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take a look at bitcoin up about two and a half percent today to about 39 300 but that downtrend has been a place here for a while despite the fact that there have been reasons to go into safer haven trades in times of like heightened political uncertainty and geopolitical uncertainty uh people are looking for ways to reduce their risks associated with centralized governments and and crypto assets offer them that exact opportunity i think that that has fundamentally changed at all these organizations because the fund sizes have gone up and the and the mathematical reality of venture capital has changed it took somewhere between three to five years for most stocks to bottom and they bottomed i think peak to trough somewhere you know towards 80 of where they were in 2000 right so it took three to five years to go basically minus 80 we did that in three months you know maybe four months and so uh the markets have become a lot more efficient over time so now that we have that reset it's pretty natural that there's going to be a very quick reset on the private market side and you know you have to go where the bodies are buried and what i mean by that in this case is the overwhelming misvaluation of late-stage private companies and so these folks don't have much of a choice they have a lot of money that they've raised before all of this happened they have a huge portfolio of stuff that they've marked up or have been marked up by others and they don't want to go through the pain now resetting so part of the easy strategic decision there is to say you know what we know this is a little bit radioactive but instead of really figuring out what the mark on these companies are we'll go to a different sort of part of the playground and play there because we don't have to go and deal with these issues and you know we can do 10 15 20 million dollar checks into early stage businesses pretty normal reactions strategically but i think the reality is that at some point in the next year or two these other companies have to get public the hope is that the market catches back up so that you can defend the last valuation and that's the that's the way that this stuff doesn't require a lot of pain the problem is if you're high burn and you are counting on yet another successive round or you're at a point in your life cycle where you need to go public in the next two years if you go public you will get taken to the woodshed you can't conflate having an enemy with having a different view those aren't the same thing having an enemy is a serious deal right whether that's domestic or international that's what we had to do in world war one world war ii in the flq crisis this is just somebody who has a different opinion i don't agree in mass mandates is what one person says i want to mask mandate is what the other person says the idea that you can de-platform one or the other or fire them from their job or prevent them from having access to the money that they've earned or preventing other people from donating money that's really um it's a really low bar and i think when you normalize this kind of behavior it's a very slippery slope and so if if somebody else were to do it they now have like it's again going back to um the rene gerard sort of philosophical discussion from last week one of the things uh about you know uh these stoning rituals right that saks talked about that we talked about last week one of the things that rene gerard talks about is it is always hardest for that first person right the first person that throws the stone right that's how jesus was able to defuse that that incident as described in the book of john but in a different example the first person that throws a stone all of a sudden normalizes it for everybody else after them and then these stonings become commonplace or became commonplace so similarly it's like if you're a sitting democratic person who just decides this doesn't work for you you can't flip the script and and basically remove everybody's democratic rights that's really crazy the minute you say something that xi jinping doesn't like it's a it's a stroke of a keyboard key it's a database entry and you just basically reroute who belong you know if you had said in isolation two or three years ago would any of these things ever happened we all would have just looked at each other and said it's impossible that these things could happen but the problem is fast forward two years of a pandemic i think we have let a lot of our civil liberties decay right under our nose and we're not willing to fight for it because it's become too tribal and rights have been politicized so the idea of having rights all of a sudden has to be a decision between whether you're left or right the two most valuable pieces of private equity that i own is a company called dcg and it's a company called netscope and collectively it's like billion dollars worth of stock that i own what i'm on the board of one i'm not on the board of the other anymore and i text with these guys maybe once every two or three months at best so you know completely confirming david your point that great founders are just n of one individuals you know but that's very different than the the series a playbook because when i ran institutional money i'm telling you there is a pressure to be involved and show some value and i do think that there is a level of judgment on the ceo that has happened now maybe that's changed historically but i think that's the single biggest pivot that one would exploit if you were tiger or co2 or d1 stepping into the early stage game which is to essentially make it a feature and it's not dissimilar to when dst and yuri milner entered the late stage round you know what was his big differentiation i'll take common stock and i won't take a board seat common and preferred converged in price per share so buying common in a late stage company was the same as buying preferred so when you set up a company you have a price per share of the common stock and then a price per share that the series a investor has the series a investor is buying preferred shares that actually looks more like debt than equity and what i mean by that is there's typically a coupon there's a rate of return there's accumulated dividends all these features give it a certain price per share and that gap is typically around 20 to 1 when you set up a company okay and that's what allows you to hire employees and give them very very cheap options with embedded upside then what happens is you raise more and more of these series b series c series d these preference stack right preferred shares build up but the value of the comment keeps rising too and by the time you go public the gap converges i realized in this discussion that the market has really meaningfully changed meaning when i was actively investing even in the early 2000s uh or sorry in the in you know 2011 12 13 there was a culture where if you underperformed you would get replaced i guess is true has really changed which is if you're running a multi-multi-billion dollar fund where every check is 20 million dollars the upside is billions but the downside is negative 20.
there's just no point i think it was i think it was known as a very tough demanding place i think benchmark was known as a very tough demanding place because the money was much more finite there's difference between high expectations which i think all these folks have to have and the willingness to replace the founder as ceo and what i'm saying is every vc claims this but there were a handful of vcs that had the courage to do this i mean famously mike morris and john doerr you know had it out with larry at the you know right right after this round like either go public you know get your business model or give us your money back famously at google so they're not they're willing to draw a line in this end i think that that has fundamentally changed at all these organizations because the fund sizes have gone up and the and the mathematical reality of venture capital has changed you
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