Has venture capital outgrown its returns?

They're worth 25, 26 billion dollars. You need 40 FIGMAs a year for the industry to make the returns work, which means that they don't. So, in my opinion, investing in venture is a return-free risk. You shouldn't. They're basically only about 20 companies.

You said return-free risk.

Exactly. If you look at every single decade, there are only about 20 companies that end up getting exit values, north of a billion dollars. Actual IPOs or M&As, north of a billion. Not the paper write-ups. Only 20 companies. More money doesn't create more great ideas or more great founders. So, I think there is way too much money in the industry. The industry does provide a lot of value. It provides some of the know-how for entrepreneurs to succeed and obviously leads to job creation and all the attendant benefits for America. But there is too much money and too many people want to be investors.

Well, I don't think we need to become Andreessen Horowitz, but look, I think fund size determines fund strategy and the size of your fund, because you're going to divide your fund size by 20 to 25 names to achieve some portfolio diversification and construction, that will determine your check size and that sort of determines where you play in the market. The thing that's spinning through my head after Thomas' presentation is, you know, are you better off just focusing on, you know, let's call it what used to be called, I don't know, late venture, early growth? You know, you're writing $50 million checks, you just kind of wait for the breakouts as opposed to playing in this really noisy, super early stage game.

No, we've got billions of both companies at this point.

Billions of both companies?

Oh, my lord. Yum, yum. I think there's this existential thing going on in venture today. David could talk about it as well. I mean, people can't, they're extraordinarily nervous about, you look at the IGV stock index, down 30% year to date, down 5% today, all software stocks plummeting, right? Venture capitalists are terrified to invest money in anything other than these frontier models and things like SpaceX or military modernization. Finding something that's out of harm's way of AI, right, where you can count on the terminal value to Chamath's insights over the last few weeks is very difficult to do. That's why you see this crowding. So we've taken a barbell approach, right?

Well, I don't think we need to become Andreessen Horowitz, but look, I think fund size determines fund strategy and the size of your fund, because you're going to divide your fund size by 20 to 25 names to achieve some portfolio diversification and construction, that will determine your check size and that sort of determines where you play in the market. The thing that's spinning through my head after Thomas' presentation is, you know, are you better off just focusing on, you know, let's call it what used to be called, I don't know, late venture, early growth? You know, you're writing $50 million checks, you just kind of wait for the breakouts as opposed to playing in this really noisy, super early stage game.

They're worth 25, 26 billion dollars. You need 40 FIGMAs a year for the industry to make the returns work, which means that they don't. So, in my opinion, investing in venture is a return-free risk. You shouldn't. They're basically only about 20 companies.

You said return-free risk.

Exactly. If you look at every single decade, there are only about 20 companies that end up getting exit values, north of a billion dollars. Actual IPOs or M&As, north of a billion. Not the paper write-ups. Only 20 companies. More money doesn't create more great ideas or more great founders. So, I think there is way too much money in the industry. The industry does provide a lot of value. It provides some of the know-how for entrepreneurs to succeed and obviously leads to job creation and all the attendant benefits for America. But there is too much money and too many people want to be investors.

Gavin and I get up every morning and we think to ourselves, should we buy today or should we sell today? Venture capitalists don't think about the sell part. They think about the buy part. So if we're going to stay private for longer and we're going to have trillion dollar private companies and Databricks at 200 billion dollars, you got to think about is today a day we should be selling some and returning it to our investors?

Because doesn't it create though, as what Jason said, these very complicated personality dynamics where maybe you get shot out of a new company, maybe you get shot out of an incremental round and there's bad blood because you're a credible investor and there's the signaling risk. Whereas in the privates, if you and Gavin decide to sell, nobody knows.