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the Then.

2:09

Hello. I'm Ted Site is

2:11

and this is Capital Hour shifts

2:14

this show is an open explorations

2:16

of the people and process behind Capital

2:19

Alice through, conversations

2:21

with leaders in the money. Game we

2:23

learned how these holders of the keys to

2:25

the Kingdom allocate their time

2:28

and their capitals you can join our

2:30

mailing lists and, premium,

2:32

content capital allocators

2:34

ducks.

2:36

capital guess that's a show, his belly the

2:39

cofounder of Upper Nineties affirmed

2:41

that invests nineties affirmed hybrid of debt and equity

2:44

in early stage technology companies

2:46

to help founders. scales efficient

2:48

in philly partnered with see some

2:50

singers the founder of seamless to

2:52

address couple steps or inefficiencies

2:55

in the event Then. Upper Nineties

2:57

deployed billion dollars of capital for

2:59

an LP base of more than three hundred

3:01

entrepreneurs are, Conversation

3:04

Covers believe background in electronic

3:06

trading formation of an investment

3:08

clubs. That brought together quantitative investors

3:10

and tech founders and the evolution

3:12

of that club into Upper Night, we

3:15

discuss upper nineties approach to investing in tech

3:17

start ups use of say. That define

3:19

lend double opportunities, sourcing

3:21

indulgence of deals and lots of examples

3:24

along the, way for

3:27

how to join the show and if you do this

3:29

week it's time to. Talk to your neighbor,

3:31

remember that the person who lives next door

3:34

to you the last two years business only we've

3:36

to in passing and post covered

3:38

world, we know that. Sometimes it's hard

3:40

to remember what to say your next. door neighbor

3:43

or here's an idea next time you tip toe

3:45

out of your house or apartment asked on

3:47

hoping normal see you and you suddenly

3:49

come across that neighbors are not break the

3:51

ice by saying i friendly neighbors

3:54

you know what really got me through the pandemic it

3:56

was listening to the capital allocator success

3:59

think of love it

4:00

Thanks so much for to work. While

4:03

you're at it on iTunes and leave

4:05

a rating for write review. Thanks

4:08

for your support. Please

4:10

enjoy my conversation with Billy

4:13

Libby. and, still

4:15

great to see things around and me it's fun to do

4:17

this i always love starting with someone's background

4:20

and maybe we go on way back to your

4:22

sporting days in college

4:24

and go from there I. Always love

4:26

being part of teams I grow in,

4:28

a suburb of Washington, see, in Bethesda,

4:31

Winter, private schools pretty homogenous

4:33

through sports is equal, all thing I

4:36

remember so many. My friends range from every part

4:38

of life in different parts of the city and it

4:40

is learn a lot about seeing the

4:42

wedding in the classroom add to that healthy A. tremendous

4:44

amount" Perspective and exposure,

4:47

and then I played soccer in college, always

4:50

try as much as can with the family now

4:52

to be as active as possible. How

4:54

did you find your way into

4:56

the investment world it's a random walk

4:58

and I think that's helped us with for ninety because we came

5:01

with fresh eyes into the B.C. c world

5:03

that hasn't changed that much in twenty

5:05

years? My. Dad was always entrepreneurial,

5:08

he was a small business lawyer and

5:10

works for gentleman and, and of starting

5:13

this company called Telling Taliban is

5:15

one of the first online banks and. I got an internship

5:17

there with his health as a senior in

5:19

high school in nineteen, ninety nine and tell bank

5:22

when public that's on the side opened

5:24

at thirteen and. Close that hundred and thirteen

5:26

or something else while I always

5:28

was really interested in technology and how

5:31

to apply that to traditional businesses and

5:33

know much about private equity, your venture.

5:35

Capital wish somebody had told.

5:38

us he can get leverage on your investments

5:40

and i'll the upside but upside

5:43

worked one summer following that at

5:45

the white house for the clinton administration and

5:48

then i ended up working

5:50

in hong kong doing investment banking my

5:52

junior year and soil users years

5:54

to explore and try to do different things and

5:56

when graduated from work just

5:59

didn't want Then. New investment banking or consulting

6:01

I wanted to be in a more fast paced

6:03

environment end when I interviewed Golden

6:06

was the one from and really give them a lot of.

6:08

Credit suit, where are you if

6:10

you're cultural fit for the from and

6:12

we see lot more of you than you see of

6:14

us at age twenty one and? So easier

6:16

for the from, we will figure out where you will be

6:18

the most impactful. Then. To be tremendous

6:21

amount of sense to me, everything from us, the interview

6:23

to be on this trading desk for fixing

6:25

common, how would you know what exists the bet?

6:28

They said we just bought new business call

6:30

Ready, which does electronic trading

6:32

we own the first exchange called Arca,

6:35

the comes in this world of kwan trading,

6:37

electronic trading that. There were no

6:39

experts you hold up your sleeves and so my first

6:42

clients were Gecko and the Sean

6:44

to Sigman and or three,

6:46

no one wanted to cover those other firms.

6:48

Everyone wanted to go to lunch and to block trains

6:51

of I trusted people and

6:53

follow their advice and as

6:55

many going to an emerging area. The

6:57

data was really being used to change the way

7:00

to training work. What was your progression

7:02

from that start?

7:04

In any new career out of the country, this

7:06

is my team, you just raise your hand and

7:08

HC on projects if you do a job

7:10

and get more responsibility, so my first client

7:13

that I was covering was a company called Deco.

7:15

Then. To give people sense, Ghetto

7:18

treated more orders in minute that

7:20

all woman's clients at the time in

7:22

debt, how do you build systems to

7:25

handle that level? Of transactional volume

7:27

really, it's syntax is how do you

7:29

look at data are you build algorithms

7:31

and having efficiently do a lot of little with

7:34

it? Really early days of insect

7:36

and using data phosphorus

7:38

into trading, I learned about operations

7:41

and out of the product and my

7:43

boss at the time said, "What's your natural

7:45

salesperson sort of put you in operation?" am

7:48

very thankful for that guy and force

7:50

you to learn how things work and

7:52

go in the bowels and you come out of it

7:54

and think it makes you a stronger business person,

7:56

yeah, so you did that for long time, what

7:58

was the? Gretchen of what you've

8:01

learned over that to seniors you're in

8:03

that world. The the power of

8:05

technology. One of my

8:07

other bosses says something that really stood

8:09

out with me in the trading

8:11

world: the average commission

8:13

was one or two pence that's

8:15

how you repay to get something transacted

8:17

per share. That doing at work

8:20

for one trading of intact, you have to

8:22

charge fractions of that, and

8:24

one of the things that he says to me: "He's lot

8:26

of people are really hesitant to change business

8:29

models. The time. There

8:31

are worried about revenue loss, like why hasn't

8:33

the To and Twenty Model really changed for

8:36

most people that are taking stocks effectively?

8:38

But. What most people don't realize is when you lower

8:41

the cost of something when you reduce of friction,

8:43

he volume games far

8:45

exceed the loss around it, what

8:48

you saw his when. Spread

8:50

and commission started coming in the volume

8:52

on the Nasdaq, nice he went up exponentially

8:55

in, so there was much more revenue

8:58

and total high as

9:00

off came down. Human.

9:02

It's hard to give up something new term

9:05

for the belief that will be day or long term, which

9:07

is very interesting for me to see the power

9:10

of technology of AS. You reduce friction in market

9:12

how much bigger the market, because

9:15

look at the Robin Hoods and other applications

9:18

we remove, cause the market teams

9:20

are the size games or exponential. So

9:22

how did you make this transition from

9:25

the around syntax, but it's he trading

9:27

to what you're doing today? When?

9:30

I was a golden, I thought it was really important

9:32

to understand the client side of the business,

9:35

banks are really sales machines, your song

9:37

hot to clients, and felt it.

9:39

Was important to be on the other side to understand

9:41

how does trading work and risk modeling and went

9:44

to a company called Night Capital, one

9:46

of the really fascinating things. That

9:48

I learned at night was micro

9:51

person. When trading

9:53

on the New York Stock Exchange, every client

9:55

effectively discharged the same press, so

9:58

if you have the issue. What's

10:00

in their training as you do usually

10:02

money, but you know, is my second

10:04

that some miss price, and if you're selling

10:06

them, they're likely making them feel

10:09

launches in some of it. There's

10:11

really a flat rock, there's so much five.

10:14

Then. If you're making market are going to

10:16

keep impacting in buying more,

10:18

here's my mom is buying one hundred years of dual,

10:20

she has no view of the market at this. Moment we're

10:23

note size behind or so,

10:25

Citadel in night went to all the recovers

10:28

and said you're being overcharged

10:30

because the market doesn't know if

10:32

you so they said we. Know what you

10:35

like an insurance business, I can be Neil, you're healthy

10:37

and young Vs also we went all

10:39

the rico from said we will build a bilateral

10:41

relationship with you. And we know are treating

10:43

against you as retail and will give you better price

10:46

than with the market. Using data

10:48

to be able to see our privacy. That

10:50

happening everywhere, data is ubiquitous

10:54

asset that was his eye opener, the

10:56

power of data and house to

10:58

individualize prices and to the

11:00

multi billion dollar business for Citadel

11:02

and that.

11:03

Then. Last night ended up getting

11:05

acquired, they wiped out the

11:07

management fees, I was like, "Yo, finally

11:10

saw very comfortable talking about these experiences

11:12

now, you learn in, you grow from" Those things,

11:14

but I'd a year off or six months off

11:16

non compete, so I was working

11:19

is or two thousand and fourteen, which

11:21

allows these insect firms

11:23

that we're just starting. To emerge

11:26

and needed advice of how to connect

11:28

to the bands and how to acquire customers

11:31

and how fire people saw his,

11:33

visor Robin Hood and can show

11:35

and all. These firms south investing

11:38

advising all these really small center for,

11:40

my for songs from them to them start

11:42

of world but a lot of same attributes

11:45

existed and those. Away from. that says

11:48

be needed so the institutional knowledge

11:50

i started investing in all of these startups

11:53

and advising them and at that

11:55

time got that notice and singer

11:57

really well The end Jason started

11:59

seen. This. Is an amazingly creative

12:02

person, some of the my investments

12:04

were in these really cool in tech start ups

12:06

for croissants, our dinner

12:08

with Jason looking at my phone

12:11

and as well. As as great as squat on

12:13

that I'm in, I'm a father of Send for

12:15

the weekend, the days of

12:17

and see what my network is at that moment

12:19

of the and. As flat and Jason's like

12:22

my portfolios and all these amazing tech

12:24

companies because of the founder of seamless

12:26

and Grab", I see all these great opportunities

12:29

in be commerce and. Of world

12:31

so that's wrong lesson on, we're joking

12:33

like him, saw a taxi or why my senior.

12:36

The one on the so why is he saying that

12:38

and he's like I want to invest in your deals and, like,

12:41

own, invest in your deal? He. Said it will

12:43

all of the counters that know would

12:45

love to have access to more liquid, shorter

12:47

duration product and as like every quarter

12:49

pounder that know would love. To have access

12:52

to you, joined the board of freshly and

12:54

can buy all this stock, and of

12:56

everyone sizes personally, a million dollar

12:58

check might be big personal depth of.

13:00

You could have done on after that, the

13:02

and are we said lessons, what this investment club together

13:05

of the ten most of the dream that founder and the temperature

13:07

and can't? "Founders and I think we all put in

13:10

your hundred greer, would kind of running in

13:12

at night, no fees was just a well organized

13:14

club. Network or really

13:16

more of lot of thing. Then.

13:19

cheerleader created when you bring people together

13:21

from different backgrounds and through the structure

13:23

of Jason and I bringing up for together

13:26

is ultimately uncovered a

13:28

lot of opportunities at other people. Weren't

13:30

thinking about not your software

13:32

business is so well really be seen it wasn't

13:35

something you could feel and it was like debatable

13:37

business and for, nine started with

13:39

Massey. Together these two universes with

13:41

pure and all sharing best ideas in bringing

13:44

community is really interesting people together

13:47

and. know it will

13:49

evolve as quickly to see into for nine loses

13:51

power from really smart people and

13:53

i'm only people together and create

13:56

some organization in efficiency around

13:58

that long The

14:00

welcoming lot and I didn't know

14:02

there could be something that has become

14:04

what was that evolution from a club

14:07

of cheering couple deals to

14:09

what became upper nineties. Anyway,

14:13

because during that one, your often as working

14:15

with all the startups, there's temptation.

14:18

Then. Going you when somebody else's start up like

14:20

this is so exciting, and Jason was

14:22

either start your own

14:24

business or go join

14:27

great company, belong to somebody else's

14:29

startup. startup You're taking all the risk

14:31

and your third guy in the door, the V.C.

14:33

benchmarking data show that

14:35

the thirtieth voice again fifty basis

14:37

points and as ridiculous as

14:39

very valuable. Advice and so I

14:42

went back to moment to help build the

14:44

business than had the often

14:46

citadel had built and to help somebody

14:48

investments that we're talking. What

14:50

a lot was we need every

14:52

minute, shared his best ideas, what

14:54

happened is they were honest with ourselves,

14:57

the real change is happening in the topic.

14:59

There's not much innovation whole new home. Really

15:03

operational, Alpha instill fear

15:05

seen at the beer or getting bigger, the bigger

15:07

parsons are getting bigger and the dishes

15:09

answer getting bigger and every neal

15:12

is now having to become of and. The

15:14

top of things that we have

15:16

new prize for now, it's all about the planning customers

15:18

efficiently, so it's scale when

15:21

it is all, is as he just started coming in from the

15:23

text box. One. Of the first seal

15:25

was really fascinating company called Film

15:28

Rice, and what they were doing is they were

15:30

taking data from Netflix, Hulu,

15:32

Amazon, YouTube, Roku, and they were

15:34

tracking. What people are watching online

15:36

they would see trend of what kind

15:39

of content with valuable, so, like, after

15:41

the Crown or Bridge or Pin, or the Jordan

15:43

documentary they can see. That there was lot of

15:45

interest in British mini series or sports

15:48

documentaries, so without data they would

15:50

then go to the BBC ITV

15:52

e's s P. N. and they would. Look at their T. V. Libraries

15:55

from the nineteen Fifties, Sixties and Seventies,

15:57

all as long tail forgotten content.

16:00

They were going in law firm thing, the digital

16:02

wallets to old school wise,

16:04

they were buying these rights from one time

16:06

revenue.

16:07

And. Give you a contact, the renting content

16:10

is trading at twenty traveling because banks

16:12

understand it and so everyone's like how

16:15

much because somebody watched the Sherlock

16:17

Holmes mini series on the. BBC

16:19

from the Sixties along with so

16:22

the mortgage or infinite in size in

16:24

there is far to conceptualize, so they were like

16:26

we're raising equity to going to acquire all this. Content

16:29

and it'll be sell Netflix or Amazon, and

16:31

we have five year contractual

16:33

payment from Netflix and the Quants

16:35

are looking at all this data from our club

16:37

and. Then why are you raising equity?

16:39

And. The founders are like when you're talking to the

16:42

Mazda has been, you want to grow,

16:44

you raise equity, and especially of the season,

16:46

Pe have gotten much larger that direction

16:49

of. The founders are push when Jason started seamless,

16:51

he said, every vc were small

16:53

in Michigan so they were, although we didn't benefit

16:55

of the quantum kept challenging and what

16:57

ended up. Having to derive even created in partnership

17:00

with some other groups, the off balance sheet

17:02

credit facility secure hired

17:04

by necklace payments, you

17:07

cook the risk of a thorough and

17:09

now the. Payment reviewed actually necklace,

17:12

and so this fascinating way of pricing,

17:14

asset and shifting the client

17:17

and the only venture that lot of questions we often get

17:19

it wasn't as venture. To venture, yeah, there's just

17:21

tool to underwrite the venture firms so

17:23

we're like must be happy to craft

17:25

the asset because he also paid back

17:28

regardless of the company so. That

17:30

and how this all started from there

17:32

we just have seen as for Pillar of

17:34

From Asset That In The Pharmacy Where

17:37

Could He Was Youth and You Just Have To? Groups

17:39

that were never really be together proposing

17:42

different solutions and everyone had

17:44

goal, how do we hope these founders

17:46

solve problems in more efficient way, how do we help?

17:48

The company is really one more of

17:50

their company, there was cure

17:52

star, but we can get really

17:55

amazing return because

17:58

the equity cost of capital.

18:00

What's that one time and enjoy even twelve

18:02

or fifteen percent a lot to get outta there

18:04

to take more closely? When he.

18:07

was he the it's all part of the companies have

18:09

been assassinated no one asked what the cost

18:11

of attributes but you're fixated on fixated

18:13

headline that number did that become

18:16

the investment philosophy for

18:18

upper nineties Then. We can have mine in his

18:20

repeatable deals where there was some

18:22

detachable asset or cashflow, there

18:24

was a few things that even other participants

18:27

were different, there were common

18:29

goals so. No one is no one

18:31

was really interested sign up for money for ten

18:34

to twelve years, as is asset price

18:36

to get decent return, your decision

18:38

under the journal Science. And politics

18:40

and for twelve years or venture to go to

18:43

Milan or new one of the politically

18:45

we were getting very small, you so

18:48

how does someone from with our?

18:50

House or money for ten plus years

18:52

and down reversal. Number

18:54

two is that are on it out

18:56

like private equity investor will have really

18:59

been changed in long time and

19:01

I saw firsthand how Swat team

19:03

and Change Launch Record. Unless

19:05

you're an exceptional has one topic

19:08

or it's hard to beat the costs

19:10

of easiest for it hard to be a closet.

19:13

Any? Good a way you do to get paid and I think

19:15

that that's gonna come to the venture world to

19:17

it's been a momentum tray and so of your sequoia

19:20

or for. Runner or Bessemer, Yeah, Services

19:22

and Tool, I think you'd be hard to prove

19:25

that you should be getting to in twenty versus

19:27

DPS equivalent, which I'm sure will come to this.

19:29

Industry or something to some given.

19:32

This rush, and plus are you return

19:34

this short duration even

19:36

if we can offer founders a more compelling

19:39

tool and more efficient source of growth

19:41

capital that seems like an egg?

19:43

sourcing Jason, be this my head. If

19:46

you have good deal, flow. There's

19:48

an apple we'd go to so fond of

19:50

around sources that community of twenty

19:52

people that sort of as far as the DNA

19:54

ever upper ninety, three or four hundred oh she's

19:57

either.

19:59

Then. Are? They gonna run away, but

20:02

all areas or from the I come across his's

20:04

s find people he

20:06

my from was a little too rigid

20:08

and houses york and now on to. Do something

20:11

more cool or that Blackstone

20:13

and own and do something little more funky but

20:15

he raised money and as entertaining as ploy

20:17

to. figure out is beautiful

20:20

engine in this without value the founders

20:22

and then figure out how is the capital so things can

20:25

happen in reverse I'm. Really curious

20:27

about this credit underwriting,

20:30

you mentioned the example and film rise of

20:33

effect of your receivable from Netflix,

20:36

what are the different ways you see in these earlier

20:38

stage companies? That there

20:40

is something that you're comfortable underwriting

20:43

with credit. The credit it can

20:45

be applied anything. What

20:47

you have to make sure that if

20:50

things are stress tested or things go

20:52

wrong, get comfortable that there's

20:54

that collateral in their principal recovery. He

20:56

said the simplest form is that there's

20:59

short term receivables

21:01

are working capital needs are just much

21:03

more way to defend tech. Ninety

21:06

is a top corner of ago at the soccer

21:08

references like "Is Hard", nietzsche talk

21:10

defines have to execute the on.

21:13

The hockey to my good friends Akshay

21:15

in as describing what I think of the opportunity.

21:18

Then you like really the center of the goal. Every

21:21

business has a syntax component that's

21:23

all the syntax as horizontal, that's

21:25

not vertical. What do I mean

21:27

by that one of our for steals his company

21:29

culpability?

21:30

Well. You're a seller on Amazon,

21:32

which there is none other than said hiking

21:35

poles, and while origin all

21:37

local Amazon pay,

21:39

though sellers fourteen days after

21:42

sale has occur, those people. Who have

21:44

working capital needs human as short duration

21:46

like their payroll, they have inventory so

21:48

pay ability basically is factoring

21:51

forty name of our see that was our

21:53

second deal. Okay, well, who's doing that on

21:55

Shopify and then the next to

21:57

your brow capital of your and at

21:59

the? allah or an Apple or Google.

22:02

They're like about what we're doing is like, "I see what's

22:04

new is old it, we have this potter twenty

22:06

years ago would be like I have a really

22:08

cool tech products in his cell in the back

22:11

of Skymall are popular mechanics and.

22:13

You. Will fail and someone's and be chatting

22:15

there's like a working capital problem, the

22:17

friction to start business online

22:19

has come down exponentially of you and I wanted

22:22

to start A. Business offline was a franchisee

22:24

that the Golan can real estate and get insurance,

22:27

and all means hire people

22:29

think of the barrier to entry to be

22:31

small business. In one week we go

22:34

and start business anymore. The

22:36

had helped. his defiance

22:38

innovation so even some business on

22:40

long almost instantaneously Do

22:43

the game see some heavy getting

22:46

into the, whoa little

22:49

lulu volume that on google

22:51

apple pay the small

22:53

business developer sixty four Wow,

22:55

actors and actresses, bubble. He

22:59

defeated, got lucky you small business.

23:02

The funny thing, individuals. Why?

23:05

Do you have neither were you searching the price, each

23:08

type of customer really tightly, and

23:10

then really understanding ecommerce platforms

23:13

and how they worked with cheese and understand

23:15

people he so? There's all of these

23:17

new businesses being started online

23:20

where bank is not going to be able

23:22

to understand you and I have twenty

23:24

on the masses, me of all this. Rental

23:26

income coming this summer. The baby

23:29

went to them as a Williams, while I do it is

23:31

there's all these new opportunities

23:33

from the is once or economy to.

23:36

Then. App developer World to people

23:39

that are creating a TV libraries what

23:41

we found is that leaves believe it is financial

23:43

partner to these online

23:46

businesses that aren't yet banks

23:48

and well. understood he's just be

23:50

my space, it's exciting

23:52

and is good for society because people will be and

23:54

will have more chances of in your own boss. They

23:57

don't need access to capital. The

23:59

meeting you. I think about Amazon Air (BNB)

24:01

Google tick tock what

24:03

these platforms now allow

24:06

for people to start businesses is

24:08

unbelievable wrong looking for, like,

24:10

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24:13

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24:15

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allocators and now back

24:49

to the show In

24:51

the feels that you've done what

24:53

kind of idiosyncratic underwriting

24:56

risks come up.

24:58

He. Now, almost twenty five people credits

25:00

as his own business is not a room morning

25:03

business and lot of ways because your best

25:05

customers want to get rid of you as. Quickly as possible

25:08

and we like helping build companies, including

25:10

precise, we said we're only one invest

25:12

in a business and we're excited about the business itself,

25:14

then he does a. Christian and at all.

25:17

When we make your credit first thing is

25:19

how diversified of these people's, however,

25:22

the bodies the rest because you don't get paid

25:24

to pay more concentration refund credit, so

25:26

diversification is your friends. Number

25:28

two is failures at

25:30

truths, yeah. In cases you

25:32

can walk into somebody's Amazon account,

25:35

you can actually verify all of the data

25:37

from O'Maha from Apple, you

25:39

can set of the bank accounts that control the flow

25:41

of funds. The we're way it's

25:43

like the ability to do these things

25:46

in smaller size changes

25:48

because you control the cash flow

25:50

and you have economical source of the.

25:52

You want to make sure that

25:55

you have access spread and a simpleton

25:57

if you can buy things cheap enough where you can.

26:00

Enough, the there's lot of Israel.

26:02

Then. On never return is very different than

26:05

letter to her house, are you able

26:07

to charge how much inefficiencies exist,

26:10

so we're looking for businesses that have meaningfully

26:12

more bookie old? Twenty five

26:14

thirty percent annual on, but the old so

26:17

they can service are twelve to fourteen percent.

26:19

It. Is strapless aki London

26:22

sort of our portfolio companies was an

26:24

amazing see our T finances

26:26

power sports jerseys easy

26:28

these it's a hundred billion dollar

26:30

industry it's fun conceptualized the. Size

26:33

of these numbers, he owns, point

26:35

of sale for powers for dealerships,

26:37

football, new finances,

26:39

human or small acquisition. It's. All

26:41

the capital's heightened a leisurely, his

26:44

book deals on the spread of ten percent

26:47

saw him onto one percent access for

26:49

because of well understood by back by any.

26:51

Michigan to teach early there's lot of room for

26:53

error, the other thing that I'd say is

26:56

thing that we went into.

26:57

As. You get under right, well understood assets,

27:00

what's a typical recovery for jet ski

27:02

or power, support him with the typical

27:04

default rate for new prime borrower,

27:07

and we really. Look for things that clutch

27:09

with Piranha of Canada they're buying

27:11

used cars, so we get him warehouse, the by

27:13

used cars which they're selling through the wrong reply

27:15

from. Over thirty sixty days, we understand

27:17

there's enough data to look at Ava.

27:20

We. Don't do we're haven't done today

27:22

are where there's a binary regulatory

27:25

risk that we cannot underwrite suitors

27:27

after Bird and Line came in whatever

27:29

else he's started very successful scooter.

27:31

Company called Spin that sort

27:33

of for the guy, and he uses

27:36

every city wow I'm in the average cost

27:38

of scooter's five hundred bucks and

27:41

you have it arises three. The average see

27:43

that period on scooter three months, so

27:45

why would I was using equity for something that has

27:47

a few multi that period and all

27:49

this data to? Support it and if you look at'em em all,

27:52

the data was very compelling, however,

27:55

as we're talking with our members right

27:57

well as new of he does, the falls

27:59

is. No, most. There's. Whatever the accident, we

28:01

can prices tell risk of fact

28:04

disrupt his assets be regulated out,

28:06

so we decided not to do it,

28:08

but because one capacity lot

28:10

of and bigger lenders. And best do that

28:12

stuff, I think they're mispricing that pioneering,

28:15

how come that we can't

28:17

really underwrite be other things you've

28:19

heard of income sharing agreements?

28:21

Where? People that are going to get

28:23

a computer science review, carnegie

28:25

Mellon, to your program in job

28:27

patients, ninety nine point nine percent, they

28:30

should be able to sell part of the. Future earnings

28:32

have so many pay for their school, it's like selling

28:34

equity in yourself fascinating concept.

28:37

More. This will calm and future, however,

28:40

Dad gets in, it is murky land of

28:42

student debt and it sounds

28:44

great on paper, but there's always awesome

28:46

that you can underrated, so we. Just stay

28:48

away from those things I'd rather be equity

28:51

in those industries works as a good

28:53

game changing price would you finance

28:56

and at sea level thirty teams was recently

28:58

about. That is, as he's

29:00

and bitcoin worse I won't be angry

29:03

about, his death of that so

29:05

see figure out where me since his death

29:07

and where he has. To be equity we

29:09

believe we're. getting into debt

29:11

like risk versus the other we're

29:14

There you mention it with the exception of the ones you

29:16

want to where you have this potential best

29:18

tail events when you go in

29:20

and Linda these companies, as

29:22

you said when it works, they want to

29:24

refinance you for less. How

29:27

have you solved this,

29:29

your have to find something before everybody,

29:31

if you do, you might not be able to hold

29:33

it for very long, it sounds like

29:35

a bit of treadmill and I'm curious

29:38

how to use evolved just

29:40

the lending peace over time.

29:42

You do, we really want to be partners any

29:44

more efficient equity capital

29:46

provider to companies. We think

29:49

that more and more companies have

29:51

any for death in Akron, especially

29:53

capital intensive businesses that are doing

29:55

landing right positions, are all us. What

29:58

we learned is that, and it goes. In

30:00

the way, we built a from having line

30:02

is with the companies we're investing in is

30:04

critical. We create line, is

30:06

we do majority of that,

30:08

but we also invest in equity. Then

30:10

we will not invest in business where

30:12

provide data we can also be equity firm.

30:15

A larger growth fines

30:17

if he sees are upset because they

30:19

want the equity but argues that there's

30:22

always room for upper nineties to be

30:24

like the saddest little while we get

30:26

sequoia but the block and get one of the.

30:28

seas he only five he sees

30:31

that are all doing the same thing Oh,

30:34

help you with the talent and will do

30:36

this, and that ten years ago that matter of

30:38

now, those tools are available to the company.

30:41

So. Really the best we were going

30:43

to be number two our capital greener because

30:45

we can do that and equity and also

30:47

putting our money where our mouth is we're not asking. For warrants

30:49

and freebies, we're going to be in a life partner,

30:52

Sony here, if you need to go and get

30:54

or can get cheaper debt equity positive

30:56

event and we're allowing. You to be refunded.

30:58

It gives you neat way to do with ready for

31:00

the company because you know about that

31:03

the company and are better are

31:05

in one home, they get the benefit of

31:07

both walking into debt. Then. Lot

31:09

of other find there's different equity group in there's

31:11

different that group is conflict, and I

31:13

think our music was Tucson Equity more

31:15

debt because that's really what's. Powerful,

31:18

most valuable and needed to the company's by

31:20

the equity allows us not to does has

31:22

three the kicker is like if they can go

31:25

to Baghdad and easy equities in. A

31:27

really strong position and so argue

31:29

that this will be the future US investing

31:31

where we can offer. The

31:33

fiery of credit is what we call it because

31:36

our don't wanna in if we go about as

31:38

if you have the best, the only have the best return.

31:41

We data investors and more the

31:43

interested in that, but it's too close

31:46

to send a lot and educating the founder. One

31:49

point has at work and is

31:52

also a. long time telemarketer

31:54

seekers what we're doing is not

31:57

traditional it sounds like

31:59

the

32:00

That. Peace and the equity peace

32:02

as you invest are distinct and so

32:04

it's not that you're investing in debt

32:06

with a checker warrants or hybrid

32:08

comfortable but you're investing in straight.

32:10

Debt and then, in certain situations, have the option

32:13

to invest inequity round player.

32:15

Then. Crash, so we phases of isn't

32:17

that we did, we can add value to it, we're excited

32:19

about four hundred enterprise value

32:21

potential number two is or

32:23

receivable or ass or cashflow. That

32:25

we think can allow us to get, he learned,

32:27

that regard to the company succeeding

32:29

when I'm smart enough to know what's

32:31

companies are gonna crosses, I

32:34

think we've been more. Right than wrong, but no one can

32:36

take the winners and I've seen more

32:38

slots for crusoe energy

32:41

there's a lot of spread and adapt easily

32:43

t that interest coverage on dat.

32:45

Nguyen we're not using leverage and the

32:47

facilities or five hand when

32:49

it's one hundred, twenty five, most of these Peter

32:51

fans that are trying to raise massive amounts

32:53

of money devils. A lot of others to passes

32:56

in, you keep your font size manageable,

32:58

you will continue to create a return. Wanna

33:01

be in and is it as Amazon and then

33:04

his or his ability for us to be directly

33:06

and see for free off in the future

33:08

we make decision of France? "The

33:10

point is that equity in any percent

33:13

in debt we follow him on, we

33:15

always make that decision of fun because we want

33:17

to minimize partner and we think is the

33:19

best was just return for our peace

33:21

because we can get into the best companies with this

33:23

mindset"

33:24

How do you think about your value add before

33:27

your portfolio companies for sure

33:29

really? focusing on how do you add value

33:32

to the founders and how you create a motor

33:34

compounding bad The slogan hours

33:36

it's not how much you raise it's how much you are.

33:38

There are no slogan, a delay

33:40

your A.

33:41

The radio cd proven the model now you want

33:43

to get into another city are you want to do another cohort

33:46

pilots will give? you this

33:48

ability to raise equity when you want

33:50

vs when you need to is as raise

33:52

flags Right now, going

33:55

on to how do we have founder's own web

33:57

or company so on is a very valuable

33:59

to? I played a healthy access, the

34:01

other thing is pass and just

34:03

general off efficiency, so CMB's

34:06

very powerful tool in qualified

34:09

small business. I'm

34:11

very curious about just

34:13

tax laws and in ways of founders. Incentives

34:17

to start businesses, so Q'S

34:19

B'S b as an example, if you look

34:21

at most companies the founder

34:23

is listed on the caps, evil

34:25

as the found that. And they get

34:27

a million dollar Q sps

34:30

exemption, the first five million the game.

34:33

It's tax free if you hold it for five

34:35

years and all these things you. can

34:37

set at five trust Find

34:40

that us vs exemption. And

34:42

then upon his, he can roll them is one

34:45

in it so much just sit about that like

34:47

you, our five million dollar. Three

34:50

or twenty five million dollar tax reasons. Well,

34:54

this at me as like Ross as he does, Capital

34:56

Markets partner. We're

34:59

really not hostile to the balance

35:01

sheet. The can help the founder think about

35:03

how they are optimized, India investment will

35:05

kill rank as a hey the insurance. On

35:08

your losses so instead of using here capital.

35:11

you can buy insurance for tail risk

35:13

or for lost for law capital

35:15

that will engage in your for that Though

35:18

it's only an older tools

35:20

around efficiency that we are able

35:22

to bring to the table. The earlier

35:25

that week and own company, the more value

35:27

the canal. Really. Important find

35:29

companies before the way that be grotesquely

35:32

round, because once that happens after

35:34

the series A is really is equities,

35:36

really the Earth it was working, the Muslim

35:38

woman lying. Than just having

35:40

second most valuable thing where interview

35:42

seen in helping people and customers?

35:45

becoming more of a commodity if you have to

35:48

do it like helping them with sirene long

35:50

enough anymore, most of the value

35:52

as teachers are ones awfully

35:55

similar things that is just part

35:57

of the selfishness. The last one

35:59

at home. This optimization

36:01

and balance sheet structure.

36:03

In which clearly a competitive environment

36:05

you talk about, even when you get past the A, you've

36:08

got lots of equity checks from venture

36:10

capitalists, how do you think about

36:12

the duration of your advantage

36:14

to the?

36:16

Then. Dark as well and we have to

36:18

continue to innovate, we've

36:20

done more just recently, and Latin

36:22

America is always have to be hustling

36:24

and adding value, one of the things I.

36:26

Learned as I look back and my career

36:29

is much better to be in an issue

36:31

with a when you're back in the try to be the smartest

36:33

person in an. Industry and they're

36:36

everywhere, everything is not as

36:38

India, which means you're gonna be able to finalise

36:40

almost and in the future so

36:42

I was wrestling a restaurant. The

36:45

elders right now face

36:47

twenty percent solution, an average is the

36:49

seed round and greater than fifty

36:51

percent after the series be. That

36:53

is going to change. The private equity

36:56

firm, or ago so giddy from coming into

36:58

series c or d sitting at the top

37:00

of the cast people with liquidity provinces

37:02

and all these downside of protection. The

37:04

only earning more than

37:07

the founders as it to me

37:09

seems like that sentence. Then. Empire's

37:11

pushing it on the right side of

37:13

the Anglo the should be making twenty five percent

37:15

I R&R to be sitting so their life

37:17

partners actually cheaper and our ninety

37:20

and. The other side, with he just left

37:22

wing view or capital intensive e commerce

37:24

or tech business services, those put

37:26

a lot of pressure on traditional grotesquely

37:29

directly Africa lol opportunity

37:32

so. I don't think we need to be unfair

37:34

and a space addison's if you're gonna find

37:36

these delays disrupt the traditional

37:39

V.C. c P model seems

37:41

like a pretty big opportunity.

37:43

When you're in and around this ecosystem

37:46

of venture companies and

37:48

growth, a lot of the models

37:50

you've described is niche, it

37:52

might be hard to see Padieu

37:55

scale this, how do you think about

37:57

the juxtaposition of those two things? Yeah.

38:00

Then. Older you think about when you enjoy

38:02

doing like seventy percent of our deals

38:04

come from our peace and or founders,

38:07

almost all of them have become out he's one

38:09

of. The most fascinating: the oh that we've

38:11

done crusoe energy, the

38:13

founders, an amazing guy cheese lot

38:15

Miller, he came from the quantity we'll

38:18

let me use actually act as though

38:20

know. It'll come in contact with a poly

38:22

chain has been nice if

38:24

it's our experiences and of putting altogether

38:26

removing like I was an overnight and. He

38:29

lived there is more data needs

38:31

and more data been captured and there's energy

38:34

available in the world sequential the these

38:36

in the store, where is a way

38:38

to capture energy to

38:40

use it for I can

38:42

see the country. In the middle of the country,

38:45

in the U.S., s where the biggest drill for oil

38:47

or one of these trailers, most of those

38:49

projects have no pipeline, so the oil

38:51

thrill the gets shipped out to be valuable,

38:54

the natural gas just gets layered

38:56

because no to put up. There's more natural

38:59

gas that if Slayer in the US

39:01

every year, then the amount of energy consumed

39:03

in Africa in Japan is cool.

39:06

He built these portable data centers

39:08

that go on close to the oil fields

39:11

where they have flaring the natural

39:13

gas he's getting better, we came

39:15

to natural gas and is powering

39:17

these on crime data centers to mind

39:19

because. Then. Like him to you and

39:22

I said you should be enough variety because

39:24

we're day you downsized protect his senior

39:26

secured miss, he returns

39:28

with additional equity upset and we're doing

39:30

it. In a startup that is mining bitcoin

39:33

in crypto, really, what are you smoking say,

39:35

how you straight face and right chase

39:38

was that one of our ultimate sense we're talking?

39:40

About Drowsy, oh, and how they were using our capital

39:42

to buy store than Amazon,

39:45

that lesson to tansy bizarre that

39:47

p series of months and is really

39:49

creative way. Of as a society. These

39:52

are starting to build our Crusoe, been team

39:54

in legacy round, there are proving the concept we

39:56

always come in after years and proof of

39:58

concept and them. Once in

40:00

a. They are listening to

40:02

the fragile presentation about how you're helping

40:05

and finance through our positions and

40:07

women tories, and it's time thinking

40:09

our business expense for Crusoe

40:11

Energy is the caterpillar

40:13

generator to power Lisa. 'Cause

40:16

we're starting from because recruiter councillor

40:19

more fun as it were too small for T

40:22

we just created off balance sheet a

40:24

Bl to the funniest the caterpillar

40:26

equipment that salvage residual

40:29

value era LCD was

40:31

really low security.

40:33

empire company so we're not hearing

40:35

of hearing thousand dollar prize

40:37

facility at the super sad and

40:39

then to answer fifty nine and of yeah

40:42

ceiling than the forty million because

40:44

there's nothing to do with being

40:46

crypto bitcoin one start up to

40:48

think about that way there's so many different

40:51

creative ways that we had relationship

40:53

with she's we had we're proposing

40:55

bespoke solution we have duty

40:57

to start small We often

41:00

than the athlete is clothes on the two billion

41:02

dollar valuation. The crimea

41:04

and I just use that example if

41:06

you distractingly if we're shown a problem,

41:08

I think we're very good at solving problems and

41:11

that go to having most of rockies and the tech world.

41:14

You realize that these strategies capacity

41:16

constrained and you okay with this, which am

41:19

then is literally your saddam

41:21

and raised or the insulin fun, and than

41:24

you know think you started rubbing, see

41:26

think bigger credit funds. Then.

41:29

Around the biggest around, achieve a mountain

41:31

in competitive disadvantage because it

41:33

allows you to stop capital and

41:35

they can be nimble anymore, it's kind of the no man's

41:38

land A. Little bit and then the avenue financial

41:40

engineering to like the man and piston,

41:42

you know of characters, yeah, to introduce lot

41:45

of other as often as risks, and we just. Keep it simple,

41:47

like we're always see secured.

41:50

And we'd bet the company

41:52

will keep growing with us when you start with

41:54

this pretty interesting exclusive

41:56

group as a couple hundred entrepreneurs

41:59

gathering. Get it bride capital, the

42:01

conversations you've had with the institutional

42:03

market, I know it's the beginning of that where

42:05

have you seen that evolution in

42:08

your conversations?

42:09

The business has different

42:12

holes not coming from

42:14

the traditional as a manager world for me specifically

42:17

is also for Jason Isaac's an advantage.

42:19

Because. It look at things differently, have more

42:21

of an open mind you're not talking,

42:24

however, there's certain

42:26

laws of the jungles of how that will

42:28

work since I argue that this fire.

42:30

It creates or flywheel essays

42:33

for are a lot of attention spans

42:36

sovereigns in some of the larger family offices.

42:39

The foundation's one of the challenges

42:41

of credit is it's very fast and efficient. "The

42:44

get the benefit of obviously the short term gains

42:46

and but honestly it's passes at higher

42:48

level, so often", said some

42:51

other groups, the hot sauce

42:53

efficiency on their side. We'll

42:55

all the credit for while. We're

42:59

we're looking to figure out who is

43:01

around Case to Tunnel Partner for us.

43:04

It can help a lot more. concentrated

43:06

time with our lps Then.

43:09

Whole reduce the amount of time or thing, and capital

43:11

markets source: I think there's definitely

43:13

a role for the have partner that

43:15

as companies the risk any more signs

43:18

there's. A switching costs and a familiarity

43:20

we should have partnership where we can

43:22

offer cheaper capital we're.

43:25

really excited about today's i left

43:27

to spend my time buying

43:30

the old building that we're forward. Loki

43:32

days and having a partner that is already

43:34

feel that capital markets. They

43:37

all that doesn't see my the smartest thing for

43:39

us to try to rebuild. Though

43:41

really thinking I'm who would be to run a partner

43:43

that have some flexibility, but

43:45

also to offer graduation

43:48

to silly as his company scale, the

43:50

something we're starting to really think

43:52

about wanna invest in over the next year.

43:55

I really want to turn to a couple of closing questions before

43:57

I let you go, what is your favorite

43:59

the? Hobby. Or activity outside of work and family

44:02

allow clothes for anything with you

44:04

all female you're forced to concentrate

44:07

is mentally critical for me running

44:09

a business and sure like you you're. Always have

44:11

to do with and emails, and when you're doing

44:13

something that requires focus

44:16

like playing sports, you have no choice

44:18

but to be present, I think that's

44:20

something that I. Need to just mentally

44:22

continue to make a priority: What's your

44:24

biggest pet peeve other, my biggest

44:27

pet peeve is when people

44:29

think that they're the smartest people

44:32

in the room for? The sound like they're the

44:34

most on'point the.

44:35

The only boy warned that think you're the smartest people in the

44:37

room or not the smartest people in the room so

44:40

I think people that are not open minded in my

44:42

think they know everything just like

44:46

me. something The like

44:48

is beer or.

44:49

So much more, Manson really, it's interesting

44:51

possible that, which to people

44:54

have had the biggest impact on your professional life.

44:57

"A lot of a decent, he really help give

44:59

me the confidence to go, start coming away

45:01

on some very grateful for him.

45:03

One finance we pretend that

45:05

we're gonna we're really discover.

45:09

How you don't have the confidence to do that

45:11

sometimes the two people alpha in

45:13

the one is Mark person. Marty.

45:16

somebody of I think about having such a

45:18

lot of different parts of my life", he introduced

45:20

us to our Rabbi, who marry

45:22

Tiffany Night, he tells the

45:25

club set up with. Me was the

45:27

first person that commit to have fun

45:29

introduces frazzle, which has been

45:31

marquee investment for us for the first capital

45:33

in that company is whole nine dollar. Valuation

45:36

people that have really been with you and

45:38

always had your best interests and never really

45:41

expect something in return, he

45:43

somebody who really stands out in meaningful

45:45

way I've. Always really enjoyed

45:47

it, we both know him, saw me somebody

45:50

who has really creative,

45:52

open minded approach

45:54

and seeking step ahead, not

45:57

just an idea, can also see if. It's amazing.

46:00

Hidden, you have first time founders. Forget!

46:03

It is it's finding people have that right, say she's

46:05

also expanded my mind, expanding

46:07

my network and thinking of have learn

46:10

about the new industry, so those are two people that. Just

46:12

kind of self to my mind, it's been

46:14

disaster fifty five really now realize

46:16

I'm net pay for God and

46:19

my screen value and I just said if

46:22

you. Find people now that ordinances purse

46:24

you really does now.

46:27

And. You spend your energy on the people that you really

46:29

think you can go meaningful relationships

46:31

with, and I ended up being learn

46:33

from me over time as well, what's the? biggest

46:36

mistake: You've made him what did you learn from it to

46:38

things sometimes when you see an ability

46:40

to make things better, things take time

46:42

to change, especially in large organizations.

46:45

No. incentive be patient: Don't

46:47

think that you're gonna change things bottom

46:50

up when other night I saw a

46:52

lot of room for efficiency, city

46:54

games or division or night with is when.

46:56

All this market making ten percent of

46:58

the employee face for one hundred

47:00

and ten percent America. There's

47:02

always years of how are you get Leaner meaner

47:04

him? Focusing on what

47:06

am I roll understanding, why in control

47:09

for my head down and not trying to change

47:11

the world and the other thing is?

47:14

I'm natalie the itself. All

47:17

he owns a bad word and. He

47:21

and fuck what's really Marin saw

47:24

lot of my career gorman like been five developments

47:26

and county myself to do something

47:28

that. One fails early

47:31

think of I'll focus my energies familiar

47:33

my career on with while I'm faster and

47:35

more financially able to lean into

47:37

it and get return on investment

47:40

it would have helped accelerate my career.

47:43

Her and probably me

47:45

lot easier for teaching from your parents,

47:48

as most stayed with him. Well, do

47:50

he said it's more exciting to

47:52

make your own money, trying to do

47:54

it yourself, and it's more of warning

47:56

if you do it versus the hall

47:58

someone else meaningful. What

48:01

do you need to live successful healthy

48:03

life there's role for money but if you were

48:05

gonna come you're driving while his

48:07

son always have more money than ours?

48:10

is tell me he always wants to be

48:12

in business of people were even leave your wallet

48:14

on the table and you trust them not

48:17

maximizing and is working people

48:19

use from even if you're going in his last

48:21

The last one, what life lessons have you

48:23

learned that you wish you knew a lot earlier in

48:26

life as it was touch, I briefly it's

48:28

if you think about what your best and most

48:30

natural to you.

48:32

You're gonna end up having such

48:34

a higher return on

48:36

your time, meaning into that

48:39

vs trying to do

48:41

something that is not natural,

48:43

and so I just.

48:45

I. Think that's my life lesson that I work

48:47

for myself personally greats Billy

48:49

thanks so much for taking the time really enjoyed it thanks

48:52

yeah, thanks

48:54

for listening to. The show, if you like what

48:56

you heard, hop on our website at the Capitol

48:58

Allocators Dot.com, com where you can access

49:01

task shows, join our mailing list and

49:03

sign up for. Premium, content have

49:05

a good one and cnx

49:10

An important

49:12

disclaimer from Janice Henderson Group,

49:14

PLC, investing involves

49:17

risk including the possible loss

49:19

of principal and fluctuation of

49:21

Valley.