasons why you would have been excited about a company or past, like these things don’t hold anymore.

Earnest Sweat 49:47
Yeah,

Alexa Binns 49:48
a little bit more of a futurist, I think.

You got any other questions, or I got one more. We can end on this one. So, from Quad Sweat, it’s a lot of sweaty families asking questions. What do you predict will happen in the in the early stage market, after all these IPOs happen,

Alexa Binns 51:26
ah, okay, what’s gonna happen downstream?

Earnest Sweat 51:30
Yeah, what’s gonna happen in the early stage after all these millionaires and IPOs and jealous people emerge.

Alexa Binns 51:40
Cool thought exercise. I think we’re seeing like real estate prices go sky high in the Bay Area, for instance. What does it do for the early stage market? I think there’s already a huge trend that you don’t necessarily need to raise capital if you’re an adult, like the kids still can’t bootstrap,

Alexa Binns 52:06
but

Alexa Binns 52:06
This influx of capital, I think it creates a bunch of people that, should they have any ambition left, they will not be coming to early stage VCs for any capital.

Alexa Binns 52:20
they’re going to own the whole thing themselves if they’re, if they’re bothering to take another swing at starting something themselves. So I think it changes your competition a little bit, like none of those people stay working at the companies once they go public, and so what do they do? I think a lot of them become angel investors.

Yeah, and they’re all going to be preferential to each other, like you’re going to have these mafios of these people who all worked together. Like, my understanding is everybody at AWS is all like X Stripe, like they’re these like little pockets of people who follow each other, and so I do think that you’ll see probably some like mafia-like outcomes, then that like things are being built in these sort of cloistered communities where people trust each other and they’re investing in each other, and

Earnest Sweat 53:45
cool,

Alexa Binns 53:46
That’s my prediction.

Earnest Sweat 53:48
Yeah, I think my prediction is that definitely we’ll have a lot more angel investors. I think we also all the pension funds and bears of venture capital, who maybe were a little bit more pro credit or pro private equity, especially with like the trouble that those asset classes are going through now, who also we can now revisit that maybe they were helped out a lot by these, these low interest rate eras. I think people will start to be like, oh, well, we need to put more money in venture capital, and so I think it’ll be a great thing overall for new managers, new founders, or it might be annoying, like you said, and we’ll just have more people starting funds because they worked at these companies.

Alexa Binns 54:46
Our audience, our audience is about to skyrocket. Yeah, everybody’s starting a fund,

Earnest Sweat 54:51
and again, Open AI, we will. We are open to offers, since you guys are acquiring. Now I’m joking.

Alexa Binns 55:00
Well, this has been a pleasure. 100 episodes, Ernest. Let’s be excited to do 100 more with you.

Earnest Sweat 55:06
Cheers to that with my Christmas cup. For some reason,

Alexa Binns 55:12
it’s always a

Alexa Binns 55:12
holiday

Alexa Binns 55:13
at

Alexa Binns 55:13
swimming with alligators.

Earnest Sweat 55:14
Always stay in touch, and we’ll be back next week with another great allocator. See

Alexa Binns 55:21
you later, allocator.

Earnest Sweat 55:24
After portfolio tile, investing with a smile,