Ian Sigalow of Greycroft joins Nick to discuss Co-Founding Greycroft with Alan Patricof & Dana Settle; Balancing Thesis Focus and Flexibility; AI Tooling vs. AI Platforms; and the Search for the Next Form Factor Amidst Smart-phone Saturation. In this episode we cover:
Venture Capital, Technology Trends, and Entrepreneurship
AI, GPUs, and Edge Computing
Future Growth Platforms for Consumer Software and Applications
AI Adoption and Platform Development
Investment Strategies and Portfolio Performance in the Tech Industry
Venture Capital, Public VS Private Markets, and Personal Habits.
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Nick Moran and Nate Pierotti of New Stack Ventures, a venture capital firm committed to investing in founders outside of the Bay Area.
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Transcribed with AI: Ian Sigalow joins us today from New York. He is co-founder and managing partner at Greycroft, a multi-stage venture fund investing in technology companies across sectors and geographies. The 17-year-old firm manages in excess of $3 billion, with a 60 person team and has made over 150 investments since inception. Ian has invested in companies including Venmo, Shipt and Fetch amongst many others. Prior to Greycroft, he was a VC at Boston Millennia Partners, specializing in software and internet investments. He also founded StrongData, a pioneer in payment encryption. Ian, welcome to the show! 0:57 Nick, thanks for having me. 0:58 It’s my pleasure. Can you start out with a quick summary of kind of your backstory in your path to to venture? 1:05 Sure. Well, it started with good luck. So the short version of this when I was in college, I had a summer internship at an investment bank called Donaldson Lufkin and Jenrette DLj. And I was hired to do energy banking. And but they put me in the tech banking group for the summer internship because I went to MIT and at the time, I didn’t know this in the background, but at the time, they were competing against for a quiet drone, and they wanted to have more MIT people in the pitch books. So I became a tech banker for a summer. And we went up to Boston all summer long on the Delta shuttle with binders of, you know, ppm is trying to place funds place interest in, in startup companies. I quickly figured out that the guys in Boston wearing the whale belts and no socks, and you know, polo shirts had a much better job than the bankers trying to sell them pieces of these companies. And I went back to college and did some on campus recruiting. And I ended up getting a job right out of college in venture capital. And it was an unusual time, right? I mean, this was in 2001. And back then you could be an analyst at a venture firm. So I, I started in this business 20 Gem age myself 22 years ago, I’m 44. And I’ve spent more than half my life doing venture capital. 2:36 It’s not very common. Most people that come on the show did not start in VC right after, after undergrad. 2:43 No. And we can talk more about that later, too. But, you know, people often say, you know, like, how do I get into the business? And is your story repeatable? And, honestly, it’s probably not repeatable. And of one that I was in venture for three years in Boston. And I decided when I was 24, that I had done with DC. And I moved to New York to start a company, the strong data business, and I went to business school at Columbia, and they had something called the lane fund, they still have, and I’m actually on the, like, the board of allowing fund today. And it was their version of the 100k competition. And this was, you know, 20 years ago, but MIT and Harvard kind of kicked this off where they would give students startups $100,000. So I competed for that. And I won the prize in 2006. Okay. And the problem was, they didn’t have $100,000. So I went to business school, and I competed for the prize, and I want it and they said, Well, we’re gonna give you an IOU and introduce you to these VCs. And like, I just got out of VC. And they connected me with someone named Alan Patricof. Well, and Alan was 71. And he had built this legendary private equity business called apex, which stands for Alan Patricof associates. And I went up to his office, and he was a trustee at the business school. And the conversation was really quick. It’s like, you know, I’m not that interested in your company. But you came highly recommended from the series of people at Columbia, and I really want to hire you like to do what is like we’re starting this new venture firm called Greg Groff. And I thought about it for about 10 seconds, said, Well, that sounds really good. So you know, we hit it off. I met my partner, Dana through Alan. And the three of us went into business together. 17 years. I was 27 when we started this great craft experiment, which is now in a big company. 4:48 You’ve been at it almost 20 years. It’s incredible. Give us give us a little insight on Alan, you know, what’s his style? How would you describe his approach to venture Oh, 4:59 You know, I went to Alan’s 80th birthday party, which was now like eight years ago. And it was like heads of state. And you had to give a video montage of the your one word that described Alan. And I thought I was going to be clever. And I said, peripatetic, because it just doesn’t stop ever, you know, keeps moving in real life, like physically, and mentally and business wise. And they’re, like 19, people said, Said, peripatetic, like, Wow, what a what a coincidence. So, you know, Alan came out of private equity. And he was, he was, and still is, in many ways, my mentor, in great craft and in the venture business. And to his credit, you know, deep diligence, you have a culture of written communication, which we still do this day, is really transparent. internal feedback, is what kills venture firms is when partners, like well, I’m going to prove your deal if you approve my deal. And you end up with a whole portfolio of things that everybody hates, because it was like a chit. Right. And, and Alan had none of that fact, you know, going into the office with Sundays getting dressed down every single day about something you did wrong the day before, because he, he would not hold back. But you know, that that culture of telling the truth, and being honest, and having integrity in your action and holding people accountable, you know, it, that part started with him. And it’s really important. 6:46 You know, you have noticed something, I’ve only been in the business for a decade, and officially for seven years. But I tend to notice that many founders have some similarities, like in personality and style to the VCs that invest in them. Like, it’s, I wonder if, if you’ve seen the same, you know, as you talk about Alan and his style, like never stopping. And I wonder if you’ve seen that as well, you know, the investor kind of likes the founders that kind of are similar in certain ways to themselves. 7:23 I think there’s a lot of truth to that. Because the founders, generally speaking, pick us. There’s not a, there’s not a short number of people who want to write checks into interesting companies and a hot space that’s growing fast with a good team, right. And they generally pick us in depends on the stage. But at the earliest stage, in particular, they’re picking us because they want what’s in your head. They want your network, they want your energy. And the reason I’m excited about investing in the company is the founders energy and what’s in their head and the team they’ve constructed. So, you know, they there’s certainly a lot of similarities there. And I’m not surprised by that. 8:12 I typically ask for people to give an overview of the thesis, but I think most people in the audience have a sense for Greycroft, you know, you’ve been at this for almost 20 years, maybe instead of the thesis, can you can you talk me through what you’ve learned and the evolution of Greycroft over time? 8:30 Sure. So how we started that business, very first fund was a $75 million fund with New York and LA, focused on digital media. And if you read the very first ppm, if you still write ppm is for funds. They’ve read the very first ppm. It talked about the growth of media online, the difference between the number of people who are reading news and information on the internet compared to the advertising amount being on the same medium. And it talked about New York and California in those markets being important markets. Fast forward, obviously, like the advertising caught up, right, like, you know, now, the internet advertising exceeds every other medium search alone, that we didn’t anticipate the iPhone. And nobody did. I went to a conference in London and Oh, six, and on stage. There’s a friend of mine from college, who at the time was working, I think, at Google. And he was kind of working on this thing called Android. And you know, it hadn’t really taken off yet. And the whole thing was about how mobile is the future and I got in the hallway, and a really well established VC from Europe. grumblings that I mobile is the future and it always will be because Like now no one’s going to adopt these mobile phones, there’s no money to make there. And we also launched the firm before Amazon launched EC two, and there’s no cloud, everything was pretty obvious. Salesforce was a quote unquote, cloud computing company. But there was no public cloud. And most companies were still on prem for pretty much everything. And when I look back over 17 years, where we’ve made money was not that media thesis, we were in Huffington Post and paid content, and we did podcasting are in wondery, and a bunch of businesses that exited well, but where we really made money is enterprise software that took advantage of the cloud, and consumer applications that took advantage of the smartphone. And it’s humbling to think about, like, we set off with intention to do one thing. And this is kind of the whole theory of venture, by the way. And where we made money was someplace totally different. That was unexpected. And we did it because we had, you know, a beginner’s mind about these things. You know, we’re we’re constantly looking for where talent is going and good ideas. And they another albinism is that, you know, it gets in the office everyday, you would say to me, in, you never know who’s going to step out of that elevator. And that’s true, you know, people come into our office with ideas that, you know, they’re unbelievable, because they spent their whole life studying one thing, and they know it better than anybody else on the planet. And for a brief minute, like, they will share their idea with you and like, wow, there’s like 10 people who know this has really cool. It’s big, big gets you going. And it’s part of the reason that I love this job. Anyway, I don’t know if I answered your question. But you can, if I if I didn’t, 11:55 is perfect. I mean, do you miss that founder stepping off the elevator Now that things have moved to zoom and have become a 12:02 refill meet people in person, I may be old fashioned, and contrarian. But I think that this pendulum from work 100% remotely, and people everywhere, is going to shift back to at least hybrid. And I got an argument with one of our CEOs this week about this very topic. But I’ve noticed that there are particularly in like, this next generation, I don’t even know what they’re called, like z or Q, I think there’s whatever the letter is for the people who are in their 20s coming out of college now, they generally bifurcate into two groups. And one group is like, are you in office because I really want mentorship, and I want to work with you. And there’s another group that’s like, it’s super inconvenient, I just want to work from home. And I can tell you now, which group is going to be more successful in 10 12:57 years? Wow, that’s a good insight. You also mentioned sort of this, you know, this point around strong convictions loosely held, you know, how does one have a thesis and focus as a venture firm, but also stay flexible, and kind of, you know, figure out how to skate to where the pucks going, so to speak. 13:16 So there’s a lot of frameworks. And what passes for a thesis, generally speaking, is not like a PhD thesis. You know, I, we went to graduate school, I know what I know what a thesis should be. But in venture parlance, it’s a series of predictions around the way the world will have wet the way things will happen. And in what order and in what time and what the, the outcomes of that will be. You know, there are at a high level insights, and we aggregate those insights together. And the partners all have unique insights. And they generally come from different places. And my partner, Dana has spent a lot of time thinking about sustainability, driven by consumer behavior and the shift in demand. And, and, you know, she’s ensconced in Los Angeles, which is, if you think about where trends come from, in the country, a lot of fashion and tick tock trends, everything that sweeps the nation, it largely starts in a couple of places. One of those places is Los Angeles. So she sees this early, and it’s where there’s a lot of consumerism, but it’s also a specific type of consumerism. And then you’ve got the technical trends, right? So we didn’t predict the iPhone or the cloud, but we saw it. And you once you see it, and you understand where you are in that cycle. Think about everything is an S curve, right? Just to like, you know, it’s early, early, early than it ramps really fast and then it’s late. Like you don’t want to be funding a linear television station in 2023. That’s way He passed the S curve. But if you’re thinking about AI, it’s clearly ramping fast. And if you’re thinking about spatial compute or whatever is like the new new thing that is going to be three to five to seven years out, you have to be patient. And you have to figure out, like what has to happen for the install base of VR and AR devices to be large enough to build a business, and then you start thinking about when to fund them. And we do a lot of work on that topic. And then all of that boils down to, you know, where to play. And, and then you develop how to win. And then you develop, how to scale the companies and exit them. But you know, like, what would pass for a thesis at Greycroft as a as a, for instance, and I’m making this up on the fly. So just, this may or may not be something we’re actively looking at at the moment. But let’s say that you said, Well, we’re Laden in mobile, because there’s already more than one cell phone for every human on the planet. And we are midway through cloud. And the big barrier, you know, Cloud is ramping with AI, and it’s ramping with other tooling. And the big barrier for AI adoption is going to be GPU access. And there just won’t be enough GPUs if if all of these companies, by the way, I’m making this whole thing up right now, because they’re very well, maybe enough GPUs possible. Yeah, like possible. And let’s say that there’s just not enough GPUs in the next three years to compensate for for the industrial demand. So your view would then be Well, where do you find excess GPUs? And what does edge compute look like? And should we be investing in the technology that can run like on my phone, or when it’s plugged in, or my Tesla when it’s parked? Because those devices have sophisticated processors, some of the AI processing can be pushed off to the edge? What is the pipeline have to look like? And the data security if you take a model and break it up into pieces and run it at the edge? And if that ultimately replaces the cloud? Because it becomes an edge compute paradigm? How do you build the metering infrastructure and who gets paid? And you can go down this rabbit hole be like, well, here are the five biggest opportunities here. One is, you know, security. Two is the payment framework. Because if you could pay me $5 an hour to use the GPU in my Tesla. That kind of pays for my car. I got like a free car, which would be cool. I maybe there’s business in that maybe Tesla owns probably 17:39 sitting idle 95% of the time or more. Yeah, 17:42 yeah, sending a train station often as they commute into the city. So yeah, like, there’s all sorts of interesting opportunity there. And it’s driven by demand trends, you know, consumer demand and industry demand, and then how you fulfill the demand, what the pieces and parts and components, and then you figure out like where the value accrues? Because you don’t want to be so far down in the supply chain, where it’s a commodity. And this is what we spend a lot of time in the partnership talking about, like if you win this house, what’s the moat? How important is it? How do you stay ahead? Can you build a big public business there? Does it end up being a component part of another person’s business? 18:33 If you had to guess is, is in the video, you know, one of the leading firms in the processing side, a decade from now or 18:42 go? Yeah, I mean, they’re the great American semiconductor company, today, no challenger with a reason. It’s, it’s a fascinating business. Because I, before I studied Nvidia, as you know, it’s a hardware business, right, and you have to retool, and you’re susceptible to Gen X processor coming from left field that, you know, because what’s happened historically, in the processor space, and Apple is kind of the key example of this, you know, they showed up to Intel and said, I need a processor for this phone. And Intel’s like, you know, go pound sand, you’re never going to ship enough of them, I’m not going to make money investing in it. It’s too high, I can’t make money at the price point. So Apple went off into, you know, their own and develop their own processors, which is now the m two and my God, it outperforms virtually all of the Intel processors. So, you know, with with quantity and scale, you can start to build in distinct spokes off of processor technology. Now with the case of Nvidia, it’s really a software business as well as a hardware business. And that’s the that’s the power of that company. That is not just a semi company. It’s all that it’s all the software that people use to do. To design on top, 20:02 I wonder if the GPU is the best way of handling, you know, these come complex ml and LLM. 20:09 You know, I have this discussion just yesterday and without, and you’re gonna start to scrape the edge of my technical knowledge. But many of these tasks do not require a GPU. And, and, you know, depends on latency. And it depends on the type of task you’re running and the size of the model. If it’s a two gigabit model versus a 30 gigabit model, a lot of these things can just be run on ARM processors super cheap, super energy efficient, readily available. And you know that that’s the contrary view on like, do I need to turn my Tesla into a supercomputer for AI? Or can I just take my application and break it down into parts that can run in the same public cloud as everything else, but this parts running on an ARM processor. And by the way, there’s six functions running on the same processor, because they’re using a bunch of efficiency tooling to make it scale. And, and keep in mind, this is not my forte as an investor. You know, I do consumer FinTech and consumer internet investing. But like all the partners that Greg Croft, we’re really at our heart generalists. And we’re so curious about the world that we read up on everything. 21:24 I feel like I’ve seen the the quantum computer pitch deck probably three or four times over the years, like stitching together all the idol processors, I think it was even featured in a TV show called Halt and Catch Fire years ago. If somebody figures that out someday, then that will be quite something but But Ian, you mentioned before how smartphone adoption is pretty saturated? Can you give us some ideas about what might be the next great growth platform for consumer software and applications? 21:51 I I’ve been following spatial compute, which is like the code word for Apple vision pro mixed reality, I may be the only person at greencroft Who’s who really likes this as a as an idea space, in part because I believe that the smartphone, which is like whatever version 16, I just don’t see enough coming between version 16 and version 25. To make me think this is the last great consumer device that will capture my attention forever. Like there will be something ultimately that replaces it. And the big discussion internally is just when and what has to happen for that future to transpire. Because it my estimate is there’s probably 5 million global, daily active users on some form of a VR AR headset today. Just tiny, it’s too small to build a software company on. And if you talk to, like meta, they’ll tell you don’t make a multiplayer game make a single player game. With single player games steam, they don’t monetize as well, they’re not used as frequently, you can’t make a multiplayer game because you can’t find another person on the planet who’s on a device at the same time to play against. Right, that’s, that’s a problem. And the second problem is that the apple vision Pro will ship hundreds of 1000s of units and not millions of units. Because they can’t make enough of it, it will sell I promise you every single device they can ship they will sell and they’ll be lines around the block to get your hands at this price point or virtually any price point they’re going to create a category and I understand also that the medic whatever three quest three pro three, I’ve lost track of their naming convention is all is also a step change improvement. But the challenge is when you come up with step change improvements, your your daily active users don’t generally grow. Because you’re going to cycle through replacement effect where the en Siglo early adopters who have a meta whatever floating around at home that’s used and frequently throw that thing away and buy the new one. And so they’re gonna they’re gonna be at five or 6 million for some time, until Apple and whatever comes next from other third parties, you know, Google or others can can actually produce 10s of millions of devices a year. And then when you get to like 50 or 60 million daily actives, holy shit, you’ve got a whole ecosystem that can support everything. I just think that futures unfortunately four to five years out. And there are certain things you would fund today that have a long lead time, but it may be 24 months too early, to make a concerted effort and investing in 24:41 I mean, like, like some predecessor platforms. Do you see maybe my Roblox 24:47 story? Like we met with Roblox so early and so many times? And yes, in the pet Wha whoa. Then it was like somebody who started in 2004 It was started when I was in Boston, you know, working at a venture firm doing semiconductors and optical switch stuff. And Chris Frey lik who’s good friend funded that business and the seed round and first round supported that company for years. And it was there were no users on it. I mean, there were users but not a lot. And then the the iPad came out. And when the iPad came out, like every unit of iPad that ship they the tax rate was high. And I don’t know what the numbers are today. But we have in my house, three iPads, and 100% of them, have Roblox on them. Because the kids play Roblox and they built a game for a device that didn’t yet exist. And when the device came, it all took off, because it makes perfect sense to sit there and play Roblox on an iPad. And so you’ve just think about, like what you were in, that’s a $26 billion company. So what would you invest in today, that isn’t growing, but needs the next form factor to come. And it will also not be superseded by Roblox who themselves are like I’m building for the next form factor to because we’re not lazy, we’re smart. And we see where the world’s coming. 26:17 That’s such a great example, because I’ve probably heard hundreds of times, you know, the the platform with the killer app example. Like in order for the VR headset, or whatever, to become successful, you need a killer application, right? And it pulls through the user base. But this is almost flipping it. It’s like what is what’s the UX? What’s the medium of engagement? Because the application already existed? It just needed the right form factor to get the adoption. 26:45 Yeah, although that may or may not be the killer app for the iPad, the iPad has a whole lot of good applications. Many exactly many wichard is desktop replacement. 26:53 100%. Interesting. I mean, do you consider AI to be a platform or a tool? And how are you advising your companies on integrating AI into their vision? 27:04 Yes, and we do. And I you know, this is it’s a really fascinating time. Because I think that, unlike the cloud or smartphones, which which technically had platform requirements, he had to ship a whole bunch of smartphones, get them in people’s hands to build the software, or you had to have enough compute in a cloud. You you have the ability if you’re a software company, to deploy AI to your user base. And as a result, like, I pretty much everybody’s using some AI tooling, either on purpose or by accident right now. Because if you log in to Outlook, or Gmail, there is an increasingly a map of out of like generative AI going on in those simple platforms composing your email, let alone all of the other tooling that we’re playing around the chat GPT, which, as you know, is the fastest growing consumer application all time. And the reason that’s happened is because the distributions are already there. So we think this is the game on the field for the next two years, it may go from zero adoption to everybody has 50 Ai, chatbots and copilots. Really fast, or it may be the case that a handful of companies, you know, become the end all be all super agent that do all of the things you want. And we’re trying to figure that out, because it has important ramifications for where we invest. And terms of our portfolio, I’d say there’s there’s a handful of big and important trends. One is our companies, the established ones, in particular, used to be worried about what little startups in a garage were doing. Like, oh, well, you know, I cracked the code and built the first this and I got to 300 500 a billion of revenue doing it, but somebody could come up with a better idea. And they’re not worried about that anymore. They’re worried about what the big companies are doing is that what the big companies do, can be deployed and mass across billions of end users fast so that that’s consuming a lot of time. The second thing is that the venture world funded point solutions down and it’s true in consumer. We joke about this, but like on the FinTech team, we were pitched so many neobanks like Instagram, comedians, were building neobanks and trying to raise venture money for them. Okay, and that’s how far that’s how far got in neobank land. And the same thing happened on the enterprise side, you know, there’s vertical SAS for everybody. There’s there’s vertical SAS for plumbers. Like there’s there’s a software application That was built, we use the word ICP, it’s about your customer profile, ideal customer profile, right and software land. And your ideal customer profile could be a social media manager in a company that’s doing XYZ industry that has fewer than 500 employees, like you narrowed the scope down to, like 1000 people that you built your software for, right? What’s happened with AI, is that ICP, because every piece of software ever built prior to last year, was exactly the same thing. It was a database with a UI on top. And that UI was customized for the end user, and the ICP, or the consumer profile. And all of a sudden, I now have a chat box, and I don’t need your UI, I have a tool that will create any graph, any chart, any response, just like talking to a person. And it can it could actually run commands for me, you know, like, I go buy a bunch of Google ads against these 47 keywords, and then let me know and like, like, I would tell somebody to do it. And, and when you deprecate the UI layer, and you replace it with a system of intelligence, with then chat and an LLM on top. Everybody’s ICP is up for grabs. There’s no place to hide, like, why is the tooling that my social media manager uses unique to dapper what? Why don’t Why is not the person who’s doing Google search and the person who’s doing display and like, why aren’t they all using the same thing now? Shouldn’t they be like, shouldn’t the system be learning about where I’m spending money on all channels? I don’t need any of this shit anymore. 31:51 I just love this example. Because I was I started as a product manager back in the aughts, right. And prior to the iPhone, and so you eyes were very fixed, very hardware based very tactile, right. And then the iPhone changed the paradigm of UI, because you could have a custom UI for any software instance. Right? Any application could have its own UI and could adapt on the fly one screen could be different than the next. And now like, what you just articulated is kind of AI is the next paradigm where it’s just kind of open and adaptive. My in UX at all times. 32:32 Yeah, it was funny, like in the early if you started, like investing in software in the 2000s. It was all dotnet garbage with Java, it was so bad. It was basically an Excel spreadsheet that you could click on and make stuff happen. That’s what software looked like for a long time. Yeah, 32:50 I remember programming in VBA. And yeah, that and all that. Oh, my horror stories from that. You know, I’d like to get your opinion though. You know, there’s a couple of different narratives coming out about savings and operational efficiency of AI. You know, the first narrative has to do with augmentation of employees and increasing their productivity. The second is that tech can be incorporated into consumer facing applications, reducing churn while expanding satisfaction and revenue. However, gray Croft recently published an article called The price of innovation. AI’s impact on your p&l. In, you know, what are most enthusiast neglecting with regards to the cost side of the equation here? 33:33 Oh, wow, I’m, I’m probably first and foremost, one of the big bulls and promoters of AI, we have, you know, we can cultivate multiple opinions that are desperate inside of great craft. So I will start with, among my team, I see generally only positive, I understand that there will be malicious users. But I also understand that there’ll be opportunity to build tooling and new companies that defeat malicious this AI race. And I’m not like all like, the sky is blue always. But I think on the margin for all of our companies, the ones that are adopting AI now are adopting it with large productivity gain. And many people are far down the curve. I just invented a whole new product because I’m using the same AI front end discussion that we started on. And yeah, I don’t know. I don’t see it the the cost side outweighing the benefit side. Right now for particularly for our companies, which are primarily software companies. 34:47 Perfect. Maybe transitioning a bit here in you know, I saw the news that Scopely has to be acquired by Saudi back savvy games group for 4.9 billion. This is the sixth biggest acquisition on record record in the video games industry. Of course savvy games group is part of the public investment fund, you know, Saudi government fund. And on paper, I imagine this is a huge winner as an investment. How do you respond to those that are critical of the Saudi government’s increasing efforts to acquire various sports and entertainment assets? 35:25 It really good question. We’re really proud, we were the first investor in the company. And, you know, when we went to market, because, you know, for an asset of this size and scale, they’re very profitable. And we ran a process. And at the end of that process, savvy games group was the high bidder for the company. I actually think that the Saudis and savvy games group in particular are playing a very long strategic and tactical game. And it’s not the first time that countries and Japan did this in the 80s. And 90s, have bought pristine US assets and the Japanese owned Pebble Beach, right. So there have been a history of direct foreign investment and partnerships with these countries. And there’s always been some pushback, like we’re selling our best assets to foreign governments or foreign backed companies, they may someday be adversaries, they’re not today, they’re friendly, but they could be their cultures are different. But in the long run, it’s always been to the benefit of America and Americans, because savvy very well could turn around list on the US stock exchange, have us shareholders, and get bought by Microsoft next week. So, you know, like long term, these are business decisions made by business people with good business rationale. And I think that’s the lens that that we view this through, same as when we sell companies to any strategic buyer, whether their money comes from a private equity firm, and that private equity firm has money from Saudi, you know, it’s like we there’s capital in this world. 37:11 Very true. So a few questions on the firm here in the summer, gray Croft announced a core fundraise of a billion, can you tell us what you’re looking for when deploying this capital? 37:22 So the main focus of great craft today is what we call intelligent applications. We’ve gone through kind of a large introspective view of where the world is, where it’s going, what is it what is an intelligent application, but most of our efforts are both consumer and enterprise tools that incorporate AI. In addition to that, there will be all sorts of infrastructure that powers this movement. We’re spending time there, cybersecurity developer tools, coding applications. I expect this will be the the majority of where our money goes there via a second group of companies. And we think about these businesses as companies that they they’re not necessarily software businesses that they could be an insurance company, for instance, but they would be building internal software that they think gives them an unfair competitive advantage. And then internal software, in all likelihood has a lot to do with AI since that’s the trend. But if you could build an insurance company that had 100% automated claims processing, which is a half the headcount of of every insurance company’s claims, you’ve taken a business and increase its operating margin by 50%. So like, we’re looking at at these types of opportunities of AI writ large, in addition to you know, the software applications 38:52 themselves. And then Ian, you recently announced a sustainability fund with Coca Cola. What is your plan for this fund? 39:00 So So coke has the detailed roadmap sustainability is core to me go to their website, and every fifth word on cokes website is sustainability. The reality of cokes positioning today is they care deeply about chemical recycling, in particular plastic. Water is really important for Coke, transportation and efficiency and carbon in their supply chain. cokes products are best when consumed cold. And that means that they supply refrigeration to retailers all around the world and that refrigeration requires electricity. So you know we are these are all new areas for Greycroft. Right? We’re primarily a software and consumer products investor if you go back through our history and media, and we’re really grateful that that coke picked us for this endeavor because it brings us in To a new space, and it’s a new space that, that we see tremendous opportunity in. And it comes with copes distribution. So part of the funds mandate is finding opportunities that we can pilot post investment. And we want to pile them right away. Because we work, we’re working not only with Coke, but also with the bottler network, which is that they owned the production facilities all over the world. And this is one of the largest global manufacturing companies. It’s unbelievable in scale. And just the amount of product that shipped 40:38 all over the world. does it operate like a traditional fund, like a committed fund? 40:44 Committed fun, great crafts, the the GP or the IC? So ultimately, we I say we control the IC, but you know, it’s a great profit vehicle. 40:56 Got it, but you can you get tremendous help, I’m sure with customer discovery. 41:00 Oh, absolutely. Absolutely. And then, 41:02 you know, let’s talk a bit about 2020 2021. Right, peak hype cycle, big firms deploying lots of capital, I suspect, you know, on rough estimates that Greycroft deployed hundreds of millions, taking a sober assessment at this point, how do you think those vintages perform, 41:21 oh, it’s gonna be tough, it’s gonna be tough for the industry. Yeah, I’d say we were deploying about 300 million a year, we did play 300 million a year for many years, back to probably 220 18, peak about 300. And like many venture managers, we’ve now been marking that whole portfolio to market. And I think, you know, we were not the last money in in most of these companies, which is the great benefit of being our size and where we are in the ecosystem. So, you know, if there was a two to 3x, step up, and we take a 50% to 70% mark down, we’re still in the money on many of these companies, which is good. Not all of them, but many of them, I think the hard part is going to be figuring out the exits, and restructuring the cap tables, and we’ve reserved a lot, not everybody has reserved a lot from those vintages. And the ability to deploy those reserves to fix some of the issues is going to be really important. And then the second thing you’re going to see is private to private combinations to build companies that are big enough to take public because the plan in 20, or 21, might have been well, look, we’re gonna grow 100% a year, for four years, and we’re gonna have a company, that’s going to be I’m just in my head 248 16 times bigger, and then that company can go public. But now you’re like, Well, I, you’re not gonna grow 100% a year for four more years, because you’re gonna burn too much money, and it wasn’t really profitable to grow that fast in the first place, you’re gonna grow 30% a year, now you’re stuck, because you’re not going to get to 16 times bigger and take the company public anymore, you’re going to be two to four times bigger, so I need to go merge with somebody else who’s in the same place. And we’ll do some 5050 deal and take out costs, and then combined will grow a little faster. And we’ll be more efficient, you’re already seeing that. And that will be one of the key motions for VCs, to create returns where, you know, business as a software business, they they merge with another software business. Now I’ve got two products that they may be adjacent, they may be in the same industry, but I only need one team to run them. And it’s great time to be an active investor, because we’re in there having these discussions all the time. I’d like to get your quick thoughts 43:57 on the public versus private markets. You know, we’re we’re recording this in early August, the public markets are doing well. Great. Private Markets are are not right. The the IPO Windows effectively closed. Lots of you know, late stage capital is constrained significantly. Do you think we’re just in a more rational, stable, traditional venture market now? Or does it? I mean, it feels like a true recessionary time in, in the VC space. You know, how do you square kind of the, what’s going on with the public markets with what’s going on, you know, in the early stage, and it says VC market. 44:40 So most public companies are profitable now of them, but most the ones that aren’t, are not doing well. And the ones that are doing great, the thing that’s happened is, I think about maybe the 10 year Treasury I don’t know what the right proxy is for the long term. discount rate, but it basically was zero. And now it’s whatever 4%. So you’ve got baked in expectations of discounting. And if you’re not making any money today, you’re not making any money tomorrow, and you’re not gonna make any money for five years, that discount rate really should weigh down the valuation of your firm, because you have to invest a whole lot, and you have to make a whole lot in the future to overcome the compounded impact of discounting. And so I’d say it’s not necessarily public, private, it’s just profitable nonprofit double is, is the line in the sand, where valuations inflect. And then the second thing, and I think about this all the time, so we have dry powder, right, and many venture managers have dry powder. And some of my LPs are delighted that we have dry powder, and others like, well, you should call capital and invested faster, because we committed last year and you know, like, whatever. And my response to that line of questioning is, look, every time we call capital, you and Greg Crowe, if I’m a big investor in the fund, personally, I have to sell my liquid public stock. So I have to sell Apple and Google and Microsoft and metta and Vidya and Tesla, just like my LPS do, those, by the way, are perhaps the very best companies that have ever been built. Right? Like, Apple may very well be the very best company ever built ever in the history of mankind, I gotta go sell shares of that, to go fund this startup thing that I’m excited about. So it really has to be good. And that’s the barometer. Because otherwise, like, You’re not calling capital, I’m gonna leave it invested in those in those better companies. And, and those companies have a great built in return, and they perform well this year, and they’ve propelled all of the indices. So you know, this, particularly in 47:04 the context of what you said before about AI, maybe the incumbents, 47:10 they are as well positioned to take advantage of it as any company. So you know, we’re weighing this. And it’s resulting in a measured pace of capital deployment, because if we swing the bat, we’re swinging hard. Interesting. 47:25 All right. And if we could feature anyone here on the show, who do you think we should interview? And what topic would you like to hear them speak about? 47:32 I mean, you should interview Mark Cuban. I’ve been on him, for probably two, it was Mark, for Dummies, a lot of fun. And that is a point of view on everything, ranging from the SEC, all the way through to how to hire and bonus people. So it would be a wide ranging and very interesting discussion. 47:54 What’s the handicap on Mark running for president? 47:57 I don’t think it’s gonna happen. 47:59 Not gonna happen. No. 48:00 I mean, if I’m Mark Cuban, I’m not running for president who wants that? That’s not a sound good. 48:07 Now, it sounds terrible. Funny enough, we were just trading emails about a deal. Do you? And do you have any habits, tactics or techniques that are a secret weapon? 48:16 Oh, boy. Probably not really. I mean, I, I’m a workaholic. So like most people, I just do what I say I’m going to do and I do it today. I don’t procrastinate. But I don’t think that’s a secret weapon in 2023. So, in short, not really. And that, and I mean, I’d say that what makes me different? Probably the way I would answer this question is I am a relentless info junkie. So I will I will sit at home. People say like, what are you reading, and I have stacks and stacks of random stuff. Like I just print things out. I’m reading National Bureau of Economic Research Papers, I’m reading papers on slippage and trading, I’ve got MIT Tech reviews deck to the ceiling. I’m reading about rust programming language. And I think in order to be good at venture, you need to be the type of person that has a very, very wide ranging set of things that you’re curious and interested in. Because it’s the cross pollination of these ideas, where and the remixes and the intersections. That’s where the great ideas come. 49:30 Do you have a really good memory? Or does it all just kind of end up in the subconscious? And then 49:35 the my wife, my wife would say, I remember everything. I don’t know if that’s true, but I don’t know. You can test me. Maybe better long term than short term. It depends on like how much sleep I’ve gotten in the past few days. 49:48 Well, Episode 800. We’ll have you back and we’ll 49:51 we’ll tell you that you can quiz me on what I said. 37 minutes in on the podcast. 49:56 There we go. And then finally here in what’s the best way for listeners to connect with you and fall Along with Greycroft, 50:01 probably LinkedIn, I’m uniquely active on LinkedIn, or Twitter. Those are the two platforms that social platforms that I spend time on. And if there’s an Instagram person who friends you would maybe an imposter. I’ll just put that out there. There’s a lot of like, en sigillo imposters from I believe Russia on Instagram. Just be cautious on that platform. 50:25 Very good. Well, the man is en sigillo. The firm is great craft. Thank you so much, sir, for spending the time with us today. I’ve been looking forward to this interview for a long time. Thanks, Nick. 50:34 Good to meet you. 50:41 All right, that’ll 50:42 wrap up today’s interview. If you enjoyed the episode or a previous one, let the guests know about it. Share your thoughts on social or shoot them an email. Let them know what particularly resonated with you. I can’t tell you how much I appreciate that. Some of the smartest folks in venture are willing to take the time and share their insights with us. If you feel the same accomplishment goes a long way. Okay, that’s a wrap for today. Until next time, remember to over prepare, choose carefully and invest confidently thanks so much for listening Transcribed by https://otter.ai