Tripp Jones of Uncork Capital joins Nate to discuss Billion $ Lessons from a Dozen Unicorns, Why Consumer VC is not Dead, How to Size a Marketplace, and What the LP Pullback means for VC Funds. In this episode we cover:
What Sets Apart a Unicorn Founding Team The Problem Uber Poses in Labor Marketplaces and Entrepreneurship Why Raising Funds May Be Difficult in the Coming Year How Slowing Down Can Increase Efficiency
The host of The Full Ratchet is Nick Moran, General Partner of New Stack Ventures, a venture capital firm committed to investing in founders outside of the Bay Area. To learn more about New Stack Ventures by visiting our Website and LinkedIn and be sure to follow us on Twitter.
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Transcribed with AI: 0:00 Tripp Jones joins us today from San Francisco. Tripp is a General Partner at Uncork Capital, a renowned seed stage fund that has made investments in Fitbit, Poshmark and Postmates, to name a few. Prior to Uncork, he was a General Partner at August Capital, where he made over 30 investments, including BARK, Hipcamp, and Wattpad. In total a dozen have gone on to exit or be valued at more than a billion dollars. Tripp, welcome to the show. 0:27 Thanks, Nate. Glad to be here. 0:29 Awesome. Can you give a quick two to three minute background in your path to VC? 0:34 Yeah, absolutely. Mine’s atypical in the sense that they’re all atypical to VC. But mine is really weird. Because I wanted to be a VC when I was since ever since I was eight years old. I grew up in the San Francisco Bay Area, obviously, that that had a big factor in my young interest in the in the venture industry. All the moms and dads in town growing up the ones I really admired were the you know, what I now would call an entrepreneur, but what I called an inventor at the time. I was a weird, anxious little kid and I always thought I had to be an inventor. And then my, my basketball coach, when I was in second grade, he was the founder of one of the old school Sand Hill Road firms called InterWest Partners was like, let me tell you about what I do. You don’t have to like be the smartest guy or gal in the room, you just have to like, figure out who the smartest guy or gal in the room is, and then give them money. And that’s what we do in VC. And I was like, that makes so much more sense to me. I’m going to do that. And ever since that, and I was like fascinated with the industry and kind of became a student. 1:33 Even at eight years old? Wow. 1:34 At eight years, I just I remember it clicking like, night and day click. And I just like this, like wave a peace washed over me and like, ope. That’s what I’m gonna do when I grow up. 1:45 I think you’re one of the lucky few that has it figured out at that age. 1:48 Totally, totally. And completely up into the right from that point on, I never got distracted or have any other interests. No, it was like an interesting, weird insight, but always cared for it. 1:59 So you worked at August Capital, transitioned to Uncork, what prompted the move, and what’s the thesis at Uncork? 2:06 Yeah, it’s a good question, because I spent more than a decade at August and August is like this long standing kind of white shoe, Sand Hill Road series A firm. And at the end of the day, the traditional series A Sand Hill world is getting totally disrupted the last five years was, you know, I’m trying not to use the word disrupted again. But it really disrupted that existing industry. When I started as a 20-something year old early stage VC, there was like 20 or 25 firms that you could like conceivably go to to raise your $6 to $10 million Series A, and you know, the vast majority of them on, you know, one three block stretch of Sand Hill Road in Menlo Park, California. You can go to like Union Square in New York, or Foundry in Boulder, but those were the exceptions. And, you know, what’s happened in the last five years has been amazing, essentially, half those funds have gotten so, so much bigger, you know, they’re not raising $3-400 million funds or raising three $4 billion funds. You know, they look like global asset managers. And you know, they’re investing anywhere across any part of the capital stack equity, debt, anything and everything, frankly, look more like Blackrock or Blackstone, and then kind of the cottage industry that was venture, you know, even 10 years ago. The other half really didn’t, you know, they’re very good, had a long history of success, like really didn’t want to evolve. And, you know, at the end of the day, I think they’re kind of all going to go away, you know, eventually put a little asterix next to Benchmark, but we’ll see how long they can carry it, because they’re so exceptionally good. But like, structurally, they’re at a disadvantage, you know, so so what was next, and what I saw emerging in the seed industry, especially again, in the last decade, but really the last five years was the institutionalization of the seed industry; it growing up, it getting bigger or more serious, buying more ownership. And even though there’s, you know, 1500 seed funds out there, I mean, every time I look, there’s, you know, my numbers wrong, there is 15 to 20, that occupy this kind of lead shack, institutional seed industry, they’re behind, you know, 10-ish percent of companies at their first three to $5 million institutional seed round, and I’m like, I have seen this play before. It feels so much like the series A industry did. I think it’s where most of the alpha is going to be in this industry over the next decade. I think, if you want kind of a safe, you know, net 2 or 3x return, like go to the big guys, you know, they’re, they’re great. They’re really good at what they do. If you want to see 10, 15, 20x plus funds it’s going to come out of the seed industry, and that’s part of the market that’s most exciting to me. That’s where I wanted to play, Uncork being kind of one of the the elite, you know, seed funds out there, founded by Jeff Clavier, who has been a friend and mentor for a dozen years Co-Managing Partne is Andy McLoughlin, who I think is absolutely the best enterprise seed software investor in the world. He also happens to be one my best friends, and so when they kind of, early in 2021, when they said, hey, there might be an opportunity for you to come join us it was, it was sort of a dream come true. And I jumped on it pretty quickly. 5:10 Yeah, you’re in good company there for sure. So can you tell us about the thesis that Uncork and what you guys are up to? 5:15 Yeah. So we are and have always been a generalist fund, focused on the early stage technology market, where our focus really lies is in this seed category, where, you know, we’re investing $1 to $3 million, or 10 to 12% ownership in a company. You know a generalist fund, that doesn’t mean we do everything. There’s 4 GP’s, Jeff and Andy, as I mentioned before, and Susan Liu, who joined us shortly before me from Scale Venture Partners. We all have our kind of zone of specialization, where we want to be known for our specific verticals, what we do very, very, very well. So when you go to a great super angel, or an advisor or another entrepreneur, or even, you know, one of the larger multistage firms, like, Hey, I have a dev tools company, I’m ready to raise my seed round, I want to make sure that we are on that list, like every single time when you’re getting your three to four intros. So if Dev Tools it’s gonna go to Andy McLoughlin, if you’re not getting intro’d to Andy, you’re probably being advised incorrectly, you know, and that’s the way we focus it we feel like we kind of cover 80-90% of the market with our different specialization groups, but we’ll pass some stuff just because it’s not perfect for us. 6:20 I’m curious given that you started at August, you transitioned to Uncork, going from series A to seed, what is the muscle that you either had to learn or unlearn as an investor changing stages? Because there is a difference there, and I’m curious from your perspective, how you’ve had to reshape your mindset moving down market. 6:40 Yeah, I know. 6:40 Up? 6:42 Yeah, downmarket, up-market.. 6:43 Who knows, right? 6:45 Earlier market definitely earlier agree on that. It’s a good question. And it’s funny, because I actually started my investment investing career in my mid 20s, at a growth equity firm focused on internet and software investing called Spectrum Equity, and like a great place to become a really good fundamental investor. And when I went from growth to Series A, I had like, break all those good learnings and like, kind of throw away all my logic. And I’ve had to do it again, you know, going from series A to seed, though the jump wasn’t quite as dramatic. To be honest, when we get involved at Uncork, it’s usually 6 to 12 months before when we invest at August, and they, but those companies are in very different places, there’s usually no real indication of Product Market Fit yet, which is kind of the hallmark of a series A investment, early product market fit, clear product market fit, oh my gosh, you have real numbers, I have 1, 3, 6 months of data, this is working, let’s jumping in it and kind of help this company and reflect. On the seed market, it’s a different mentality, I like to say, we step back, we kind of look for these big and novel new markets, you know, what piece of technology has evolved that a new 10, 20, 100 billion dollar market can be built, we think about business models that might fit into that big novel in the market. And then we look at teams attacking that big and novel market. And for whatever reason, when things are right to be different, there’s always three, four or five teams going out at different parts of the world, came to the same conclusion with with very different perspectives. And we go out, identify those teams and try to pick the best one. When we miss it’s usually because you know, not that none of the our teams are not great they are when we miss this because we we typically get that big novel market thesis correctly, but we pick the second or third or fourth best team. And when that happens, there’s a huge power law in venture and can have all your returns come from picking the very best team and, you know, we’re happy to do that. And then once that best team emerges, it’s beyond us, that’s then the time for the Andreessen Horowitz’s and Sequoia’s to step in and fund them and kind of any valuation necessary, as much capital as they can bear. And I just love going in and making those bets, and they are bets at the end of the day before it’s obvious to the rest of the market. 8:59 So you’ve invested in 12 unicorns, is there a unifying thread among the founding teams in the opportunities that you’ve identified that have reached the upper echelon of that power law? 9:10 It’s funny, like, I get asked this question a lot. I think about this question a lot. Because if I had like a really good quantifiable answer, like, shouldn’t I just be able to invest in only unicorns from seed stage? The short answer is hard to quantify. I actually just listened to an interview that Keith Rabois just did, he was asking exact same question. And the way he defined it was, he said like, he looks for a spark, for a guy who’s about as smart as they come the way he had to describe it, is a spark? Like kind of says a lot that it’s really hard to quantify. For me, I kind of look for the, I call it this clarity of vision, almost like they have such a clear, these teams have such a clear picture of what the company they’re building will look like in 10 years. And it’s like they’re working backwards. It’s like every day is just like, Okay, I have 3650 days to make this company work to get to my 10 year vision, what do I need to do today to push the ball forward, and it’s squishy, I get that. But the unifying theme is like, it’s almost like these teams were placed on this earth to build these companies. And I think in their heart of hearts, they truly believe that if they don’t do it, it won’t be built. Like only they can build it. Which, you know, that’s debatable. But like that type of confidence and that type of vision is kind of a clarifying theme. It’s still really hard to pick because sometimes when you’re like pre product, or team of three or four, and you’re talking about, like the $20 billion company, you’re gonna build, you come off as sort of a crazy person, like, you sound insane. Like it’s irrational. And that’s the thing about entrepreneurs I like respect so much is like, you have to make a near crazy, you know, 99 out of 100 people are gonna say like, you’re an idiot, you should stay at your job at Google or whatever. You’re gonna make that leap? And I hopefully am the one person’s like, yeah, that’s a great idea. Here’s 2 million bucks. Let’s go build it. 10:58 Yeah, they’re the most exciting founders to back. 11:01 Totally, yeah, there’s a thin line between ambition and vision and delusion. 11:06 Yeah, definitely. What about the opposite side of the coin? What have been some of your biggest misses and how they impacted your investing mindset today? 11:14 Oh, man, I mean, I mean, where to start? Like Bessemer Fund has their famous anti-portfolio list. I’m like, I feel like after doing this for, you know, a dozen years, I’m like, my anti portfolio list is almost as long. They’re all over the place. Right? There’s examples were like, I had True Religion, and I just couldn’t convince my older partner. Like I remember being obsessed with Airbnb in my 20’s, and like, falling over backwards to try to convince my old partnership back in the Spectrum days, it was so not a fit to take that company seriously. And I was told to put my office on Airbnb to get some productivity out of it by my boss. I remember ones where I finally got my, you know, pulled my partnership through, and I just lost the deal because I just got out hustled and out competed and viscerally remember losing the Oculus series A to a very talented syndicate in Spark and Matrix, and like how crushing that was, and how I vowed to myself that I would never lose another fair fight on a term sheet again, and I don’t think I have since then. And then there’s ones where like, I got the green light kind of looked into the abyss and didn’t pull the trigger. The one that stands out, just kind of off the cuff is I worked with the founding team at Roman when one of the founders was the head of growth at one of my portfolio companies BARK, like I knew this guy Rob Schutz, incredibly talented kind of marketer, growth oriented growth hacker, whatever you want to call him. They saw this new market, which now turned into Roman, started around actually erectile dysfunction pills, which is kind of a little bit of an awkward category, but one that because of its awkwardness, there was an opportunity there. And I did all the work. My partnership was super supportive at August, and it was the summer of Me Too. And it was the one time I didn’t do an investment for another emotional personal reason. I’m like, I don’t know if I want to fund a boner pill company, you know, in the summer of Me Too. And I’m like, I thought it was a smart move, even though I thought it’s a medical need for a lot of people out there, and just general health care, personal health care for folks with an exceptional team with a big vision. And I passed just because of that, and I kick myself over that emotional, ego driven, like protect my reputation, you know, and I kicked myself because I don’t know what that company is going to be valued at the end of the day. But that was a $3 million seed round on a company I think the last round was 5 billion post, you know, that one hurts. 13:29 That’s a tough one, that’s a tough one. So you’ve made a few investments in the consumer space, and there’s a popular belief that consumer VC is dead. What do you find attractive about consumer today? And what would you say to people that are skeptical about the future of consumer in general? 13:47 Well, I hear this a lot. You know, it’s kind of a common trope over the last four or five years, like consumer VC is dead. And I’ve watched a lot of my consumer brethren pivot to like vertical saas, which, you know, no, that really gave up on it. But a lot of them have really pivoted to like web3 and crypto because there’s some similar dynamics in the markets. But at the end of the day, like 70% of the US economy is consumer GDP, the amount of consumer spend in the US economy is like the greatest economic engine in the history of the world. And to think that category is dead is just like silly. We’re between trends, sure, you know, I wouldn’t say I’m inspired every day when the consumer tech market, but you know, you only have to just wait around for only so long before the next great consumer deal pops up. And I hopefully will have a prepared mind and ready for it. In terms of like, what do I do to get that prepared mind and think about it, I do a couple of things. One, I’m constantly focused on like where the cultural zeitgeist is going. I’m trying to kind of see over the horizon of like, where culture is going. I am not the coolest guy in the world. I’m a 41 year old white man that lives in the suburbs, likw call a spade a spade. However, I think you can do that just by like reading a ton. So I like to read all the difficult business stuff and I like sit there and like read the celebrity bloggers and I read like cheesy magazines and I read a ton of science fiction. That’s like one of my like the secret sauces, I probably read like one science fiction book a month, because it always has me thinking about like, what the world will look like in the future, just so like when I see it, I’m kind of ready for it when the future is today. The other thing that I focus on and try to be really mindful of, and again, it’s a little unnatural for me, is 80% of the consumer economy is powered by women, and it’s essentially women between the ages of 13 and 65. And I think I have this prototypical woman in my mind, and she doesn’t live in San Francisco or New York or LA or London and or somewhere, you know, metropolitan and swanky she lives in, I always put her in Cincinnati, Ohio. You know, it’s kind of like, what’s the most average place in America now, it’s like Cincinnati, or Boise, Idaho, you know, she makes 75 grand a year, and I invest at different points in her life. You know, when she’s a teenager, early 20s, I think about like, how she interacts with her friends, and where she spends her time, and it brought me to investments like Wattpad, which is like a social network for writers and readers, and it’s predominantly younger women. Later in her life when she’s married and starting a family, you know, it’s a big time where she changes her consumer behaviors and completely shifts how she spends money, and it goes towards baby and family and community, you know, and it led me to investment in Zulily and and Yumi and others in that category. And I kind of basically follow her up and down her life cycle. And it really can’t just be products for me or my wife or whatever. It’s got to be products for like the masses of American women that basically power the consumer economy. 16:34 How do you delineate between falling into the trap where this is where you think the future is going in, and you think this is, using the example of his Cincinnati mother, you think this is what she needs, when she has her first child, for example. How do you delineate between this is what I think the mother needs versus like, this is the reality of what they actually want? 16:57 Yeah, that’s a good question. I think a lot of VCs have really, really strong opinions of like, they’re so self assured that like, I know what’s best, I understand the technology, I know what’s best for the world, like, I’ll call the future the way I see it. I try to listen a lot more, I try to travel a lot more. I have three young kids, my wife and I like to get out and about and travel even during the COVID times, like we’ could go move somewhere for two weeks and work from somewhere else. I mean, it’s kind of weird, but like, we’ll utilize a lot of babysitters. I’m always like, I know this is awkward, can I look at your phone? And (laughs) ask a 20 year old woman like, can you look at her phone like, it’s gonna be a weird conversation. But like, I want to see what’s on her home screen. I want to see what she’s doing. I then just kind of pepper with like, Have you ever used The Real Real? And no, you know, 20 year old babysitter in Idaho, or Ohio has ever used The Real Real. But you’re like, Have you ever used Poshmark? And they’re like, yeah, I love Poshmark. Like, that’s the place where I got my prom dress or whatever kind of important thing to her. And so just listening to those women, reading as much as possible, and kind of being intentionally humble about, I am not that person. I cannot tell that person who to be or what to be or what to like, like, listen to what she actually wants, how she actually is spending her time and her money. That’s the I think the key to it. least that’s the one that served me well, for the last 15 years. 18:16 Do you have a framework that you use when you’re evaluating a consumer startup or a process that you follow? 18:22 Yeah, I mean, there’s a couple. I oftentimes these days invest pre launch. But there’s indications of whether or not there’s kind of product market fit before there’s actually a launch of product market fit. One of my like, insights around marketplaces, for example, is whatever behavior this marketplace is going to try to drive. So investors in companies like Hipcamp, or Turo, that my partner Howard did at August, you know, other ones like Poshmark, that Jeff did at Uncork. They basically, the behaviors that those companies are driving are actually, you know, everyone’s like, Oh, wow, like these companies invented a new consumer behavior. I disagree with that. I think people are trying to hack together a new consumer behavior, like, Hey, I just I have all this extra clothes, all of a sudden, I would love to get rid of them. I can drop them for Goodwill, but they’re really nice, like, there’s value here. How can I do this? And like, people start, you know, all of a sudden, you started seeing consignment shops, and eBay was starting to sell like higher end stuff. And basically, people are trying to hack together these behaviors. And a really smart entrepreneur stands in front of this macro change that’s occurring, wraps a bunch of software around it, and enables a new marketplace. And so watching the way people are trying to hack the behavior before, see, like, how much friction they’re willing to wade through how much expense they’re willing to suffer, and then kind of tells me like, hey, is this thing gonna work or not? And if you know, if there’s 1000s, or millions of people around the world dealing with this pain, you kind of know that if a marketplace comes out there, launches, makes all that pain go away or takes most of the friction out of the system, it’s going to work and it’s going to work fast. 19:52 On that topic, we’re talking about marketplaces, oftentimes they’re activating idle supply which increases the frequency of these behaviors, maybe it’s not an entirely new behavior, but it expands the bubble and it breeds some non consumption, right, just due to the ease of friction of the experience. And we see this in Poshmark, Hipcamp, Uber, you know, the list goes on. Many investors at the seed stage question, what is the market size of these startups? As an investor, how do you think about market sizing today to make sure that you’re not potentially missing out on an opportunity that seems niche to most? 20:32 Yeah, it’s a good question. And this is another one that’s hard to quantify. Everyone’s always like, how do you quantify it right? Because as all our venture funds get bigger, as we have to be able to return an entire fund with a two or $3 million investment, if not multiples of fund, making sure we invest in big markets is really, really important. However, with some of these kind of new behaviors that we’re helping, if not create, but helping kind of take the friction out and unlocking like potential these new behaviors. They’re hard to quantify, because let’s use Hipcamp, as example, and so Hipcamp is a marketplace for people to essentially like rent out their private land, open space for camping, other outdoor recreation opportunities. Before Hipccamp was around, people did this, like you could go out and knock on a rancher’s door or farmer’s door and be like, Hey, can I like rent your back 40 for a wedding or go fishing or hunting or camping on it, you could do it, it was massively friction filled. But if you try to, like quantify the size of that market it’d be pretty small, like it’s pretty nichey. If you we’re like, well, that’s a lot a lot of pain, I could just go to a state park and camp next to you know, the other 57 families wanting to camp or I could wake up at 6am and try to reserve a spot in Yosemite or Yellowstone for the weekend. I want to go camping. And so that was so much easier that that’s where the vast majority of the market went. And so that was a big question for a lot of people like this doesn’t seem big enough. But the other thing about these markets is like they basically invent the markets too. So maybe renting private land to go camping or outdoor recreation was a billion dollar market before Hipcamp. Now that Hipcamp shown that it works like it’s 10s of billions of dollars, it’s hundreds of billions. If you include the whole world, it really, really giant market. 60% of the United States is privately owned land, not like built up houses, like privately owned land, that’s providing access to arguably one of the biggest markets out there, you know, and then that’s why I don’t think anyone thought that when the company first started. And so it is hard. And you basically have to hold a really fine line to be like, okay, can this be big enough? But the big variable that you need to really get your head around is what if this works? If this works, will it change the market? Will it change consumer behavior so much that it expands a market 2x, 10x, 20x whatever x to be a big and important company? And that’s something that I wrestle with constantly. 22:46 Where do you see investors often getting market sizing wrong? 22:50 I think a lot, you know, what category, where are they focused on? I think, and I’ve done this before, you know, and I’m certainly not omnipotent. I think it’s when consumer VCs usually go wrong when there’s a new consumer marketplace, or new consumer product that speaks to them, where they’re clearly the core demo, and they’re just like, oh my god, this is amazing. I love this new new thing. Everyone’s going to need one of these, but it’s actually just for 40 year old dudes in Palo Alto or Manhattan, and they just vastly overestimate the market size just because, in their social group, in their kind of community, it’s a perfect product, but there’s just not that many of them, and that’s where I think they miss the most. Like I’ll you know, famously pick on like a Juicero or something like this, like, Yes, we all need a $600 smoothie maker. Like, yeah, I get why it was really cool product for like, no one.. that gal in Cincinnati, she is not going to buy a $600 smoothie maker even if it worked, which it didn’t. 22:50 Yeah. So you spent a lot of time on supply side driven marketplaces. What about them is most intriguing for you as an investor? 24:03 Yeah. So, you know, I’ve had a lot of influences in my life. But the two most, the two guys who I had not worked with, but that I kind of look up to and, you know, I’m a disciple of is Bill Gurley and Mike Maples, who I think are two of the greatest marketplace investors ever. And in Gurley, in particular with a very focused on supply driven marketplace, where the hard part, the valuable part was going out and acquiring a bunch of hard to access supply. So for him, let’s use like an OpenTable, one of his early hits where it was like, hey, if I can go get all these restaurants, like which is a pain in the ass, selling to restaurants sucks. I’m gonna get all these restaurants. So they start using my software, give me their inventory to make them bookable. And if I go deal with the pain of all these restaurants doing that, I will have a very, very sticky supply base, but not just that, like once I get it, you know, I’ll spend a buck to make a buck in the next 12 or 24 months, which is not a great amount of capital efficiency, but once I get them, I’ll then make a buck 50 in year two, and two bucks in year three and three bucks in year four, and frankly, have those supply cohorts stay on for essentially ever, until you fail with your value prop. And on the flip side, on the demand side, because unlocking that sticky, valuable supply, and we’ll just use Open Table, use Turo we’ll use Hipcamp, we use Airbnb, once someone’s gone out and done the hard work of unlocking that supply, demand almost comes in naturally, because such a strong value prop, that demand just kind of overwhelmingly comes in and you don’t have to acquire demand. And so there’s a lot of marketplace businesses out there. And they’re really hard to stand up, which a lot of people know if you’ve spent time with them. But I have a very small strike zone for what I look for. I look for hard to access, very sticky supply where you know that supply GMV growth will grow over time, if the company delivers what it’s supposed to, it will grow over time, therefore it’s worth the initial investment. And then the demand side comes in basically for free. Where because of supply so valuable, it just comes in like a voracious appetite demand. I mean, the one perfect example of that was Uber, where the demand was so extreme for Uber kind of over the years, it was unlike anyone ever saw that people could not get enough of it. The negative for me on Uber, and August did pass on it before my time. I never looked at it seriously. But the issue I would have had with my current thinking and framework would be I don’t like investing in marketplaces where the supply component is essentially hourly human capital, where people, you know, you’re basically like wrangling as much people who are getting paid for their actual hourly labor into the market because people do not like that rake being taken off their back, like it doesn’t feel good, they can feel it, you know. I drove you across town, I made 20 bucks. I know, Uber made five, like I don’t like that, it’s not a good feeling. And there’s a lots of different labor marketplaces like that. And the issue is they do it for a while. It’s a kind of a necessary bridge gap in their life. And then they turn off it soon as they can, and so those marketplaces, they spent so much money acquiring supply, reacquiring supply, acquiring more supply that they lost. And you know, it’s very, very difficult to build a base of a stable supply that that can drive enterprise value over years or decades to come. Now, not like a car or a piece of land or house doesn’t feel that rake, it doesn’t mind being utilized 24 hours a day, you know, it’s happy to be utilized fully, it’s inanimate. Those are the type of marketplaces I really, really like. It doesn’t mean I don’t invest in people driven marketplace, if the supply side is people, but it’s people acting as a small business, that’s interesting to me, like Shopify is a hell of a marketplace because it people on one side but it’s enabling people to run small businesses. My more recent investment in Ubiquitous which is a basically a business in a box for creators, like it let’s creators run their entire business. Yes, they’re taking a rake, but like, without Ubiquitous their small business would be so much harder to run. And those are dynamics where I will invest in in people driven supply side businesses. 28:08 How do you get to conviction that the demand will be there for marketplaces where the supply side is hard to capture? 28:15 Yeah, again, I can’t talk about it but I closed a recent investment in a marketplace business pre launch last week. I don’t know if there’s demand there. I’ll only know after launch. What I do know is I’m watching that consumer behavior. I’m watching what people are trying to do before this marketplace exists. And they’re doing things that like it’s either hard, time intensive, or costly, at times dangerous to themselves, whether it’s like financially or physically. And when I see like, almost irrational behavior on the demand side trying to unlock a behavior, you know, I get comfort that if you kind of do it right, provide a better experience, that demand will naturally flow right into this supply side that you’ve unlocked for it. 28:57 Does the type of supply affect your analysis? So for example, does a supply side that’s homogenous like an Uber, you don’t care which driver picks you up, you just want to be picked up, versus Hipcamp, where your campsite can be very different. Each unit the supply is different. How does the type of supply affect your analysis, if at all? 29:19 I think unique high quality supply is super, super important. I think if you have a totally homogenous supply, you know, let’s say you’ve gone out and acquired, you know, 1000 generic widgets, and you take your 20% rake because you offer widgets, widgets, again, don’t care if you over utilize them. So it works. But then another entrepreneur can come along and be like, wow, there’s a lot of demand for the widget market. I’ll offer my 1000 which I’ll go acquire 1000 widgets and offer it for 10% rate. And I think it’s kind of a death spiral. Like if you acquire unique interesting supply, you can’t be commoditized out. So you know whether it is a great restaurant or a great piece of land or a really cool vacation property. Those are unique pieces of supply. I think that proximity can provide uniqueness like a Turo car that’s two blocks away that can be unique, though, that it does have potential for some, commoditization. I think that’s paramount of importance to me. I actually think that kind of the success and hype and just mindshare that Uber took in the VC community and a broader tech community. Actually, it looked like such an amazing thing to marketplace investors, but to actually like poison a generation of marketplace, investors and entrepreneurs who are like, I’m going to be the Uber for x. It was such a perfect product market fit based on mobile phones, and a moment in time that it works so well. But fundamentally is not a good marketplace fit business, in my opinion. It’s still TBD, on like, whether this thing can ever be profitable. So everyone for a generation was just like, I’m gonna do the Uber for x. Maybe you’ve heard that 1000 times. Oh, it’s Uber for Uber for x. And every time you’re like that, I’m like, it couldn’t be a pass for me, because I don’t think it’s a good business. 31:04 Definitely. So over the past couple of years, we’ve continued to see records for capital deployment and venture as an asset class, you’ve said that you think the venture market is under estimating the flow of capital from LP’s away from the industry over the next 12 plus months. What are your concerns? And why do you think this? 31:26 Yeah, no, it’s a really interesting time. And as I mentioned, early in this chat, like I’ve been kind of a student of history, student of venture for a long time. And it’s funny, my focus in college was history and psychology, which is not the typical background for most venture capitalists, you know, CS majors, or, you know, real scientists. But I do think this is like the one place human behavior and history really, really matters here. And we always look back like, Okay, why is this like 2000? Or why is like 2008, with trying to draw parallels, and like, every cycle is the same, and every cycle is totally different. And this one’s a weird one, because we’ve had such a massive 12 year bull market in the venture industry, like, everyone did a lot of the things well, because, you know, the rising market, just kind of forgave all sins. What’s happened though, is these traditional allocators. And so it’s not discussed that often, but venture funds have LP investors. And those LP’s historically have been foundations, endowments of universities, these fund to funds that specialized in different pools of capital, and everyone’s done exceptionally well. But now you can read about these, the Harvard foundation being 42 billion, these deca-billion dollar foundations that have been running up in venture, so much of these endowments are now venture growth oriented technology, private investing, like 30-40% of these endowments. And when you kina look at the way to properly manage endowments, you know, they’ll overload on alternative assets. However, their models are not supposed to be that highly concentrated. So we’ve had this record run up where their endowments are out of balance. At the same time, we’ve seen a big sell off in the public markets and you know, public bond markets where the value of those positions in these endowments and foundations have come down significantly in the last six months. So we’re way overweight venture. And then we’re even more overweight venture because the public markets, so if we were at 35%, now we’re at 45%. So what’s happened, venture industry is full of a bunch of really smart people and really smart firms. They’ve all kind of been like, uh oh, we’re about to hit a systematic problem in the in the capital flows in this market, let’s go out and raise bigger funds as we possibly can before we told our LP’s that we’re going to do it, but we’re the blue chip of the blue chip names, and I’ll pick on them because they’re so good, but the Andreessens and Sequoias all raised gigantic new funds at the beginning of this year. Andreessen closed on $9 billion, you know, when they weren’t supposed to be in market yet. You know, he’s one of those situations where like, people like, oh, I can’t pass on Andreessen because if I pass on Andreessen, I’m out, and I won’t get my seat back at the table. So it took that endowment that should be 20%, was at 35%, and then went to 45%, now to 50%. Now the board of trustees are screaming, people are worried. And you know, the capital gates are up with traditional managers. And we’ve created this perfect storm, where there essentially isn’t traditional LP capital for new venture commitments right now. If you weren’t around for years, didn’t message hey, I’m coming, please reserve me capital. You’re not getting funded this year. You know, unless you’re, there’s not even unless you’re spectacular, like it just might be full stop, and you’re gonna see a huge decrease in new fund formation, you’re gonna see good funds that aren’t great, really, really struggle to raise new funds. It gonna be a tough time as this kind of like works through the market. And it takes a long time because even though intellectually might say with Whoa, those big gigantic venture portfolios are overvalued. We should start revaluing them. You kind of gotta wait for your managers to do it. But managers don’t like to mark their portfolios down unless like something objectively is going wrong. They try to be like insulated from the public market. So they’re gonna hold these valuations too high for too long, and it’s gonna take time, unless big, you know, new pools of capital come into the market, which I don’t really see en masse, like it’s gonna be a bit of a winter here for 12 to 24 months in the venture capital fundraising market,. 35:13 What are going to be some of the second and third order effects from LP’s pulling back? So funds being able to raise new funds, that’s obviously one that’s going to affect them directly. But what will the effect on founders be? What are some of the other effects that we’re going to see in the market due to LP’s pulling back? 35:32 I think this realization has come into, you know, every day, I think more and more of the market wakes up to this and they realize that their next fundraisers can be difficult, even if they’re great. I think the first thing that happens is all of a sudden, people start slowing the pace. And people have been investing way too fast, in my opinion, over the last several years, just kind of anything that looks good, feels good, and has the right vibe getting investment, I think people are gonna really start underwriting and you can say like, it’s gonna affect valuations, I don’t care like who cares about valuation, valuations like a marking time, but like, I do care about capital going into these companies, cause capital pays people salaries, capital, lead to higher capital, like, you know, buys computer, capital builds products. And I think one of the first effects people are going to start seeing and I’d argue that they’re already seing today is that there’s plenty of capital still out there. But capital is really getting focused in the stuff that like seems safest, the highest fliers, the very best in the category leaders. And if you’re not quite perfect, it’s going to be a lot harder. And if you’re just good and not great, capital may not be available to you. And it’s gonna really start affecting entrepreneurs and people, even though they’re doing a pretty good job and building real companies, people are going to hit a capital wall and not be able to raise, you know, across the stack. You see, it was a couple of high fliers that were a little bit more hype than substance, like the Fast’s of the world, who kind of went out of business last month, very abruptly, very quickly, primarily, because they thought they had it in the bag, they thought they had access to near infinite capital, and very quickly, it wasn’t there. I think you’re gonna start seeing it throughout the life cycle – seed series, A B, C, it’s going to hit every stage. 37:07 Definitely. So this question is called three data points. I’m going to give you a hypothetical situation with a startup, and you can ask three questions for three specific data points. Let’s say your approached to invest in a seed stage consumer marketplace startup, the company is based in San Francisco, the sector’s e commerce, they’re generating 50k in monthly GMV, and they’re growing 40% month over month. Again, the catch is you can only ask three questions for three specific data points in order to make your decision. Which three questions do you ask? 37:42 Oh man, this is a good exercise. The first one would be talking about like the supply side because that’s what I’m focused on, which is why are you different? Not why are you better, why are you different? Why is what you’re doing different? And why no– ah two questions, trying to sneak in like two or three at the same time. That would be number one, just to be like, Hey, do I think it’s interesting? I’m first and foremost, I’m I’m looking for these big and novel new marketplaces. Number two is like why you? Why was this team placed on Earth to come together to do it? And that one, I’m probably secretly would ask about 75 different questions in there to like, really figure out why this team was placed on it. And so those really would be one and two, I don’t even know if I need a third. You told me like it’s growing plenty fast. It’s in my backyard, so I can shepherd it. Like, I only need two. 38:32 Awesome. All right. If we could feature anyone on the show, who should we interview? And what topic would you like to hear them speak about? 38:40 Hmm, that’s a good question. There’s some people you know, I think earlier in this podcast, I kind of mentioned that I have this huge affinity for the thinking of Bill Gurley and Mike Maples. I’ve kind of always looked up to them. And so it’s like, who of my generation or the generation below me is going to be the next great thinker and venture? And you know, the people that I, whenever they write something or whenever they say something I like really stop and listen will be like a Sarah Tavel at Benchmark. I just think she’s an immaculate thinker. You know, he can be a little controversial sometimes with his Calendly quips, but like Sam Lessin at Slow Ventures is a special thinker. The systematic approach of Nikhil Basu Trivedi at Footwork is pretty special. And then there’s like this modern cultural kind of, who’s at the center of the VC zeitgeist like a Logan Bartlett at Redpoint, who’s like really changing the game of how you source and how you kind of build your reputation in venture with his shitposting and memes. Because there’s like some methodology behind the madness. Those types of folks all have very thoughtful, long term plans of how they’re building their careers. 39:43 Definitely. Do you have any tools or hacks that are a secret weapon? 39:48 Yeah, it’s a good question. I actually have gone the other way. Everyone’s trying to make their lives more efficient, which, who doesn’t? Right? I’ve actually tried to carve more time that doesn’t involve tools and hacks. My answer to that question’s always cast iron pans because they’re like intentionally slow and I spend a weird amount of time like making my children hot breakfast every morning. And then like taking the time to properly clean and oil my cast iron pan because it’s almost focusing me to slow down and it’s like slow down to clear my mind so I can speed up throughout my day. You know, it’s not this is not an output game, venture. This is a be smart of one smart decision can make your next 10 years. So get yourself in the right mentality and make that one smart decision. 40:31 What’s the go to breakfast? 40:33 You know, it rotates pretty regularly, you know, French toast pancakes, cinnamon rolls, scrambled eggs, Dutch babies, it’s kind of like a pop over pancake. 40:42 Full service over there. 40:43 Yeah, you know, like I have one cast iron pan. I always got the bacon and sausage going on the other burner. It was a COVID kind of new behavior but that I keep on extending because it’s an important part of my day to spend that time with my children and clear my mind. 40:58 And what’s the best way for listeners to connect with you? 41:01 You know, they can reach out to me, Tripp, T-R-I-P-P at UncorkCapital.com. DM me on Twitter. You know, I’m more of a voyeur than a poster, or reach out to someone that knows me. Awesome. All right. 41:13 Cool. Thanks, man. 41:14 Yeah, that was great. Appreciate the time. Transcribed by https://otter.ai