📈 Private capital concentrates in a few mega-GPs that take themselves public

“They're cutting two funds out of their 20, and then they're cutting their commitments to the weaker ones of the other 18”

“But now they have a lot of mouths to feed. So when you put money to work, you pull down more fee. And so, you know, these funds now, I mean, if you're Tiger or some of these big funds, you have giant cost bases that you've created because of the size of the firm that you created.”

“I think a lot of people realize that if you can get 2.5% or 3% management fee investing $300 million at a pop, that's an easier lifestyle than actually taking board seats and doing work. And so I think a lot of money and activity got pulled into the late stage market. Nearly every firm started doing that.”

“The risk adjusted returns on ventures, and this is not to throw shade at even all of those people that you mentioned are fucking terrible.”

“So Insight was trying to raise a $10 billion fund and they've only been able to raise two, according to this article.”

“And all of a sudden, the profits don't matter, which means the outcomes don't matter, which means the diligence is perfunctory.”

“Yeah, but I actually think retrenching is good because it simplifies things.”

“Then they tried this like very convoluted evergreen structure right before the market fell apart, where you could basically become a permanent capital vehicle. And as far as I can tell from the outside looking in, it just seems like a tax, a tax play for the GPs to not have to sell and realize capital gains.”

“All roads lead to, it says we're in for a slog. And so trying to put a $2 billion fund to work doesn't seem to make a lot of economic sense to some of the smartest people in the room.”

“I think subscale small funds with no DPI, they're going to find a really, really tough time to Chamath's point about DPI raising capital. And you're going to see the scale player scale.”

“I think the other thing it does, this idea of the industrialization of venture, the SoftBank, the Tigers, it's a myth. You can't industrialize. You can build an index fund of the public market because you can buy every company. You might even be able to build an index like fund in private equity because everybody can go bid for every company. But in venture, the founder chooses you.”

“Well, I mean, I think Chamath's right that their stated goal is to build like a larger institutional VC type investor. I mean, doesn't Andreessen have a portrait of JP Morgan hanging on his wall or something? I mean, they want to turn VC from being like a little craft business to something larger and more institutional.”

“You can make the argument that technology is as important as those three categories. And so, you know, if I think it's pretty obvious that Andreessen is trying to build a publicly ownable security that represents all things in technology. So again, I don't think that they're necessarily out to generate massive returns for LPs.”

“It is scalable. It's just that if you try to scale it, your returns will go to zero.”

“And fundamentally, you know, VC is not that scalable. There was an attempt to make it scalable. There's an attempt to push more money into VC.”

“Over the next three years, of the quarter trillion, I think you're probably counting 50% of that is private equity or more. Maybe 70% is traditional private equity. ... Leveraged buyout firms are gonna have a field day. ... I mean, so Toma Bravo and all these guys, they will spend all of that.”

“I agree at that point that these mega funds are very hard to repay because they require you to have multiple winners, not just winners, but mega winners. So, you know, we've always kept our funds in that five to $600 million range where you really only need one winner per fund to basically return the fund.”

“And what the data says is that in the last 30 years, the minute you get over your ski tips at a billion dollars, very few people know what they're doing. Very few.”

“it's gotten a lot harder, I think, especially at the growth rounds. We actually have signed to growth term sheets recently, and it was much harder for us to do growth rounds last year, just because you had these huge mega funds come in at crazy valuations. But now they're kind of licking their wounds, and we're starting to see some really attractive growth opportunities. Everyone else is backed off.”

“if you're seeking out AUM, you're going to hire a very different kind of person than if you're helping trying to help build companies. And the difference is that when you're trying to raise AUM, your customer is not the company, the customer is the LP.”

“the incentive for a traditional venture capitalist that maybe isn't motivated by improving their craft, but they're motivated and incentivized primarily by making money is to raise more capital and get more deals. ... It used to be maybe a VC would sit on a handful of boards, and now it's like you're the board representative for 12 companies. ... the VCs are more incentivized to raise more money, to make more investments and then pay less attention and just go raise the next fund.”

“Can I take the other side of this? ... I think it's going to work, but not for the right reasons. ... if these large late-stage crossover firms really step into the early stage, I think they could really build a big book of business.”

“I don't know if this reporting is actually true, but if the goal is all of a sudden for Tiger to become a Series A investor that competes with Kraft or Sequoia or these other firms that are very hands-on, that doesn't seem like a great strategy to me.”

“The problem is if you're running that much money, you're insane to not take your GP public because it's the only way. ... when you're sitting on 20, 30, 40 billion of imputed wealth by being the owner of the GP of Tiger or Andreessen, you'd be insane to not go public.”

“Silicon Valley in terms of capital is seeing power returns itself. There's going to be a few firms that are going to control 80% of the capital. ... if you look at the aggregate capital that's being deployed into private markets right now, in probably two years, 80% of it's going to come from three firms or four firms.”