Earnest Sweat 00:13
Today, we have Aram Verdian. He’s a partner at accolade partners, one of the top performing alternative asset platforms in venture capital, growth equity and blockchain. He’s had previous experience at Andreessen Horwitz and has some consulting experience. Today, he’s going to share with us the principles that drive accolades investment strategy across ventures, what separates consistently great managers from the pack and the role of LP conviction and engagement in building durable GP relationships. So with that, we welcome you to swim with allocators.

Aram Verdiyan 00:54

Earnest Sweat 01:00
if you could just share some highlights from, from just how you got to accolade.

Aram Verdiyan 01:17
Yeah, I was happy to graduate from college right around the 2008-2009 financial crisis. It was very hard to find a finance job, and I got into consulting. I always had wanted to explore private equity. I knew loosely what venture capital was, but didn’t have a great idea. And so I was in Washington, DC, working consulting, and saw an analyst job opening at accolade. I didn’t know what a fund of funds was, and I literally knew nothing about allocating. I didn’t know what a capital call was, so I applied, and after applying online, I didn’t hear back, not surprisingly, because my background was nothing they were looking for. And then I called them, and I said, you know, I’m local. At the very least, I can just come in, like, have a coffee with you and learn about your business. They thought it was weird, but they said yes to that request. And so I came in, and then five rounds of interviews later, I got the job, and that was 14 years ago. In between, I did go to business school and then came back and did a few things in business school that were, I think, very creative to the job I do today at accolade. So I worked on the direct investment side. We had some operating experience as well starting a company, and then came back so but yeah, I would have never expected 14 years later I would still be here and when I joined. I mean, it’s interesting, because I sometimes talk to either undergraduate or graduate students who are thinking about charting their career path, and they’re saying, I’m at A and I want to go to point B in the next five to 10 years. And the two things I’ve always told them, at least from my experience, is that point B may not be what you think it is 10 years from now? And secondly, if you are going to go from point A to point B, it’s most likely not going to be a linear path. So just have that ambiguity in your mind as you’re thinking about what’s next in your career.

Aram Verdiyan 03:40
14 years later, my team and I still send cold emails all the time. It hasn’t changed. I mean, we were cold emailing for fundraising back then, we’d have to do less of that now, just because we have a very established track record. But back then, we called emailed managers, we called emailed LPs, and to this day, we still do it.

Alexa Binns 03:59
What would you be pitching? What’s the accolade sort of story?

Aram Verdiyan 04:08
I think any LP that wants to use a fund of funds, this is not an accol, this is a fund of funds pitch. And then I can narrow down to accolades should I get three things. One is access and access and access that they can’t get themselves. I mean, that’s fairly standard. Everyone, every fund of funds that exist in the world is going to pitch access. That’s why they exist. Secondly is returns, and what I mean by returns, and I’ll specifically focus on venture, and blockchain can be a part of this. I know we’ll discuss it later. Is venture has, as you know, this dispersion of returns phenomena going back to 50 plus years, where the top 1020 now it’s more than 1010 20, but the top 1020 companies per year drive the majority of the returns in the industry, and only a handful of firms are getting access to those companies at the early stages with lead checks. And so when you think about that, there’s zero. Point 1% of all the firms really drive the majority of the returns. Same on the company level. I mean, how many 50 billion plus market cap companies are there today that are venture back? You can count them on two hands. And so what if you are a fund of funds, and you’re pitching you have access, then theoretically, you have access to that 0.1% of the firms, which means you should be able to outperform even the direct top quartile benchmark, the top 75% if you’re, if you’re truly getting access to the 0.1% even with an extra layer of fee and care, you should still do better than the top quartile direct. If you don’t, that means you’re actually not getting access to that 0.1% and so anyone who’s using a fund of funds should not only benchmark those funds to other funds, but to actual direct funds, because of the dispersion of returns in ventures that exist. Three is the reason using a fund of funds is because you don’t have a dedicated team that can do it themselves, and you want a portfolio of whatever asset class you’re looking for, Blockchain Venture Seed series A early stage, late stage. And so one is access, two returns. But the returns, I want to be very specific.

Earnest Sweat 06:40
if we’re now saying, Okay, we want to be in the fund of funds. Now, why accolade? Well,

Aram Verdiyan 06:47
One is that we have access. Two is we’ve consistently beaten the top quartile direct benchmark, direct venture benchmark. And the third part, I would say, is we take a concentrated portfolio approach. So what is concentrated? And I want to go back to the first thing I said, there are only a handful of firms that do well every year, and we can quantify that too. Our data is not perfect, but it’s pretty accurate. So if you look at the last 20 years, if your n is three to 4000 venture firms in the US, there are maybe a couple dozen that consistently have generated 3x that. So that percentage, the top end to the bottom end of the funnel is really small. And so if someone came to you and said, I’m running a fund of funds, and I’m going to have 50 venture managers over a year or two years, it’s just really hard to find that point, 1% over so many managers into in a two, three year time frame, what ends up happening is you might end up with like an index, like fund of funds, if you’re doing the index in venture just do the public markets. You can get tech exposure that way to private equity, better liquidity, better risk return profile. And so the way we think about concentration is two ways. One is we want every manager to be meaningful to our portfolio. So when they get a five to 10x fund level outcome, you have a shot of returning half of our fund of funds or more. Second thing I want to say about that isn’t that, let’s look at the actual company exposure. So what we have found over the past 20 years is, if you look at our top 10 companies on an on the look through basis, we have about three to 400 companies in every one of our funder funds, but the top 10 companies are able to return more than 1x our whole fund of funds. So you can say two things there. Well, you were great at picking good for you, but you actually sized the manager correctly in your portfolio. What would be really frustrating is that if you pick the right manager, they had a 10x return at a fund level, and it’s like returning 10% of your fund, like you’re not going to get another 10, 10x funds in a single fund of funds. Statistically, that’s hard to do, and so we think a lot about what’s the optimal level of concentration where a single company or single manager can really drive returns for us. Wow. That means you have to pick well, though, like, there’s a there’s The con of that is, like, whoa, if can’t have a zero, like that will really hurt your performance. But you have to pick well. But if you don’t pick well then, but if you’re gonna have the diversified approach, I don’t know if you need to venture that way, like you’re gonna get the average return, the average return, the average return, you can look at the Cambridge benchmarks. It’s

Earnest Sweat 09:24
not great. No, there are other asset classes that have far better risk return profiles. Wow, that’s that. That’s an interesting, and I think, a very impressive way to look at fund to funds and what you should be benchmarking against. Can I

Aram Verdiyan 09:41
tell you another way you can look at ventures broadly. So right now, every year, run rate, 75 200 billion is raised by venture capital firms. That’s the fundraising number two, three. That’s per year to 3x that as an industry, you need to generate about 600 billion or so in exit value. If you assume VCs are going to own about 40% of a company or so, or 50% at exit, you need to generate $ 600 billion in exit value per year. We don’t necessarily have that, which is why it goes back to the same dispersion of returns like you will have a stripe, an enduro, a figma, a Databricks. These are amazing companies, but that’s not well distributed across the whole industry. It’s going to a handful of firms,

Speaker 1 10:25
yeah,

Alexa Binns 10:26
And, and you’re such a quantitative person, are you thinking of picking in a quantitative way, or is this qualitative ? Is there a balance there? If you’re not indexing, you know, I’d say those are like the full quant index fund of funds. What’s going into your picking process?

Aram Verdiyan 10:45
Yeah, you can be too quantitative here. It has to be a combination of two, because a lot of the time what we do is a fund one. We actually love starting with the manager at fund one, being their biggest LP, growing with them over time. And so at fund one, I would argue, has the least data. Now, it doesn’t mean you have zero track record. There are indications of your track record from your prior body of work, but we’re not one of those LPs. Like, we need to see fund one and two and three and then some DPI in order to do the next one. Like, that’s just not who we are. We need to be able to see a body of work that’s represented enough, and we ourselves would do a lot of projections to get a sense of whether that body of work maps to what the manager wants to do at fund one? And if the answer is yes, that’s the perfect entry point for us. Typically, that’s where we lean in. We’re the biggest LP. We grow with them over time. The other thing we do, that I think could maybe be somewhat contrarian, is a lot of LPs over time, scale their checks to a manager because they say, oh, it’s fund one. It’s too early. Let me write a $5 million check when they’re on fund four, and it’s like much bigger. We’ll write 4x that check. We increase our allocations to managers over time, but we start at a core, large check at the first bite. And usually the first few funds are the best ones.

Alexa Binns 12:13
how do you think about right sizing in terms of that check size to the fund size

Aram Verdiyan 12:21
depends. So like, if we have a $500 million fund, 25 to 30 is sort of the minimum we like per manager, and we don’t care about being a large part of a manager’s fund. So we’re if we’ve done 15 on a $20 million fund. I mean, I tell you, like our managers, we have in our portfolio, if today, they told us, you can have the whole fund. You the whole fund, like we would have a serious conversation about having done that. We don’t care about the concentration risk, like we don’t need to see others come in for us to anchor funds. We want to be the first ones to do so. I also think the GPS we got back is very aligned with that as well, like I’ve had this conversation managers quite a lot of saying, don’t optimize for funds based on a LP check. What do I mean by that? An LP comes to the manager and says, Well, I can only write a $20 million check, but I can’t be more than 20% of your fund. That means you have to have a $100 million fund, yeah. But say your fund math bottoms up to get a 5x plus works at a $50 million fund, what are you gonna do? Most folks in most folks end up raising 100 million the GPS, we back will say no to that capital and raise 50 million, and then we’ll go to them and say we’re happy to take the full 50, or give us 25 to 30 at least.

Earnest Sweat 13:33
Wow. I love the intention and conviction that you have with GPS. Can you speak to you know, you all have been doing this over a number of years. How do you think about reevaluating funds as they, you know, become more and more mature,

Aram Verdiyan 13:53
It’s pretty constant, like we are constantly in touch with our managers and all their team members. It’s us. We are not the type of LP where the next fundraise is coming. The data room is open, and that’s when we start diligencing the existing ones. Like, by the time the data room comes, we’ve already made our decision, and so we are constantly in touch with the managers of their portfolio companies. I would like to believe, and I’ll take a step back. We don’t do international ventures, we don’t have other products. We just do venture blockchain growth like us, primarily, that’s what we’ve been doing for 25 years. We have a small team. We’ve had no turnover on our team, so it’s the same people underwriting the managers for a long time. And so what we would like to believe is that if you called any of our managers and said, Who is your highest value at highest engaged LP, who knows the portfolio well, who has had a consistent track record and programming venture, and who really understands your portfolio? We’re going to be on that list consistently. And so when they come back to market, we’re not we will do our formal process of writing a memo, but this. Decision sort of has been made leading up to that, because we’ve, we have a lot of data and touch points leading up to the next fund raise

Alexa Binns 15:05
Can you talk about what you consider in those cases? And, and maybe that leads into whether, like, a re up decision or not. I don’t know if this related, no, we

Aram Verdiyan 15:23
I don’t have specific case studies, but I can tell you, sorting out the vectors that are important to us, that we focus on as a team is a big part of it. There’s a huge qualitative signal in that, like we have, we do significant offsheet references to get a sense of the manager and the team in terms of their ability to source the best deal, speak early with founders, their ability to lead, how they’re perceived amongst the syndicate of other investors. They work with like, that’s a continuous process we have so team, reputation, deal flow, their ability to source add value. That’s the qualitative stuff that’s on. The quantitative stuff is you’re looking at two things. You’re looking at how the fund size is being deployed relative to portfolio construction. And I can get into that, put a pin on that. And the second part is the actual company performance, underlying company performance at the funds, a lot of folks focus on, well, I did an up round from x, or I have an up round from y, I think there’s some signal to that. But by and large, actual underlying company performance is far more important. So and then on the fund size, portfolio construction, what we generally look for is, do you have the right font size and ownership level in an underlying company, so that post dilution, at exit, if you have a meaningful outcome, it can return a significant part, if not multiples, of your fund. And the reason that’s important is going back to the very first comment I made in this conversation, is you have dispersion of returns with very few large outcomes. If you happen to have a very large outcome, you really want that to be meaningful to your portfolio. We operate the same way. At accolades, we have a great outcome, we want it to be meaningful to our fund, the funds, I’ll give you a quick example. Take a sort of a $50 million fund. Gets 5% ownership. If you’re doing well, that’s going to be diluted to, I’d say, 50% average dilution in the industry. You sell that company for a billion, it returns half of your fund. You need 10 like that to get a 5x growth, high threes network fund, 10, $1 billion outcomes are hard in a single fund cycle over two years. And also, like, you were so early in that company, you worked so hard, like you want that billion dollar outcome to return. What was your fund? And so we do, generally, there are a few firms that have defied this model and have done well. You need to have like, incredible deal flow and reputation to have many shots on goal and do well. And there are firms that have done that, it’s just hard to do that model really well and consistently. On the flip side, you have to have a more concentrated portfolio and invest with conviction. And so what you’re doing has to work. I mean, you still can have a 50% loss ratio, but the one or two things that work, like really have to work, and then you can have a five to 10x fund. What I literally said for an underlying manager is what we do on the fund’s level too. Yeah.

is there a gap you see in the market? Is there, if you were looking for, a strategy, a VC manager, or strategy that you feel like you’re looking for, that you haven’t seen yet?

Aram Verdiyan 21:00
So I’m gonna give you an answer you won’t like. If we started investing like this, I think it would be terrible. Here’s why, because I don’t think we at accolades are smart enough to figure out what’s missing in the market. Let’s go find it. But what we do, what we have been really good at, is seeing everything, finding the best talent that has identified the next thing and investing in them. We’ve had this insight for a long time. We’re not smarter than other allocators, or like we’re not going to try to figure out what’s next. Now I can put a pin in that, and I’ll talk about why we were early in blockchain and why today we’re the biggest allocator, but it’s because we saw significant talent go into the space to say this warrants for us to do X. So we have to see the signal from a manager’s standpoint for us to do something, versus us saying we want to do something in this part of the market. Let’s go find the manager. I just don’t think we’ll be any good at identifying that part of the market. I actually believe the best investors operate in the same way, like if you talk to the top venture firms, they will do market mapping. They will think about sub sectors. But it’s only because they’ve started to see significant entrepreneur activity, high quality activity, come into that specific sector. The entrepreneur is going to drive where everyone is looking for allocators, venture investors.

Earnest Sweat 22:20
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Alexa Binns 23:09
venture. And now back to our LP interview.

Earnest Sweat 23:14
I think that’s a good point just like when I saw him when we first spoke, and you spoke about the investment you all have made into blockchain, it kind of took me by surprise a little bit. Can you talk about the just the kind of the thinking behind it, and what’s the strategy? Yeah, we

Aram Verdiyan 23:31
had venture managers in 2015, 16, who started doing blockchain investing. It was so young back then. I mean, you had just picks and shovels, wallets, infrastructure, solutions, and you had the Bitcoin white paper since 08 that was gaining traction. And then in 2015 Ethereum main net launched, which means you find out how to smart contract solutions where theoretical decentralized applications can be built on top. We went through the ICO craziness in 1720. 18 was the light bulb moment where dedicated blockchain funds started out of firms. You would know, benchmark Lightspeed Sequoia. And recently we saw significant entrepreneurial talent from all the best universities go and start blockchain companies. You now have infrastructure to build on top, like Ethereum. And we said, back then, there were 30 blockchain firms or so, and we said, we can’t just do one of these 30. We should have a portfolio. Today, we’ve looked at 560 dedicated venture blockchain funds. So it’s really hard to prosecute the space by just having one or two managers. We wanted to have a portfolio, and the reason we did it is because we saw significant entrepreneur talent, great manager talent coming to the space that informed us we need to have a point of view and a dedicated product around it that came first, versus us saying, blockchain will be big. Let’s go find the managers. Fast forward to today. I believe we’re the biggest allocator. I mean, I don’t know globally, maybe there’s some we don’t know, but 1.3 billion in committed capital. So we have backed over 22 blockchain funds, usually the biggest LP, usually at fund one, the same thesis we had in venture. We’re doing that on the blockchain side. I think blockchain is earlier in its evolution as an industry. So theoretically, the return profile should be higher than traditional ventures. If you’re just going to do like a 3x net plus over 10 years, you can just do traditional ventures. You don’t have to take the risk on blockchain.

Alexa Binns 25:52
about Any advice for LPS trying to thoughtfully navigate investing in blockchain?

Aram Verdiyan 26:00
Iff you want access to blockchain, that means you already have venture exposure, typically. And I believe if you have venture exposure, Blockchain should be a part of that exposure. Just the same way, saying AI should be part of that exposure. Obviously you’ll get it through venture but AI and blockchain are probably the two areas we’re seeing the most significant innovation from founder talent, how to navigate it. I think you can today. There are products out there, like ETFs, where you can access some of them. The analogy would be like The Magnificent Seven of blockchain, like Bitcoin, Ethereum. You should do that directly. To complement that with early stage exposure, unless you have a dedicated team to do it yourself. To pick 15 out of 560 fund managers, I would try to find an allocator to help you complement that larger public market beta exposure. I would say the same thing to anyone who’s looking into venture: you can buy some of the public market tech exposure. And then, if you don’t have the team to do venture yourself, find the fund of funds that could do it for

Alexa Binns 27:06
you. Absolutely and curious, what are the pieces? Maybe it’s the things you’re hearing from your managers at their AGMs and so on. What are the things in 2025 beyond that are exciting you right now? About blockchain? What are some of the I don’t know if it’s applications or,

Aram Verdiyan 27:22
When we started the effort, there were almost no users in the space. Infrastructure was not working in blockchain, meaning, like it wasn’t scalable, slow, the UI, UX was clunky and regulation was unclear. So when an LP asked us, like, what are the risks? I would say adoption is early. Regulation is unclear. Infrastructure is early. Like, it’s just you’re like, in the dial up phase today for you to do something on the blockchain, like, if you want to transfer USD and do something on the blockchain, on Ethereum in 2021 it cost you $10 today, cost you less than a penny. There are over 220 million monthly active addresses that are interacting with Blockchain applications, and we have a number of companies in our blockchain portfolio exceeding 100 million ARR in four to five years on little capital raised on the regulatory side in the last six months, five months of 25 we have had more progress than we had in last four years. If you look at who’s at the SEC CFTC, we have a Bitcoin strategic reserve. We have a stable coin bill that’s close to being passed, followed by a market structure bill. We’ve had case dismissals against great companies like Coinbase, uniswap, Kraken and others. We’re actually in a great place with a nice tailwind on the regulatory front. The infrastructure is far more developed, and we have product market fit, and a lot of folks ask about use cases, and there are a bunch of companies that are exceeding 100 million plus in ARR but the biggest use case today is in stable coins. Stable coins last year settled 14 trillion. It’s more than any of the traditional incumbent payment providers, with 240 billion in circulation. Now, let me put that in context. There’s a billion people that are unbanked in the world, and the cross border payment volume globally is 200 trillion. So like, we are still so early in actually, in that stable coin adoption. So once we have a stable coin bill, you’re gonna continue to see this significant adoption.

Earnest Sweat 29:21
Anything from the blockchain experience that you feel that you all will apply to AI. Do you think they’ll ever be kind of like a dedicated or is it just so ubiquitous now that’s just

Aram Verdiyan 29:35
It’s going to be part of AI. I mean, I think blockchain is starting to intersect more and more in AI, and it’s intersecting in two ways, where AI has the limitations around it needs to continuously consume hardware, GPU ASIC capacity, and it’s provisioning them to find that it’s hard. There’s only a few providers that do that. You can have a decentralized solution for that. So Alexa can put her unused GPU capacity on a network. Work and earnestness, can use that to train his AI model. You don’t have to go to one of the big companies for that. And we have a company like that in a portfolio that today is 400,000 containers on its platform across 95 countries, exceeding 100 and 40 million Arr, that’s at the intersection of AI and crypto. Similarly, for the AI to get better, you have to continuously train the data and label it like that. Effort can be done through your internal team at a company. It can also be decentralized. And so we have companies like that that are also in that revenue traction phase, that are either providing the data or training the data. Anyone can do that on a decentralized network. So I think those are the two areas where you’re seeing blockchain really make AI deployment efficient today, and in general, that’s what blockchain does. It decentralizes the value creation of a company to everyone, all the participants. And if something is really resource intensive, instead of you raising a lot of capital spending, capex to buy that, you can outsource that effort to an independent operator.

Earnest Sweat 31:01
what else do you feel that you provide as a value add to anybody who joins your portfolio?

Aram Verdiyan 31:36
Yeah, so we started quantifying this years ago. I want to put the value add in two buckets. The one bucket is a tactical value add. We’ll help you with recruiting, like on the blockchain side. To give you an example, we will refer candidates. We’ll help interview candidates. We’ll help close candidates for a manager. We help the portfolio companies with customer introductions, partnerships. That’s on both the blockchain and venture side, we serve as a reference. We have helped with portfolio construction, LP, composition, general guidance on blockchain specifically, we have a whole effort on operational due diligence. This is where it’s different from venture. You actually do need help if you want to institutionalize your firm, thinking about what is my valuation policy on a token that’s not vested? What’s my custody solution? Should I use stable coins if I’m going to stake my assets? How should I stake? How should I stake them securely? What insurance policy should I have? We, as a firm, have been doing this for six years now, and have best practice across all of those. So if you’re a fund one, this is where you come to accolade. We can anchor you and institutionalize your whole firm for the next, future funds. So that’s the value add. But I think the second part of the value add, I think this is really important, is we don’t just want to be on the ELPAC. You’re having a bad day and it’s 10pm. It’s midnight, you’re calling us. We want to be that LP we’re on Slack channels with our managers. You can call us about anything, whether it’s firm related, company related, market related. So we want to be that first call they make when they want to bounce any idea off of their LPs. Is

Alexa Binns 33:03
Is there anything that you find yourself correcting or educating GPS on that things have changed? I’m curious if there’s something you find yourself repeating to GPS that is pitching you, or the GPS in your portfolio where because you’re sitting one level above you see things differently.

Aram Verdiyan 33:28
Yeah, this isn’t necessarily related to our existing managers. I think broadly managers in venture and blockchain forget how hard it is to consistently outperform the venture asset class. I mentioned, there are three to 4000 firms in the US, only a couple of dozen have consistent 3x returns. That’s a really, really terrible ratio for an asset class. So, like that. I mean, that’s why the funds, I think exist, because they’re gonna pitch, we’re gonna get access to that two dozen firms. But I think managers forget how hard it can be. And what I mean by that is it is really important to stay disciplined in your approach. If you have an ability in a lane that you think I can do X because I have the competitive advantage in deal flow sourcing in this part of the market with this fund size, and I have a way to own X amount with these historical exits, to get a three to 5x net fund. It’s really important to stay in that lane, fund after fund after fund, despite the fact that you can have a lot of LP interest, despite the fact that you can raise a lot more money, have multiple funds, etc. I think, I think that’s the one thing we remind our LPS is not just RGPS, but GPS generally is, do you want to be the best, or do you just want to grow? And I think, I mean, they’re both. There are two paths to doing that. And by the way, there is a narrow path for you to grow and continue to be the best, but it has to make sense. Bottoms up, that’s probably the number one thing. That comes

Earnest Sweat 35:00
up, does that influence how you change your touch points and how you advise firms as they scale, like when you first work with someone at fund one, obviously you can help them institutionalize. You use the example with Blockchain fund managers, but as they do scale, how does your coaching approach change? If at all?

Aram Verdiyan 35:24
I don’t want to use the word coach like we’re not. We’re never going to coach our managers. Our managers are 100% of the time in the driver’s seat. We’re sort of very much in the back, and if they need us, we’ll help them and we’ll give them guidance. But I think what we really focus on is always bottoms up. Whatever you do is think about where your strengths and weaknesses are. As a manager, where you can excel. That means opportunity, set, font size, check size, account for dilution, follow ons, et cetera. That’s your font size. Your font size is your strategy, and so staying consistent to where you’ve been excellent at delivering both in terms of deal flow, actual sizing of investments, that’s what we remind our managers to do

Alexa Binns 36:09
all and in your own planning for your next fund. Are there any adjustments you’re making? I am sure you are very disciplined, but I’m wondering if there’s any lessons learned, or, you know, if you’re leaning into x more than Y on the next one,

Aram Verdiyan 36:28
kept the font size the same deliberate approach. You know, the fundraise was the quickest where we’ve ever had as a firm. I mean, this didn’t require cold calling this time or cold emailing. But, no, I mean, look, everyone makes mistakes. I think we learned from our mistakes. I think we want to keep the strategy, the portfolio, construction and our filter pretty consistent. Has our process become more rigorous over time? Absolutely, we have the same team, but we have more process around it. But I actually think if you look at the next two to three years, and you look at the funds we just raised, it will look very similar on the blockchain side. I do think we’re leaning in a little more into secondaries and more interesting creative structures, like GP stakes as an example. So we would love to do more of that. That’s more recent, I think, on the blockchain side and secondaries on the blockchain side, you could see upside significantly higher than a primary fund investment.

Earnest Sweat 37:32
What’s your views on secondaries for your core venture portfolio?

Aram Verdiyan 37:37
We look at them. It’s really hard to find, and most of the secondaries we’ve done in the past have been with our managers. It’s very one, they don’t trade often. Two is, they’re so high quality, their discounts are low, it’s very hard for us to underwrite what we’re looking for on the blockchain side, because it’s blockchain. It’s an early industry, and people don’t understand it as well. You could actually get a 50 plus percent discount on a high quality portfolio. And because we’ve been doing it for a long time, we’re the largest allocator. We know these portfolios really well. I just think that asymmetry is less prevalent in traditional ventures in secondaries.

Alexa Binns 38:15
Is there, like, a favorite point I can tee this up with if there’s one you know, final thought, something that you just love teaching people, or, you know, any, any, anything that we haven’t gotten to that you love to pound the table on.

Aram Verdiyan 38:34
No, I think you covered it all. You know, I get asked a lot by managers about managing liquidity as well, especially in the market today, where we see very little liquidity in venture we’re a weird environment where you’ve had hundreds of these unicorns that have been created over the past few years, a number, like the majority, are kind of stuck. They either have to raise a down round, and like, they haven’t met their projections, and then there’s this small subset that has continued to raise at even higher clips, very frequently, because these are the best companies, and all the private capital is chasing them. On top of that, these management teams can do tender offers, which relieves the pressure to go public. And so the best are staying private longer, simply because they can, and the venture investors are allowing that because they’re putting more money to work in them. And by the way, these are really high quality companies. They’re not the rule of 3040, so you look at the public markets, the rule of 40 trades eight times. These are rules of 50 to 100 plus in the public markets, those companies get 1520, times. Next 12 months revenue multiples. And so managers always ask about liquidity. And I think if you’re a large manager of one of the big brands, it’s hard to get liquidity in these companies, because you have your own multiple funds that are all invested in this company. You have to wait for an IPO or a large m&a event. Maybe there is some way for you to do a large secondary like a continuation vehicle. But that’s generally. We don’t see a lot of that. If you’re a smaller pre seed seed manager, though, there are ways for you to take money off the table along the way before the company exits. So we do see a lot of managers take advantage of the later stage venture market. If you were a really early investor, and if you are returning three times your fund, and someone wants to come in and do rounds, maybe you take some money off the table. Yeah, you don’t take all of it off the table. Like there’s a balance between your level of conviction where you are in your fund cycle. Do you really think this company can three to 5x from there take all that into account and decide what ratio makes sense for you to sell? But we do see that, and like we talk to our managers quite a lot about, like, balancing of what’s what’s the right thing to do. We don’t get involved in saying, like, you know this company best, you’ll have the conviction in it, but decide what’s best to do in terms of liquidity, given where you are in your fund cycle, how much of your funded returns today? What’s your level of conviction going forward?

Alexa Binns 40:58
Yeah, my first associate VC role, I got to sit in on the conversation about, okay, Zoom is going public, and we have the opportunity to sell some before the IPO. How much do you take off the table? And

Aram Verdiyan 41:15
you’re sorry, what’d you do?

Alexa Binns 41:17
You’re like, not breathing, holding, holding your ass tight being like, I hope this is right. There was, they did take some off the table at Maven. And it was exactly the reason you were describing. It was returning the fund. You know, it was everything above that was going to be gravy. So it was, it was a pretty easy call,