E450: Brijesh Jeevarathnam on Why Venture Is Eating Public Markets, Picking Great VCs, and the AI Boom

What if just 7% of venture-backed companies generate all the gains, and the real skill is identifying the managers who can find them first? In this episode, I sit down with Brijesh Jeevarathnam, Partner and Global Head of Fund Investments at Adams Street Partners, to explore how institutional investors identify exceptional venture capital managers in an increasingly crowded market. Drawing on more than 20 years of experience evaluating venture and private equity funds, Brijesh explains why the best VCs think independently, how they earn access to extraordinary founders, and why past performance is often the least predictive part of manager selection. We discuss how Adams Street evaluates emerging managers, the role of information asymmetry in fund investing, and why venture capital is increasingly capturing value creation once available to public market investors. Brijesh also shares how AI is changing institutional due diligence and why the next generation of transformative AI companies may still be ahead of us.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  Venture is an information asymmetry business. We have confidential information within a core wall that we only share with ourselves, the investment team, that we can leverage to get to the best companies one or two steps earlier.

• 0:16David Weisburd?

  How do you know early on whether a venture capitalist is a founder whisperer?

• 0:21Speaker 00

  A canonical example that people talk about might be Elad Gil. He wrote the Growth Handbook and he's very revered as a mentor and a company builder. They have enough founder trust and confidence in company building chops from before to still end up early on the cap table.

• 0:43David Weisburd?

  What inning of the AI boom are we in?

• 0:45Speaker 00

  I don't think a single person has told me it's going to post the fifth inning. It's still broadly kind of first half in people's consensus. I like to sometimes go back and watch a presentation or a new product release from OpenAI on topic and see what those very smart people, Sam Altman, Dario, say. And what I find interesting is with the passage of time, even they cannot quite foresee where this is all going, right?

• 1:13David Weisburd?

  I talked to USV Benchmark, they're raising their growth funds for the first time. They believe that power loss still exists at the growth stage. Do you think power loss could still really exist at that late stage of a company?

• 1:25Speaker 00

  It depends on.

• 1:28David Weisburd?

  So, Brijesh, you've spent over 20 years evaluating the very top private equity and venture capital managers, first at Common Fund, now at Adam Street. If you had to summarize what makes a great venture capital manager, what would that be?

• 1:43Speaker 00

  A great venture capital manager is somebody who can see around corners and kind of see and think about the world in a way that seems completely non-obvious. I remember a great quote, Mike Moritz, who's obviously Sequoia, great venture capitalist. And the quote was, "People always said Mike was a loner, and that's because he was always so ahead of the pack." And I thought it was a pity way to talk about how somebody like him, Mike in this case, and other great VCs like him, can appear off the reservation in a way. But really what they're doing is they're thinking about the world

• 2:26Speaker 00

  in ways that other people don't. Not every vision, not every thesis works out, but enough work out to build a portfolio of great companies. So that's a key aspect. The second key aspect is more maybe bottom up at the people level. These great VCs can attract and win over founders. We call them founder whispers in a way. They resonate with founders in a very fundamental way. And founders choose their money, their capital versus other sources they have. David, as we know, the best founders have many choices from where to draw their capital from to build their companies.

• 3:08Speaker 00

  And in that extent, capital is a commodity, right? Not generally, but in the specific case for a great founder. So these great VCs can find a way to be the board member of choice, so the early backer of choice for these founders. And that's another amazing trait, I would say.

• 3:26David Weisburd?

  I want to get into in a bit about what makes a VC a great founder whisperer. But first, you said the Michael Moritz kind of being lonely away from the pack and being this independent thinker. One of the most underrated memes today from Marc Andreessen is this idea that there are no more diamonds in the rough, only diamonds. Does that still apply today?

• 3:49Speaker 00

  Marc is a much more profound thinker than I on these topics. I might have a slightly different view on what Marc said. And I did hear that whole segment. I think what he was trying to say is the diamonds in the rough are off by one. And there's a reason why they're off by one, like the founder is unusual or a different geo, or the thesis has evolved, the founder is hard to work with, etc. We think about the world a bit differently. When we look at our portfolio, when we look at the few companies that drive returns, and we'll come back to this topic, the power law in venture, which everyone knows about. I'll share some statistics on it in a minute.

• 4:30Speaker 00

  What we look for is who backed these companies first? Who backed them early before it became a bit more of a feeding frenzy? So it's not enough to be in company X, this great potential winner. Who can back the first run of company X when it was far from the breakout winner, right? So I guess in that sense, those companies are diamonds in the rough. And there are great GPs, great venture firms, that have a consistent way of getting there to be the first or among the first to invest in a company that is not yet obvious to the world why it's going to be the potential winner in a category, and then help build it to become the winner.

• 5:13Speaker 00

  So that's our view on this, slightly nuanced from Marc's view. And I do think there are many examples where even today in this world of potential FOMO and potential consensus thinking, if you go to the earlier stages, there is kind of non-consensus thinking in the seed, Series A, etc., around backing these great founders and hoping they'll become something in the next few quarters or years.

• 5:40David Weisburd?

  This episode is presented by Juniper Square, the operations partner for private markets.

• 5:47David Weisburd?

  So another way, sure, there might be consensus at some stage, but if you keep on walking it back, back, further back, it's absurd to think that there's consensus when it's just two founders thinking on an idea. That's kind of an absurd idea. So the question is, when does this consensus form?

• 6:04Speaker 00

  Yeah, it's hard to draw a bright line and say this is where the consensus is. If I had to take a step back, I think we should talk about what venture is today versus what it used to be. And you started by saying, I've been in this industry now of selecting managers, both venture and buyout, for 20 years. And boy, the time's flown by. And what's also happened is the industry's really changed in that time. When you look at the venture industry today, depending on which source you look at, there are about 4,000-ish firms, 3 to 4,000, let's call it. When I go back to when I started in the industry, 2006, 20 years ago, 2006,

• 6:46Speaker 00

  there were about 500 firms, active firms, per PitchBook and NVC data ballpark. So that's an 8X-ish increase in the number of firms between now and then, right? Not only has that gone up, the number of firms, the amount of capital going into venture-backed companies has gone up. You know, we're looking at, I think, NBC as a third quarter, we're at 500 billion plus, which is a mind-numbing number. To think about the number of startups has gone up. And it's now, I believe, at like 40,000 companies or whatever, venture-backed startups, which is an 8 to 10X increase from 15, 20 years ago.

• 7:29Speaker 00

  My point in saying all this is venture is no longer kind of a craft industry. It is very small compared to the public markets, obviously, still. But it's expanded in scope, in size, and broadly funding aperture to a point where we may have to use different terms to talk about the different parts of venture. To answer your question, to tie it back to that, it's not clear to us exactly when a company becomes consensus. In today's AI world, the letters don't mean much. Series A, B, C, D, as you know, companies raise kind of five rounds in one year kind of thing. But there is a point when maybe the company's found product market fit,

• 8:10Speaker 00

  they have some marquee customers, and they're seeing a high net dollar retention and so on. When these companies in a particular subsector break out from the crowd, right? At that point, clearly it's consensus. Before that, you pick any category, it could be, let's say, AI. It could be at the hardware part of the stack, or the infrastructure part of the stack, or the app part of the stack. At the very earliest stages, it's unclear who's going to break out, right? And that, I think, is the magic and the alchemy of venture. And our focus, we are a full-spectrum investor from seed all the way through kind of growth stage.

• 8:52Speaker 00

  But our focus remains on the early part of the spectrum.

• 8:57David Weisburd?

  Today, does what you look for in VC managers, is that dramatically different than even five years ago?

• 9:05Speaker 00

  Yeah, some things have changed, but I would say most things are perennial. High level, we have always looked for three attributes to be strong. Those three attributes are number one, the investment team itself in the venture fund. Number two, it is the investment strategy they're pursuing. Number three is the track record in venture. Of the three, as you can imagine, the third, the track record is the most quantitative. It is also backward looking. So while it's good to have, it is in many ways the least important indicator of future success.

• 9:48Speaker 00

  So we spend a lot of time on the softer aspects, which is the team and the investment strategy. The team, people ask us, what do you look for? Many things such as intelligence, academic accomplishments, prior experience in an industry. They're all table stakes because there's so many folks who check those boxes, right? What we're looking for beyond that is we're looking for a few things. One is the chemistry and the level of complementarity between the team. There are many teams where it's like a basketball team, right? There's a version of a center and a point guard and so on and so forth. People have different skills, but combined they make up for a force that is really hard to beat in a competitive market.

• 10:31Speaker 00

  And they're able to, once again, see around corners because maybe one of the partners has a particular skill with people, the other one is more numbers oriented, one is perhaps good at thinking about markets and products, et cetera, et cetera. Right? So we're looking for that kind of magic to happen in the combined team composition. We're looking for harmony between them. One of the bigger risks we take is that there is team, I'll call it disharmony or fallout, et cetera, et cetera, which happens in partnerships, right? We're also looking for an X factor, and it's really hard to quantify what that is. It is kind of a chip on the shoulder. It can be from many things. It can be from the way somebody grew up or where they grew up or being fired from a prior

• 11:15Speaker 00

  job, including a venture fund or many, many things. Josh Wolfe of Lux Capital has a great quote on this. I think he says, chips on shoulders, put chips in pockets, right? And this X factor is important because the best VCs, I guess the best founders as well, of course, they're driven by economics and by their net worth, but they're driven by much more than that. They really want to, quote unquote, do something, achieve something, show the world. You can use whatever set of words you want, but those folks are the ones who keep on going. And they will find a way to outwork, out hustle and win against folks who don't have that X factor.

• 11:54David Weisburd?

  When I think about chip on shoulders, dozens of entrepreneurs come to mind, people like Palmer Lucky, people like Adam Newman. When it comes to venture capitalists, what are some examples of great VCs that have this chip on their shoulder?

• 12:07Speaker 00

  I'll stay away from the names here, if you don't mind, but I'll give you some archetypes, perhaps. We back both franchise managers, well-known names, but also we back a number of fun ones and twos. And these fun ones and twos, they're folks we've known for typically five, 10 years. So it's kind of very much a relationship that is long-term. So we know the folks. The archetypes of these kind of folks that we back, besides sticking all the basics, would be they had a, let's call it a not the best departure from a prior venture firm, for whatever reasons, of their own choosing, of the other firm's choosing, and/or that

• 12:50Speaker 00

  firm has gone a direction in terms of scale or geography where they feel they cannot practice their craft the same way. And now the chip on the shoulder is, I guess, to put it in human terms, I guess, I'll prove you wrong. I can do this without the shingle of great brand X or without the calling card of franchise Y. And that is one archetype. Another archetype would be folks who have been, let's say, operators before in a startup or maybe they had a startup that failed, et cetera. And they've had a tough time in the LP market fundraising. And they have an interesting thesis.

• 13:33Speaker 00

  They, from our vantage point, have the right to win with entrepreneurs and they're raising usually a kind of a modest fund, but they've taken enough bruises in the LP fundraising journey. They are really motivated to kind of prove, you know, that they can belong with kind of a, let's call it a franchise set of venture managers. Now, we don't back many of these. We back some of these folks. What's great is if we can find them early and get into their fund one or two, that quality of relationship we can build with them is exceptional because they never forget, right? They might have allegiance to all LPs, but that first one or two keystone LPs that kind

• 14:15Speaker 00

  of put them in business, quote unquote, that is another great archetype as well of venture firms we like to back early.

• 14:21David Weisburd?

  What is a second order fact of an LP having a great relationship with a GP?

• 14:25Speaker 00

  The main thing I would say is venture is an information asymmetry business. Now, that has shrunk with what's happening in the world, meaning there's much more information available out there, including about startups, right? But there is still, I would say, compared to probably most other asset classes, massive information asymmetry in terms of both the venture partnerships themselves, but also about the portfolio companies. And our business as allocators of capital and direct investors in companies is to get access to as much of that information as possible, the inside baseball, if you

• 15:10Speaker 00

  will, before we make a decision on a venture fund, a next LP recommitment, or investing in a next round of a business. So what that access, that relationship gives us is a look inside the tent before we back that next manager. I'll give you a thing we talk about all the time. Our re-up on a venture fund begins the day after we commit to the current one. So in other words, it's a three-year process before they raise the next fund or in continuous DD on the next fund. What do I mean by that? In that time, we're talking to people in the network, we're talking to our close GPs, founders, we go to social events.

• 15:55Speaker 00

  We're picking up all this intel that I like to think we're a bit more privileged to get the extra kind of like 10, 20, 30% that helps us make better decisions on both the next venture fund we're investing in, but also the next venture investment directly into a company that we're considering.

• 16:14David Weisburd?

  In the venture investing game, oftentimes you make investment and three months later you're like, oh, man, I made a mistake. How long is the shortest time that takes to understand that you made a mistake on the GP side?

• 16:29Speaker 00

  That's a good question. This is a long feedback loop business. And unlike investing, let's take the public markets equities as the exact opposite because you can know in days and suddenly in months and quarters that, you know, something is not going well or going well. This, in the venture LP part of the business, it takes, I would say realistically, four to five years before we have high confidence on the quality of the first decision. Now, if I take a step back, there are many early indicators of how it's going. Those indicators are, right away, you look at the portfolio they're building and you

• 17:10Speaker 00

  get a sense of, are they executing to strategy? Are they getting the kinds of ownership percent in these companies that they were targeting? If they were looking for, and I'm making this example up, a portfolio they were going to build with, say, 25 companies, get about 15% average ownership, early-stage companies, et cetera. But if they put kind of 10, 20 companies in the portfolio and they're like getting little itty-bitty parts of ownership in the company, 2%, 5%, then something is off. And we can kind of, we need to have a conversation about why their playbook isn't working out the way they wanted it to.

• 17:55Speaker 00

  There are other indicators as well, the team itself, the team chemistry and how they are working as one unit. We have a lot of network node points with the founder world and other GPs. We hear kind of, oh, I saw this firm in the deal I was competing in and they beat out another firm, right? And those indicators are the interim markers. But the reality is, we don't know for a while, till kind of year four and five. And as you can imagine, famously, there have been examples where things look bleak for year four, five, six, et cetera. And then because it's an outlier business, it just takes one great investment to catapult

• 18:38Speaker 00

  that particular manager or fund back into the spotlight and into, let's say, top decile, top quartile returns.

• 18:46David Weisburd?

  This whole question about VC skill is my answer to this Peter Thiel question, which is what do you disagree with other smart people in your industry?

• 18:56David Weisburd?

  And I think a lot of VCs will even say, well, you don't know 14 years in because you invested the pre-seed and then 14 years it takes to go to IPO. I think it's absolute bananas that people, people look at that kind of timeframe. I think really there's two different aspects to it. One is if you, if you look at GPs kind of from these two different frames that we looked at before, which is somebody that could get access, that's a skill, and somebody that could be non-consensus. Sure, on the non-consensus thing, it could be like SpaceX, it took 24 years. So maybe 14 years may not even be enough to know that you're a good investor. But on the access part, I think you could know probably within two, three years, within the investment period, whether someone is truly great.

• 19:39Speaker 00

  I agree with that second, with both the points you made. And that's one of the, as I said, the kind of early litmus test of is this venture firm moving in the right circles, i.e. seeing the best deals and then winning?

• 19:59Speaker 00

  One of the challenges of that is in the very early stage, seed, series A, these companies, it becomes a bit, it takes a while for them to truly become winner circle companies, quote unquote. And so just to even know if seed investment X made, let's say, this year is a good one and they're the best founders in the category, it's going to take two, three years, right? So.

• 20:28Speaker 00

  In the seed and early stage, this is still a challenge, either long feedback loop, but I fully agree with your point. There's many interim markers of is this investment in Fundex a good one or not?

• 20:41David Weisburd?

  So I want to go back to this concept of the founder whisper. How do you know early on whether a venture capitalist is a founder whisper?

• 20:53Speaker 00

  That goes back to my point about tapping our network for references and speaking to a lot of participants in the market. We like reference lists. We love off the list references and we have a big enough network now where we can talk to people, founders, that is, and get a sense of venture firms relevance and attractiveness to founders. A canonical example that people talk about might be Elad Gil. I mention him only because

• 21:32Speaker 00

  he wrote the Growth Handbook and he's very revered as a kind of a mentor and a company builder outside the founder of the company. There are greatness like that where these folks, they may not be the domain expert in said company's kind of domain, but they have enough founder trust and confidence in company building chops from before to still end up early on the cap table. I really think it comes down to a resonance with the

• 22:13Speaker 00

  founder's worldview and empathy for what they're doing. And it's hard to kind of say what kind of person, what archetype is best suited for that. What I mean is there are career VCs who are good at this, that are former operators who are good at this. And I think it comes down to a personality type and really making the effort to build the trusted relationships with the founder community.

• 22:40David Weisburd?

  One thing I've learned from talking to hundreds of investors is that great investment firms aren't built on investment returns alone. The firms under are great at the things most people don't see, their operations, their relationship with LPs, and the quality of information they use to make decisions. And here's what AI has changed. Every firm now has access to the very same models, so the intelligence isn't the edge anymore. The edge is what you could feed it. A firm with its fund operations and data in one connected record can actually put AI to work. A firm running on disconnected systems simply can't. That's why thousands of GPs run their funds on Juniper Square. Juniper Square puts your fund operations, data, and administration together in one connected

• 23:20David Weisburd?

  record. That means less time managing disconnected systems and more time investing, working with LPs, and building your firm. This episode is brought to you by Juniper Square, the operations partner for private market GPs. Learn more at junipersquare.com/HowIInvest. That's junipersquare.com/HowIInvest. There's been this ongoing battle, probably since the beginning of venture, since 1970s, about what makes the best venture capitalist, this career venture capitalist versus this founder turned venture capitalist. Where do we stand on that today?

• 23:52Speaker 00

  10, suddenly 20 years ago, there were all kinds of great VCs with, I'll call it idiosyncratic backgrounds. And once again, the examples might be, I'll pick Mike again, Moritz, who was a journalist, or people that were more in a sales function in their prior role, not exactly like deep technologies who came in and became great VCs. And now, I think it's still, it's not true that there's one spec, but I do think what's happening is, in this moment in time, the technical chops of a venture investor get put to the

• 24:37Speaker 00

  test very quickly. The founders these days, and I'm generalizing, tend to be very young, often very technical. And if you don't speak their language, it's hard to kind of build a connection, then to build conviction, and then to win the founder over. So maybe the prototypes of what makes a great VC has shrunk a little bit. There are still many different kinds of former careers that translate to VC investing. But I would say it's maybe a little bit less heterogeneous than it was 15, 20 years ago, for the reason I just said.

• 25:14David Weisburd?

  The other thing that's maybe a little bit paradoxical is this concept of the right to win. So a lot of people look for this canonical right to win, but of course, when you're a founder and you're looking to fill your cap table, you're looking to fill different needs on the cap table. So you might want somebody with brands, somebody with a lot of capital, and maybe you want somebody that could help recruit these types of engineers. How much does right to win matter in the context of a startup? And is there such a thing as the correct right to win? Or is it as diverse as there are types of founders and types of industries?

• 25:51Speaker 00

  I do think there's a bit of a difference between the right to win, as you just said, in an earlier stage company, where it's more of a founder bet, and compared to a later stage company, where there are more metrics to evaluate, and frankly, more capital being raised, right? If I start with the growth or later side of the equation, the right to win, even taking a step back from that, even seeing those deals and being able to pick where they want to put that growth check. And nowadays, the growth checks are large,

• 26:32Speaker 00

  as you know, right? 50, 100, $500 million checks. In the very best companies, which are raising a lot of capital per round, it is still a food fight to get on the cap table. The company may be raising half a billion dollars or more. There are companies raising tens of billions now, as you know, but it's surprisingly still a heavily subscribed round. I think in those cases, the right to win might include the brand of both the person and the firm in terms of not just kind of the patina of the firm, but also longevity, like how long they can kind of keep backing this journey. Because as we see, the private

• 27:17Speaker 00

  capital markets are really expanding and eating into what the public markets used to do. And I want to come back to that point. I'm going to park it for now. So the brand matters, the check size, or how deep the pockets are, I should say, really matters as well, right? Can this investor back me not just now, but in six months or a year? But I need the next growth check. And then I think potentially, as these companies prepare for exit, either M&A or IPO, they look for like the right board member to draw from, from these institutions. So those all are attributes, not comprehensive by any means, of the right to win at that stage. If I go to the earlier stage, it might be a different sets of right to win. On the seeing side, it includes showing up at hacker

• 28:01Speaker 00

  houses these days in San Francisco or somewhere else, and I don't know, courting with the best of them, or speaking the language, like I said, or just understanding at the very fundamental level what these often 20-somethings in age, or sometimes even younger, how they see the world and connecting with them. And as you know, at that stage, it really is a founder bet. Somebody else said this better than me, which is, a great founding team and a not so great idea will always beat a mediocre founding team and a fantastic

• 28:42Speaker 00

  idea. Because as we know, things evolve, things morph and pivot and so on and so forth. And being able to win the hearts and minds of those great founders, often starting their first business, that's a very different kind of skill set. It's based on trust, based on empathy, based, of course, on technical skills. And as I said before, that's why the alchemy of venture is, where you can put a small check in a company at that stage, and especially now, take out hundreds of millions, if not billions of dollars out on the other side in a few years.

• 29:13David Weisburd?

  The best example of the hacker house is Josh Browder, Browder Capital. And he has a one-person accelerator. He only accelerates one person at a time. The reason for that is they live in his house. And part of his secret sauce is he wakes them up at 3:00 AM, middle of the night, and asks for more allocation, which I think is both a joke and actually serious. But this is like the ultimate thing that can't scale, is these highly high-value models. It's interesting that you keep on answering my questions at the early stage and the late stage. I just had Eric Swartstum from Angelus, and they have data from, I think at this point, 25,000 companies. And they figured out that they

• 29:55David Weisburd?

  couldn't actually generalize or make any useful mathematical calculations or anything from the entire data set. They had to actually divide it into what they call two asset classes, the early stage and the late stage. It's not just some convenient way to divide the world. It's actually like two idiosyncratic, almost mathematically different parts of the market that to generalize is just, it doesn't even compute mathematically.

• 30:17Speaker 00

  That's very true.

• 30:21Speaker 00

  And the funding round alphabet doesn't necessarily correlate with that, right? It's more company metrics and even the revenues, because some spaces, let's take AI now, the revenue ramps are so steep in a very short time, right? And some of those companies keep just growing at that rate and some just plateau, i.e. there's false positives. But I agree with your point 100%. And one could argue that you could actually kind of micro-segment, and data is the challenge in doing this, maybe into not just two, but three or four kind of sub areas, based on the kind of the product market fit and early customers and reaching positive unit economics

• 31:06Speaker 00

  and so on and so forth. But it definitely is, and this is where I started, venture is not a homogenous asset class anymore. It is, once again, not huge in the scheme of financial assets in the world, but it's become much more micro-segmented.

• 31:25David Weisburd?

  One thing that I've learned from talking to hundreds of investors, founders and business leaders is that planning for the future isn't just about growing assets, it's also about protecting the people who matter most. Life comes with a lot of important milestones. Maybe you're buying a home, starting a family, planning for college, or simply thinking more intentionally about your financial future. As those responsibilities grow, it's worth making sure you protect those you love. Not sure what kind of life insurance you may need? Concerned about how much it may cost? Think life insurance is too complicated? Your local State Farm agent can help answer those questions. They can help you explore your options for life insurance and choose coverage that you can adjust as your family's needs change over time. Financial protection for your loved ones when it matters most. Learn more about life insurance at statefarm.com. Like a good neighbor, State Farm is there.

• 32:09David Weisburd?

  One thing that I've learned from talking to hundreds of investors, founders and business leaders is that planning for the future isn't just about growing assets, it's also about protecting the people who matter most. Life comes with a lot of important milestones. Maybe you're buying a home, starting a family, planning for college, or simply thinking more intentionally about your financial future. As those responsibilities grow, it's worth making sure you protect those you love. Not sure what kind of life insurance you may need? Concerned about how much it may cost? Think life insurance is too complicated? Your local State Farm agent can help answer those questions. They can help you explore your options for life insurance and choose coverage that you can adjust as your family's needs change over time. Financial protection for your loved ones when it matters most. Learn more about life insurance at statefarm.com. Like a good neighbor, State Farm is there.

• 32:53David Weisburd?

  One thing that I've learned from talking to hundreds of investors, founders and business leaders is that planning for the future isn't just about growing assets, it's also about protecting the people who matter most. Life comes with a lot of important milestones. Maybe you're buying a home, starting a family, planning for college, or simply thinking more intentionally about your financial future. As those responsibilities grow, it's worth making sure you protect those you love. Not sure what kind of life insurance you may need? Concerned about how much it may cost? Think life insurance is too complicated? Your local State Farm agent can help answer those questions. They can help you explore your options for life insurance and choose coverage that you can adjust as your family's needs change over time. Financial protection for your loved ones when it matters most. Learn more about life insurance at statefarm.com. Like a good neighbor, State Farm is there.

• 33:37Speaker 00

  What's interesting is, if you look at financial assets around the world, and depending on which source you look at, let's call it roughly 300 trillion, and I'm going to round up these numbers, because the point is not the actual number, but the proportions. If the global financial assets are about 300 trillion, including bonds and equities and so on and so forth, between 90% to 95%, depending on the source you look at, are some combination of bonds, listed bonds, public equities, and maybe some commodities. The remaining 5% to 10% is private markets. And within the private markets, you've got buyout, venture, real estate, et cetera, et cetera.

• 34:21Speaker 00

  And on a look-through basis, venture is very small. But, and so are buyouts, by the way, in the scheme of these financial assets, obviously, sub 10%, as I said, combined. But they're growing at a rapid clip. And the point I want to make is that venture capital specifically, and private markets broadly, are eating the public markets. And if I tie that back to a famous quote by Mark and Bresin, I believe in the 2010-2011 timeframe, "Software is eating the world." And then, I think Jensen Huang said, maybe five years after that, "AI will eat software."

• 35:04Speaker 00

  We think at this point in time in 2026, both those things are true, very much true, have come true. What people talk about, but in my opinion, not as much as one should, is private capital markets, especially venture capital, is eating the public markets. And let me kind of expound on that for a second. If I go back to, say, 25, 30 years ago, long time, obviously, in the scheme of things, but in the scheme of financial markets, not that long, there were 8,000-plus public companies in the US. And as you know, that number is now about half, let's call it 4,000 companies now, roughly, in the US, public equity, publicly listed companies.

• 35:47Speaker 00

  So that number has gone down by 50%. At the same time, the combined market capitalization of these companies today, rounding it up, roughly 80 trillion, has grown about 9 to 10x over that time period. And while public market investors still have a lot of choice in where to put their capital, there are fewer choices than 20, 30 years ago. At the same time, venture capital has taken market share in the sense that financing rounds or investment entry points that were available previously to public investors

• 36:31Speaker 00

  are available only to venture investors. That company raising at a $5 billion valuation and raising $200 million, for example, that is only available to private market, i.e. venture capital investors. And if you look at some of the exits, whether it's Wiz at $32 billion, got acquired, as you know, of course, or canonically SpaceX at a 1.8, whatever trillion it was at the end. In theory, the first entry point for public investors was at that tens of billions, or now crazy to say trillion-plus mark. And all the value creation from zero, that first seed fund, 20 to 30 million, whatever

• 37:11Speaker 00

  it was, to tens of billions, let's say, cursor at 60 billion, for example, to trillions, happens away from the public markets. And my point in saying that is, we think, and I know I'm talking in my book and saying this, we think venture is not a luxury now for institutional investors, it is a necessary complement, a necessary addition to the public books, the public equity exposure, so that these investors, with a long timeframe especially, have balanced exposure across the value creation spectrum. They're not just getting in in the fourth, fifth or sixth inning of value creation.

• 37:56David Weisburd?

  Absolutely. If 20 years ago, these companies, Amazon, Google, were going public at sub-billion dollars, you could actually have invested in the IPO price and done even better than the Series A, Series B investor, if you continue to hold it. Today, obviously, it's very difficult to argue that SpaceX has another 10,000x, as much as a holder and bull I am of SpaceX. There are limitations to, once a company goes public at 1.75 trillion. I had Matt Wilt Tyler, who runs growth at Wellington, we talked about this topic. And there's two aspects going on here. One is, you mentioned 80 trillion in public markets. Venture, I think the latest AUM number is roughly 3.5 trillion.

• 38:39David Weisburd?

  So, you know, roughly, it's about 20x more in the public markets versus the private markets. That's assuming all things being equal. I actually think all things are not being equal. And a bit of a contrarian take, but I actually think that the reason that SpaceX went public at 1.75 trillion, the reason that Anthropic is going public at a reported $2 trillion, the reason OpenAI will have to go public, is because they've run out of private capital. Q1 2026 this year, 75% of all of venture capital went to just five companies. Said another way, if they raised another round each, if they doubled the amount of money, it would be 150% of all venture capital. Forget about even 100%.

• 39:24David Weisburd?

  And if you look at ground truth in venture capital in general, we call it this access class. What does that mean? That means the founders choose the VCs that they want to invest, the best founders, and the best VCs choose the best LPs. So if you take that to ground truth, and then you look at the founder level, I've never met a founder, especially a great founder, that says, I want to go public tomorrow. I want the scrutiny of quarterly financials and all this stuff. Sure, there's some people that want to ring the bell and have a milestone. But I'd say 90-plus percentage of the top founders, they want to be able to build their company privately. And the problem with that is just there's not enough venture capital. So I actually think if that three and a half trillion was now seven trillion, a lot of that money would, for better or for worse,

• 40:09David Weisburd?

  be absorbed by the same five companies doing just one or two more rounds.

• 40:13Speaker 00

  That's an interesting point. And I think the premise of these companies go public because they have run out of private financing options. I think it's always been true. It's just that the private markets have expanded their investment aperture along the way to accommodate much bigger investment dollars and much longer timeframes. And we can talk about whether it's good or bad and the cost of capital and so on for the later-stage investors. But I do think that across the spectrum from very early stage to, let's call it, pre-IPO round, the opportunity to make, maybe not 100x, but attractive returns

• 40:58Speaker 00

  or attractive risk-adjusted returns has really expanded over time. And that is cyclical, of course. The closer you get to the exit part of this, it gets more cyclical. But the venture market today is no doubt massive, as I told you, 500 billion plus in three quarters compared to even a few years ago, and certainly compared to 15, 20 years ago. And the question is, where does one draw the line in terms of where can I earn an attractive risk-adjusted return in the private markets? And where does it get maybe a little bit upside down?

• 41:41David Weisburd?

  I want to also double-click on something that you said, that investors can't afford not to venture in their portfolio. I'm summarizing. And there's two aspects to that. One is, you could argue, from the return standpoint, over the last 50 years, venture capital has been the best-returning asset class in the world, outside of sports teams. I've been corrected on that. But if you can't afford the Pittsburgh Steelers or the New York Giants, venture capital is the best asset class to own. On top of that, just 87% of $100 million-plus revenue companies are private. So there's actually another aspect to that, which is diversification. You can't just access technology in the public markets. You're just going to have like a small portion of the portfolio. So in order to have a diversified

• 42:24David Weisburd?

  portfolio, in order to kind of have the optimal risk and reward, there's an argument that you should be in venture just for the sake of diversification, let alone returns. Earlier on, you were talking about these three things that you look for in teams. I realize I cut you off. You said chips on shoulder, and you also said team and team cohesion. What else is important when you look to invest in a venture capital manager?

• 42:48Speaker 00

  Three things. The team, which we talked about in terms of not just having the table stakes of being super smart, connected, et cetera, but also having team cohesion, complementary skills, and a chip on the shoulder. We talked about, that's one. We talked about the track record, which is backward-looking by definition. The third bucket we haven't talked about is investment strategy. And by that, I mean, what is the investment thesis in this market? What's the worldview? And what is their kind of stage that they're pursuing to invest in? What's the portfolio construction? Do they have the right network connectivity?

• 43:27Speaker 00

  And the, now overused, I guess, phrase, right to win in that particular part of the market, whether it's early-stage seed investing, or growth, writing bigger checks, et cetera. And as you can imagine, this, as I talk about these three buckets, it's art and science, right? You can't just kind of put this in an AI model and say, hey, should I invest in this fund or not? There is a very heavy people element to this assessment. And we were talking before about the feedback loops. The LP job, the feedback loops are very

• 44:03Speaker 00

  long. And we have to work extra hard to make sure we capture the feedback and then make changes to course correct. So we, for example, at Adam Street, we have three to four times a year, I'll call it kind of offsites and mini-offsites, two main ones, one in Jan, one in June, with the entire team, the senior team, to talk about a number of things, including what we call our anti-portfolio. What'd we miss, you know, three years ago, five years ago? And what was our underwriting then? And how has it changed? This business is

• 44:44Speaker 00

  very humbling. David, when you invest, you make both kinds of errors, both omission and commission. And we don't need to be in every great fund, but every fund that we invest in, we want it to be great. And we make both those errors. So anti-portfolio is things we missed. And then we make the other kind of error as well, which is, you know, I think kind of four, five years in, we got this one wrong. It's in our portfolio. What did we miss? Or what has changed since then? And that kind of forcing function of looking at it two to three times a year helps hone our thinking. And human nature is, we

• 45:26Speaker 00

  forget this recency bias. But by going back three, five, seven years and looking at what we did right and wrong, we've, I think, found a way to institutionalize and build upon this very long feedback cycle into something we keep improving every year.

• 45:42David Weisburd?

  It's not an easy job to be an LP, because you're constantly thinking about all these different frames, all these memes that you have to remember, all these like mistakes that smart people make. And then you need to, the next day, go and break these same rules that I've been hammered into for decades, especially today. So many things are changing, and you have to figure out what's changing, what's the same, what doesn't even fit into this like changing versus non-changing framework. You have to truly think from first principles.

• 46:08Speaker 00

  It is challenging. And let me share some stats around that as well, because our job as allocators, both in venture and buyout, has become more difficult, simply because there's way more firms. And therefore, getting to the signal and parsing out all the noise, it's just much harder. I think I said this before, there are something like 3,000 to 4,000 venture firms in the US alone today, and that compares to something like, say, to 400 to 500 in, say, 15, 20 years ago. And when I first started in the business, it was kind of clear of those, let's say, 500 venture firms in the US, which maybe

• 46:53Speaker 00

  10 to 20 were the ones that really were exceptional. And it was less about picking, it was more about getting access when I first started. Today, with 4,000-plus venture firms that are active, there are years, there are cycles where more new firms are created, venture firms, than ever existed when I first started in this business. So we're meeting these new firms, and all these names, and these great people, et cetera. And this is especially hard in an outlier business. As I'm sure you've seen the stats, we're fortunate to have 40-plus years of data. We've been investing in venture capital funds

• 47:33Speaker 00

  and companies since the 1970s. And we use the data as an offensive weapon. It's obviously proprietary. And our data tells us that 7% of venture-backed companies generate all the gains, and the rest, 93%, is just a wash. It's just noise, right? Now, of course, ex ante, before the investment, no one really knows which 7% I'm going to make it. If I go up one layer from that to the managers, right? Just like there can be an outlier effect at the company level, the funds that back these companies, some can get lucky,

• 48:17Speaker 00

  or some can kind of really find, to use the prior phrase, we talked about diamonds in the rough, et cetera. And it's really hard to predict in a linear way, attributes kind of A, B, C, and D make for a great venture manager. We've got to think really kind of outside the box and change our playbook, et cetera. So we invest in about, let's say, 20 to 30 venture managers in the US. And we're picking, as I said, from a cast of about 4,000. And previously, it was clear what those top maybe 30, 40, or 20, 30 would be. Now it's not so clear. And it makes our job extra hard. And I think this is where

• 49:02Speaker 00

  the job of an allocator has become much more challenging, because we have to move fast. These funds, they come back to market, they raise capital quickly. We have to really broaden our coverage. We're looking at many more funds and sectors and so on than before. And in that sense, to a certain extent, it's become like direct investing, because you're investing in a much more noisy space with arguably even less data than before. And that's the challenge. And that's where we kind of leverage our, not just the data,

• 49:44Speaker 00

  but the investment judgment of the people we have. The cliche about it's a people business is true in investing. And we're fortunate to have a team that is now approaching 40 people strong, that spends all their time selecting managers. And some of the folks on the team have been doing this for 10, 15, 20 years, like myself. And it takes that long to kind of get the pattern recognition engine working. It's still not a static engine. It's got to be dynamic as we keep adapting to the market.

• 50:17David Weisburd?

  I'm doing the math, 4,000 managers, 40 people, still a lot of managers for every professional to handle. How are you leveraging AI to help?

• 50:26Speaker 00

  I'll start with the premise, the true premise, that venture investing is a people business. And some of that lends itself to using AI. A lot of it does not. So let me start with the top of the funnel. Part of our job is to know attribution, not just at the venture firm level, but at the individual partner level. And that we can use AI for. Let's call it individual track record. But to know which person with a great track record is going to leave their franchise in potentially three months, six months, who are they thinking about pairing up with? And we have a few live examples of this as we speak. I don't

• 51:11Speaker 00

  think AI can do this anytime soon. And this comes from us being in the ecosystem, talking to people, and being in the Bay Area, especially, you'll appreciate this, you're fully surrounded by other folks. So I go to my, whether it's my kid's high school, or a soccer game, or a social event, you see somebody, you pick up some information. That is very much a human process. And we got to go to where the puck is going to be. Because often when these great people start a firm, the best ones is an invite only list. And you got to get there before they really are kind of in official fundraising process. That's

• 51:50Speaker 00

  an example of where AI is not helpful. That's very much a human process. But where AI can be helpful is, I mentioned the data we have in-house, and we're always ingesting more data. This data is sitting in very, I would say, disparate parts, unstructured data sometimes. We're using AI to help us connect those dots. Something could be in a meeting note somebody took, versus a quarterly report, versus an advisory board deck. Everything is confidential. But we got to learn about this particular GP or the particular company, we have to have it at fingertips, the collective information base that Adam Street has within

• 52:35Speaker 00

  his four walls. And AI is really helping us do that. In addition to the more, I'll call it, process elements of due diligence, writing the memo, for example, or doing some of the quantitative data cuts, for example. And we're still scratching the surface here. We can do a lot more with AI. But I would posit that on both the funder picking side and the early-stage founder picking side, it remains very much a human-centric business for now.

• 53:05David Weisburd?

  I want to double-click a little bit on Adam Street, the company, and your platform. So you don't only invest in funds, you also invest in companies. Maybe talk about the general strategy.

• 53:17Speaker 00

  We have one investment strategy, i.e. to invest in companies that are seeing rapid growth, or will benefit from dislocation and change, and therefore to capture that alpha. That one investment strategy is executed through five different teams. And the five teams quickly, and I'll go to the specific question you asked. We invest in funds, we call it the primary business, that's the team I'm part of. We invest in venture companies directly, usually at kind of the early growth stage, two later. We invest in buyout companies

• 53:57Speaker 00

  directly, usually as co-investments alongside our GPs. We invest in private credit, which is the leverage for leverage buyouts. And the fifth is we invest in secondaries, both LP and GP secondaries. So specifically on these two, I talked about the information asymmetry before. And that is still an edge. That edge is, I would say, on the margin, declining compared to five, 10 years ago, because it's just so much more data out there, even about private companies. But we have confidential information within our four walls that we only share with ourselves, the investment team, that we can leverage

• 54:37Speaker 00

  to get to the best companies one or two steps earlier. We always work with our venture investors in that manager. We never try to go around or bypass the existing venture syndicate. We leverage our relationships with these great managers. And this ties back to a prior question you asked, which is, what does that great relationship with the GP get you? It gets us kind of, I'll call it, privileged information in some cases, and access in many cases as well. That is our secret sauce, combined with our investment judgment, to pick great venture companies to invest into directly. If I had to summarize

• 55:18Speaker 00

  the thesis for that direct investment program, I mentioned before, 7% of venture-backed companies now, and the sample set is like, thousands of companies, 10,000-plus companies now in our database. 7% of those companies drive all the returns. Our job with the direct venture investments we're making into companies is to double down our exposure as much as possible to what'll end up potentially in that 7%. Because in the stage we're going into, there's a few more data points to say, well, this will be in the winner's circle or not. And of course, nobody bats a thousand, we don't bat a thousand either. But we leverage

• 55:58Speaker 00

  the access and information we have to get more exposure to the outliers that are emerging.

• 56:07David Weisburd?

  I talked to USV Benchmark, they're raising their growth funds for the first time. They believe that power loss still exists at the growth stage. You're investing directly into these companies. Do you think power loss could still really exist at that late stage of a company?

• 56:21Speaker 00

  Yes, it depends on how late stage we're talking about, and depends on the category in the company. And I say that because we didn't, the world and the venture industry didn't foresee the scale of exits now. If you take acquisitions, Wiz at $32 billion was a big number, and the record is broken by Cursor at $60 billion, as you know. And I have no doubt there'll be other bigger acquisitions in the coming years, right? So the bar keeps getting raised on what that exit value is. Not to mention IPOs. What's stunning to me is that we're even talking about a trillion-dollar-plus valuation for

• 57:03Speaker 00

  an IPO. Because it's easy to forget, until, what, five, six years ago, there were no companies in the world, I think Apple became the first one, to cross a trillion dollars in value. And even today, there are maybe 10 companies, 11 companies in the world, with a trillion-plus in market cap. So for a startup, quote unquote, to come along, and it could be talking Anthropic, or OpenAI, or pick any company, and to be in that very short list of trillion-dollar-plus companies, potentially, right off the bat, is just unthinkable. And I say all that to say that if we can still find, venture can find outliers at

• 57:42Speaker 00

  that scale of addressable market, and therefore value creation, the power law will still apply and be true in the growth stage as well. There's a lot of ifs I put in there in terms of both the company, TAM, the execution, the public markets, the buyer universe, et cetera. But I don't think they're wrong. I do think if one picks correctly, the outliers are so extreme now, one can still earn venture multiples at the growth stage.

• 58:17David Weisburd?

  I had this very conversation with Matt Harris, who's at Bain Capital Ventures. One of the benefits of the podcast is I get to get investment and tax planning advice. I invested in the Series C in Anthropic, and I just asked him, like, what do you think about Anthropic at $2 trillion? Like, what should I do with my position? And he used a very simple heuristic, which is, if you look at the revenue multiples, and you just take away the last three zeros, so now you say $2 billion valuation, instead of $100 billion in revenue, you say $100 million revenue. It seems pretty reasonable. So we just get such sticker shock on some of these numbers, that sometimes you just think, it just can't be more, that there's no more room. And maybe there is or not room at $2

• 59:00David Weisburd?

  trillion, but certainly, if there's companies going public at $2 trillion, at $1 billion, there is still, depending how you define power law, there is still this power law, some non-zero chance of a power law.

• 59:11Speaker 00

  Absolutely. And there was a, was it a $70 or $80 billion round in Anthropic, and a $180 billion round in Anthropic, right? If this company goes out next month, knock on wood, hopefully, right? And trades well, even there, we're looking at like 10x-plus returns for those early investors, right? Ballpark. And that might have been unthinkable a few years ago, considering the ongoing entry valuation. But I do want to separate the cyclical from the structural. I think

• 59:40Speaker 00

  There are elements of the market we're in today that are no doubt cyclical. We're going to see kind of not just up and to the right, but maybe some kind of, I'll call it normalization in the coming quarters and years. But if I step back far enough, the structural element of the venture aperture growing in both dollars and in terms of what it funds and magnitude and so on, that is a structural change in our mind and that'll keep kind of over a long time, keep going up.

• 1:00:21Speaker 00

  And as I said before, eating the universe of publicly listed companies, starting from a small base, still small. And we might look back in 10 years from now and look back at this moment in time and be very wrong about the upside of these companies in either direction, right? We might be have been very conservative. If I think about 2016, 10 years ago, there were some things that seemed kind of like ticking in the kind of 2016, 17, 18 era. And some of that was true, as 2022 proved, and some of that has not been true.

• 1:01:03Speaker 00

  So it's hard to kind of really prognosticate and say we're at a structural maxima. I think we're at a local maxima potentially, I don't know. But I think there's still long-term growth in the private capital markets for sure.

• 1:01:20David Weisburd?

  I have to ask, what inning of the AI boom are we in?

• 1:01:24Speaker 00

  It's funny you ask me that because that's one of my favorite questions to ask our most trusted GPs. So I will paraphrase what they tell me. I've gotten various answers, including some that say, oh, I think we're still in the kind of warmups, right? But I don't think a single person has told me it's kind of post the fifth inning. So in other words, it's still broadly kind of first half in people's consensus, whether it's kind of still pregame warmups or first or second inning. I like to sometimes go back and watch a presentation or a new product release from OpenAI or Anthropic and see what those very smart people, Sam Altman, Dario, say.

• 1:02:07Speaker 00

  And what I find interesting is with the passage of time, even they cannot kind of quite foresee where this is all going, right? And my point there is if the best minds in the world in AI cannot quite kind of prognosticate where we are in the AI cycle, generally optimistic, of course, but only directionally correct. I think we can all just say, well, we don't know what we don't know, but likely we're still, we still have a lot of room to go from here. You know, one rubric that I like to talk about is, and this came from a few of our GPs, when there's a seminal moment in a particular technology, and maybe the best example is

• 1:02:48Speaker 00

  Netscape, the first kind of real public browser, I think it was 93, early 90s. The, there were many companies that were started in the Internet 1.0 era, but the best ones came arguably kind of four to seven-ish years out. And this is despite the dot com issues. I'm talking about the Amazons and the Googles of the world, right? Even eBay.

• 1:03:14David Weisburd?

  Facebook as well. I think it was like the 12th or 13th social network.

• 1:03:17Speaker 00

  Yes, exactly, right? So, you know, it came after the Friendster, MySpace era, right? Exactly. And if we then say, look, history definitely rhymes, even if it doesn't repeat. And if we then say, OpenAI and ChatGPT, that moment in fourth quarter of 2022, let's call it about four years ago from today, was that seminal AI moment. It certainly was the moment when AI burst into our consciousness, collective consciousness in a very, oh my God, it's here kind of way, right? One could argue that we are just getting started with the Google, Amazon, your example, Facebook phase of this company creation, right?

• 1:04:00Speaker 00

  And only time will tell, but I feel, won't be a smooth journey necessarily, but there is a lot more to come in terms of company creation, building around this mega wave. And I think it's easy to say it's all AI all the time, but there's a lot more to it, in my opinion. I think AI is building on all the prior waves that came before it. I think Sequoia did a good job recently talking about, you know, why is AI scaling so quickly? For example, distribution channels, right? With our smartphones and so on and so forth. I think AI is a wave built on all the prior waves that came before it that is creating a pace of change in terms of adoption by customers, in terms of monetization, and really growth at scale.

• 1:04:45Speaker 00

  Anthropic, OpenAI are good examples of this, that we have never seen before. And I think, I don't think these are late innings. I think there's more to come.

• 1:04:56David Weisburd?

  A variation of this very question I like to ask people is, if AI is a bubble, how is that possible? Like, what part of the thesis would be wrong? And what people settle on is there's no way, there's no intrinsic value in the technology? People might be off on valuations or might be overly bullish, but there's no way this is a binary bubble like the eyeballs were for the dot com bubble. There's just no possible way that there's no business use case for AI because everybody experiences the productivity gains.

• 1:05:27Speaker 00

  Right. And I certainly see that point. And at this moment in time, if one kind of uses your analogy and then adds like the dark fiber part of it, like, you know, was it ever lit up kind of thing? At this point, at what in time, the demand for compute seems to be far outstripping the supply into the, at least the foreseeable future. And from a broad use case standpoint, it appears to be still very early in the AI wave. So one could argue there's real legs to this potentially. And of course, you and I both know the most dangerous words in investing is this time it's different.

• 1:06:11Speaker 00

  But there are enough parameters to say that there is a lot more adoption and therefore monetization and therefore value creation to come from AI.

• 1:06:28David Weisburd?

  Well, speaking of innings, it's been 440 episodes since I first reached out to you, Brijesh. I think I've reached out to you probably close to a dozen times. So first of all, sorry for spamming you. Secondly, you probably don't even remember. People get so obsessed about being persistent and they realize that nobody even, nobody cares. You just need to keep on persisting. So it's an honor to have you on the podcast and thanks so much for jumping on.

• 1:06:51Speaker 00

  David, I appreciate you saying that. I don't do, I think this is my first podcast in fact. And I appreciate what you have done and I respect hustle and persistence. And it wasn't my objective to kind of make you wait. I'm not, I'm not that kind of busy or important. You've certainly had many, many, many more seller guests. But I really respect what you've built in terms of a podcast that speaks to people in not just the investment world, but folks outside who want to learn about how investors think and where we're going.

• 1:07:34Speaker 00

  So congrats to you on the success and thank you for making time for me.

• 1:07:40David Weisburd?

  Thank you so much, Brijesh. Really appreciate it.